ASSET PURCHASE AGREEMENT
THIS
AGREEMENT
is made
by and among DPI
of Rochester, LLC,
a New
York limited liability company with an address at 0000 Xxxxxxx Xxxxxx,
Xxxxxxxxx, Xxx Xxxx 00000 ("Seller"); Xxxxx
Xxxxxxx,
an
individual residing in the State of New York (“Xxxxxxx”); Xxxxxxx
Xxxxxxx,
an
individual residing in the State of New York (“Xxxxxxx”); and Secuprint
Inc.,
a New
York corporation with an address at 00 Xxxx Xxxx Xxxxxx, Xxxxxxxxx, Xxx Xxxx
00000 ("Buyer"), a subsidiary of Document
Security Systems, Inc.
The
Seller, Stanley, Kellman and the Buyer and are collectively referred to as
the
“Parties” and individually as a “Party.”
RECITALS:
I. Seller
is
engaged in the business of commercial printing (the "Business"); and
II. Seller
desires to sell certain assets, properties and rights now owned and held by
it
and used or usable in connection with the operation of the Business; and
III. Buyer
desires to purchase certain Business assets, properties and rights of Seller
upon the terms and conditions hereinafter set forth, and to continue the
Business; and
IV. The
Parties acknowledge that Seller intends to file a voluntary petition for relief
(the “Bankruptcy Case”) under Chapter 11 of Title 11 of the United States Code,
11 U.S.C. §§101, et seq. (the “Bankruptcy Code”) in the United States Bankruptcy
Court for the Western District of New York (the “Bankruptcy
Court”).
X. Xxxxxxx
and Xxxxxxx (“Members”) are the only members of the Seller, and execute this
agreement only to confirm the representations, warranties and covenants in
Articles II and III, and to specifically indicate their assent to the provisions
of Paragraph 3.09 of this Agreement.
NOW,
THEREFORE,
in
consideration of the foregoing premises and the mutual covenants hereinafter
contained, the Parties hereto agree as follows:
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ARTICLE
I
PURCHASE
AND SALE
1.01 Purchase
of Assets.
On the
Closing Date set forth in Article V, Seller agrees to sell and Buyer agrees
to
purchase, subject to the terms and conditions of this Agreement, the assets,
properties and rights of Seller relating to the Business (the "Assets"), free
and clear of all liens, claims, charges, and encumbrances of any kind or nature
whatsoever except as provided herein, as follows:
A. All
of
Seller's inventory relating to the Business as the same shall exist on the
Closing Date and which is usable and saleable in the ordinary course of
business, including but not limited to the items listed and described on
Schedule 1.01A hereto;
B. All
of
Seller's furniture, fixtures, machinery, equipment, tools, supplies and
leasehold improvements relating to the Business as the same shall exist on
the
Closing Date, including but not limited to the items listed and described in
Schedule 1.01B hereto;
C. All
Seller’s personal property leases for equipment listed on Schedule 1.01C
attached hereto (the “Personal Property Leases”);
D. All
accounts receivable owned by Seller and existing as of the Closing Date;
and
E. All
of
Seller's trademarks, tradenames (including "DPI"), goodwill, intangible assets
and records relating to the Business, including, but not limited to, Seller's
telephone numbers, internet addresses, websites, customer lists, mailing lists,
sales and purchasing correspondence and records, computer software, data
processing records and all of the operational books, records and data used
by
Seller in connection with the Business, except as hereafter set
forth.
It
is the
intention of the parties hereto that the Assets shall include all of Seller's
assets, used or usable in the conduct of the Business, whether or not
specifically listed in the Schedules attached hereto and made a part hereof;
PROVIDED, however, that there is specifically excluded from the Assets the
items
listed on Schedule 1.01C.
1.02 Liabilities.
Except
as set forth in Schedule 1.02, it is expressly understood and agreed that Buyer
does not, nor will it assume or become liable for, any of Seller's liabilities
of any kind or nature at any time existing or asserted, whether fixed,
contingent or otherwise, including without limitation, accounts, notes and
taxes
payable, workers compensation claims, liability claims, lease obligations
accrued prior to the Closing Date, salaries, wages, commissions, severance
or
separation pay, or vacation, profit sharing, retirement, pension, bonus,
hospitalization, medical, health or other employee benefits or any unemployment
or other benefit taxes relating to any of Seller's employees.
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1.03 Purchase
Price.
The
aggregate purchase price to be paid by Buyer to Seller for the Assets and the
Covenant Not to Compete (the "Purchase Price") shall be calculated as the lesser
of: (A) the sum of: (i) ninety percent (90%) of the value of Seller’s net
(non-contra) accounts receivable less than 90 days old (as adjusted pursuant
to
Paragraph 1.04); plus
(ii)
fifty percent (50%) of the value of Seller’s inventory (as adjusted pursuant to
Paragraph 1.04); plus
(iii)
Fifty Thousand Dollars ($50,000.00); or (B) One Million Dollars ($1,000,00.00).
The Purchase Price shall be allocated to the various portions of the Assets,
and
to the Covenants Not-To-Compete established by Paragraph 3.09 hereof, as set
forth in Schedule 1.03. Such allocation shall be used by the parties for all
tax
purposes and filings, including without limitation, IRS Form 8594.
1.04 Adjustment
of Account Receivables/Inventory.
