EXHIBIT 2.1
IMAGEMAX, INC.
ASSET PURCHASE AGREEMENT
FOR CERTAIN ASSETS OF
INTEGRATED INFORMATION SERVICES, L.L.C.
TABLE OF CONTENTS
Page
PRELIMINARY STATEMENTS...................................................1
ARTICLE 1 - CERTAIN DEFINITIONS..........................................1
ARTICLE 2 - SALE AND PURCHASE OF ASSETS; CONSIDERATION;
ASSUMPTION OF LIABILITIES.............................6
2.1. Agreement to Sell and Purchase Assets..........................6
2.2. Consideration and Payment......................................6
2.3. Post-Closing Adjustment Process................................7
2.4. [Intentionally Omitted]........................................7
2.5. Payment of Purchase Price......................................7
2.6. Allocation of Purchase Price...................................8
2.7. Assumption of Liabilities......................................8
2.8. Rework Warranty................................................8
2.9. Removal of Purchased Assets....................................8
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES OF SELLER AND MEMBERS.........9
3.1. Organization; Qualification; Good Standing.....................9
3.2. Authorization for Agreement....................................9
3.3. Ownership, Subsidiaries and Legal Names........................9
3.4. Enforceability................................................10
3.5. Pending Legal Proceedings, Orders or Investigations...........10
3.6. Title to the Purchased Assets and Related Matters.............10
3.7. Compliance with Laws..........................................10
3.8. Labor Matters.................................................10
3.9. Employee Benefit Plans........................................11
3.10. Financial Statements..........................................12
3.11. Real Property.................................................12
3.12. Contracts.....................................................12
3.13. Intellectual Property.........................................13
3.14. Environmental Matters.........................................14
3.15. Regulatory Filings............................................14
3.16. Taxes and Tax Returns.........................................15
3.17. Receivables...................................................15
3.18. Solvency......................................................15
3.19. Affiliate Transactions........................................16
-i-
Page
3.20. Brokers or Finders............................................16
3.21. Customers.....................................................16
3.22. Absence of Changes............................................16
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES OF PURCHASER.................17
4.1. Organization..................................................17
4.2. Authorization for Agreement...................................17
4.3. Enforceability................................................17
4.4. Litigation....................................................17
4.5. Brokers or Finders............................................17
4.6. Financial Means...............................................18
ARTICLE 5 - [Intentionally Omitted].....................................18
ARTICLE 6 - CONDITIONS PRECEDENT TO CLOSING.............................18
6.1. Conditions Precedent to the Purchaser's Obligations...........18
6.2. Conditions Precedent to the Seller's
and Members' Obligations....................................19
ARTICLE 7 - CLOSING.....................................................19
7.1. The Closing and the Closing Date..............................19
7.2. Third Party Consents..........................................19
7.3. Employment, Compensation and Employee Benefits
From and After Closing......................................20
7.4. Severance.....................................................21
ARTICLE 8 - COVENANT NOT TO COMPETE.....................................21
8.1. Confidentiality...............................................21
8.2. Covenant Not To Compete.......................................21
8.3. Specific Enforcement; Extension of Period.....................22
8.4. Disclosure....................................................22
8.5. Interpretation................................................22
8.6. Acknowledgment................................................23
-ii-
Page
ARTICLE 9 - SURVIVAL....................................................23
ARTICLE 10 - INDEMNIFICATION............................................23
10.1. The Seller and the Members Indemnification....................23
10.2. The Purchaser's Indemnification...............................24
10.3. Payment; Procedure for Indemnification........................24
10.4. Limitations on Indemnification................................25
ARTICLE 11 - [Intentionally Omitted]....................................26
ARTICLE 12 - POST-CLOSING COVENANTS.....................................27
12.1. Further Cooperation...........................................27
12.2. Maintenance of Books and Records..............................27
12.3. Use of Name...................................................27
12.4. Discharge of Obligations......................................27
12.5. Receivables...................................................28
12.6. Public Announcements..........................................28
12.7. Trademark License.............................................28
ARTICLE 13 - TAXES RELATING TO PURCHASED ASSETS.........................28
ARTICLE 14 - MISCELLANEOUS..............................................28
14.1. Notices.......................................................28
14.2. No Third Party Beneficiaries..................................30
14.3. Schedules.....................................................30
14.4. Expenses......................................................30
14.5. Further Assurances............................................30
14.6. Entire Agreement; Amendment...................................30
14.7. Section and Paragraph Titles..................................30
14.8. Binding Effect................................................30
14.9. Counterparts..................................................30
14.10. Severability..................................................30
-iii-
Page
14.11. Governing Law.................................................31
-iv-
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (as amended or supplemented from time to
time, this "Agreement") is hereby made this 23rd day of January, 1998 by and
among Integrated Information Services, L.L.C., a Nevada limited liability
company (the "Seller"), Xxxxxxxxx, L.L.C. ("Xxxxxxxxx") and Xxxxxxx Holding,
L.L.C. ("Xxxxxxx") (collectively, the "Members"), and ImageMax, Inc., a
Pennsylvania corporation (the "Purchaser").
PRELIMINARY STATEMENTS
The Seller is engaged in the business of providing document management
products and services. The Members own one hundred percent (100%) of the issued
and outstanding membership interests of the Seller. The Seller desires to sell
to the Purchaser and the Purchaser, desires to purchase from the Seller, all of
the Seller's assets that are used in or related to the operation of the Seller's
document management and related businesses (the "Business"), together with the
goodwill related to the Business in accordance with the provisions set forth in
this Agreement. Except for those specific obligations and liabilities of the
Seller identified in this Agreement, the Purchaser is assuming none of the
Seller's obligations or liabilities.
IN CONSIDERATION of the foregoing and the mutual promises, covenants and
agreements contained in this Agreement, the parties, intending to be legally
bound, hereby agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the meanings
herein specified, unless the context otherwise requires:
1.1. Affiliate shall mean: (i) any Person that directly or indirectly
through one or more intermediaries controls, is controlled by or under common
control with the Person specified; and (ii) any officer, director or manager of
the Person specified.
1.2. Assumed Liabilities shall mean the Obligations and Liabilities set
forth on Schedule 2.7.
1.3. Assumed Taxes shall mean those Taxes on sales, on the ownership or use
of the Purchased Assets and on payroll obligations (specifically excluding Taxes
measured by the net income of any party), only to the extent in the amounts
reflected on the Closing Balance Sheet or incurred consistently with past
business practice in or as a result of the normal and ordinary course of
business after the Balance Sheet Date.
1.4. Balance Sheet Date shall mean December 31, 1997.
1.5. Books and Records shall mean all records, documents, lists and files,
relating to either or both of the Purchased Assets or the Business including,
without limitation, price lists, lists of accounts, customers, suppliers and
personnel, all product, business and marketing plans, historical sales data and
all books, ledgers, files and business records (including, without limitation,
all financial records and books of account) of or relating to either or both of
the Purchased Assets or the Business; in any of the foregoing cases, whether in
electronic form or otherwise.
-1-
1.6. Closing Balance Sheet shall mean the balance sheet of the Seller
as of December 31, 1997 prepared in accordance with GAAP.
1.7. Code shall mean the Internal Revenue Code of 1986 and the rules
and regulations promulgated thereunder, as amended and supplemented from time to
time, or any successors thereto.
1.8. Computer Software shall mean all computer applications software,
owned or licensed by Seller, whether for general business usage (e.g.,
accounting, word processing, graphics, spreadsheet analysis, etc.) or specific,
unique-to-the-business usage (e.g., order processing, manufacturing, process
control, design, shipping, etc.) and all computer operating, security or
programming software, owned or licensed by Seller.
1.9. Confidential Information shall mean (i) with respect to any party
to this Agreement or any Affiliate of such party, all financial, technical,
commercial or other information, including but not limited to information,
materials, documents, financial reports, business plans and marketing data that
relate to the business, strategies or operations of the parties hereto,
disclosed or otherwise made available by such party or such Affiliate (the
"Discloser") to another party or affiliate (the "Recipient") in connection with
the transactions contemplated by this Agreement and (ii) each of the terms,
conditions and other provisions contained in this Agreement and in the
agreements or documents to be delivered pursuant to this Agreement.
Notwithstanding the preceding sentence, the definition of Confidential
Information shall not include any information that (i) is in the public domain
at the time of disclosure to the Recipient or becomes part of the public domain
after such disclosure through no fault of the Recipient, (ii) is possessed in
writing by the Recipient at the time of disclosure to such Recipient, or (iii)
is disclosed to a party by any Person other than a party to this Agreement;
provided, that the party to whom such disclosure has been made does not have
actual knowledge that such Person is prohibited from disclosing such information
(either by reason of contractual, or legal or fiduciary duty or obligation). For
the purposes hereof, public domain shall not include disclosure of information,
except as otherwise provided herein, to any other person in connection with the
transactions contemplated hereby.
1.10. Consents shall mean any consents, waivers, approvals, authorizations,
certifications or exemptions required from any Person or under any Contract or
Requirement of Law, as applicable.
1.11. Contracts shall mean, with respect to any Person, any indentures,
indebtedness, contracts, leases, agreements, instruments, licenses, undertakings
and other commitments, whether written or oral, to which such Person is, or such
Person's properties are bound.
1.12. Employee Benefit Plan shall mean any deferred compensation, pension,
profit sharing, stock option, stock purchase, savings, group insurance or
retirement plan, and all vacation pay, severance pay, incentive compensation,
consulting, bonus and other employee benefit or fringe benefit plans or
arrangements maintained by the Seller or any ERISA Affiliate (including, without
limitation, health insurance, life insurance and other benefit plans maintained
for retirees) within the previous six plan years or with respect to which
contributions are or were (within such six year period) made or required to be
made by the Seller or any ERISA Affiliate or with respect to which the Seller
has any liability.
1.13. Encumbrances shall mean, with respect to any asset, any security
interests, liens, encumbrances, pledges, mortgages, conditional or installment
sales Contracts, title retention Contracts,
-2-
transferability restrictions and other claims or burdens of any nature
whatsoever attached to or adversely affecting such asset other than liens
arising in the ordinary course of business which are not incurred in connection
with the borrowing of money and which, in the aggregate, are not material.
1.14. Environmental Laws shall mean all Requirements of Law relating to
pollution or protection of the environment (including, without limitation,
ambient air, surface water, groundwater, land, or surface or subsurface strata)
including, without limitation, Requirements of Law relating to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals, petroleum, or industrial, toxic or hazardous substances or wastes
into the environment and Requirements of Law relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of any of the foregoing including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
ss.9601 et. seq. ("CERCLA"), the Resource Conservation and Recovery Act, 42
U.S.C. ss.6901 et. seq., and the rules and regulations promulgated thereunder,
all as amended and supplemented from time to time, and together with any
successors thereto.
1.15. ERISA shall mean the Employment Retirement Income Security Act of
1974 and the rules and regulations promulgated thereunder, as amended and
supplemented from time to time, or any successors thereto.
1.16. ERISA Affiliate shall mean any Person that is included with the
Seller in a controlled group or affiliated service group under Sections 414(b),
(c), (m) or (o) of the Code.
1.17. Escrow Agent shall mean the individual or entity named as the Escrow
Agent in the Escrow Agreement.
1.18. Escrow Agreement shall mean the Escrow Agreement between the Seller,
the Members, the Purchaser and the Escrow Agent to hold the Escrow Amount
pursuant to the terms and conditions therein as referred to in Section 2.5,
substantially in the form attached hereto as Exhibit A.
1.19. GAAP shall mean generally accepted accounting principles in the
United States, applied by Seller on a basis consistent with preceding years and
throughout the periods involved.
1.20. Generic Intellectual Property shall mean those items of commercial
off-the-shelf computer shrink-wrap licenses.
