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ASSET PURCHASE AGREEMENT
BY AND AMONG
MIDWEST GRAPHICS & RESPONSE SYSTEMS, INC.
BUYER
XXXXXXX X. XXXXX
GUARANTOR
INTRANET DISTRIBUTION GROUP, INC.
SELLER
MARCH 30, 1998
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TABLE OF CONTENTS
1. PURCHASE AND SALE OF ASSETS.....................................................................1
1.1 Generally.....................................................................1
1.2 Excluded Assets...............................................................3
2. PURCHASE PRICE..................................................................................3
2.1 Generally.....................................................................3
2.2 Transition Period Income Statement............................................3
2.3 Payment of Purchase Price.....................................................4
2.4 Adjustment of Purchase Price Following Transition Period......................4
3. LIMITATION ON ASSUMPTION OF LIABILITIES.........................................................5
4. CLOSING.........................................................................................5
5. LABOR AND EMPLOYMENT MATTERS....................................................................5
5.1 Generally.....................................................................5
5.2 Employment Transition Provisions..............................................6
5.3 Employee Vacation Matters.....................................................6
6. LOSS, DESTRUCTION, CONDEMNATION OR DAMAGE TO ASSETS.............................................6
7. PRORATIONS, ETC.................................................................................6
8. OTHER AGREEMENTS................................................................................6
9. REPRESENTATIONS AND WARRANTIES OF SELLER........................................................7
9.1 Corporate Organization........................................................7
9.2 Corporate Power...............................................................7
9.3 Conflicting Agreements, Governmental Consents.................................7
9.4 Restrictive Covenants. ......................................................8
9.5 Entire Business...............................................................8
9.6 Corporate Authority...........................................................8
9.7 Actions, Suits, Proceedings...................................................8
9.8 No Violations.................................................................8
9.9 Labor Matters.................................................................8
9.10 Title to Personal Property....................................................9
9.11 Condition of Assets...........................................................9
9.12 Payment Obligations of Customers..............................................9
9.13 Inventory Contracts, Purchase Orders and Other Contracts......................9
9.14 Computer Software. ...........................................................9
9.15 Licenses and Permits..........................................................9
9.16 Financial Information........................................................10
9.17 Taxes........................................................................10
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9.18 Capital Projects.............................................................10
9.19 Insurance....................................................................11
9.20 Brokers and Finders..........................................................11
9.21 Full Disclosure..............................................................11
10. REPRESENTATIONS AND WARRANTIES OF BUYER........................................................11
10.1 Organization.................................................................11
10.2 Conflicting Agreements, Governmental Consents................................11
10.3 Corporate Authority..........................................................11
10.4 Brokers and Finders..........................................................11
11. CONDITIONS TO OBLIGATION OF BUYER TO CLOSE.....................................................12
11.1 Representations and Warranties...............................................12
11.2 No Adverse Change............................................................12
11.3 Observance and Performance...................................................12
11.4 Officer's Certificate........................................................12
11.5 Verification of Operating Results............................................12
11.6 Searches.....................................................................12
11.7 Consents of Third Parties....................................................12
11.8 Regulatory Approvals.........................................................12
11.9 Copies of Documents..........................................................13
11.10 No Legal Actions.............................................................13
11.11 Other Agreements.............................................................13
11.12 Closing Documents............................................................13
11.13 Due Diligence. .............................................................13
12. CONDITIONS TO OBLIGATION OF SELLER TO CLOSE....................................................13
12.1 Representations and Warranties...............................................13
12.2 Observance and Performance...................................................13
12.3 Officer's Certificate........................................................13
12.4 Regulatory Approvals.........................................................13
12.5 Delivery of Consideration....................................................14
12.6 Other Agreements.............................................................14
12.7 No Legal Actions.............................................................14
13. OPERATION OF BUSINESS PRIOR TO CLOSING.........................................................14
13.1 Maintenance of Business......................................................14
13.2 Employees....................................................................14
13.3 No Disposition of Assets.....................................................14
13.4 No Additional Liens..........................................................14
13.5 No Modification of Agreements................................................14
13.6 Maintenance of Tangible Assets...............................................14
13.7 Maintenance of Intangible Assets.............................................14
13.8 No Extraordinary Agreements..................................................15
13.9 Maintenance of Insurance.....................................................15
13.10 Ordinary Operations..........................................................15
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14. INSPECTION RIGHTS..............................................................................15
14.1 Pre-Closing Inspection Rights................................................15
14.2 Post-Closing Inspection Rights...............................................15
15. TAXES, FEES AND OTHER EXPENSES.................................................................15
15.1 Taxes and Fees...............................................................15
15.2 Expenses.....................................................................16
16. INDEMNIFICATION BY SELLER......................................................................16
16.1 Generally....................................................................16
16.2 Deductible...................................................................17
16.3 Limitations on Seller's Indemnification Obligations..........................17
16.4 Procedures...................................................................17
16.5 Settlement and Compromise....................................................17
16.6 Manner of Indemnification....................................................17
16.7 Non-Waiver, Non-Exclusive Remedy.............................................18
17. INDEMNIFICATION BY BUYER.......................................................................18
17.1 Generally....................................................................18
17.2 Limitations on Buyer's Indemnification Obligations...........................19
17.3 Procedures...................................................................19
17.4 Settlement and Compromise....................................................19
18. TERMINATION OF AGREEMENT.......................................................................19
18.1 Mutual Consent...............................................................19
18.2 Breach of Agreement..........................................................19
18.3 Results of Due Diligence.....................................................20
18.4 Government Action............................................................20
19. ASSIGNMENT. ..................................................................................20
20. COVENANT OF FURTHER ASSURANCES.................................................................20
21. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.....................................................20
22. OBLIGATIONS OF GUARANTOR.......................................................................20
23. PUBLIC ANNOUNCEMENT............................................................................21
24. ENTIRE AGREEMENT...............................................................................21
25. AMENDMENT AND WAIVER...........................................................................21
26. CHOICE OF LAW..................................................................................21
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27. SEVERABILITY...................................................................................21
28. COUNTERPARTS...................................................................................21
29. FACSIMILE EXECUTION............................................................................21
30. INTERPRETATION.................................................................................21
31. NOTICES........................................................................................21
EXHIBITS
EXHIBIT A - Promissory Note
EXHIBIT B - Employment Agreement between Buyer and Xxxxxxx X. Xxxxxx
EXHIBIT C - Separation Agreement between Seller and Xxxxxxx X. Xxxxxx
EXHIBIT D - Noncompetition and Confidentiality Agreement
EXHIBIT E - Transition Agreement
EXHIBIT F - Xxxxxxx X. Xxxxx Guaranty
SCHEDULES
SCHEDULE 1.1(A) - Equipment
SCHEDULE 1.1(C) - Accounts Receivable
SCHEDULE 1.1(E) - Inventory Contracts
SCHEDULE 1.1(F) - Purchase Orders
SCHEDULE 1.1(G) - Other Contracts
SCHEDULE 1.1(H) - Computer Systems
SCHEDULE 1.2(C) - Excluded Assets
SCHEDULE 2.1 - Allocation of Purchase Price
SCHEDULE 2.3(B) - Assumed Liabilities
SCHEDULE 9.9 - Employment Agreements and Collective Bargaining Agreements
SCHEDULE 9.10 - Encumbrances on Personal Property
SCHEDULE 9.15 - Licenses and Permits
SCHEDULE 9.17 - Tax Extensions
SCHEDULE 9.19 - Insurance
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THIS ASSET PURCHASE AGREEMENT, dated as of March 30, 1998, by and among
Midwest Graphics & Response Systems, Inc., a Minnesota corporation ("Buyer"),
Xxxxxxx X. Xxxxx ("Guarantor") and IntraNet Distribution Group, Inc., a
Minnesota corporation ("Seller").