For the
purposes of calculating the Purchase Price pursuant to Paragraph 1.03, the
actual value of the inventory on the Closing Date shall be determined by a
physical inventory conducted jointly by Seller and Buyer following the close
of
business on the day preceding the Closing Date, with each item of inventory
to
be valued at the lower of cost or market. Similarly, net (non-contra) accounts
receivable shall be valued as reflected on the Seller’s books and records after
properly crediting all payments made against accounts receivable on the Closing
Date.
1.05 Payment
of Purchase Price.
The
Purchase Price, net of offset under Section 1.06, shall be paid at the Closing
to Seller in the form of a wire transfer to an account specified by
Seller
1.06 Credit
for DIP Financing.
Subject
to the approval of the Bankruptcy Court, it is anticipated that Buyer or an
affiliate might provide financing to Seller, as a debtor in possession (“DIP”),
in connection with the Bankruptcy Case. Buyer may, at its option, use part
or
all of any amounts due from Seller pursuant to the terms of the DIP credit
facilities extended to Seller by Buyer or its affiliate to apply against or
satisfy any of Buyer’s obligations to pay the Purchase Price.
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ARTICLE
II
REPRESENTATIONS
AND WARRANTIES OF SELLER AND MEMBERS
Seller
and the Members, to the best of their knowledge, jointly and severally represent
and warrant to Buyer as follows:
2.01 Authority.
Seller
is a limited liability company, duly organized, validly existing and in good
standing under the laws of the State of New York. Subject to the authority
of
the Bankruptcy Court and any orders of such court in the Bankruptcy Case
(specifically including, without limitation, the Sale Order described in Article
6), Seller has full power and authority to own the Assets, to carry on the
Business as currently conducted, to enter into this Agreement and to sell,
transfer and deliver the Assets. Subject to the authority of the Bankruptcy
Court and any orders in the Bankruptcy Case (specifically including, without
limitation, the Sale Order described in Article 6), Seller has taken all such
actions as may be necessary or advisable and proper to authorize this Agreement,
the execution and delivery thereof, the consummation of the transactions
contemplated hereby and the execution and delivery of each of the documents
required to be delivered hereunder.
2.02 Absence
of Restrictions.
Except
as specifically set forth in Schedule 2.03, and the Bankruptcy Case, Seller
has
made no other agreement with any other party with respect to the sale or
encumbrance of the Assets. Except for the Bankruptcy Case and the consent of
Seller's landlord with respect to the negotiation of a new lease of the Business
premises located at 0000 Xxxxxxx Xxxxxx, Xxxxxxxxx, Xxx Xxxx (the “Business
Premises”), the execution and delivery of this Agreement, and the consummation
of the transactions provided hereunder, do not require any third party consent
and do not violate, conflict with, result in the breach of, or cause the
acceleration of or default under any provision of any obligation, mortgage,
lien, lease, agreement, instrument, law, order, arbitration award, judgment,
decree or any other restriction to which Seller is a party or by which Seller
is
subject or bound.
2.03 Title
to Assets.
Except
as set forth in Schedule 2.03, Seller is in possession of the Assets and has
good, marketable and indefeasible title to all of the Assets, free and clear
of
all liabilities, mortgages, conditional sales agreements, security interests,
leases, liens, pledges, encumbrances, restrictions, charges, claims or
imperfections of title whatsoever.
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2.04 Condition
of Property.
All of
Seller's tangible personal property and equipment included in the Assets in
good
working order so as to be fit for use in the ordinary course of the
Business.
2.05 Inventory.
All of
Seller's inventory included in the Assets is located on the Business Premises,
is usable and saleable in the ordinary course of the Business and is of a
quality suitable for sale in the ordinary course of such Business.
2.06 Contracts.
Other
than the Bankruptcy Case, Seller has no contracts or commitments of any kind
or
nature which would materially and adversely affect the Business, the Assets
or
the continuation of the Business by Buyer.
2.07 Litigation
and Claims.
Other
than the Bankruptcy Case, there is no litigation, proceeding, suit, action,
controversy or claim in law or in equity (including proceedings by or before
any
governmental board or agency) existing, pending or, to the best of Seller's
and
Members' knowledge, threatened against Seller which might materially adversely
affect the Business or the Assets, and there is no fact known to Seller and
Members which could form the basis for any such litigation, proceeding, suit,
action, controversy or claim. Seller has complied with all laws, regulations
and
orders applicable to the Business, specifically including all orders of the
Bankruptcy Court, all applicable zoning and environmental regulations and
orders. Other than the Bankruptcy Case, there are no judgments, orders, or
notices, whether or not filed, against Seller which might materially adversely
affect the Assets and the continuation of the Business as now conducted by
Seller.
2.08 Taxes.
Except
as set forth in Schedule 2.08, Seller has filed returns for and paid in full
all
of its federal, state and local taxes, including New York State sales and
franchise taxes, to the extent such filings and payments are required or due
prior to the date of this Agreement. All such returns were true and correct
when
filed.
2.09 Environmental
Compliance.
At all
times in the conduct of the Business, Seller has complied in all material
respects with all environmental laws and regulations, including, but not limited
to, those laws and regulations relating to the use, storage, transport, and
disposal of any hazardous substances, wastes or other materials and any related
documentation, labeling or records.
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2.10 Financial
Statements.
The
reviewed financial statements of the Seller as, at and for the periods ended
December 31, 2006, December 31, 2007, and September 30, 2008, annexed hereto
as
Schedule 3.05, (a) are in accordance with the books and records of the Seller
(b) present fully, fairly and accurately the consolidated financial position
of
the Seller as of said dates and the operational results of the Seller for the
periods represented thereby and (c) have been prepared in accordance with GAAP.