1.21. Governmental or Regulatory Authority shall mean any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality of
the government of the United States or of any foreign country, any state or any
political subdivision of any such government (whether state, provincial, county,
city, municipal or otherwise).
1.22. Intellectual Property shall mean all Computer Software, patents,
patent rights, patent applications, registered trademarks and service marks,
trademark rights, trademark applications, service xxxx rights, service xxxx
applications, trade names, registered copyrights, copyright rights and all
intellectual, industrial, software or proprietary rights and trade secrets,
technology and know-how, whether or not owned or under license, relating to
either or both of the Purchased Assets or the Business, in each case together
with any amendments, modifications and supplements thereto and in each case all
goodwill associated with the Business in connection with which any such
intellectual property is used.
-3-
1.23. IRS means the Internal Revenue Service or any successor organization
thereto.
1.24. Knowledge shall mean with respect to any representation, warranty or
statement of any party in this Agreement that is qualified by such party's
"knowledge" or "best knowledge," the actual knowledge of such party or, in the
case of an entity, the actual knowledge of any officer, director or manager of
such entity.
1.25. Legal Proceeding shall mean any action, suit, arbitration, claim or
investigation by or before any Governmental or Regulatory Authority, any
arbitration or alternative dispute resolution panel, or any other legal,
administrative or other similar proceeding.
1.26. Material Adverse Effect shall mean an effect which is or is
reasonably likely to be materially adverse to the Business and the Property or
the financial condition or results of operation, of the Seller.
1.27. Obligations and Liabilities and words of similar import include,
without limitation, any direct or indirect indebtedness, guaranty, endorsement,
claim, loss, damage, deficiency, cost, expense, obligation or responsibility,
fixed or unfixed, known or unknown, asserted or unasserted, xxxxxx or inchoate,
liquidated or unliquidated, secured or unsecured.
1.28. Order shall mean any judgment, order, writ, decree, injunction or
other determination whatsoever of any Governmental or Regulatory Authority or
any other entity or body whose finding, ruling or holding is legally binding or
is enforceable as a matter of right (in any case, whether preliminary or final).
1.29. PBGC means the Pension Benefit Guaranty Corporation or any successor
organization thereto.
1.30. Permits shall mean all licenses, permits, certificates of authority,
authorizations, approvals, registrations, franchises, rights, orders,
qualifications and similar rights or approvals granted or issued by any
Governmental or Regulatory Authority relating to either or both of the Purchased
Assets or the Business.
1.31. Person shall mean any natural person, corporation, general
partnership, limited partnership, limited liability company, proprietorship,
joint venture, trust, association, union, entity, or other form of business
organization or any Governmental or Regulatory Authority whatsoever.
1.32. Prepaid Expenses shall mean, as of any date of determination,
payments made by the Seller with respect to the Business, other than payments
made by the Seller to any Affiliate of either the Seller or the Members, that
constitute prepaid expenses of the Business in accordance with GAAP consistently
applied as of such date.
1.33. Property shall mean the Real Property, Intellectual Property and
Tangible Personal Property of the Seller.
1.34. Real Property shall mean the Seller's sales office at 00 X. Xxxxxx,
Xxxxx 000, Xxxxxxx, Xxxxxxxx.
-4-
1.35. Receivables shall mean, as of any date of determination, the Seller's
accounts receivable, notes receivable and other miscellaneous receivables
associated with the Business at such date.
1.36. Regulatory Approvals shall mean all Consents from all Governmental or
Regulatory Authorities.
1.37. Requirement of Law shall mean, with respect to any Person, such
Person's articles or certificate of incorporation, by-laws or other governing or
constitutive documents, if any, and any provision of law, statute, treaty, rule,
regulation, ordinance or pronouncement having the effect of law, or any Order,
to which, in each case, such Person or any of such Person's properties,
operations, business or assets is bound or subject.
1.38. Restricted Period shall mean, with respect to the Seller and the
Members, the period commencing on the date hereof and ending on the second
anniversary of the date hereof, as such period may be extended pursuant to
Section 8.3(b).
1.39. Retained Liabilities shall mean all Obligations and Liabilities of
the Seller and the Members of any nature whatsoever, whether now existing or
hereafter arising or incurred, except for the Assumed Liabilities.
1.40. Taxes shall mean (i) all taxes, charges, fees, levies or other
assessments including, without limitation, all net income, gross income, gross
receipts, sales, use, ad valorem, transfer, franchise, profits, payroll,
employment, social security, unemployment, excise, estimated, stamp, occupancy,
occupation, property or other similar taxes, including any interest or penalties
thereon, and additions to tax or additional amounts imposed by any federal,
state, local or foreign governmental authority, domestic or foreign (a "Taxing
Authority") or (ii) all liability for the payment of any taxes, interest,
penalty, addition to tax or like additional amount resulting from the
application of Treasury Regulation ss.1.1502-6 or comparable Requirement of Law.
1.41. Tax Returns shall mean any declaration, return, report, estimate,
information return, schedule, statements or other document filed or required to
be filed, with or when none is required to be filed with a Taxing Authority, the
statement or other document issued by, a Taxing Authority.
1.42. Trade Accounts Receivable shall mean, as of the applicable date, the
Seller's trade accounts receivable associated with the Business.
1.43. Transferred Receivables shall mean those Receivables that are part of
the Purchased Assets.
1.44. Transfer Taxes shall mean any applicable documentary, sales, use,
filing, transfer and similar Taxes payable as a result of the transactions
contemplated by this Agreement.
-5-
ARTICLE 2
SALE AND PURCHASE OF ASSETS; CONSIDERATION;
ASSUMPTION OF LIABILITIES
2.1. Agreement to Sell and Purchase Assets. Subject to the terms and
conditions set forth in this Agreement, and in reliance upon the joint and
several representations and warranties made by the Seller and the Members to the
Purchaser in this Agreement, effective as of the close of business on the date
hereof, the Seller shall sell to the Purchaser and the Purchaser shall purchase
and receive from the Seller, free and clear of all Encumbrances and all
Obligations and Liabilities (other than the Assumed Liabilities (as defined in
Section 2.7)), all of the tangible and intangible assets of the Seller, whether
real, personal or mixed, that are incremental to, or relating to, or used in
connection with, the Business, wherever located, including, without limitation
(i) the assets included on the Closing Balance Sheet, (ii) the assets listed on
Schedule 2.1(a) attached to this Agreement and (iii) all assets acquired by the
Seller after the Balance Sheet Date, but excluding the assets listed on Schedule
2.1(b) (the "Excluded Assets") and any assets used or disposed of in the
ordinary course of business consistent with past practice (collectively, the
"Purchased Assets").
2.2. Consideration and Payment. As full consideration for the Purchased
Assets being purchased pursuant to this Agreement, the Purchaser shall pay,
deliver or cause to be delivered to the Seller (in addition to the assumption of
the Assumed Liabilities), in the manner set forth in Section 2.5 of this
Agreement, the sum of $1,150,000 (the "Base Purchase Price") less adjustments,
if any, as further set forth in this Section 2.2 (the "Purchase Price").
(a) Closing Working Capital Adjustment. The Base Purchase Price shall be
reduced after Closing, by $1.00 for each $1.00 that the Seller's Adjusted
Working Capital (as hereinafter defined) as of the Closing Date (the "Closing
Adjusted Working Capital Amount") is less than $950,000 (the "Closing Working
Capital Adjustment"). The Seller's Adjusted Working Capital shall mean the
current portion of Purchased Assets, calculated pursuant to GAAP, less Adjusted
Current Liabilities included as Assumed Liabilities. The Adjusted Current
Liabilities shall mean all of the Seller's liabilities which would be classified
as current liabilities in accordance with GAAP, except current amounts of
principal, interest or penalties due and owing: (i) under promissory notes or
lines of credit (including to an employee or on the account of an employee);
(ii) to an Affiliate of the Seller or the spouse, parents, children, siblings,
mothers-in-law, fathers-in law, sons-in-law, daughters-in-law, bothers-in-law,
and sisters-in-law of an Affiliate of Seller; (iii) to a lessor under a capital
lease (except for any capital lease on account of real property); (iv) on
account of expenses in connection with this Agreement that are the obligation of
the Seller or the Members under this Agreement; (v) on account of Taxes, other
than Assumed Taxes, or earned insurance premiums; (vi) Rework Expenses; and
(vii) Moving Expenses (as hereinafter defined).
(b) Post-Closing Adjustments. As further set forth in Section 2.3
hereof, the Closing Working Capital Adjustment (the "Closing Amount") shall be
finalized after Closing. Any Working Capital Adjustment, as determined pursuant
to Section 2.3, plus 8% interest on such amount, shall be paid by Seller to
Purchaser in immediately available funds within five (5) business days of
finalizing the Closing Working Capital Amount pursuant to Section 2.3 hereof. If
such amount is not received by the Purchaser within such time period, such
amount shall be paid from the Escrow Amount pursuant to the Escrow Agreement and
the Seller and Members shall jointly and severally be obligated to immediately
replenish the Escrow Amount by depositing with the Escrow Agent upon such
payment cash in a like amount. The Seller and the Members shall have no
obligation to indemnify any person with respect to any
-6-
breach of representation or warranty if and to the extent that the payment of
the Closing Working Capital Adjustment cures any Indemnifiable Loss that would
otherwise arise from such breach.
(c) Members Obligation The Members hereby agree that they will be
jointly and severally liable for all obligations of the Seller under the
Purchase Price adjustments set forth in this Section 2.2 including, but not
limited to, the obligation to replenish the Escrow Amount.
2.3. Post-Closing Adjustment Process. Promptly following the Closing,
and in order to, determine the Closing Working Capital Adjustment, if any, the
Purchaser agrees to cause the internal accounting staff and the independent
certified public accountant of the Purchaser (the "Accountants") to determine
the Closing Working Capital Adjustment, if any. No later than forty-five (45)
days following the Closing Date, the Purchaser shall notify the Seller and the
Members if it requests any Closing Working Capital Adjustment and shall provide
a report indicating its determination of the Closing Working Capital Amount (the
"Purchaser's Closing Report"). The determination of the Closing Working Capital
Adjustment by the Purchaser shall be conclusive and binding upon the parties
hereto unless the Seller shall object within fifteen (15) days following its
receipt of the Purchaser's Closing Report. The Seller's objection, if any, to
the Purchaser's Closing Report (the "Seller's Objection") shall set forth in
reasonable detail the Seller's objection(s) to the Purchaser's Closing Report
and the Seller's calculation of the Closing Working Capital Adjustment. Within
ten (10) days after receipt of the Seller's Objection, the Purchaser will notify
the Seller whether it accepts or disputes the Seller's adjustments, if any,
which notification shall set forth in reasonable detail the adjustments made by
the Seller which the Purchaser continues to dispute (the "Purchaser's Response
Notice"). If the Seller does not object to the Purchaser's Closing Report, or if
the Purchaser agrees to accept the Seller's adjustments to the Purchaser's
Closing Report, then the additional adjustments based on the then final Closing
Working Capital Adjustment, if any, shall be paid by Seller to the Purchaser as
set forth in Section 2.2(b) above. If the Seller objects to the Purchaser's
Closing Report as set forth above and the Purchaser does not accept the Seller's
proposed adjustments, then an independent accounting firm mutually satisfactory
to the Seller and the Purchaser shall be engaged to determine the amount of the
Closing Working Capital Adjustment, such determination to be binding on the
parties. The parties hereto agree to cooperate fully with such independent
accountants at their own cost and expense, including, but not limited to,
providing such independent accountants with access to, and copies of, all books
and records that they shall reasonably request. The Purchaser and the Seller
shall each bear one-half of all of the costs and expenses of such independent
accounting firm, and if the parties hereto are unable to agree upon an
independent accounting firm, the Seller and the Purchaser will request that one
be designated by the President of the Philadelphia office of the American
Arbitration Association.