RECITALS
WHEREAS, Seller is engaged in, among other businesses, the business of
printing; and
WHEREAS, Seller desires to sell and Buyer desires to purchase
substantially all of the Minneapolis assets of Seller located in Minnesota
related to Seller's printing business to the extent performed in Minnesota,
specifically excluding any business taking place outside of Minnesota (the
"Business") on the terms and subject to the conditions of this Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and conditions contained herein, the parties hereby agree as follows:
1. PURCHASE AND SALE OF ASSETS.
1.1 Generally. On the terms and subject to the conditions of this
Agreement, Seller agrees to sell, transfer, convey and deliver to Buyer, and
Buyer agrees to purchase from Seller, on and as of the Closing Date (as defined
in Section 4 hereof), all property and assets of Seller utilized in, related to
or arising from the Business, as reflected in its books and records (the
"Assets"), other than the Excluded Assets (as defined in Section 1.2 hereof).
The Assets to be transferred to Buyer shall include without limitation the
following:
(a) All machinery, equipment, tools, motor vehicles, spare parts, tools,
accessories, furniture, and other miscellaneous tangible personal
property and utilized in or related to the Business, to the extent
listed on SCHEDULE 1.1(A) hereto (collectively, exclusive of those
items of personal property described in clause (d), herein referred to
as the "Equipment");
(b) All rights of Seller under any warranty or guarantee by any
manufacturer, supplier or other transferor of the Assets;
(c) All accounts, notes and other receivables in favor of Seller arising
out of the Business and as existing on the Closing Date, together with
all collateral security therefor, to the extent listed on SCHEDULE
1.1(C) hereto (the "Accounts Receivable");
(d) All merchantable inventory (including raw materials, work in process
and finished goods), packaging materials and supplies of Seller
utilized in the Business (the "Inventory");
(e) All rights of Seller under contracts and agreements pursuant to which
Seller has agreed to purchase or sell, as the case may be, Inventory
after the Closing Date ("Inventory Contracts"), including, without
limitation, the Inventory Contracts identified in SCHEDULE 1.1(E)
hereto;
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(f) All rights of Seller under purchase orders and purchase contracts
(including purchase orders for work-in-process) other than Inventory
Contracts, issued by it in the ordinary course of operating the
Business ("Purchase Orders"), including, without limitation, the
Purchase Orders identified in SCHEDULE 1.1(F) hereto;
(g) All rights of Seller under any contracts, indentures, guarantees,
leases, commitments, or other agreements necessary to operate to the
Business (the "Other Contracts"), including without limitation the
Other Contracts identified in SCHEDULE 1.1(G) hereto;
(h) All computer hardware, software programs (including but not limited to
all process control software and all computer applications software,
owned or licensed, whether for general business usage (e.g., printing,
accounting, word processing, graphics and spreadsheet analysis) or
specific, unique-to-the-business usage (e.g., order processing, process
control and shipping) and all computer operating, security or
programming software, owned or licensed by Seller and used in the
Business and including all documentation and source code with respect
to such software programs), and systems utilized in the Business (the
"Computer Systems") including without limitation, the Computer Systems
identified in SCHEDULE 1.1(H) hereto;
(i) All goodwill and other general intangibles of Seller utilized in the
Business; and
(j) All sales records, purchase records, customer lists (both house lists
and rented lists), supplier lists, advertising and promotional
materials, vendor records and information, production records and other
records relating to the Business; copies of all deeds and other
instruments, maps, and profiles relating to the Business in the
possession of Seller; copies of all real estate and engineering data,
blueprints and other property records relating to the Business in the
possession of Seller; all records regarding the Occupational Safety and
Health Act ("OSHA") and other governmental examinations and clearances
relating to the Business; and all personnel records; provided, however,
that Seller may make and retain copies of any records transferred to
Buyer.
Except as hereinafter specifically provided, the Assets will be
transferred by Seller to Buyer in accordance with this Agreement with all
required consents of any and all third parties (to the extent such consents can
be obtained at no charge to Seller, provided, however, that if any such consents
are not obtained, Buyer shall have a right to terminate this Agreement) free and
clear of all liens, security interests or encumbrances, other than (i) liens for
taxes and installments of special assessments not yet due and payable, (ii)
other liens, charges or encumbrances incidental to the conduct of the Business
in the ordinary course or the ownership of the Assets which were not incurred in
connection with the borrowing of money or the obtaining of advances or credit
and which do not in the aggregate materially detract from the value of the
Assets or materially impair or interfere with the use thereof in the operation
of the Business, and (iii) liens or encumbrances relating to Assumed
Liabilities, as defined in Section 2.3 (collectively, the "Permitted
Encumbrances").