Such financial statements set forth all of the liabilities and obligations
of
the Seller, direct and indirect, contingent and accrued, of any nature
whatsoever, whether arising out of contract, tort, statute or otherwise, except:
(a) where not required to be included in such financial statements pursuant
to
GAAP, (b) liabilities and obligations set forth in the contracts, leases and
commitments listed and described in the attached Schedules, and (c) liabilities
and obligations incurred in the ordinary course of the Business subsequent
to
the respective dates thereof.
2.11 Labor
Relations.
Except
as set forth in Schedule 2.11(a) hereto, the Seller has complied in all material
respects with all applicable agreements, laws, rules and regulations relating
to
the employment of labor, including those related to wages, hours and payroll
taxes. The Seller has withheld and remitted to the proper Governmental
Authorities all amounts required by law or agreement to be withheld from wages
or salaries of its employees and is not liable for any arrearage of wages or
any
taxes or penalties for failure to comply with any of the foregoing. The Seller
has no labor troubles in the sense that within the last 12 months there have
been no strikes, work stoppages, slowdowns, threatened unfair labor practice
charges or other material controversies pending or threatened by any of its
employees; and the Seller has not entered into any collective bargaining
agreement and no union represents, or in the past twelve (12) months has
demanded or requested to represent or is currently attempting to represent,
any
of the employees of the Seller. Except as set forth in Schedule 2.11(b) hereto,
the Seller has not promulgated any policy or entered into any agreement relating
to the payment of any medical insurance premium, retirement pay, severance
pay,
vacation pay or sick leave to any present or former employees of the Seller.
Schedule 2.11(b) will reflect all vacation accrued as of the Closing and set
forth the names of any employees of the Seller who are currently on a leave
of
absence for any reason including military duty, sickness, injury or disability
and the reasons for and other details of such leave(s). All of the employees
of
the Seller and their current wage rates, none of which has been increased in
the
past thirty (30) days, are listed in Schedule 2.11(b). True, correct and
complete copies of all written employment policies and all employee manuals
which are still in effect for any present or former employee of the Seller
have
heretofore been delivered to Buyer.
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2.12 ERISA
Matters.
Seller
does not maintain or contribute to any "employee benefit plans" as defined
in
Paragraph 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), (including any "multiemployer plans" as defined in Paragraph
3(37) of ERISA), or any other material bonus, deferred compensation or other
fringe benefits plan or arrangement for the benefit of employees of Seller
which
are subject to the minimum funding standards contained in Section 302 of ERISA.
Set forth on Schedule 2.12 is a list and description of each bonus, deferred
compensation or other fringe benefit plan or arrangement for the benefit of
employees of Seller.
2.13 Accounts
Receivable.
All of
the Accounts Receivable owned by Seller and existing as of Closing: (a) arose
in
the ordinary course of Seller's business; and (b) to the best of Seller’s and
Members’ information as of the date of this Agreement, will be free and clear of
all defenses and claims, including claims of offset, of any nature whatever,
2.14 General
Warranty.
No
representation or warranty contained in this Agreement, nor any Schedule,
statement or certificate furnished to or to be furnished by Seller to Buyer
pursuant to the terms hereof, or in connection with the transactions
contemplated hereby, contains or will contain any untrue statement of a material
fact, or fails or will fail to state a material fact necessary to make the
statements contained or incorporated therein or herein not misleading.
ARTICLE
III
COVENANTS
OF SELLER AND MEMBERS
Seller
and the Members jointly and severally covenant and agree as
follows:
3.01 Conduct
of the Business.
Except
as required in connection with the Bankruptcy Case, to conduct the Business
pending the Closing in the normal and usual manner consistent with the
successful operation thereof and, without the prior approval of Buyer, not
to
make any change in the policies affecting the operation and conduct of the
Business nor to commence negotiations for, or enter into, any material or
unusual contracts or agreements affecting the Business or the Assets, or
extending beyond the Closing.
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3.02 Retention
of Business.
To use
and exert best efforts between the date hereof and Closing to keep and retain
the Business as a going business for the benefit of Buyer and to provide such
assistance and cooperation as may be reasonably requested by Buyer as necessary
to assure the orderly transfer of the Business to Buyer and the continuation
thereof by Buyer subsequent to the Closing.
3.03 Changes.
Between
the date hereof and the Closing, to notify Buyer of any unusual changes,
problems or developments with respect to the Business and the status of Seller's
liabilities, obligations and relationship with its creditors, customers and
suppliers, to endeavor to obtain an uninterrupted and efficient transfer of
the
ownership of the Business.
3.04 Liabilities.
To the
extent authorized by the Bankruptcy Court, to pay and discharge, or to make
adequate provision satisfactory to Buyer for the payment and discharge of,
all
of Seller's liabilities, indebtedness, obligations, claims and losses arising
out of, or by reason of, the operation of the Business prior to the Closing
Date.
3.05 Access.
To
allow the authorized personnel and agents of Buyer, upon reasonable notice,
access to any and all of the records and premises of Seller concerning the
Business at reasonable times as agreed to by the Parties between the date hereof
and the Closing; and to furnish Buyer with all information concerning Seller's
affairs as the same pertain to the Business as Buyer may reasonably request;
and
to permit Buyer to make extracts from, and copies of, all of Seller's tax
returns and related canceled checks, books, records, appraisals, files, purchase
orders, sales orders and other records as the same pertain to the
Business.