2.4. [Intentionally Omitted]
2.5. Payment of Purchase Price.
(a) Purchase Price. An amount equal to the Base Purchase Price less the
amount deposited into escrow pursuant to Section 2.5(b), shall be payable at the
Closing to the Seller. The Base Purchase Price shall be payable in immediately
available funds by a wire transfer to an account to be designated by the Seller
in writing prior to the Closing.
(b) Delivery into Escrow. Notwithstanding the foregoing, cash in the
amount of $115,000 shall be delivered by Purchaser upon execution hereof to the
Escrow Agent to be held in an account pursuant to the Escrow Agreement (the
"Escrow Account"). The Escrow Account, pursuant to the
-7-
terms of the Escrow Agreement, shall be available to fund (but shall not be the
sole source of funding) any obligations of the Seller and the Members under this
Agreement.
2.6. Allocation of Purchase Price. The Purchaser shall on or before
forty-five (45) days after the Closing Date initially determine and send to the
Seller a schedule containing the allocation of the purchase price, as defined in
the Code, among the Purchased Assets as is required by Section 1060 of the Code
(the "Allocation Schedule"). The Allocation Schedule will be deemed to be
accepted by the Seller unless the Seller provides a written notice of
disagreement to the Purchaser within five (5) business days after receipt of the
Allocation Schedule. If the Seller provides such written notice, the Seller and
the Purchaser shall proceed to negotiate in good faith to agree on a mutually
acceptable Allocation Schedule. If no mutually acceptable Allocation Schedule is
created within ten (10) business days of the Seller's receipt of the written
notice of disagreement, then an independent accountant mutually satisfactory to
the Seller and the Purchaser (the "Independent Accountant") shall be engaged to
determine the Allocation Schedule. The fees for such determination shall be
split evenly by the Seller and by the Purchaser. Such determination by the
Independent Accountant, or the original Allocation Schedule if not objected to
by the Seller, or the mutually acceptable Allocation Schedule shall be binding
and conclusive to all parties to the Agreement and all parties shall file all
relevant tax returns consistent with such final determination, unless otherwise
required by applicable law; provided, however, that if the Purchase Price is
adjusted in accordance with this Article 2, the Allocation Schedule otherwise
determined shall be adjusted in accord with the requirements of Section 1060 of
the Code.
2.7. Assumption of Liabilities. Subject to Section 7.3, at the Closing, the
Purchaser will assume only the Seller's Obligations and Liabilities as of and
after the Closing Date expressly listed on Schedule 2.7 attached to this
Agreement, if any (collectively, the "Assumed Liabilities"). All other
Obligations and Liabilities of the Seller and the Member shall be Retained
Liabilities and not assumed by the Purchaser.
2.8. Rework Warranty. Purchaser hereby agrees to assume all obligations to
perform services or repair or replace products in order to correct any material
deficiencies in services or products performed or sold by the Seller in the
ordinary course of its business prior to Closing ("Rework"). The Escrow Amount
shall be available to fund (but shall not be the sole source of funding) any
obligations of the Purchaser hereunder. The Seller and the Members, jointly and
severally, agree to indemnify and hold the Purchaser harmless from any and all
reasonable costs and expenses incurred in connection with Rework during the 180
day period following the date hereof, including, without limitation, all
reasonable attorneys' and experts fees, expenses and disbursements and court
costs in connection therewith (the "180 Day Rework Expenses"). Notwithstanding
the foregoing, the Purchaser shall not be entitled to reimbursement and
indemnity for Rework hereunder until such time as the aggregate of all 180 Day
Rework Expenses shall exceed $25,000 (the "Rework Threshold"), whereupon the
Seller and the Members shall be responsible for the excess over $25,000 up to a
maximum of $100,000 of such 180 Day Rework Expenses, whereupon the Seller and
the Members, on the one hand, and Purchaser, on the other hand, shall split such
180 Day Rework Expenses equally. The Seller shall have the right to inspect and
audit the books and records of the Business to verify the 180 Day Rework
Expenses.
2.9. Removal of Purchased Assets. Prior to 7 p.m. on January 28, 1997,
Purchaser shall remove the Purchased Assets from the Seller's facility at 00000
X. Xxxxxxxx Xxxxxx, Xxxxxx, Xxxxxxx (the "Facility"), except that Purchaser may
leave the telephone system and the appropriate office furniture for one
receptionist at the Facility until 7 p.m. on January 29, 1997 (the "Vacancy
Date"). To
-8-
the extent the Purchased Assets are moved after the Closing Date, they shall be
moved during normal business hours without interference with the operations at
the Facility and without damage to the Facility. The Purchaser and the Seller
shall pay equally all out-of-pocket expenses to third parties in connection with
such move up to an aggregate of $30,000, including expenses of packing and
moving incurred by Seller prior to the date hereof and storage costs incurred
from the date hereof until and including the Vacancy Date ("Moving Expenses").
Storage expenses incurred by Seller prior to the date hereof shall be the sole
obligation of Seller and storage expenses incurred by the Purchaser after the
Vacancy Date shall be the sole obligation of the Purchaser. To the extent such
aggregate expenses exceed $30,000, the parties will negotiate in good faith the
payment of such excess. The Purchaser shall pay Seller $10,000 per day for each
day the Purchased Assets remain at the Facility after the Vacancy Date, in
addition to Seller's reasonable moving expenses incurred to remove any remaining
Purchased Assets from the Facility. In addition, if the Purchaser has not
removed the Purchased Assets by the Vacancy Date, Seller shall have the right to
remove the Purchased Assets from the Facility at the Purchaser's risk with the
reasonable expenses of such move paid by the Purchaser.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER AND MEMBERS
Except as set forth on the disclosure schedule delivered by the Seller and
the Members to the Purchaser on the date hereof (the "Disclosure Schedule"), the
numbers of which are numbered to correspond to the section numbers of this
Agreement to which they refer, the Seller, Xxxxxxxxx and Xxxxxxx hereby, jointly
and severally, represent and warrant to the Purchaser as follows:
3.1. Organization; Qualification; Good Standing. The Seller (i) is a
limited liability company duly organized, validly existing and in good standing
under the laws of the state of its organization, (ii) has the power and
authority to own and operate its properties and assets and to transact the
Business and (iii) is duly qualified and authorized to do business and is in
good standing in all jurisdictions where the failure to be duly qualified,
authorized and in good standing would have a Material Adverse Effect. Listed in
the Disclosure Schedule is a true and complete list of all jurisdictions in
which the Seller is qualified to do business.
3.2. Authorization for Agreement. The Seller's and the Members' execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby: (i) are within their powers and authority,
corporate or otherwise, and are duly authorized by all necessary corporate and
member action on the part of the Seller and (ii) do not (A) require any action
by or in respect of, or filing with, any Governmental or Regulatory Authority,
(B) contravene, violate or constitute, whether with or without the passage of
time or the giving of notice or both, a breach or default under, any Requirement
of Law applicable to the Seller, the Members or any of its or their properties
or any Contract to which the Seller, the Members or any of its or their
properties is bound or subject or (C) result in the creation of any Encumbrance
or any obligation and liability on any of the Purchased Assets.
3.3. Ownership, Subsidiaries and Legal Names. The Members are the record,
beneficial and equitable owners of all of the outstanding equity of Seller. The
Seller does not own, directly or indirectly, any debt, equity or other ownership
interest in any other Person. No shares or other ownership or other interests,
either of record, beneficially or equitably, in any Person are included in the
Purchased Assets. The
-9-
Seller has no d/b/a names and has not conducted business under any other name
except its legal name on its Certificate of Organization.
3.4. Enforceability. This Agreement has been duly executed and delivered by
the Seller and the Members and constitutes the legal, valid and binding
obligation of the Seller and the Members, enforceable against each of them in
accordance with its terms except as may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
rights of creditors generally.
3.5. Pending Legal Proceedings, Orders or Investigations. Except as set
forth on the Disclosure Schedule, there are no Legal Proceedings or Orders
pending, or, to the Seller's or the Members' knowledge, threatened, against or
related to the Seller, the Business, the Purchased Assets or the Assumed
Liabilities or which otherwise could adversely affect or restrict the ability of
the Seller or the Members to consummate the transactions contemplated hereby or
that question the validity of this Agreement, whether or not fully covered by
insurance.
3.6. Title to the Purchased Assets and Related Matters. Except for the
items of tangible Personal Property possessed or used by the Seller in
connection with the Business ("Tangible Personal Property") leased by the
Seller, the leases and agreements for which are in full force and effect and
constitute valid and binding agreements on the Seller (and to the knowledge of
Seller and Members, the other parties thereto) in accordance with their
respective terms, the Seller owns and has good and valid legal and beneficial
title to all of the Purchased Assets free and clear of all Encumbrances. All of
the Purchased Assets are in the possession or under the control of the Seller.
EXCEPT FOR THE SPECIFIC REPRESENTATIONS AND WARRANTIES SET FORTH HEREIN, THE
PURCHASED ASSETS ARE BEING SOLD AS IS WHERE IS WITH NO WARRANTIES AS TO
CONDITION AND SUFFICIENCY AND ALL OTHER WARRANTIES EXPRESS OR IMPLIED ARE HEREBY
DISCLAIMED, INCLUDING ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS
FOR A PARTICULAR PURPOSE.
3.7. Compliance with Laws. The Seller is operating in compliance with all
Requirements of Law applicable to it or any of its properties or to which the
Seller, or its properties is bound or subject, except where non-compliance would
not have a Material Adverse Effect. In addition, none of the Seller or the
Members has received any notice from any Person concerning alleged violations
of, or the occurrence of any events or conditions resulting in alleged
noncompliance with, any such Requirement of Law. With respect to the Business,
none of the Seller, the Members, any of their respective Affiliates, or any of
such Affiliates' respective Affiliates, has made any illegal kickback, bribe,
gift or political contribution to or on behalf of any customer, or to any
officer, director, employee of any customer, or to any other Person.
3.8. Labor Matters.
(a) Seller has provided Purchaser with an accurate list showing all
employees of the Seller, listing all Contracts with such employees (copies of
which are attached to the Disclosure Schedule) and the rate of compensation (and
the portions thereof attributable to salary, bonus and other compensation,
respectively) of each of such persons as of the Balance Sheet Date. Since the
Balance Sheet Date, there have been no increases in the compensation payable or
any special bonuses to any employee, except ordinary salary increases
implemented on a basis consistent with past practices. To the knowledge of the
Seller and the Members, no individuals retained by the Seller as an independent
contractor or consultant
-10-
would be reclassified by the IRS, the U.S. Department of Labor or any other
Governmental or Regulatory Authority as an employee of the Seller for any
purpose whatsoever.
(b) The Seller is not bound by or subject to (and none of its
respective assets or properties is bound by or subject to) any arrangement
with any labor union. No employees of the Seller are represented by any labor
union or covered by any collective bargaining agreement with the Seller. To the
knowledge of the Seller and the Members, no campaign to establish such
representation is in progress and, except as set forth in Section 3.8 of the
Disclosure Schedule, there is no pending or, to the best of the Seller's and the
Members' knowledge, threatened, labor dispute involving the Seller and any group
of its employees. The Seller has not experienced any labor interruptions since
March 1, 1996.
3.9. Employee Benefit Plans.
(a) The Disclosure Schedule sets forth a complete and accurate list
and description of each Employee Benefit Plan applicable to Seller or its
employees. With respect to each Employee Benefit Plan applicable to Seller or
its employees, the Seller and the Members have delivered or caused to be
delivered to the Purchaser true and complete copies of (i) the plan document,
trust agreement and any other document governing such Employee Benefit Plan,
applicable to Seller or its employees, (ii) the summary plan description, (iii)
the most recent Form 5500 annual reports and attachments, and (iv) the most
recent IRS determination letter, if any, for such plan.