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1.2 Excluded Assets. The following property and assets of
Seller are excluded from sale to Buyer (the "Excluded Assets"):
(a) The corporate charter, qualifications to conduct business as a foreign
corporation, arrangements with registered agents relating to foreign
qualifications, taxpayer and other identification numbers, general
ledgers, tax returns, seals, minute books, stock transfer books and
similar documents of Seller relating to the organization, maintenance
and existence of Seller as a corporation (provided that Buyer shall
have access thereto to the extent reasonably necessary for the
operation of the Business and the preparation of tax returns and
financial statements of Buyer following the Closing Date);
(b) Cash and cash equivalents;
(c) The property listed on SCHEDULE 1.2(C) hereto; and
(d) Any of the rights of Seller under this Agreement or any other agreement
between Seller and Buyer entered into on or after the date of this
Agreement in accordance with the terms hereof.
2. PURCHASE PRICE.
2.1 Generally. Subject to adjustment as provided herein,
including but not limited to as set forth in Sections 2.4, 6 and 7 hereof, the
total purchase price to be paid to Seller for the Assets (hereinafter referred
to as the "Purchase Price") shall be $1,648,917. The Purchase Price shall be
allocated among the Assets as set forth in SCHEDULE 2.1 hereto.
2.2 Transition Period Income Statement.
(a) Within twenty (20) days following the Closing Date, Seller shall
deliver to Buyer an income statement (the "Transition Period Income
Statement") for the Business for the period March 1, 1998 to March 31,
1998, inclusive (the "Transition Period"). Seller covenants and agrees
that the Transition Period Income Statement shall (i) be prepared in
accordance with the books and records of Seller, (ii) present fairly
the financial condition of the Business for the Transition Period and
(iii) be prepared in accordance with good accounting principles,
applied on a basis consistent with that applied in the preparation of
the Basic Financial Statements (as hereinafter defined).
(b) Buyer shall have the right, exercisable by written notice delivered to
Seller within ten (10) days following the delivery of the Transition
Period Income Statement, to dispute any element of the Transition
Period Income Statement. The foregoing notice is referred to herein as
a "Dispute Notice." The Dispute Notice shall set forth with specificity
the items in dispute. For a period of 30 days after the delivery of a
Dispute Notice, Seller and Buyer shall negotiate in good faith to
attempt to settle the dispute. If they are able to settle the dispute,
the Transition Period Income Statement shall be adjusted to reflect the
resolution
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of the dispute. If they are unable to settle the dispute, the parties
shall submit the matters then in dispute to binding arbitration in
Minneapolis, Minnesota, pursuant to the commercial arbitration rules of
the American Arbitration Association. The arbitrator shall be a member
of an accounting firm which has not rendered services to Seller or
Buyer during the two year period preceding the Closing Date. Each of
the parties agrees to initially share the costs of arbitration, but
further agree that upon a final determination, the prevailing party
shall be reimbursed for all of its expenses in such arbitration,
including reasonable attorneys' fees, and the nonprevailing party shall
pay all costs thereof, as determined by such arbitration. Seller hereby
agree that Buyer's (i) right to review the Transition Period Income
Statement and (ii) Buyer's failure to dispute any or all items
contained therein as contemplated in this Section 2.2, shall not
constitute approval or ratification of any amounts contained in the
Transition Period Income Statement (except for purposes of the
calculation of the Purchase Price hereunder), nor in any way limit
Seller's representations, warranties, covenants or indemnification
obligations under this Agreement.
2.3 Payment of Purchase Price. The Purchase Price shall be
payable as follows:
(a) At the Closing, Buyer shall pay to Seller $359,142 by certified check,
cashier's check or wire transfer.
(b) At the Closing, Buyer will assume certain of Seller's unpaid
liabilities to the extent identified on SCHEDULE 2.3(B) (the "Assumed
Liabilities"), subject to Section 3 below. The Assumed Liabilities will
be deemed to constitute $1,139,775 of the Purchase Price.
(c) Within five (5) days after Buyer and Seller agree on, or the Arbitrator
determines, the amounts on the Transition Period Income Statement,
Buyer shall deliver to Seller a promissory note for the balance of the
Purchase Price (i.e., the Purchase Price net of the amounts set forth
in (a) and (b) above and as adjusted, if required, pursuant to Sections
2.4, 6 and 7 hereof) substantially in the form set forth as EXHIBIT A
hereto (the "Promissory Note"), which note will bear interest payable
quarterly at an annual rate of 1 1/2% over the reference rate of
Norwest Bank Minnesota, N.A., Minneapolis, Minnesota, as in effect from
time to time, with principal payable over three (3) years in twelve
(12) equal quarterly installments beginning June 30, 1998. An executed
copy of the Promissory Note with the principal amount thereof left
blank shall be held in escrow by Xxxxxx Xxxxxxx Xxxxxx & Brand, LLP,
which firm shall fill in the principal amount thereof and deliver the
same to Buyer upon written instructions executed by both Buyer and
Seller.
2.4 Adjustment of Purchase Price Following Transition Period.
The Purchase Price shall be increased in the amount of pre-tax losses, if any,
incurred by the Business during the Transition Period as shown on the Transition
Period Income Statement; provided, however, that no adjustment pursuant to this
sentence shall exceed $40,000. The Purchase Price shall be decreased in the
amount of pre-tax income, if any, earned by the Business during the Transition
Period as shown on the Transition Period Income Statement.
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2.5 Reassignment and Purchase Price Offset for Uncollected
Accounts Receivable. Buyer shall have the right to assign back to Seller any
Accounts Receivable which remain uncollected more than 120 days after the
Closing Date (the "Uncollected Receivables"). Upon receipt from Buyer of duly
executed instruments of transfer evidencing such assignment, Seller shall
deliver a certified check payable to Buyer or its assigns for the aggregate
amount of the Uncollected Receivables. The Purchase Price shall be decreased in
such amount.