3.06 Indemnification.
A. The
Members shall jointly and severally fully indemnify and hold harmless Buyer,
its
officers, directors, agents, employees, advisors, successors and assigns, as
applicable, from and against and in respect of any and all liabilities,
obligations, damages, losses and expenses, including claims of every kind and
nature, whether accrued, absolute, contingent or otherwise, and reasonable
attorneys' fees and the costs of defense, incurred by any of them as a result
(the “Buyer’s Losses”), or by reason, of the breach, falsity or failure of any
of Seller's representations, warranties, covenants or undertakings contained
in
this Agreement; it being agreed by the Parties hereto that the provisions of
this indemnification shall survive the Closing Date for a period of five (5)
years. In particular, this indemnity shall include any claim against or losses
or damages Buyer may suffer as a result of any violation by Seller of any
environmental laws or regulations, failure to pay any taxes or related interest
or penalties, or Seller's failure to satisfy any claims of
creditors.
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Notwithstanding
any provision of this Section 3.06A, the Seller or any Member will have no
liability (indemnification or otherwise) with respect to an inaccuracy or breach
of any representation, warranty or covenant set forth in this Agreement or
any
exhibit, schedule or certificate until the Buyer’s Losses shall exceed $10,000
in the aggregate (the “Seller’s Basket”) and then the Seller and the Members
shall have liability only for such amount in excess of the Seller’s Basket. In
no event shall the aggregate liability of the Seller or Members with respect
to
any Buyer’s Losses exceed $100,000.
B. The
Buyer
shall fully indemnify and hold harmless the Seller and its Members or employees,
as applicable, from and against and in respect of any liabilities, obligations,
damages, losses and expenses, including claims of every kind and nature, whether
accrued, absolute, contingent or otherwise, and reasonable attorneys’ fees and
the costs of defense, incurred by any of them as a result, or by reason of
the
breach, falsity or failure of any of Buyer’s representations, warranties,
covenants or undertakings contained in this Agreement (“the Seller’s Losses”);
it being agreed by the Parties hereto that the provisions of this
indemnification shall survive the Closing Date for a period of five (5)
years.
Notwithstanding
any provision of this Section 3.06B, the Buyer will have no liability
(indemnification or otherwise) with respect to an inaccuracy or breach of any
representation, warranty or covenant set forth in this Agreement or any exhibit,
schedule or certificate until the Seller’s Losses shall exceed $10,000 in the
aggregate (the “Buyer’s Basket”) and then the Buyer shall have liability only
for such amount in excess of the Buyer’s Basket. In no event shall the aggregate
liability of the Buyer with respect to any Seller’s Losses exceed $100,000.
Further, in no event shall this indemnification extend to any members’ liability
under any equipment lease guaranty, mortgage guaranty, or other monetary
obligation of the Members.
3.07 Cooperation.
To
execute, acknowledge and deliver to Buyer on demand, both prior and subsequent
to the Closing, all such instruments, consents, authorizations, certifications,
books, records and data, and to take all other action, as previously agreed
or
as may be reasonably necessary or advisable in the opinion of Buyer: (i) to
satisfy the Conditions to Closing contained in Article V hereof, (ii) to effect
the provisions and intent of this Agreement, or (iii) to facilitate the transfer
and conveyance of title to and possession of the Assets to Buyer; and further
to
assist and cooperate with Buyer in connection with any litigation or other
claims of third parties involving the Business or the Assets.
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3.08 Sales
Tax Notification.
To
cooperate with Buyer in its preparation and filing of form AU-196.10 with the
Sales Tax Bureau of the New York State Department of Taxation and Finance.
3.09 Non-competition.
For a
period of five (5) years from and after the Closing Date, Seller and Members
each hereby severally agrees not to engage or compete, directly or indirectly,
as a principal, on his/her/its own account, or as a shareholder, member,
officer, director, employee, consultant, advisor, partner or joint venturer
in
any corporation or other business entity, as the case may be, in any business
engaged in the sale, distribution or provision of products or services
previously sold, distributed or provided by Seller with respect to the Business,
or which is otherwise in competition with the Business, in the geographical
area
in Seller’s products were distributed. If any of these restrictions on
post-closing competitive activities contained in this Paragraph shall for any
reason be held by a court of competent jurisdiction to be excessively broad
as
to duration, geographical scope, activity or subject, such restrictions shall
be
construed so as to be limited or reduced to be enforceable to the extent
compatible with the applicable law as it shall then appear; it being understood
that by the execution of this Agreement the parties hereto regard the
restrictions herein as reasonable and compatible with their respective rights.
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES OF BUYER
Buyer
represents and warrants to the Seller and Members as follows:
4.01 Corporate
Standing.
Buyer
is a business entity duly organized, validly existing and in good standing
under
the laws of the State of New York. Buyer has full corporate power and authority
to own its properties and to carry on its business as currently
conducted.
4.02 Corporate
Authority.
Buyer
has full corporate power and authority to enter into this Agreement and to
purchase the Assets. Buyer has taken all such corporate action as may be
necessary or advisable and proper to authorize this Agreement, the execution
and
delivery thereof, the consummation of the transactions contemplated hereby
and
the execution and delivery of each of the documents required to be delivered
hereunder, so that Buyer will have full right, power and authority to purchase
the Assets from the Seller and to perform all of its obligations under this
Agreement at the Closing.