(b) Except as set forth in the Disclosure Schedule:
(1) Neither the Seller nor any of its ERISA Affiliates currently
has any liability to make any withdrawal liability payment to any Multiemployer
Plan.
(2) Each Employee Benefit Plan that provides medical benefits has
been operated in compliance with all material requirements of sections 601
through 608 of ERISA and either (i) section 162(i)(2) and (k) of the Code and
regulations thereunder (prior to 1989) or (ii) Section 4980B of the Code and
regulations thereunder (after 1988), relating to the continuation of coverage
under certain circumstances in which coverage would otherwise cease. Seller
shall continue to provide continuation coverage to those former employees of
Seller (and their dependents or former dependents) who are receiving such
coverage as of the Closing.
(3) No Employee Benefit Plan maintained by the Seller with respect
to the Purchased Assets provides post retirement medical benefits, post
retirement death benefits or other post retirement welfare benefits.
(4) All contributions to, and payments from, the Employee Benefit
Plans which may have been required to be made in accordance with the
Employee Benefit Plans and, when applicable, section 302 of ERISA or section 412
of the Code, have been timely made.
(5) There have been no statements or communications made or materials
provided to any employee or former employee of the Seller by any Seller or its
Affiliates (including any member of an ERISA Affiliate or any employee, officer
or director of any member of an ERISA Affiliate) which provide for or could be
construed as a contract or promise by the Purchaser to provide for any pension,
welfare, or other insurance-type benefits to any such employee or former
employee, whether before or after retirement.
-11-
(6) Each Employee Benefit Plan complies in all material respects
with all applicable state and federal laws, including, without limitation,
ERISA, the Age Discrimination in Employment Act, as amended, the Americans with
Disabilities Act, the Family Medical Leave Act, Title VII of the Civil Rights
Act of 1964, as amended, and Title X of the Consolidated Omnibus Budget
Reconciliation Act of 1986, as amended.
(7) There are no events, contingencies, claims or Legal Proceedings
that could rise to the level of liability with the IRS, PBGC, United States
Department of Labor, or any other governmental agency or person on account of
any event or circumstances arising under any Employee Benefit Plan or a claim
for benefits under any such plan.
3.10. Financial Statements. The Seller and the Members have delivered, or
caused to be delivered, to the Purchaser a copy of the Seller's balance sheets
as of March 31, 1996 and 1997 and December 31, 1997, and the related statements
of income for the years and periods, as applicable, then ended (collectively,
the "Financial Statements"). A true and complete copy of the Financial
Statements is attached to the Disclosure Schedule. The Financial Statements have
been prepared in accordance with GAAP (except for the lack of footnotes and
year-end audit adjustments) and fairly represent the financial position of the
Seller as of the date of such Financial Statements and the results of operations
for the periods covered thereby, in all material respects.
3.11. Real Property. The Purchased Assets do not include any interest in
real property other than the lease for the Real Property and the facility at 000
Xxxxxxxxxxxxx Xxxx., Xxxxxx, Xxxxxxx (the "New Facility").
3.12. Contracts.
(a) Attached to the Disclosure Schedule is a complete and accurate list
of each pending Contract described below to which the Seller or any of its
properties is party or is otherwise bound or subject (a "Material Contract"):
(i) each Contract with the Seller's customers (but only if such
customers are among the Seller's ten highest, in terms of dollar value of
purchases, for the twelve-month period ending on the Balance Sheet Date);
(ii) any Contract that creates a partnership or a joint venture or
arrangement that involves a sharing of profits (whether through equity
ownership, Contract or otherwise) with any other Person;
(iii) any Contract that purports to or has the effect of limiting
either the Seller's right to engage in, or compete with any Person in, any
business;
(iv) any Contract involving the incurrence by the Seller of
liabilities (other than liabilities to render services to customers in the
ordinary course of business) in any one transaction or series of related
transactions in excess of $25,000;
-12-
(v) any Contract not made in the normal and ordinary course of the
Seller's Business;
(vi) any Contract granting any preferential rights to purchase or
acquire any interest in any of the Purchased Assets or requiring consent of
any party to the transfer and assignment of any of the Purchased Assets (other
than consents to assign Contracts);
(vii) any Contract creating any Encumbrance on any of the Purchased
Assets; and
(viii) any Contract involving an amount in excess of $25,000 which
relates to or affects any Tangible Personal Property, including leases.
(ix) any contract which relates to the Real Property or the New
Facility.
(b) Each Material Contract to which the Seller or any of its properties
is a party or is otherwise bound or subject (i) is valid and binding on the
Seller and, to the knowledge of the Seller and the Members, is valid and binding
upon parties other than the Seller in accordance with its terms, and (ii)
contains no provision or covenant prohibiting or materially limiting the ability
of the Seller to operate their respective Business as currently conducted.
(c) No party to any Material Contract to which the Seller or any of its
properties is a party or is otherwise bound or subject (i) has provided any
notice to the Seller of its intent to terminate, or withdraw its participation
in, any such Contract, (ii) has, to the knowledge of the Seller and the Members,
threatened to terminate, or withdraw from participation in, any such Contract or
(iii) is, to the knowledge of the Seller and the Members, in breach or default
under any provision thereof, and, to the knowledge of the Seller and the
Members, no event or condition has occurred, whether with or without the passage
of time or the giving of notice, or both, that would constitute such a breach or
default.
(d) Except as set forth in the Disclosure Schedule, no Consent of any
party to any Material Contract to which the Seller or any of its properties
is a party is required in connection with the transactions contemplated by this
Agreement.
(e) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not (i) result in or
give to any Person any right of termination, non-renewal, cancellation,
withdrawal, acceleration or modification in or with respect to any Material
Contract to which the Seller or any of its properties is a party, (ii) result in
or give to any Person any additional rights or entitlement to increased,
additional, accelerated or guaranteed payments under any such Material Contract
or (iii) result in the creation or imposition of any obligation and liability
upon the Seller or any Encumbrances upon any of the Purchased Assets under the
terms of any such Material Contract.
-13-
3.13. Intellectual Property.
(a) Included in the Disclosure Schedule is a complete and accurate list
and full description of each item of proprietary software, patents, patent
applications, registered trademarks and service marks, trademark applications,
service xxxx applications and registered copyrights included in the Intellectual
Property, except for the Generic Intellectual Property, and each such item is
owned by the Seller. The Intellectual Property constitutes valid and enforceable
rights of the Seller and does not infringe or conflict with the rights of any
other Person.
(b) There is neither pending, nor to either the Seller's or the Members'
knowledge, threatened, any Legal Proceeding against the Seller contesting the
validity or right of the Seller to use any of the Intellectual Property, and the
Seller has not received any notice of infringement upon or conflict with any
asserted right of others nor, to the Seller's or the Members' knowledge, is
there a basis for such a notice. To either the Seller's or the Members'
knowledge, no Person is infringing the Seller's rights to the Intellectual
Property.
(c) Except as set forth on the Disclosure Schedule, the Seller does not
have any obligation to compensate others for the use of any Intellectual
Property, except the Generic Intellectual Property. In addition, except licenses
on proprietary software in the ordinary course of business, the Seller has not
granted any license or other right to use, in any manner, any of the
Intellectual Property, whether or not requiring the payment of royalties.
3.14. Environmental Matters.
(a) The Seller and the operation of the Business is and has been in
compliance with all applicable Environmental Laws.
(b) There have occurred no and there are no events, conditions,
circumstances, activities, practices, incidents, or actions on the part of, or
caused by, the Seller or the Members (or to the knowledge of the Seller or the
Members, caused by a third party) that may give rise to any common law or
statutory liability, or otherwise form the basis of any Legal Proceeding, Order
or action involving or relating to the Business, the Real Property or the
Seller, based upon or related to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling, or the emission, discharge,
release or threatened release into the environment, of any pollutants,
contaminants, chemicals, petroleum, or industrial, toxic or hazardous substance
or wastes.
(c) To the knowledge of the Seller and the Members, there is no asbestos
contained in or forming a part of any building, structure or improvement
comprising a part of any of the Real Property. To the knowledge of the Seller
and the Members, no polychlorinated byphenyls (PCBs) are present, in use or
stored on any of the Real Property.
3.15. Regulatory Filings. The Seller has filed all registrations, filings,
reports, or submissions that are required by any Requirement of Law. All such
filings were made in compliance with applicable Requirements of Law when filed
and no deficiencies have been asserted by any
-14-
Governmental or Regulatory Authority with respect to such filings and
submissions that have not been finally resolved.
3.16. Taxes and Tax Returns.
(a) The Seller has duly and timely filed all Tax Returns. Each such Tax
Return is true, accurate and complete. The Seller has paid in full all Taxes for
the period covered by such Tax Return. All Taxes not yet due and payable have
been withheld or reserved for or, to the extent that they relate to periods on
or prior to the date of the Closing Balance Sheet, are reflected as a liability
thereon. The Seller has been taxed as a partnership for federal and state
purposes, without interruption, since the Seller was organized as a limited
liability company.
(b) The Seller has complied with all applicable Requirements of Law
relating to the payment and withholding of Taxes (including, without limitation,
withholding of Taxes pursuant to Section 1441 and 1442 of the Code, or similar
provisions under any foreign Requirements of Law) and have, within the time and
in the manner prescribed by applicable Requirements of Law, withheld from
employee wages and paid over, in a timely manner, to the proper Taxing
Authorities all amounts required to be so withheld and paid over under
applicable Requirements of Law.
(c) No deficiency for any Taxes has been asserted or assessed against
the Seller that has not been resolved and paid in full or fully reserved
for and identified on the Closing Balance Sheet and, to the knowledge of the
Seller and the Members, no deficiency for any Taxes has been proposed that has
not been fully reserved for and identified on the Closing Balance Sheet. The
Seller has not received any outstanding and unresolved notices from the IRS or
any other Taxing Authority of any proposed examination or of any proposed change
in reported information relating to the Seller. No Legal Proceeding or audit or
similar foreign proceedings is pending with regard to any of the Seller's Taxes
or Tax Returns.
(d) No waiver or comparable consent given by the Seller regarding the
application of the statute of limitations with respect to any Taxes or Tax
Returns is outstanding, nor, to the knowledge of the Seller and the Members, is
any request for any such waiver or consent pending.
(e) No state of facts exists or has existed that would constitute
grounds for the assessment of Tax liability with respect to period that
have not been audited by the IRS or any other Taxing Authority.
3.17. Receivables. The aggregate Receivables owing to the Seller as of
January 21, 1998 equal at least $800,000 if reflected in accordance with GAAP.
Seller has received an aggregate of approximately $8,000 in collections of
Receivables on January 21, 1998 and January 22, 1998. All Receivables incurred
since December 31, 1997 were incurred in the normal and ordinary course of
business and are stated in accordance with GAAP.
3.18. Solvency. On and as of the date of this Agreement, and after giving
effect to the Closing and any other transactions contemplated by this Agreement,
the Seller is not insolvent as defined in, or otherwise in a condition which
could in any circumstances then or subsequently render
-15-
any transfer or conveyance made by it voidable or fraudulent pursuant to, any
Requirements of Law pertaining to bankruptcy, insolvency or creditors' rights
generally or any other applicable Requirements of Law relating to fraudulent
conveyances, fraudulent transfers or preferences. The Seller is receiving
reasonably equivalent value and consideration from the Purchaser for the
Purchased Assets and is not selling the Purchased Assets to the Purchaser with
intent to hinder, delay or defraud any of its creditors.