3. LIMITATION ON ASSUMPTION OF LIABILITIES. Except for the Assumed
Liabilities, Buyer shall not assume any liabilities or obligations of Seller,
including but not limited to, all liabilities for income taxes, notes payable to
shareholders, together with accrued interest thereon, and accrued dividends
payable.
4. CLOSING. A pre-closing of the transactions contemplated by this
Agreement shall take place at the offices of Xxxxxx Xxxxxxx Xxxxxx & Brand, LLP,
Minneapolis, Minnesota, at 10:00 a.m. on March 30, 1998, and the closing thereof
(the "Closing") shall be held at the same time and place on March 31, 1998 (the
"Closing Date"). At the Closing, (a) Buyer shall (i) pay to Seller the Purchase
Price as specified in Section 2.3 hereof, (ii) deliver to Seller the various
certificates, instruments and documents referred to in Sections 8 and 12 hereof
and (iii) deliver to Seller an assumption agreement evidencing the assumption by
Buyer of the Assumed Liabilities, and (b) Seller shall (i) deliver to Buyer such
bills of sale, assignments, consents, estoppels, warranties, and other documents
of transfer reasonably required to transfer to Buyer the interest of Seller in
the Assets; and (ii) deliver to Buyer the various certificates, instruments and
documents referred to in Sections 8 and 11 hereof.
5. LABOR AND EMPLOYMENT MATTERS.
5.1 Generally. Without limiting the generality of Section 3
hereof, except as provided in Section 5.3 hereof, Buyer shall not assume any
employment obligation, wage or salary payment obligation, including without
limitation those arising under any pension, profit sharing, deferred
compensation, severance, welfare, accrued or earned vacation (except as
reflected on SCHEDULE 2.3(B)), wage or other employee benefit plan, procedure,
policy or practice of Seller regardless of whether such plan, procedure, policy
or practice is disclosed in this Agreement. Seller shall afford Buyer a
reasonable opportunity to interview its employees for prospective employment by
Buyer if so requested by Buyer. Except as set forth in Section 8.1 hereof, Buyer
shall be entitled (but shall have no obligation) to offer employment to any such
person, but in its discretion may offer employment to any such person on terms
and conditions established by Buyer. Seller will furnish to Buyer such
information in its personnel files as Buyer may reasonably request in connection
with determining whether to employ a person presently employed by Seller. To the
extent Seller has any ongoing requirements to provide benefits (under COBRA or
other similar laws) to former employees of Seller, Buyer agrees to make its
benefit plans available (to the extent it offers such benefits) for Seller to
use to meet such obligations provided that Seller hereby acknowledge that it
shall remain liable for such obligations and hereby agree to indemnify and hold
Buyer harmless for any and all costs thereof.
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5.2 Employment Transition Provisions. Seller shall terminate
the employment of each person employed by Seller in the conduct of the Business,
effective the Closing Date. Seller shall pay or provide for all other employee
benefits maintained by Seller for all periods prior to the Closing Date, all in
accordance with applicable law.
5.3 Employee Vacation Matters. Promptly after the Closing,
Seller and Buyer shall jointly prepare a schedule setting forth for each
employee of Seller who accepts employment by Buyer: (i) the number of days of
vacation earned by such employee for his or her current year of employment but
unused as of the Closing Date, (ii) the number of days of vacation accrued for
such employee as of the Closing Date for his or her next year of employment
(such accrual to be based upon the number of days in the employee's current year
of employment to and including the Closing Date), and (iii) the value of such
earned and accrued vacation, based upon the level of compensation paid by Seller
to such employee immediately prior to the Closing Date. Buyer shall recognize
such earned and accrued vacation of the employees of Seller who accept
employment with Buyer, and shall provide such vacation to the employees while
employed by Buyer pursuant to Seller's existing vacation schedule to the extent
such earned and accrued vacation is reflected on SCHEDULE 2.3(B).
6. LOSS, DESTRUCTION, CONDEMNATION OR DAMAGE TO ASSETS. If
between the date of this Agreement and the Closing Date, tangible Assets (other
than Inventory) are lost, destroyed or condemned, or suffer any material damage
and this Agreement shall not have been terminated pursuant to Section 19 hereof,
if applicable, then, at the option of Buyer, either (a) the Purchase Price shall
be reduced by the excess of (i) the fair market value of such Assets prior to
such loss, destruction, condemnation or damage, over (ii) the salvage value, if
any, of such Assets following such loss, destruction, condemnation or damage
(such excess, the "Loss Amount"), or (b) no adjustment to the Purchase Price
shall be made and Seller shall, on the Closing Date, assign to Buyer all
insurance and/or condemnation proceeds payable to Seller on account of such
loss, destruction, condemnation or damage pursuant to an assignment in form and
substance satisfactory to Buyer and pay to Buyer the amount of any deductible
under any such insurance provided such insurance proceeds and deductible are
equal to or greater than the Loss Amount.
7. PRORATIONS, ETC. On the Closing Date, rent, utility charges,
maintenance and repair charges, real estate and all other taxes payable under
any assumed lease and all other items of expense and other similar obligations
to third parties (to the extent not completely included as Assumed Liabilities)
shall be prorated between Seller and Buyer. Real estate and other property taxes
(including any real property assessments and similar charges) shall be prorated
based upon the year with respect for which such taxes are payable, determined in
accordance with local law.
8. OTHER AGREEMENTS. On the terms and subject to the conditions of
this Agreement, on the Closing Date, the following agreements shall be
delivered:
8.1 Employment Agreement between Buyer and Xxxxxxx X. Xxxxxx
in the form of EXHIBIT B hereto (the "Employment Agreement").
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8.2 Separation Agreement between Seller and Xxxxxxx X. Xxxxxx
in the form of Exhibit C hereto (the "Separation Agreement").
8.3 Noncompetition and Confidentiality Agreement between Buyer
and Seller substantially in the form of Exhibit D hereto (the "Non-Compete
Agreement").