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4.03 Consents.
Neither
the execution of this Agreement nor the consummation of the transactions
contemplated hereby on the part of Buyer requires the consent of any third
party.
ARTICLE
V
CLOSING
Closing
(the “Closing”) shall take place at the offices of Xxxxxxxxx & Xxxxxxx LLP,
000 Xxxxxx & Xxxx Xxxxx, Xxxxxxxxx, Xxx Xxxx within 10 days of the last date
upon which the Sale Order and/or Assignment Order required pursuant to Article
6
of this Agreement shall become Final Orders, as defined in Paragraph 6.03 of
this Agreement (“the Closing Date”).
ARTICLE
VI
BANKRUPTCY
CONDITIONS TO CLOSING
Seller
has advised Buyer, and Buyer acknowledges that Seller has advised it, that
Seller is contemplating and is expected to seek protection from its creditors
under the Bankruptcy Code. This Agreement, and the obligations of each party
performed hereunder, shall be subject to the fulfillment or wavier of each
of
the following conditions (any one or more of which may be waived in writing
in
whole or in part by the written consent of Seller and Buyer, as the case may
be):
6.01 Seller
obtaining an order from the Bankruptcy Court in a form reasonably satisfactory
to Seller and Buyer which shall have been entered upon appropriate notice to
appropriate parties in interest entitled thereto, in the Bankruptcy Case (“the
Sale Order”): (i) approving this Agreement and the transaction contemplated
hereby; (ii) authorizing Seller to transfer and assign to Buyer all of its
rights, title and interest in and to the Assets under Section 363 of the
Bankruptcy Code, free and clear of any mortgage, pledge, claim, lien, charge,
encumbrances or security interests with such mortgage, pledge, claims, liens,
charges, encumbrances and security interests, if any, to attach to the proceeds
of the sale with the same validity, priority, enforceability and to the same
extent as such liens previously attached to the Assets; (iii) all of the
requirements of Section 363 of the Bankruptcy Code have been satisfied; (iv)
notice of the hearing on the transactions completed by this Agreement (1) was
given in accordance with the applicable provisions of the Bankruptcy Code ad
the
Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”) and (2)
constitutes such notice as is appropriate under the particular circumstances
and
in accordance with the Bankruptcy Code and applicable law; (v) finding that
the
Buyer is a “good faith” purchaser as that term is used in Section 363(m) of the
Bankruptcy Code; and (vi) provisions for the Bankruptcy Court’s retention of
jurisdiction over matters arising out of or related to this Agreement and the
transactions contemplated hereby. Buyer shall have a reasonable opportunity
to
review and approve any proposed Sale Order prior to its submission to the
Bankruptcy Court.
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6.02 As
to the
assigned Executory Contract(s) (as defined in Schedule 6.02 attached hereto),
Seller obtaining entry of an order (the “Assignment Order”) of the Bankruptcy
Court (which order may also be the Sale Order), in form reasonably acceptable
to
Seller and Buyer, on notice other parties to such agreement(s) and subject
to
the consent of such other parties if necessary, authorizing and providing for
(a) the assumption of the assigned Executory Contract(s) by the Seller; and
(b)
the valid assignment of the assigned Executory Contract(s) to Buyer. Buyer
shall
be responsible for satisfying the conditions of Section 365(b)(1)(A) - (C)
of
the Bankruptcy Code to the extent necessary to permit the assumption by Seller
and the assignment to Buyer of the assigned Executory Contract(s) (all such
obligations, including without limitation any payments required to be made,
the
“Cure Obligations”). Buyer shall have a reasonable opportunity to review and
approve any proposed Assignment Order prior to its submission to the Bankruptcy
Court.
6.03 The
Sale
Order and the Assignment Order shall have become a Final Order (as defined
in
this paragraph); provided,
however,
that
this condition may be waived in writing by the parties. “Final Order” shall mean
an order or judgment of the Bankruptcy Court (a) which is not the subject of
a
pending appeal, petition for certiorari, or other proceeding for review,
rehearing or reargument accompanied by a stay of the transactions contemplated
hereby, (b) which has not been reversed, stayed, modified, or amended and (c)
respecting which the time to appeal from or petition for certiorari or to seek
review, rehearing or reargument of such order shall have expired, as a result
of
which such order shall have become final in accordance with Rule 8002 of the
Bankruptcy Rules and other applicable law, and there shall not be in effect
any
preliminary or permanent injunction, stay or order, or decree or ruling, by
a
court of competent jurisdiction or by a governmental regulatory or
administrative agency preventing performance of the transactions contemplated
by
this Agreement.
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6.04 In
the
absence of such Sale Order and the Assignment Order, this Agreement shall be
deemed null and void and neither Party shall have any claim against the other
by
virtue of this Agreement; provided,
however
that the
Buyer shall be entitled to a break-up fee in the amount of One Hundred
Twenty-five Thousand Dollars ($125,000.00) if, prior to the termination of
the
Agreement in accordance with its terms, the Bankruptcy Court approves an
Alternative Transaction (as defined in this paragraph) and such Alternative
Transaction is consummated; provided further,
however,
that
the Seller’s obligation to pay such break-up fee, and the amount of such
break-up fee, are subject to the Bankruptcy Court’s approval. For the purposes
of this Agreement, an “Alternative Transaction” shall mean any one of the
following transactions with or by any person or group other than the Buyer:
(a)
a merger, consolidation or similar transaction involving the Seller, or (b)
a
sale, lease or other disposition directly or indirectly by merger, consolidation
tender offer, share exchange or otherwise of some or all of the
Assets.