3.19. Affiliate Transactions. The Disclosure Schedule lists and fully
describes each Material Contract, transaction or series of transactions, whether
written or oral (other than for the compensation arrangements described in the
Disclosure Schedule under Section numbers 3.8 and 3.9), pursuant to which the
Seller is a party or otherwise bound with any Affiliate of any or all of the
Seller and the Members (an "Affiliate Transaction").
3.20. Brokers or Finders. Neither the Seller nor the Members has engaged
the services of any broker or finder with respect to the transactions
contemplated by this Agreement.
3.21. Customers. The Disclosure Schedule accurately and completely lists
the names of the ten largest customers (in terms of dollar volume of purchases)
of the Seller during the past fiscal year and details the Seller's total revenue
attributable to each such customer for the last fiscal year. Except as reflected
on the Disclosure Schedule, to the knowledge of the Seller and the Members,
there has been no adverse change in the Seller's business relationship with any
such customer that, in the aggregate, would have a Material Adverse Effect.
3.22. Absence of Changes. Except as set forth on the Disclosure Schedule,
since the Balance Sheet Date, there has not been with respect to the Seller:
(i) any event or circumstance (either singly or in the aggregate)
which would constitute a Material Adverse Effect;
(ii) any increase in the compensation, bonus, sales commissions or fee
arrangement payable or to become payable by it to any of its respective
officers, managers, members, employees, consultants or agents, except for
ordinary and customary bonuses and salary increases for employees in
accordance with past practice;
(iii) any distribution, sale or transfer, or any agreement to sell or
transfer, any material assets, property or rights of any of its business to
any person, including, without limitation, the Members and their
Affiliates, other than distributions, sales or transfers in the ordinary
course of business to persons other than the Members and their Affiliates;
(iv) any cancellation, termination or agreement to cancel or terminate
any Contract, including any indebtedness or other obligation owing to it,
other than the negotiation and adjustment of customer invoices in the
course of good faith disputes with customers in a manner consistent with
past practice;
(v) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in the Purchased Assets or
requiring consent of any party to the transfer and assignment of the
Purchased Assets;
-16-
(vi) any Obligation or Liabilities, except for Obligations or
Liabilities that were incurred consistently with past business practice in
or as a result of the normal and ordinary course of business;
(vii) any waiver of any of its material rights or claims;
(viii) any transaction by the Seller outside the ordinary course of
its respective businesses; or
(ix) any change in the accounting methods or practices followed by the
Seller, except as required by GAAP and disclosed on the Disclosure
Schedule.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PURCHASER
The Purchaser hereby represents and warrants to the Seller and the Members
as follows:
4.1. Organization. The Purchaser is a corporation duly incorporated,
validly existing and in good standing under the laws of the state of its
incorporation, (ii) has the power and authority to own and operate its
properties and assets and to transact its business as currently conducted and
(iii) is duly qualified and authorized to do business and is in good standing in
all jurisdictions where the failure to be duly qualified, authorized and in good
standing would have a material adverse effect upon the Purchaser's businesses,
prospects, operations, results of operations, assets, liabilities or condition
(financial or otherwise).
4.2. Authorization for Agreement. The execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated hereby
by the Purchaser (i) are within the Purchaser's corporate powers and duly
authorized by all necessary corporate action on the part of the Purchaser and
(ii) do not (A) require any action by or in respect of, or filing with, any
governmental body, agency or official, except as set forth in this Agreement, or
(B) contravene, violate or constitute, whether with or without the passage of
time or the giving of notice or both, a breach or default under, any Requirement
of Law applicable to the Purchaser, or any of its properties or any Contract to
which the Purchaser, or any of its properties is bound.
4.3. Enforceability. This Agreement has been duly executed and delivered by
the Purchaser and constitutes the legal, valid and binding obligation of the
Purchaser, enforceable against the Purchaser in accordance with its terms,
except as may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the rights of creditors generally.
4.4. Litigation. There is no Legal Proceeding or Order pending against or,
to the knowledge of the Purchaser, threatened against or affecting, the
Purchaser, or any of its properties or otherwise that could adversely affect or
restrict the ability of the Purchaser to consummate fully the transactions
contemplated by this Agreement or that in any manner draws into question the
validity of this Agreement.
4.5. Brokers or Finders. The Purchaser has not engaged the services of any
broker or finder with respect to the transactions contemplated by this
Agreement.
-17-
4.6. Financial Means. The Purchaser has the financial means to perform the
Assumed Liabilities.
ARTICLE 5
[Intentionally Omitted]
ARTICLE 6
CONDITIONS PRECEDENT TO CLOSING
6.1. Conditions Precedent to the Purchaser's Obligations. The Purchaser's
obligation to consummate the transactions contemplated by this Agreement is
subject to the satisfaction of, or waiver in writing by the Purchaser of, prior
to or at the Closing, each and every of the following conditions precedent:
(a) Representations and Warranties; Covenants and Conditions. Each of
the representations and warranties of the Seller and the Members contained
in this Agreement shall be true and correct on and as of the Closing Date with
the same force and effect as though such representations and warranties had been
made on and as of the Closing Date, except for those representations and
warranties that by their terms relate to an earlier date, which representations
and warranties shall be true and correct in all material respects with regard to
such earlier date. The Seller and the Members shall have each performed and
complied in all material respects with each and every covenant, agreement and
condition required by this Agreement to be performed or satisfied by the Seller
and the Members, as the case may be, at or prior to the Closing Date.
(b) No Legal Proceeding Affecting Closing. On the Closing Date, no
Order or law, restraining or prohibiting the transactions contemplated by
this Agreement and no Legal Proceeding shall be pending or threatened in which
it is sought to restrain or prohibit or to obtain damages or other relief in
connection with this Agreement or the consummation of the transactions
contemplated hereby or thereby, and no investigation that might eventuate in any
such suit, action or proceeding shall be pending or threatened.
(c) Opinion of Counsel of Seller. XxXxxxxxx, Will & Xxxxx,
counsel for the Seller and the Members, shall have delivered to the Purchaser
their favorable opinion, dated the Closing Date as to the matters covered in
Schedule 6.1(d).
(d) Escrow Agreement. The Members and the Seller shall have executed
the Escrow Agreement substantially in the form of Exhibit A attached
hereto.
(e) General Conveyance, Transfer and Assignment. The Seller and the
Members shall execute and deliver to the Purchaser the General Assignment
Agreement substantially in the form attached hereto as Exhibit C and any other
agreements of conveyance reasonably requested by the Purchaser to convey title
in the Purchased Assets.
-18-
(f) Delivery of Documents. The Seller and the Members shall have each
delivered to the Purchaser all documents, certificates, instruments and items
required to be delivered by it or him at or prior to the Closing Date pursuant
to this Agreement.
6.2. Conditions Precedent to the Seller's and Members' Obligations. The
Seller's and the Members' obligation to consummate the transactions contemplated
by this Agreement is subject to the satisfaction of, or waiver in writing by the
Seller of, prior to or at the Closing, each and every of the following
conditions precedent:
(a) Representations and Warranties; Covenants and Conditions.
Each of the representations and warranties of the Purchaser contained in this
Agreement shall be true and correct in all material respects on and as of the
date of the Closing Date with the same force as though such representations and
warranties had been made on and as of the Closing Date. The Purchaser shall have
performed and complied in all material respects with each and every covenant,
agreement and condition required by this Agreement to be performed or satisfied
by the Purchaser at or prior to the Closing Date. The Purchaser shall execute
and deliver to the Seller a certificate dated as of the Closing Date to such
effect.
(b) No Legal Proceeding Affecting Closing. On the Closing Date, no
Order or law, restraining or prohibiting the transactions contemplated by
this Agreement and no Legal Proceeding shall be pending or threatened in which
it is sought to restrain or prohibit or to obtain damages or other relief in
connection with this Agreement or the consummation of the transactions
contemplated hereby or thereby, and no investigation that might eventuate in any
such suit, action or proceeding shall be pending or threatened.
(c) Escrow Agreement. The Purchaser shall have executed the Escrow
Agreement substantially in the form of Exhibit A attached hereto.
(d) Assumption Agreement. The Purchaser shall have executed and
delivered an Assumption Agreement substantially in the form of Exhibit D.
(e) Opinion of Counsel of the Purchaser. Xxxxxx Xxxxxxxx LLP, counsel
for the Purchaser, shall have delivered to the Seller and the Members its
favorable opinion, dated the Closing Date, as to the matters covered in Schedule
6.2(e).
(f) Delivery of Documents. The Purchaser shall have delivered to the
Seller all documents, certificates, instruments and items required to be
delivered by it at or prior to the Closing.
ARTICLE 7
CLOSING
7.1. The Closing and the Closing Date. The Closing of transactions herein
contemplated (the "Closing") shall occur on the date hereof effective at the
close of business (the "Closing Date"). The Closing shall take place by
providing copies of each of the documents necessary for Closing by facsimile,
with originals of each Closing document delivered to the respective parties
promptly after Closing. On the Closing Date, the Parties shall deliver all
documents and items contemplated hereunder, including those specifically set
forth in Article 6 hereof.
-19-
7.2. Third Party Consents. Unless otherwise agreed to by the Purchaser, to
the extent that any Contract is not assignable without Consent, this Agreement
shall not constitute an assignment or an attempted assignment thereof, or an
assumption or attempted assumption of Obligations and Liabilities arising
thereunder, if such assignments or attempted assignment would constitute a
breach thereof unless the necessary Consents are obtained. The Purchaser shall
use commercially reasonable best efforts to obtain the Consents required for the
assignment of the Purchased Assets. The Seller and the Members will cooperate to
the extent commercially reasonable with the Purchaser in its effort to obtain
such Consents (without incurring any expense). If any such Consent shall not be
obtained, then the Seller, the Members and the Purchaser shall take such actions
(without incurring any expense) as may be reasonably necessary to (a) provide
for the Purchaser the benefits intended to be assigned to the Purchaser
hereunder with respect to any such other Contract (including enforcement at the
cost and for the account of the Purchaser of any and all rights of the Seller
against the other party thereto arising out of the breach or cancellation
thereof by such other party or otherwise), (b) relieve the Seller of, or
indemnify the Seller against, its obligations to the other contracting party
under any such Contract.
Without limiting the provisions of this Section, the Seller and the
Purchaser shall use commercially reasonable efforts to enter into, and shall
cooperate with one another in good faith in entering into, appropriate and
reasonable alternative arrangements pursuant to foregoing paragraph, on terms
mutually agreeable, with respect to any Contract which is not, by its terms,
assignable (in whole or in part) by the Seller or under which the Seller may not
assign its obligations or delegate its duties.
7.3. Employment, Compensation and Employee Benefits From and After
Closing. The respective undertakings and covenants of the Purchaser from and
after the Closing with respect to the employment by the Purchaser of employees
of the Seller or other employees engaged in the conduct of the Business, except
for those individuals to receive an employment agreement, and the compensation
and employee benefits to be provided such employees employed by the Purchaser
shall be as set forth below:
(a) Employment. The Purchaser shall offer employment as of the end of
business on the Closing Date to the employees of Seller. The offer of employment
to any such employee may, but not need not be for the same position as held by
the employee in the Business immediately prior to the Closing. The Purchaser
shall initially offer such Employees employment at the same rate of compensation
as paid by the Seller immediately prior to the Closing; provided, however, that
Purchaser shall not be prohibited from lowering such rate of compensation at any
time after Closing. Any such offers of employment and the actual employment of
any such employee shall be subject to the Purchaser's right, in its sole
discretion, to establish and modify from time to time the terms and conditions
of such employment and to terminate any such employee at any time. Except as the
Purchaser may expressly provide, all such employees shall be treated as new
employees of the Purchaser from their date of employment.