8.4 The Promissory Note.
8.5 Transition Agreement between Buyer and Seller
substantially in the form of Exhibit E hereto (the "Transition Agreement")
relating to (a) use of the space currently occupied by the Business, (b) use of
the systems, if any, currently shared by Seller and its affiliates, and (c) the
relationship between Buyer and affiliates of Seller regarding resale of certain
software products manufactured or represented by affiliates of Seller.
8.6 Guaranty by Xxxxxxx X. Xxxxx of the Promissory Note,
substantially in the form of Exhibit F hereto.
9. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller hereby represents
and warrants to Buyer that, except as set forth in the disclosure schedule
accompanying this Agreement and signed by the parties (the "Disclosure
Schedule"):
9.1 Corporate Organization. Seller is duly organized, validly
existing and in good standing under the laws of the State of Minnesota, with
full corporate power to carry on the Business as it is now and has since it
organization been conducted and to own, lease or operate the Assets. True and
correct copies of the Articles of Incorporation and By-Laws of Seller have been
provided to Buyer. Seller does not own, directly or indirectly, the capital
stock of any class of any other corporation, nor is Seller a party to any
partnership or joint venture related to the Assets or the Business.
9.2 Corporate Power. Seller has the corporate power to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby.
9.3 Conflicting Agreements, Governmental Consents. The
execution and delivery of this Agreement and all of the other agreements and
instruments to be executed and delivered by Seller in connection with this
Agreement, the consummation of the transactions contemplated hereby, and the
performance or observance by Seller of any of the terms or conditions hereof or
thereof, will not (a) conflict with, or result in a breach or violation of the
terms or conditions of, or constitute a default under, or result in the creation
of any lien on any of the Assets pursuant to, the Articles of Incorporation or
By-Laws of Seller, any award of any arbitrator, or any indenture, contract or
agreement (including any agreement with stockholders), instrument, order,
judgment, decree, statute, law, rule or regulation to which Seller or the Assets
is subject, or (b) require any filing or registration with, or any consent or
approval of, any federal, state or local governmental agency or authority.
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9.4 Restrictive Covenants. Seller is not a party to nor are
the Assets bound or affected by any agreement or document containing any
covenant limiting the freedom of Seller to compete in any line of business or
which materially or adversely affects the business practices, operations or
conditions of the Business or the continued operation of the Business after the
Closing Date on substantially the same basis and on substantially the same terms
and conditions as the Business is presently carried on.
9.5 Entire Business. All of the Assets and operations of the
Business are comprised within and owned or leased by Seller.
9.6 Corporate Authority. The execution and delivery of this
Agreement and all of the other agreements and instruments to be executed and
delivered by Seller, and the consummation of the transactions contemplated
hereby or thereby, have been duly authorized by all necessary corporate action.
This Agreement and all other agreements and instruments required hereby to be
executed and delivered by Seller are, or when delivered will be, legal, valid
and binding obligations of Seller, enforceable in accordance with their
respective terms.
9.7 Actions, Suits, Proceedings. There are no actions, suits
or proceedings pending or, to the knowledge of Seller, threatened against Seller
or any of Seller's property in any court or before any federal, state, municipal
or other governmental agency or before any other private or public tribunal or
quasi-tribunal which, (a) if decided adversely to Seller, would have an adverse
effect upon the Business or Assets, (b) seek to restrain or prohibit the
transactions contemplated by this Agreement or obtain any damages in connection
therewith, or (c) in any way call into question the validity of this Agreement
or the other agreements and instruments to be executed and delivered by Seller;
nor is Seller in default with respect to any order of any court or governmental
agency entered against it in respect of the Business or Assets. Seller has
received no notice, formally or otherwise, of any judgments, orders, decrees,
stipulations, settlement agreements, liens or injunctions, relating in any way
to the Assets, which have not been wholly and completely settled, complied with
and discharged.
9.8 No Violations. Seller is not in violation of any
applicable law, rule or regulation relating to the Business or Assets. There are
no requests, claims, notices, investigations, demands, administrative
proceedings, hearings or other governmental claims against Seller alleging the
existence of any such violation. Seller has provided to Buyer copies of all
written field inspection reports in its possession submitted to Seller by
governmental authorities since its organization.
9.9 Labor Matters. There are no existing labor disputes or
disturbances which adversely affect the Business or the future prospects of the
Business. There are no existing employment agreements or collective bargaining
agreements between Seller and any of its employees engaged in operation of the
Business or any collective bargaining unit representing any such employees
except as set forth on SCHEDULE 9.9 hereto. No petition has been filed or is
pending with the National Labor Relations Board by any labor organization or any
group of employees for an election or certification regarding the representation
of any group of Seller's employees by a labor
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organization. To the best knowledge of Seller without independent inquiry or
investigation, there is no present solicitation or campaign by any labor
organization or employee for the representation of Seller's employees by a labor
organization. Seller is in compliance with all material terms and provisions of
its collective bargaining agreements. There are no outstanding material disputes
or grievances under its collective bargaining agreements.
9.10 Title to Personal Property. Except as set forth on
SCHEDULE 9.10 hereto, Seller has good title to all personal property included in
the Assets, free and clear of all mortgages, liens, pledges, charges and
encumbrances other than Permitted Encumbrances.
9.11 Condition of Assets. All of the tangible Assets are to be
transferred to Buyer in "as-is" condition.
9.12 Payment Obligations of Customers. The Accounts Receivable
reflected on SCHEDULE 1.1(C) shall have arisen from bona fide transactions in
the normal course of the operation of the Business, shall constitute valid and
binding obligations of the debtors enforceable in accordance with their terms at
the amount recorded therefor on the books of Seller (subject to any allowance
for doubtful accounts), and not be subject to any discounts.
9.13 Inventory Contracts, Purchase Orders and Other Contracts.
SCHEDULE 1.1(G) hereto sets forth correctly all contracts, indentures,
guarantees, leases, commitments or other agreements relating to the Business to
which Seller is a party or by which it is bound with respect to the Business,
except Purchase Orders and Inventory Contracts referred to specifically in
clauses (e) and (f) of Section 1.1 hereof. Seller and, to the best knowledge of
Seller, each other party thereto, have substantially performed all obligations
required to be performed by them to date, and are not in default in any material
respect, under any of the instruments or agreements described above. The
instruments and agreements described above which are to be assigned to Buyer
hereunder are each in full force and effect and, except as set forth on SCHEDULE
1.1(G), are assignable to Buyer without the consent of third parties, and Seller
has not waived or assigned to any other person any of its rights thereunder.