ARTICLE
VII
OTHER
CONDITIONS OF CLOSING BY BUYER
The
obligation of Buyer to consummate the transactions contemplated by this
Agreement shall be subject, at Buyer's sole discretion, to the satisfaction
of
the following conditions precedent:
7.01 Representations.
All of
the representations and warranties of Seller herein contained shall be true
and
correct as of the date of this Agreement, and as of the Closing Date as if
expressly made on and as of the Closing Date.
7.02 Performance
of Covenants.
All of
the covenants to be performed and all of the conditions to be satisfied by
Seller prior to the Closing Date shall have been performed or satisfied on
or
before the Closing.
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7.03 Books
and Records.
Seller
shall have delivered to Buyer on or before the Closing Date all of Seller's
operational books, records, data and materials used by Seller in the conduct
of
the Business which are or would be necessary or useful to Buyer in the
continuation thereof.
7.04 Condition
of Property.
All of
the Assets shall be in the same condition on the Closing Date as the same are
as
of the date hereof, ordinary wear and tear alone excepted.
7.05 Employment
of Members.
Buyer
shall have entered into employment agreements with both Xxxxxxx and Xxxxxxx,
on
terms acceptable to Buyer which shall include those set forth in Schedule
7.05.
7.06 Lease
for Business Premises.
Buyer
and Seller’s landlord shall have entered into a lease for the Business Premises.
Said lease shall be upon such terms as are acceptable to Buyer, but shall
include: (i) an initial term of five (5) years; (ii) a five (5) year option
to
renew, exercisable by Buyer; (iii) an option to purchase the real property
during the term or any renewal of the lease for fair market value, so long
as
the landlord has not sold the property to a bona fide arm’s length purchaser;
(iv) a right of first refusal to purchase the property during the term of the
lease, or any renewal thereof, on the same terms as contained in any bona fide
arm’s length offer to purchase received by the landlord, provided,
however,
that
Buyer’s exercise of that right of first refusal shall require Buyer to pay
landlord Twenty-five Thousand Dollars ($25,000) more than said bona fide arm’s
length offer (Buyer’s failure to exercise the right of first refusal within
thirty (3) days of notice of a bona fide offer shall terminate Buyer’s option to
purchase upon the closing of landlord’s sale of the property to another party);
and (v) the rent payable under such lease shall be “triple net,” with an annual
base rent of $80,000 (payable in monthly installments) for the first year,
and
shall increase by five percent (5%) per year during the term or any renewal
thereof.
7.07 Additional
Contingencies.
This
Agreement is contingent upon (i) Buyer’s obtaining a commitment for financing in
an amount and upon terms satisfactory to Buyer in its sole discretion; and
(ii)
Buyer's obtaining any required governmental permits, approvals or consents
relating to the operation of the Business.
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7.08 Delivery
of Documents.
Buyer
shall have received all such documents, certificates, opinions and papers
required of Seller pursuant to the terms of this Agreement, or which shall
have
been reasonably requested by Buyer in connection therewith, in form and
substance as approved prior to the Closing by Xxxxxxxxx & Xxxxxxx LLP,
attorneys for Buyer, including but not limited to the following:
A. A
duly
executed warranty Xxxx of Sale to the Assets.
B. A
new
lease for the Business Premises has been executed and received by Buyer.
C. A
certified copy of the Sale Order and Assignment Order, accompanied by a
certification by Seller’s counsel that they constitute Final Orders as herein
defined.
D. A
certificate jointly from Seller and Members dated as of the Closing Date, to
the
effect that, as of the Closing Date, all of the representations and warranties
of Seller contained in this Agreement and the Schedules hereto are true and
correct and that all of the covenants and conditions contained in this Agreement
to be performed or satisfied by Seller prior to the Closing have been performed
or satisfied.
ARTICLE
VIII
OTHER
CONDITIONS OF CLOSING BY SELLER
The
obligation of Seller to consummate the transactions contemplated by this
Agreement shall be subject, at Seller’s sole option, to the satisfaction of the
following conditions precedent:
8.01 Representations.
All of
the representations and warranties of Buyer herein contained shall be true
and
correct as of the date of this Agreement, and as of the Closing Date as if
made
on and as of the Closing Date.
8.02 Covenants
and Conditions.
All of
the covenants to be performed and all of the conditions to be satisfied by
Buyer
prior to the Closing Date shall have been performed or satisfied on or before
the Closing.
8.03 Members’
Equipment Lease Guarantees.
The
lessors on any and all Personal Property Leases assigned to Buyer shall have
released any guarantees by which the Members secured payment of such leases
by
the Seller.
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15 -
8.04 Deliveries.
Seller
shall have received all such documents, payments, certificates, notes,
instruments, opinions and papers required of Buyer pursuant to the terms of
this
Agreement, in form and substance as approved prior to the Closing by Seller's
Attorney, including expressly, but not limited to, the following:
A. Payment
of the Purchase Price to the extent and in the manner set forth in Paragraph
1.05 hereof.
B. A
certificate of resolutions adopted by Buyer's Board of Directors or Executive
Committee thereof authorizing the execution of this Agreement, the consummation
of the transactions contemplated hereby and the execution and delivery of the
documents required to be delivered hereunder, appropriately certified by Buyer's
corporate Secretary.