(b) The Purchaser's Compensation Practices and Employee Benefits
Programs. The Purchaser shall establish such compensation practices and
employee benefit programs for its employees as it determines appropriate or
desirable. The Purchaser reserves the right (1) to determine the terms and
conditions of all such practices and programs and (2) to amend, discontinue or
terminate, in whole or in part, any such practice or program. The Purchaser
intends to establish its own such practices and programs and not to continue or
otherwise assume any of the Seller's plans or personnel policies.
(c) Health Care and Disability Plans. All health care plans maintained
by the Seller for those of its employees who are employed by the Purchaser
on or after the Closing will terminate not
-20-
earlier than the end of the month in which the Closing occurs (the "Termination
Date"). The Seller shall pay, or cause to be paid, all claims for health care
benefits covered by any of its insured or self-insured health care plans which
relate to health care services rendered on or before the Termination Date,
regardless of when such claims may be filed and to the extent such plan would
honor such claims in accordance with its terms. Purchaser shall pay Seller
$2,000 at Closing for costs associated with such insurance from the Closing Date
until the Termination Date, at which time such employees shall be covered by
Purchaser.
7.4. Severance. The Seller shall remain liable to the Seller's former
employees for severance benefits, if any, resulting from their termination of
employment with the Seller.
ARTICLE 8
COVENANT NOT TO COMPETE
8.1. Confidentiality.
(a) Each party to this Agreement shall use Confidential Information
only in connection with the transactions contemplated hereby and shall not
disclose any Confidential Information about any other party to any Person unless
the party desiring to disclose such Confidential Information receives the prior
written consent of the party about whom such Confidential Information pertains,
except (i) to any party's directors, officers, employees, agents, advisors and
representatives who have a need to know such Confidential Information for the
performance of their duties as employees, agents or representatives, (ii) to the
extent absolutely necessary to obtain any Consents including, without
limitation, any Regulatory Approvals, that may be required or advisable to
consummate the transactions contemplated by this Agreement, (iii) to enforce
such party's rights and remedies under this Agreement, (iv) with respect to
disclosures that are compelled by any Requirement of Law or pursuant to any
Legal Proceeding; provided, that the party compelled to disclose Confidential
Information under this clause (iv) pertaining to any other party shall notify
such other party thereof and use his or its commercially reasonable efforts to
cooperate with such other party to obtain a protective order or other similar
determination with respect to such Confidential Information; (v) made to any
party's legal counsel, independent auditors, investment bankers or financial
advisors under an obligation of confidentiality; or (vi) as otherwise permitted
by Section 12.6 of this Agreement.
(b) In the event that the transactions contemplated by this Agreement
are not consummated in accordance with the terms of this Agreement, each
party shall, upon the request of the other party, return to the other party or
destroy all Confidential Information and any copies thereof previously delivered
by such requesting party, except to the extent that such party deems such
Confidential Information necessary or desirable to enforce his or its rights
under this Agreement.
(c) The obligation of confidentiality contained in this Section 8.1
shall survive the termination of this Agreement, or the Closing, as
applicable, for a period of two years after the date of such termination or the
Closing Date, respectively; provided, that, if the Closing shall occur, then the
Purchaser's obligation of confidentiality shall terminate upon the Closing.
8.2. Covenant Not To Compete. As a material inducement to the Purchaser's
consummation of the transactions contemplated by this Agreement, each of the
Seller and the Members shall not, during the Restricted Period, do any of the
following, directly or indirectly, without the prior written consent of the
Purchaser in its sole discretion:
-21-
(a) engage, directly or indirectly, in the business of converting paper
documents to electronic format, including through the use, sales, licensing and
distribution of the Intellectual Property included in the Purchased Assets (the
"Restricted Business") within any geographic area located within the United
States of America, its possessions or territories (the "Restricted Area");
(b) become interested (whether as owner, stockholder, lender, partner,
co-venturer, director, officer, employee, agent, consultant or otherwise),
directly or indirectly, in any Person that engages in the Restricted Business
within the Restricted Area; provided, that each Member may own, as a passive
investor, not more than five percent (5%) of the outstanding securities of any
class of any publicly-traded securities of any publicly held company listed on a
well-recognized national securities exchange or on an interdealer quotation
system of the National Association of Securities Dealers, Inc; or
(c) solicit, call on, divert, take away, influence, induce or attempt
to do any of the foregoing, in each case within the Restricted Area, with
respect to the Purchaser's or any of the Related Companies' (A) customers or
distributors or prospective customers or distributors (wherever located) with
respect to goods or services of the Restricted Business, (B) distributors,
consultants, agents, or independent contractors of the Seller to terminate or
modify any contract, arrangement or relationship with the Purchaser or any of
the Related Companies or (C) employees of the Seller to leave the employ of the
Purchaser or any of the Related Companies.
(d) Nothing herein shall restrict the Seller, the Members and their
Affiliates from engaging in the business of Stenograph, L.L.C., as conducted on
the date hereof and, any other business related to its shorthand machines, voice
transcription and related software products businesses.
8.3. Specific Enforcement; Extension of Period.
(a) The Seller and the Members acknowledge that any breach or
threatened breach by them of any provision of Sections 8.1 or 8.2 will
cause continuing and irreparable injury to the Purchaser and the Related
Companies for which monetary damages would not be an adequate remedy.
Accordingly, the Purchaser and any of the Related Companies shall be entitled to
such injunctive relief from a court of competent jurisdiction, including
specific performance, with respect to any such breach or threatened breach. In
connection therewith, neither the Seller nor the Members shall, in any action or
proceeding to so enforce any provision of this Article 8, assert the claim or
defense that an adequate remedy at law exists or that injunctive relief is not
appropriate under the circumstances. The rights and remedies of the Purchaser
and any of the Related Companies set forth in this Section 8.3 are in addition
to any other rights or remedies to which the Purchaser or any of the Related
Companies may be entitled, whether existing under this Agreement, at law or in
equity, all of which shall be cumulative.
(b) The periods of time set forth in this Article 8 shall not include,
and shall be deemed extended by, any time required for litigation to
enforce the relevant covenant periods. The term "time required for litigation"
as used in this Section 8.3(b) shall mean the period of time from the earlier of
the Seller's or the Members', as applicable, first breach of the provisions of
Sections 8.1 or 8.2 or service of process upon the Seller or the Members, as
applicable, through the expiration of all appeals related to such litigation.
8.4. Disclosure. The Seller and the Members acknowledge that the Purchaser
or any of the Related Companies may provide a copy of this Agreement or any
portion of this Agreement to any Person
-22-
with, through or on behalf of which either the Seller or the Members may,
directly or indirectly, breach or threaten to breach any of the provisions of
Section 8.2.
8.5. Interpretation. It is the desire and intent of the parties that the
provisions of this Article 8 shall be enforceable to the fullest extent
permissible under applicable law and public policy. Accordingly, if any
provision of this Article 8 shall be determined to be invalid, unenforceable or
illegal for any reason, then the validity and enforceability of all of the
remaining provisions of this Article 8 shall not be affected thereby. If any
particular provision of this Article 8 shall be adjudicated to be invalid or
unenforceable, then such provision shall be deemed amended to delete therefrom
the portion thus adjudicated to be invalid or unenforceable, such amendment to
apply only to the operation of such provision in the particular jurisdiction in
which such adjudication is made; provided that, if any provision contained in
this Article 8 shall be adjudicated to be invalid or unenforceable because such
provision is held to be excessively broad as to duration, geographic scope,
activity or subject, then such provision shall be deemed amended by limiting and
reducing it so as to be valid and enforceable to the maximum extent compatible
with the applicable laws and public policy of such jurisdiction, such amendment
only to apply with respect to the operation of such provision in the applicable
jurisdiction in which the adjudication is made.
8.6. Acknowledgment. The Seller and the Members acknowledge that they have
carefully read and considered the provisions of this Article 8. The Seller and
the Members believe that they have received and will receive sufficient
consideration and other benefits to justify the restrictions in this Article 8.
The Seller and the Members also acknowledge and understand that these
restrictions are reasonably necessary to protect the Purchaser's and the Related
Companies' interests, and the Seller and the Members do not believe that such
restrictions will prevent them from conducting businesses that are not
competitive with those of the Purchaser or any of the Related Companies during
the term of such restrictions in the Restricted Area.
ARTICLE 9
SURVIVAL
The representations and warranties of the Seller and the Members on the one
hand, and the Purchaser on the other hand, contained in this Agreement shall
survive until eighteen months after the Closing Date; provided that
representations and warranties and indemnification obligations with respect to
which a claim is made within such period shall survive until such claim is
finally determined and paid. Notwithstanding the foregoing, the representations
and warranties set forth in each of Section 3.14 and Section 3.16 shall survive
until the expiration of the statute of limitations applicable to the subject
matter addressed thereunder; provided that representations and warranties and
indemnification obligations with respect to which a claim is made within such
period shall survive until such claim is finally determined and paid. The
covenants and agreements of the Seller and the Members on the one hand, and of
the Purchaser on the other hand, contained in this Agreement will survive the
Closing until, by their own respective terms, they have been fully performed.
-23-
ARTICLE 10
INDEMNIFICATION
10.1. The Seller and the Members Indemnification. From and after the
Closing Date, the Seller and each of the Members shall, jointly and severally,
indemnify and hold harmless the Purchaser and any of its Affiliates, and each
Person who controls (within the meaning of the Securities Act of 1933, as
amended) the Purchaser or any such Affiliate, and each of their respective
directors, officers, employees, agents, successors and assigns and legal
representatives, from and against all liabilities, obligations, claims, demands,
damages, penalties, settlements, causes of action, costs and expenses
(including, without limitation, all reasonable attorneys', experts' and
accountants' fees, expenses and disbursements and court costs in connection
therewith) (collectively, "Indemnifiable Losses") that may be imposed upon,
incurred by or asserted against any of them which are caused by (i) any
misrepresentation, breach of any warranty or non-fulfillment of any covenant to
be performed by the Seller or the Members under this Agreement or any document,
instrument, certificate or other item required to be furnished to the Purchaser
pursuant hereto or thereto or in connection with the transactions contemplated
by this Agreement; (ii) any Retained Liabilities; or (iii) any Legal Proceeding
or Order, arising out of any of the foregoing even though such Legal Proceeding
or Order may not be filed, become final, or come to light until after the
Closing Date.
10.2. The Purchaser's Indemnification. From and after the Closing Date, the
Purchaser shall indemnify and hold harmless the Seller and the Members and any
of their Affiliates, and each Person who controls (within the meaning of the
Securities Act of 1933, as amended) the Seller or the Members or any such
Affiliate, and each of their respective managers, officers, employees, agents,
successors, assigns and legal representatives, from and against all
Indemnifiable Losses imposed upon, incurred by or asserted against any of them
which are caused by: (i) any misrepresentation, breach of any warranty or
non-fulfillment of any covenant to be performed by the Purchaser under this
Agreement or any document, instrument, certificate or other item furnished or to
be furnished to the Seller or the Members pursuant hereto or thereto or in
connection with the transactions contemplated by this Agreement; (ii) any
Assumed Liabilities; and (iii) any Legal Proceeding or Order, arising out of any
of the foregoing even though such Legal Proceeding or Order may not be filed,
become final, or come to light until after the Closing Date.
10.3. Payment; Procedure for Indemnification.
(a) In the event that the Person seeking indemnification under this
Article 10 (the "Indemnified Party") shall suffer an Indemnifiable Loss,
he, she or it shall promptly, after obtaining Knowledge of the incurrence of any
such Indemnifiable Loss, give written notice to the party from whom
indemnification under this Article 10 is sought (the "Indemnifying Party") of
the Indemnifiable Loss (the "Indemnity Notice"). The failure of any Indemnified
Party to give the Indemnifying Party the Indemnity Notice shall not release the
Indemnifying Party of liability under this Article 10; provided, however that
the Indemnifying Party shall not be liable for Indemnifiable Losses incurred by
the Indemnified Party that would not have been incurred but for the delay in the
delivery of, or the failure to deliver, the Indemnity Notice or to the extent
the Indemnifying Party is materially prejudiced by the delay. In the event that
the parties are unable to resolve the subject of the Indemnity Notice, the issue
shall be submitted for determination to a neutral third party designated by the
President of the Philadelphia office of the American Arbitration Association.