9.14 Computer Software. SCHEDULE 1.1(I) hereto correctly
describes all Computer Systems owned or leased or used by Seller in the
operation of the Business, and such Computer Systems are sufficient to conduct
the Business as it has been historically conducted.
9.15 Licenses and Permits. SCHEDULE 9.15 hereto correctly
describes all material licenses and permits granted to or by Seller in
connection with the operation of the Business. Seller has all material licenses
and permits required by law or otherwise necessary for the proper operation of
the Business as it has been historically conducted. All licenses and permits
granted to Seller are in full force and effect, and no action to terminate any
such license or permit is pending or, to the best knowledge of Seller without
independent inquiry or investigation, has been threatened by any governmental
agency or other party. Except as disclosed on SCHEDULE 9.15, the consummation of
the transactions contemplated by this Agreement will not violate the provisions
of, or require Buyer to reapply for, any such license or permit.
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9.16 Financial Information. Seller has delivered to Buyer an
unaudited balance sheet of Seller as of December 31, 1997 and income statements
for the period then ended (collectively, the "Basic Financial Statements").
Seller will deliver to Buyer the Transition Period Income Statement within
twenty (20) days following the Closing Date. The Basic Financial Statements and
the Transition Period Income Statement were, or will be, prepared from the books
and records of Seller, fairly present, or will fairly present, in all material
respects, the financial condition of the Business at such dates and the results
of operations for the respective periods then ended or ending and have been, or
will be, prepared in accordance with good accounting principles, consistently
applied. Since December 31, 1997, there has not been:
(a) any material adverse change in the financial condition, the Assets, the
Business or the liabilities of Seller;
(b) any damage, destruction or loss (whether or not covered by insurance)
materially and adversely affecting the Business or the Assets;
(c) any sale or transfer of any of the assets used in or useful to the
Business, except in the ordinary course of business; or
(d) any transaction affecting the Business or the Assets entered into by
Seller other than in the ordinary course of business, except this
Agreement.
9.17 Taxes. All taxes, including, without limitation, income,
profits, franchise, sales, use, property, excise, payroll, added value,
employees' income withholding and social security taxes, and other taxes and
assessments, imposed by the United States or by any foreign country or any
state, municipality, subdivision or instrumentality of the United States or of
any foreign country, or by any other taxing authority, which are due or payable
by Seller, and all interest and penalties thereon, whether disputed or not, have
been paid in full, all tax returns required to be filed in connection therewith
have been accurately prepared and duly and timely filed and all deposits
required by law to be made by Seller with respect to employees' withholding and
other taxes have been duly made. Seller has not been delinquent in the payment
of any foreign or domestic tax, assessment or governmental charge or deposit and
has no tax deficiency or claim outstanding, proposed or assessed against it, and
there is no basis for any such deficiency or claim. Seller's federal income tax
returns have never been audited by the Internal Revenue Service and, except as
set forth on SCHEDULE 9.17, there is not now in force any extension of time with
respect to the date on which any tax return was or is due to be filed by or with
respect to Seller, or any waiver or agreement by it for the extension of time
for the assessment of any tax, has paid all federal, state and local income. No
claims for additional taxes have been asserted against Seller and no audits are
pending with respect to any tax liabilities of Seller.
9.18 Capital Projects. No construction or other capital
projects are in progress, have been contracted for or, to the knowledge of
Seller, are required by applicable law or regulation in connection with the
operation of the Business. All completed construction and other capital projects
are reflected in the Basic Financial Statements.
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9.19 Insurance. Seller maintains property and casualty
insurance on all tangible Assets on a replacement value basis and product
liability insurance with respect to the Business as described generally on
SCHEDULE 9.19 hereto. All policies providing such insurance are in full force
and effect and Seller has not received any notice of impending cancellation or
nonrenewal thereof.
9.20 Brokers and Finders. Seller has not retained or engaged
any broker, finder or other financial intermediary in connection with the
transaction contemplated by this Agreement.
9.21 Full Disclosure. No representation or warranty by Seller
contained herein, nor any statements or certificates furnished or to be
furnished by Seller to Buyer or its representatives contains or will contain any
untrue statement of a material fact, or omits or will omit to state any material
fact required to make the representations and warranties herein or therein
contained not misleading.
10. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer hereby represents
and warrants to Seller as follows:
10.1 Organization. Buyer is a corporation duly organized and
existing and in good standing under the laws of the State of Minnesota and has
the corporate power to execute and deliver this Agreement and to consummate the
transactions contemplated hereby.
10.2 Conflicting Agreements, Governmental Consents. The
execution and delivery of this Agreement and all of the other agreements and
instruments to be executed and delivered by Buyer, the consummation of the
transactions contemplated hereby or thereby, and the performance or observance
by Buyer of any of the terms or conditions hereof or thereof, will not (a)
conflict with, or result in a breach or violation of the terms or conditions of,
or constitute a default under, the Articles of Incorporation or By-Laws of
Buyer, any award of any arbitrator, or any indenture, contract or agreement
(including any agreement with stockholders), instrument, order, judgment,
decree, statute, law, rule or regulation to which Buyer is subject, or (b)
require any filing or registration with, or any consent or approval of, any
federal, state or local governmental agency or authority.
10.3 Corporate Authority. The execution and delivery of this
Agreement and all of the other agreements and instruments to be executed and
delivered by Buyer, and the consummation of transactions contemplated hereby or
thereby, have been duly authorized by all necessary corporate action. This
Agreement and all other instruments required hereby to be executed and delivered
by Buyer are, or when delivered will be, legal, valid and binding obligations of
Buyer, enforceable in accordance with their respective terms.
10.4 Brokers and Finders. Buyer has not retained any broker,
finder or other financial intermediary in connection with the transactions
contemplated by this Agreement.