C. A
certificate of Buyer, dated as of the Closing Date, to the effect that, as
of
the Closing Date, all of the representations and warranties of Buyer contained
in this Agreement are true and correct and that all of the covenants and
conditions contained in this Agreement to be performed or met by Buyer prior
to
Closing have been performed or met, such certificate to be executed by Buyer's
President.
D. Bankruptcy
Court approval of this Agreement.
ARTICLE
IX
CONTINGENT
FINANCIAL MATTERS
9.01 Tax
Status and Effect.
It is
understood and agreed that neither Seller nor Buyer has made any representations
to the other as to the tax status or tax effect of the transactions contemplated
by this Agreement, and each of the Parties hereto is therefore separately taking
counsel as to such matters and each is assuming, subject only to the express
and
specific provisions of this Agreement, the tax, if any, which may be incurred
by
reason of the carrying out of the terms and provisions hereof.
9.02 Sales
or Use Tax.
In the
event that any sales or use tax shall be due to any state or local governmental
authority by reason of the sale of the Assets, such tax shall be borne by Buyer;
provided,
however,
that
Seller shall be solely responsible for any sales taxes arising out of the
operation of the Business prior to Closing.
9.03 Brokerage
Commissions.
Seller
and Buyer represent and warrant, each to the other, that this Agreement and
the
transactions contemplated hereunder were brought about without the assistance
of
any broker, person or firm, and that no one is entitled to a commission, fee
or
payment of any kind relative to this Agreement or the transactions contemplated
hereby.
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16 -
9.04 Risk
of Loss.
All
risk of loss to the Assets shall remain on Seller until completion of the
Closing.
9.05 Expenses
of Parties.
All
expenses involved in the preparation, authorization and consummation of this
Agreement, including, without limitation, all fees and expenses of agents,
representatives, counsel and accountants, shall be borne solely by the Party
which shall have incurred the same, and the other Parties shall have no
liability with respect thereto.
ARTICLE
X
TERMINATION
This
Agreement may be terminated, and the transactions contemplated hereby may be
abandoned, by written notice promptly given to the other parties hereto, at
any
time prior to the Closing Date:
10.01 By
mutual
written consent of the Seller and Buyer;
10.02 By
either
Seller or Buyer if any permanent injunction or other order of a court or
competent authority or governmental agency which prevents the consummation
of
the transaction shall have become final and not appealable;
10.03 By
either
Seller or Buyer upon ten (10) days written notice of such termination to the
other parties, if the Closing shall not have occurred on or prior to
__________;
provided
that the
failure of the Closing to occur by such date is not due in whole or in part
to a
material breach of the terminating party of such party’s representations,
warranties or covenants under this Agreement;
10.04 By
either
Seller or Buyer if either (A) the Sale Order or the Assignment Order is not
entered by _______; or (B) the Sale Order or the Assignment Order is not a
Final
Order by ________ (or if the Sale Order or the Assignment Order was entered
in
the ten (10) days prior to such date and no appeal has been perfected, eleven
(11) days after the date of the Sale Order or Assignment Order was entered;
or
(C) the Bankruptcy Court shall have denied the Sale order or the Assignment
Order;
10.05
By
either
Seller or Buyer if the Closing has not occurred by the date which is thirty
days
after the last to occur of the date of the Sale Order and the date of the
Assignment Order;
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17 -
10.06 Automatically,
without further action by either Party, if the Bankruptcy Court approves an
Alternative Transaction, as defined in Paragraph 6.04;
10.07 By
Buyer
if there has been a breach by Seller of any of its representations, warranties
or covenants that would result in the condition set forth in Article VII not
being met, which breach is not curable, or if curable, is not cured within
thirty (30) days after notice of such breach is given by Buyer to Seller; or
by
Seller if there has been a breach by Buyer of any of its representations,
warranties or covenants that would result in the condition set forth in Article
VIII not being met, which breach is not curable, or if curable, is not cured
within thirty (30) days after notice of such breach is given by Seller to
Buyer.
ARTICLE
XI
MISCELLANEOUS
PROVISIONS
11.01 Survival
of Representations and Warranties.
All
representations and warranties of the Seller and the Members contained in this
Agreement shall survive the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby and the transfer and
conveyance of the Assets.
11.02 Buyer's
Liability.
It is
understood and agreed that all of Buyer's obligations and responsibilities
hereunder are solely those of Secuprint Inc., and that Document Security
Systems, Inc., has, and shall have, no personal liability with respect
thereto.
11.03 Binding
Effect; Assignment.
This
Agreement shall be binding upon and inure to the benefit of the Parties hereto
and their respective personal representatives, successors and
assigns.
11.04 Entire
Agreement.
This
Agreement contains the entire understanding and agreement among the Parties
hereto and supersedes any prior understandings, memoranda or other written
or
oral agreements between or among any of them respecting the within subject
matter. There are no representations, agreements, arrangements or
understandings, oral or written, between or among any of the Parties relating
to
the subject matter of this Agreement which are not fully expressed
herein.
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18 -
11.05 Modifications;
Waiver.