(b) In the event the facts giving rise to the claim for indemnification
under this Article 10 shall involve any action, or threatened claim or demand by
any third Person against the
-24-
Indemnified Party, the Indemnified Party, promptly after obtaining Knowledge of
the filing of a lawsuit or the existence of a claim or demand giving rise to the
claim for indemnification, shall send written notice of such claim to the
Indemnifying Party (the "Claim Notice"). The failure of the Indemnified Party to
give the Indemnifying Party the Claim Notice shall not release the Indemnifying
Party of liability under this Article 10; provided, however, that the
Indemnifying Party shall not be liable for Indemnifiable Losses incurred by the
Indemnified Party that would not have been incurred but for the delay in the
delivery of, or the failure to deliver, the Claim Notice or to the extent the
Indemnifying Party is materially prejudiced by the delay. The Indemnifying Party
shall be entitled to defend such claim in the name of the Indemnified Party at
its own expense and through counsel of its own choosing; provided, that if the
applicable claim or demand is against, or if the defendants in any such Legal
Proceeding shall include, both the Indemnified Party and the Indemnifying Party
and the Indemnified Party reasonably concludes that there are defenses available
to it that are different or additional to those available to the Indemnifying
Party or if the interests of the Indemnified Party may be reasonably deemed to
conflict with those of the Indemnifying Party, then the Indemnified Party shall
have the right to select separate counsel and to assume the Indemnified Party's
defense of such claim, demand or Legal Proceeding, with the reasonable fees,
expenses and disbursements of such counsel to be reimbursed by the Indemnifying
Party to the extent related to the Indemnifiable Loss. The Indemnifying Party
shall give the Indemnified Party notice in writing within ten (10) days after
receiving the Claim Notice from the Indemnified Party in the event of litigation
or otherwise of its intent to do so. Whenever the Indemnifying Party is entitled
to defend any claim hereunder, the Indemnified Party may elect, by notice in
writing to the Indemnifying Party, to continue to participate through its own
counsel, at its expense, but the Indemnifying Party shall have the right to
control the defense of the claim or the litigation; provided, that the
Indemnifying Party retains counsel reasonably satisfactory to the Indemnified
Party and pursuant to an arrangement satisfactory to the Indemnified Party;
otherwise, the Indemnified Party shall have the right to control the defense of
the claim or the litigation. Notwithstanding any other provision contained in
this Agreement, the party controlling the defense of the claim or the litigation
shall not settle any such claim or litigation without the written consent of the
other party; provided, that, subject to the next sentence, if the party
controlling the defense of the claim or the litigation shall have, in good
faith, negotiated a settlement thereof, which proposed settlement contains terms
that are reasonable under the circumstances, then the other party shall not
withhold or delay the giving of such consent (and in the event the Indemnifying
Party and Indemnified Party are unable to agree as to whether the proposed
settlement terms are reasonable, the Indemnifying Party and Indemnified Party
will request that the disagreement be resolved by a neutral third party
designated by the President of the Philadelphia office of the American
Arbitration Association). In the event that the party controlling the defense of
the claim or the litigation shall have negotiated a settlement thereof, which
proposed settlement is substantively final and unconditional as to the parties
thereto (other than the consent of the Indemnified Party required under this
Section 10.3(b)) and contains an unconditional release of the Indemnified Party
and does not include the taking of any actions by, or the imposition of any
restrictions on the part of, the Indemnified Party and the Indemnified Party
shall refuse to consent to such settlement, the liability of the Indemnifying
Party under this Section 10, upon the ultimate disposition of such litigation or
claim, shall be limited to the amount of the proposed settlement; provided,
however, that in the event the proposed settlement shall require that the
Indemnified Party make an admission of liability, a confession of judgment, or
shall contain any other non-financial obligation which, in the reasonable
judgment of the Indemnified Party, renders such settlement unacceptable, then
the Indemnified Party's failure to consent shall not give rise to the limitation
of Indemnifying Party's liability as provided for in this Section 10.3(b), and
the Indemnifying Party shall continue to be liable to the full extent of such
litigation or claim.
-25-
10.4. Limitations on Indemnification. The Purchaser, and the other
Persons or entities indemnified hereunder shall not assert any claim or be
entitled to indemnification against the Seller or the Members until such time as
the aggregate of all claims which such persons may have against the Seller or
the Members shall exceed $10,000 (the "Indemnification Threshold"), whereupon
such claims shall be indemnified in excess of the Indemnification Threshold.
Neither the Seller nor the Members shall assert any claim for indemnification
against the Purchaser until such time as the aggregate of all claims which the
Seller or the Members may have against the Purchaser shall exceed the
Indemnification Threshold, whereupon such claims shall be indemnified in excess
of the Indemnification Threshold. The limitation on the assertion of claims for
indemnification contained in this paragraph shall apply only to claims based
upon inaccuracies in, or breaches of, representations and warranties contained
in this Agreement or any document, instrument, certificate or other item
required to be furnished pursuant to this Agreement or in connection with the
transaction contemplated by this Agreement. In addition, the Indemnification
Threshold shall be separate and apart from the Rework Threshold and any claims
in connection with the Rework Expenses shall not apply to the Indemnification
Threshold.
No person shall be entitled to indemnification under this Article 10 if and
to the extent that such person's claim for indemnification is directly or
indirectly related to a breach by such person of any representation, warranty,
covenant or other agreement set forth in this Agreement.
Notwithstanding any other term of this Agreement, the Seller and the
Members on the one hand, and the Purchaser on the other hand, shall not be
liable under this Article 10 for an amount which exceeds $625,000. No claim
under this Article 10 shall be made unless an Indemnity Notice, or a Claim
Notice (as applicable) has been given prior to the applicable survival period.
In computing the amount of any Indemnifiable Loss which is sustained,
suffered or incurred by the Indemnified Party, the Indemnifying Party shall be
given the benefit of insurance proceeds, if any (up to a maximum equal to the
amount of the Indemnifiable Loss), actually received by the Indemnified Party,
reduced by any and all out-of-pocket costs, legal or otherwise, incurred by the
Indemnified Party in the collection of such insurance proceeds; it being
understood that the other party shall at no time be deemed to be a third-party
beneficiary of any such insurance. Further, the parties acknowledge that due to
the uncertainties of collection of any such insurance proceeds, the potential
availability of insurance proceeds will not abrogate a party's responsibility to
reimburse the Indemnified Party for any Indemnifiable Loss sustained, suffered
or incurred, as and when such Indemnifiable Loss is sustained, suffered or
incurred; it being understood that if insurance proceeds are thereafter received
by the Indemnified Party with respect to such Indemnifiable Loss, the proceeds
of such insurance will be utilized to reimburse the Indemnifying Party for any
payments made on account of such Indemnifiable Loss, with the remainder of any
such insurance proceeds to be retained by the Indemnified Party. Purchaser shall
use commercially reasonable efforts to obtain insurance proceeds which may be
available to cover an Indemnifiable Loss on behalf of Seller and the Members.
The Indemnifying Party shall have no obligation to indemnify the
Indemnified Party for consequential damages, special damages, incidental
damages, indirect damages, lost profits or similar items.
The Indemnified Party shall not bring a claim or be entitled to
indemnification with respect to any facts or circumstances resulting in a breach
of any representation, warranty, covenant or agreement of which the Indemnified
Party had actual knowledge on or before the Closing Date.
-26-
To the extent that an Indemnifying Party discharges any claim for
indemnification hereunder, such Indemnifying Party shall be subrogated to all
rights of the Indemnified Party against third parties.
The indemnification rights of the parties under this Article 10 are
exclusive of other rights and remedies that the parties may have under this
Agreement (but for this provision), at law or in equity or otherwise with
respect to the transactions provided for herein, except as to rights which may
be exercised against a party on account of such party's fraud.
ARTICLE 11
[Intentionally Omitted]
ARTICLE 12
POST-CLOSING COVENANTS
12.1. Further Cooperation. From and after the Closing Date, the Seller
shall, and the Members shall and shall cause the Seller to, (i) assist and
cooperate with the Purchaser in effecting the orderly transfer of the Purchased
Assets to the Purchaser, and (ii) execute and deliver such documents and take
such other actions as the Purchaser reasonably requests to fully consummate the
transactions contemplated by this Agreement. In addition, the Seller and the
Members shall (i) provide or cause to be provided such written information with
respect to themselves, (ii) execute and deliver or cause to be executed and
delivered such other documents, certificates or instruments, and (iii) take or
cause to be taken such actions, as the Purchaser, or any auditor reasonably
deems necessary or desirable to complete any audit of the Purchaser's
consolidated financial statements, the Seller's financial statements or in
connection with any Requirements of Law applicable to the Purchaser, including
federal or state securities laws.
12.2. Maintenance of Books and Records.
(a) For a period of seven (7) years after the Closing Date, the
Purchaser shall maintain all Books and Records maintained by the Seller on
or prior to the Closing Date which are transferred to the Purchaser and shall
permit the Seller or the Members or their respective representatives and agents
access, at the Seller's or the Member's sole cost and expense, to all such Books
and Records, as well as all employees of Purchaser involved with the Business
(to the extent such access requires significant time away from such employees'
ordinary duties, Seller and Members will provide Purchaser with reasonable
reimbursement) upon reasonable notice by the Seller or the Members, as
applicable, and on terms not disruptive to the business, operation or employees
of the Purchaser. The Seller and the Members will hold all information provided
to them pursuant to this Article 12 (and any information derived therefrom) in
confidence to the same extent as required by Section 8.1 of this Agreement with
respect to Confidential Information.
(b) For a period of three (3) years after the Closing Date, the Seller
shall, and the Members shall, cause the Seller to, maintain all Books and
Records possessed or to be possessed by the Seller or the Members that relate to
the Business prior to the Closing Date. The Seller shall, and the Members shall,
cause the Seller to, permit the Purchaser, or their representatives and agents
access, at the Purchaser's sole cost and expense, to all of such Books and
Records upon reasonable prior written notice for any reasonable business
purpose.
-27-
12.3. Use of Name. From and after the Closing Date, the Seller shall,
and the Members shall cause the Seller to: (i) sign such consents and take such
other actions as the Purchaser shall reasonably request to permit the Purchaser
to use the name Integrated Information Services (the "Name"); (ii) cease to use
the Name and all variants thereof; and (iii) take all necessary action to change
its corporate and trade names by a date which is twenty days from the Closing
Date to such name or names that are substantially different from and not
confusingly similar to the Name.
12.4. Discharge of Obligations. From and after the Closing Date, the Seller
shall, and the Members shall cause the Seller to, pay and discharge diligently,
in accordance with past practice but not less than on a timely basis, all of the
Retained Liabilities, including, without limitation, those relating to
employees, trade creditors and customers.
12.5. Receivables. If, at any time after the Closing Date, the Seller or
the Members shall receive any payments on account of any of the Receivables or
other rights to payment constituting a part of the Purchased Assets, then the
Seller or the Members, as applicable, shall hold such funds in trust for, and
shall promptly remit (and the Members shall cause the Seller to remit promptly)
such funds to the Purchaser immediately upon receipt thereof. The Seller hereby,
effective from and after the Closing Date, authorizes and grants to the
Purchaser (acting through any one or more of the Purchaser's authorized
representatives or agents) a power of attorney to endorse the Seller's name on
any check or any other remittances received by the Purchaser on account of the
Receivables. The foregoing power of attorney is coupled with an interest and is
irrevocable.