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11. CONDITIONS TO OBLIGATION OF BUYER TO CLOSE. The obligation of
Buyer to effect the closing of the transactions contemplated by this Agreement
is subject to the satisfaction prior to or at the Closing of the following
conditions:
11.1 Representations and Warranties. All of the
representations and warranties of Seller contained in this Agreement shall be
true and correct on the Closing Date, as if made on the Closing Date.
11.2 No Adverse Change. There shall have occurred no material
adverse change in the Assets as a whole or the Business since December 31, 1997,
nor shall there have occurred any material damage, loss, destruction or
condemnation of Assets. Notwithstanding the aforementioned, between December 31,
1997 and the Closing Date, Seller shall not have incurred any material
obligations of any kind, nor entered into any contracts or agreements, related
to or arising out of the Business, except as have been incurred in the ordinary
course of the Business consistent with the historical operation of the Business.
11.3 Observance and Performance. Seller shall have observed
and performed all covenants and agreements required by this Agreement to be
observed or performed by Seller on or prior to the Closing Date.
11.4 Officer's Certificate. Seller shall have delivered to
Buyer a certificate of a responsible officer of Seller, dated the Closing Date,
to the effects set forth in Sections 11.1, 11.2 and 11.3 above.
11.5 Verification of Operating Results. Buyer shall have been
afforded the opportunity to review the invoices, purchase documents relating to
the cost of goods sold, production expenses and sales expenses of Seller related
to the Business in order to determine the results of operations of the Business,
and shall have concluded that such results of operations are consistent in all
material respects with the results of operations for such periods heretofore
disclosed by Seller to Buyer.
11.6 Searches. No Uniform Commercial Code searches or federal,
state or local tax lien or judgment searches obtained by Buyer against Seller
shall disclose any liens or security interests against the Assets other than
Permitted Encumbrances.
11.7 Consents of Third Parties. Buyer shall have received duly
executed copies of any consents necessary to permit consummation of the
transactions hereof, including but not limited to the assignment of the Other
Contracts described in SCHEDULE 1.1(G) hereto without breach thereof.
11.8 Regulatory Approvals. Buyer shall have received from
Seller all authorizations, consents and approvals of governments and
governmental agencies required in connection with the purchase and sale
contemplated by this Agreement.
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11.9 Copies of Documents. Buyer shall have received accurate
and complete copies of all documents and instruments listed in any of the
exhibits or schedules to this Agreement (and of any amendments, waivers or
similar supplementary materials related thereto).
11.10 No Legal Actions. No court or governmental authority of
competent jurisdiction shall have issued an order restraining, enjoining or
otherwise prohibiting the consummation of the transactions contemplated by this
Agreement, and no person, firm, corporation or governmental agency shall have
instituted an action or proceeding which shall not have been previously
dismissed seeking to restrain, enjoin or prohibit the consummation of the
transactions contemplated by this Agreement.
11.11 Other Agreements. Buyer shall have received signed copies
of all of the agreements required by Section 8 hereof.
11.12 Closing Documents. Buyer shall have received such bills
of sale, a non-disturbance agreement from any lender of record, assignments and
other documents of transfer reasonably required to transfer to Buyer the
interests of Seller in the Assets consistent with the terms of this Agreement.
11.13 Due Diligence. Buyer shall not have discovered any fact
or condition in the performance of its due diligence which Buyer believes
materially effects the amount, composition or quality of the Assets or the
Business.
12. CONDITIONS TO OBLIGATION OF SELLER TO CLOSE. The obligation of
Seller to effect the transactions contemplated by this Agreement is subject to
the satisfaction prior to or at the Closing of the following conditions:
12.1 Representations and Warranties. The representations and
warranties of Buyer contained in this Agreement shall be true and correct on the
Closing Date, as if made on the Closing Date.
12.2 Observance and Performance. Buyer shall have observed and
performed all Covenants and agreements required by this Agreement to be observed
or performed by Buyer on or prior to or at the Closing Date.
12.3 Officer's Certificate. Buyer shall have delivered to
Seller a certificate of a responsible officer of Buyer dated the Closing Date to
the effects set forth in Sections 12.1 and 12.2 above.
12.4 Regulatory Approvals. Buyer shall have received all
authorizations, consents and approvals of governments and governmental agencies
required in connection with the purchase and sale contemplated by this
Agreement.
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12.5 Delivery of Consideration. Buyer shall have fulfilled its
obligations to deliver the consideration as set forth in Section 2.3 hereof.
12.6 Other Agreements. Seller shall have received signed
copies of all of the agreements required by Section 8 hereof.
12.7 No Legal Actions. No court or governmental authority of
competent jurisdiction shall have issued an order restraining, enjoining or
otherwise prohibiting the consummation of the transactions contemplated by this
Agreement, and no person, firm, corporation or governmental agency shall have
instituted an action or proceeding which shall not have been previously
dismissed seeking to restrain, enjoin or prohibit the consummation of the
transactions contemplated by this Agreement.
13. OPERATION OF BUSINESS PRIOR TO CLOSING. Seller agrees that, except
with Buyer's prior written consent, from the date hereof to the Closing:
13.1 Maintenance of Business. Seller will use its best efforts
to preserve intact the business organization of the Business, keep available the
services of key employees on terms no less favorable to Seller than those on
which such officers and employees are presently employed, and preserve for Buyer
the good will of suppliers, customers and others having business relationships
with the Business. Seller will maintain its books and records during such period
in a manner consistent with past practice.
13.2 Employees. Seller will not hire any new employees for the
Business, or effect any increase in compensation or employee benefits for its
employees engaged in operating the Business.
13.3 No Disposition of Assets. Seller will not sell, transfer,
dispose of or abandon any portion of the Assets, except in the ordinary course
of business and consistent with past practice.
13.4 No Additional Liens. Seller will not permit any of the
Assets to become subject to any mortgage, lien, charge, or encumbrance, other
than Permitted Encumbrances.
13.5 No Modification of Agreements. Seller will not modify or
amend any material contract, lease, commitment or agreement to be assigned to or
assumed by Buyer hereunder, or waive or assign to any third party any of its
rights under any such contract, lease, commitment or agreement.