No
modification or waiver of this Agreement or any part hereof shall be valid
or
effective unless in writing and signed by the Party or Parties sought to be
charged therewith, no waiver of any breach or condition of this Agreement shall
be deemed to be a waiver of any other subsequent breach or condition, whether
of
like or different nature, and no waiver of any breach of this Agreement by
any
Members shall be deemed to be a waiver of any other Members for the same breach
or any subsequent breach, whether of like or different nature. No course of
dealing between or among any of the Parties hereto will be deemed effective
to
modify, amend or discharge any part of this Agreement or the rights or
obligations of any Party hereunder.
11.06 Partial
Invalidity.
If any
provision of this Agreement shall be held by a court of competent jurisdiction
to be invalid or unenforceable, such provision shall be construed so as to
be
limited or reduced to be enforceable to the maximum extent compatible with
the
law as it shall then appear. The total invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof and this Agreement shall be construed in all respects as if such invalid
or unenforceable provision were omitted.
11.07 No
Third Party Beneficiary.
None of
the provisions of this Agreement shall be for the benefit of, or enforceable
by,
any person or entity which is not a Party hereto.
11.08 Notices.
Any
notice or other communication required or permitted under this Agreement shall
be in writing and shall be deemed to have been duly given (i) upon hand
delivery, or (ii) on the third day following delivery to the U.S. Postal Service
as certified or registered mail, return receipt requested and postage prepaid,
or (iii) on the first day following delivery to a nationally recognized United
States overnight courier service, fee prepaid, return receipt or other
confirmation of delivery requested or (iv) when telecopied or sent by facsimile
transmission if an additional notice is also given under (i), (ii) or (iii)
above within three days thereafter. Any such notice or communication shall
be
directed to a Party at its address set forth below or at such other address
as
may be designated by a party in a notice given to all other Parties hereto
in
accordance with the provisions of this Paragraph.
|
Notice
to Buyer shall
|
Secuprint,
Inc.
|
|
be
shall be sent to:
|
00
Xxxx Xxxx Xxxxxx
|
|
Xxxxxxxxx,
Xxx Xxxx 00000
|
|
|
Attn.:
Xxxxxxx Xxxxx
|
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19 -
|
with
a copy to:
|
Xxxxxxxxx
& Xxxxxxx LLP
|
|
000
Xxxxxx & Xxxx Xxxxx
|
|
|
Xxxxxxxxx,
Xxx Xxxx 00000
|
|
|
Attn:
Xxxxxxx X. Xxxxx
|
|
|
Notice
to Seller
|
DPI
of Rochester, Inc.
|
|
shall
be sent to:
|
0000
Xxxxxxx Xxxxxx
|
|
Xxxxxxxxx,
Xxx Xxxx 00000
|
|
|
Attn.:
Xxxxx Xxxxxxx
|
|
|
with
a copy to:
|
Xxxx
Xxxxxx, LLP
|
|
000
Xxxx Xxxx Xxxxxx
|
|
|
Xxxxxxxxx,
Xxx Xxxx 00000
|
|
|
Attn.:
Xxxxx X. XxxXxxxxx
|
11.09 Governing
Law.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of New York pertaining to contracts made and to be wholly performed within
such state, without taking into account conflicts of laws
principles.
11.10 Jurisdiction
and Venue.
DURING
THE PENDENCY OF THE BANKRUPTCY CASE, THE BANKRUPTCY COURT WILL HAVE JURISDICTION
OVER ANY AND ALL DISPUTES BETWEEN OR AMONG THE PARTIES, WHETHER IN LAW OR IN
EQUITY, ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY AGREEMENT
CONPTEMPLATED HEREBY; PROVIDED, HOWEVER, THAT IF THE BANKRUPTCY COURT IS
UNWILLING OR UNABLE TO HEAR SUCH DISPUTE:
(i) the
courts of the State of New York and/or the United States Federal Courts located
in the State of New York shall have exclusive jurisdiction over each of the
Parties and such proceedings; and
(ii) the
venue
of any such action shall be in Monroe County, New York and/or the United States
District Court for the Western District of New York.
11.11 Headings.
The
headings contained in this Agreement are inserted for convenience only and
do
not constitute a part of this Agreement.
11.12 Gender.
Whenever the context may require, any pronoun used herein shall include the
corresponding masculine, feminine or neuter forms and the singular of nouns,
pronouns and verbs shall include the plural and vice versa.
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20 -
11.13 Fair
Meaning.
This
Agreement shall be construed according to its fair meaning, the language used
shall be deemed the language chosen by the Parties hereto to express their
mutual intent, and no presumption or rule of strict construction should be
applied against any Party hereto.
11.14 Counterparts.
This
Agreement may be executed in several counterparts, each of which shall be deemed
an original, and all of said counterparts shall together constitute but one
and
the same instrument which may be sufficiently evidenced by one counterpart.
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21 -
IN
WITNESS WHEREOF, the Parties hereunto have duly executed this Agreement on
November 6, 2008.
|
BUYER:
SECUPRINT,
INC.
|
||
|
|
By:
|
/s/
Xxxxxxx Xxxxx
|
|
|
Xxxxxxx
Xxxxx, President
|
|
|
SELLER:
DPI
OF ROCHESTER, INC.
|
||
|
|
By:
|
/s/
Xxxxx Xxxxxxx
|
|
Xxxxx
Xxxxxxx, President
|
||
| XXXXX X. XXXXXXX: | |||
| /s/ Xxxxx Xxxxxxx | |||
| (a Member, per Recital V) | |||
|
XXXXXXX
XXXXXXX:
|
|||
| /s/ Xxxxxxx Xxxxxxx | |||
| (a Member, per Recital V) | |||
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