12.6. Public Announcements. No party shall issue any public report,
statement, press release or similar item or make any other public disclosure
with respect to the substance of this Agreement prior to the consultation with
and approval of the other parties. Nothing contained herein shall restrict the
ability of a party from contacting a third party in order to obtain a Consent to
the transactions contemplated hereby.
12.7. Trademark License. Notwithstanding anything herein to the contrary
(including Schedule 2.1(b)), Seller and Members hereby grant Purchaser a
perpetual, royalty-free license to utilize the trademark DISCOVERY PRODUCTS
(Serial No. 741560,692) for use in connection with the Purchased Assets. In
connection with this grant, Purchaser agrees that the quality of the products in
connection with which the DISCOVERY PRODUCTS trademark is used shall be
consistent with or exceed the historic quality of such products prior to the
date hereof.
`
ARTICLE 13
TAXES RELATING TO PURCHASED ASSETS
The Seller shall, and the Members shall cause the Seller to pay, and the
Seller and the Members shall jointly and severally indemnify and hold harmless
the Purchaser from and against all Transfer Taxes which are imposed on the
Seller and the Members. The Purchaser shall pay, and the Purchaser indemnifies
and holds harmless the Sellers and Members from and against all Transfer Taxes
which are imposed on the Purchaser.
-28-
ARTICLE 14
MISCELLANEOUS
14.1. Notices. All notices required to be given to any of the parties to
this Agreement shall be in writing and shall be deemed to have been sufficiently
given, subject to the further provisions of this Section 14.1, for all purposes
when presented personally to such party or sent by certified or registered mail,
return receipt requested, with proper postage prepaid, or any national overnight
delivery service, with proper charges prepaid, or facsimile transmission with
receipt confirmed by such party, to such party at its address set forth below:
(a) If to the Seller and Members:
Xxxxxxxxx, L.L.C.
0000 Xxxxxxxxxx Xx.
Xxxxx 000
Xxxxx, XX 00000
Fax No.:000-000-0000
Attn: Chief Financial Officer
c/x Xxxxxxxxx, L.L.C.
0000 Xxxxx Xxxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Fax No. 000-000-0000
with a copies to:
XxXxxxxxx, Will & Xxxxx
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Fax No. 000-000-0000
Attn: Xxxxxxx X. Meadow P.C.
(b) If to the Purchaser:
ImageMax, Inc.
Xxx Xxxx Xxxxx, Xxxxx 000
Xxxx Xxxxxx, XX 00000
Fax No.: 000-000-0000
-29-
with a copy to:
Xxxxxx Xxxxx
0000 X. 00xx Xxxxxx
Xxxxxxxxx, XX 00000
Fax No.: 000-000-0000
Xxxxxx Xxxxxxxx LLP
3000 Two Xxxxx Square
00xx & Xxxx Xxxxxxx
Xxxxxxxxxxxx, XX 00000-0000
Attention: Xxxxx X. Xxxx
Fax No.: 000-000-0000
Such notice shall be deemed to be received when delivered if delivered
personally, the next business day after the date sent if sent by a national
overnight delivery service, or three (3) business days after the date mailed if
mailed by certified or registered mail. Any notice of any change in such address
shall also be given in the manner set forth above. Whenever the giving of notice
is required, the giving of such notice may be waived in writing by the party
entitled to receive such notice.
14.2. No Third Party Beneficiaries. Except as is otherwise expressly
provided in this Agreement, this Agreement is not intended to, and does not,
create any rights in or confer any benefits upon anyone other than the parties
hereto.
14.3. Schedules. All schedules attached to this Agreement are incorporated
by reference into this Agreement for all purposes.
14.4. Expenses. The parties to this Agreement shall pay their own expenses
incident to the preparation, negotiation and execution of this Agreement
including, without limitation, all fees and costs and expenses of their
respective accountants and legal counsel.
14.5. Further Assurances. The Seller or the Members on the one hand, and
the Purchaser on the other hand, shall, at their own respective expense, from
time to time upon the request of the other party, execute and deliver, or cause
to be executed and delivered, at such times as may reasonably be requested by
such other party, such other documents, certificates and instruments and take
such actions as such other party deem reasonably necessary to consummate more
fully the transactions contemplated by this Agreement.
14.6. Entire Agreement; Amendment. This Agreement and any other documents,
instruments or other writings delivered or to be delivered pursuant to this
Agreement constitute the entire agreement among the parties with respect to the
subject matter of this Agreement and supersede all prior agreements,
understandings, and negotiations, whether written or oral, with respect to the
subject matter of this Agreement. None of the terms and provisions contained in
this Agreement can be changed without a writing signed by all parties hereto.
-30-
14.7. Section and Paragraph Titles. The section and paragraph titles used
in this Agreement are for convenience only and are not intended to define or
limit the contents or substance of any such section or paragraph.
14.8. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of each of the parties to this Agreement and their respective successors
and permitted assigns. Neither the Seller, the Members, nor Purchaser shall have
the right to assign this Agreement without the prior written consent of the
others.
14.9. Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute one and the same
instrument.
14.10. Severability. Any provision of this Agreement (other than those
contained in Article 8 of this Agreement, in which case, Section 8.5 of this
Agreement shall govern with respect to the invalidity, unenforceability, or
illegality of any such provision) that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions of this Agreement or such provision, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
14.11. Governing Law. This Agreement shall be governed and construed as to
its validity, interpretation and effect by the laws of the Commonwealth of
Pennsylvania notwithstanding the choice of law rules of Pennsylvania or any
other jurisdiction.
-31-
IN WITNESS WHEREOF, the Seller, the Member and the Purchaser have
caused this Agreement to be duly executed as of the date first written above.
INTEGRATED INFORMATION
SERVICES, L.L.C.
By: /s/ Xxxxxxxxxxx Xxxxxx
-----------------------------------------
Name: Xxxxxxxxxxx Xxxxxx
Title: Vice President
IMAGEMAX, INC.
By: /s/ Xxxxx X. Xxxxxx
-----------------------------------------
Xxxxx X. Xxxxxx, Chief Executive Officer
XXXXXXXXX, L.L.C.
By: /s/ Xxxxxxxxxxx Xxxxxx
-----------------------------------------
Name: Xxxxxxxxxxx Xxxxxx
Title: President
XXXXXXX HOLDING, L.L.C.
By: /s/ Xxxxxxx X. Xxxxxxx
-----------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Assistant Secretary
-32-
Schedule 2.1(a)
Purchased Assets
The Purchased Assets include all of the Seller's right, title and interest
in the items described below:
1. Personal Property Leases. Seller's interest, as lessee or otherwise, in
all personal property that is the subject matter of any leases to which the
Seller is a party.
2. Equipment, Machinery and Other Tangible Personal Property. All machinery,
equipment, trucks, automobiles, supplies, office furniture, computing and
telecommunications equipment and other items of personal property that are
owned by Seller and used in connection with the Business.
3. Contracts. All of the interest in all Contracts relating to the acquisition
or ownership by Seller of any of the Purchased Assets or the operation of the
Business including, without limitation, those listed in the Disclosure
Schedule.
4. Books and Records. All of Seller's Books and Records relating to the
Business.
5. Intellectual Property. All of Seller's right, title and interest in and to
the Intellectual Property including, without limitation, that listed in the
Disclosure Schedule.
6. Business and Goodwill. All of Seller's right, title and interest in and to
the Business as a going concern and all of the goodwill incident to the
Business.
7. Inventory. All inventory incremental or relating to, or used in connection
with the Business including, without limitation, all supplies, work-in-process
and finished goods of the Business on the Closing Date.
8. Receivables. All of Seller's Receivables associated with the Business
existing at the Closing Date.
9. Prepaid Expenses. All Prepaid Expenses.
10. Computer Software. All Computer Software.
11. Other Intangible Assets. All other assets (including causes of action,
rights of action, contract rights and warranty and product liability claims
against third parties) relating to the Purchased Assets, the Assumed
Liabilities and the Business.
12. Leases. The Seller's interest in the lease related to the New Facility and
Seller's sales office in Chicago.
-33-
Schedule 2.1(b)
Excluded Assets
1. Insurance Policies. Any insurance policies maintained by Seller with
respect to the Business.
2. Cash Consideration. The aggregate cash consideration paid by the Purchaser
to Seller pursuant to this Agreement.
3. Corporate Records. Seller's corporate minute book and stock books, records
and tax records.
4. Certain Claims. Any of Seller's claims and rights against third parties
(including, without limitation, insurance carriers), to the extent they relate
to Retained Liabilities.
5. Benefit Plan Assets. Assets constituting any pension or other funds for the
benefit of Seller's employees including, without limitation, any Employee
Benefit Plan.
6. Tax Refunds. All of Seller's claims for refunds of Taxes and other
governmental charges to the extent such refunds relate to periods ending on or
prior to the Closing Date.
8. Affiliate Payments. All amounts payable to the Seller from its
Affiliates.
9. Certain Agreements. (i) The Agreement for Purchase and Sale of Assets
dated February 13, 1996 by and between Stenograph Acquisition Corp. and IIS
Acquisition Corp., on the one hand, and Quixote Corporation, Legal
Technologies, Inc., Stenograph Corporation, Legal Technologies Limited and
Integrated Information Services, Inc., on the other hand and (ii) the
Agreement for Purchase and Sale of Assets dated July 3, 1996, by and
between Integrated Information Services, Inc. and Xxxxxxxxx Corporation,
Discovery Products, Inc. and Quixote Corporation.
10. Records. All personnel records of employees not hired by the Purchaser
on the Closing Date.
11. Pre-Closing Items. Items sold, transferred, disposed of or consumed in the
ordinary course prior to Closing, and contracts and other agreements to the
extent performed or terminated prior to Closing.
12. Permits. All of Seller's interest in all Permits relating to the Facility.
13. Cash. All of Seller's cash and cash equivalents on hand or in Accounts.
14. Software. Subject to Section 12.7, the Computer Software listed on
Annex B attached to this Schedule 2.1(b) (and any related Intellectual
Property Rights, manuals and documentation).
-1-
Schedule 2.1(b)
Annex B
Software
--------
Discovery ZX Windows Windows transcript viewer restricted to ZX format
Discovery ZX DOS DOS-based transcript viewer restricted to ZX format
Discovery Base DOS database program for transcript management
Convert ZX DOS application to convert ASCII files to ZX format
Discovery Video ZX DOS-based transcript search for video transcripts
Case View Litigation support software for digital transfer of
electronically recorded testimony
Trademarks
----------
Xxxx Registration/Application Number
---- -------------------------------
Discovery ZX and Design 74/385,296
Discovery ZX and design Reg. No. 1,902,462
Discovery Base Reg. No. 1,617,380
Discovery ZX Reg. No. 1,729,005
Discovery Video ZX Reg. No. 1,799,874
Discovery Products (and Design) 74/560,692
The Real Power of Attorney 1,952,236
Litigation Support for the Legal Professional 1,872,071
-2-
Schedule 2.7
Assumed Liabilities
1. The Adjusted Current Liabilities of Seller, only to the extent and
either in the amounts reflected on the Closing Balance Sheet or incurred
consistently with past business practice in or as a result of the normal and
ordinary course of business after the Balance Sheet Date.
2. Assumed Taxes.
3. All Obligations and Liabilities related to the Purchased Assets
arising on or after the Closing Date including liabilities and obligations
arising on or after the Closing Date under the Contracts included in the
Purchased Assets.
4. All Obligations and Liabilities to perform Rework on or arising after
the Closing Date, except for the 180 Day Rework Expenses which shall be
allocated in accordance with Section 2.9.
5. Moving Expenses which shall be allocated in accordance with Section 2.9.
-3-