13.6 Maintenance of Tangible Assets. Seller will maintain all
tangible Assets in good order and repair, ordinary wear and tear excepted.
13.7 Maintenance of Intangible Assets. Seller will maintain
and protect to the full extent allowed by law, all intangible Assets including
but not limited to the Intellectual Property.
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13.8 No Extraordinary Agreements. Seller will not enter into
any contract or agreement which relates to the Business or Assets and which
contains terms or conditions inconsistent with past business practices of Seller
or the continued operation of the Business as a going concern.
13.9 Maintenance of Insurance. Seller will continue to carry
all existing policies of insurance relating to the Assets, or will effect
renewals or replacements thereof in substantially the same form and amount, and
providing substantially the same coverage, as such existing policies.
13.10 Ordinary Operations. Without limiting the generality
of the foregoing, Seller will in all other respects operate the Business in the
ordinary course.
14. INSPECTION RIGHTS.
14.1 Pre-Closing Inspection Rights. Seller will permit
employees and agents of Buyer during normal business hours and on reasonable
prior notice to Seller to inspect the Assets and to inspect all contracts,
agreements, other documents and records reflecting or reasonably relating to the
Assets or the Business. Buyer will comply with all reasonable requests by Seller
to limit Buyer's exposure to employees and customers. All information and
records obtained by Buyer pursuant to this Section shall be maintained as
confidential and shall not be disclosed to any third party without the consent
of Seller except in response to legal process or to the extent required to
comply with applicable law. Buyer shall not be obligated to maintain as
confidential any information obtained from Seller which is publicly available,
readily ascertainable from public sources, known to Buyer at the time the
information was disclosed or which is rightfully obtained f rom a third party.
The obligations of confidentiality arising under this Section shall survive the
termination or abandonment of this Agreement.
14.2 Post-Closing Inspection Rights. Buyer agrees that all
books and records delivered to Buyer by Seller pursuant to the provisions of
this Agreement shall be open for inspection by representatives of Seller at any
time during regular business hours on or prior to the first anniversary of the
Closing, and that Seller may during such period at its expense make such
excerpts therefrom as it may deem desirable. Seller agrees that such documents
and materials retained by Seller and that are related to the Assets or Business
shall be open for inspection by representatives of Buyer at any time during
regular business hours on or prior to the first anniversary of the Closing and
that Buyer may during such period at its expense make such excerpts therefrom as
it may deem desirable. Thereafter, each party shall offer an opportunity to copy
any such documents and materials prior to the destruction thereof.
15. TAXES, FEES AND OTHER EXPENSES.
15.1 Taxes and Fees. Seller shall be responsible for and shall
pay all sales, transfer or similar taxes or governmental charges, if any, and
all deed taxes and recording fees with respect to the sale and purchase of the
Assets, whether levied against the Assets, Seller or Buyer.
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15.2 Expenses. Each party shall pay all of the costs and
expenses incurred by it in negotiating and preparing this Agreement (and all
other agreements, certificates, instruments and documents executed in connection
herewith), in performing its obligations under this Agreement, and in otherwise
consummating the transactions contemplated by this Agreement, including, without
limitation, its attorneys' fees, accountants' fees and investment banking,
appraisal and brokerage fees.
16. INDEMNIFICATION BY SELLER.
16.1 Generally. Seller shall indemnify, defend and hold
harmless Buyer and its respective directors, officers, employers, agents,
consultants, representatives, successors, transferees and assigns (individually
an "Indemnified Party" and collectively the "Indemnified Parties"), promptly
upon demand, at any time and from time to time, from, against, and in respect of
any and all claims, losses, damages, liabilities, assessments, suits, actions,
proceedings, interest, penalties, and expenses (including, without limitation,
settlement costs and any legal, accounting and other expenses for investigating
or defending any actions or threatened actions or for enforcing such rights of
indemnity and defense) incurred or suffered by the Indemnified Parties, in
connection with, arising out of or as a result of each and all of the following:
(a) any breach of any representation or warranty made by Seller in this
Agreement or any instrument contemplated by this Agreement;
(b) the breach of any covenant, agreement or obligation of Seller contained
in this Agreement or any other instrument contemplated by this
Agreement;
(c) any misrepresentation or omission contained in any statement or
certificate furnished by Seller pursuant to this Agreement or in
connection with the transactions contemplated by this Agreement;
(d) any claim of any broker, finder or investment banker engaged by Seller;
(e) any and all liabilities and obligations of Seller except to the extent
specifically assumed and agreed to be paid by Buyer pursuant to Section
2.3 hereof and any and all liabilities and obligations arising from
ownership of the Assets, operation of the Business and incidents and
occurrences on or prior to the Closing Date, whether or not reflected
in Seller's books and records and whether or not manifest on or before
the Closing Date;
(f) any and all loss, injury, damage or deficiency resulting from any
non-fulfillment of any covenant or agreement on the part of Seller
under this Agreement; and
(g) Any and all demands, claims, actions, suits, proceedings, assessments,
judgments, costs and legal and other expenses incident to any of the
foregoing.
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16.2 Deductible. No claim for indemnification under this
Section shall be made by Buyer unless and until the aggregate amount of such
claims shall exceed Ten Thousand Dollars ($10,000) (the "Threshold Amount"), and
in such event, Buyer shall be entitled to all amounts in excess of, but not
including, the Threshold Amount.
16.3 Limitations on Seller's Indemnification Obligations.
Seller's obligations to indemnify Buyer under this Section to the extent based
on any misrepresentation or breach of warranty shall terminate on the second
(2nd) anniversary of the Closing Date, except (a) for any claim based on the
untruth or inaccuracy of any representation or warranty made herein or in any
statement, certificate or schedule furnished hereunder with an intent to deceive
or defraud or with reckless disregard for the truth or accuracy thereof, (b) for
any claim based on any untruth or inaccuracy of a representation made in Section
9.17 hereof, and (c) that with respect to any pending claim for indemnity
hereunder which shall have been made prior to such second (2nd) anniversary, the
right to indemnify shall not terminate until the final determination and
satisfaction of such claim.
16.4 Procedures. In the event any demands or claims are
asserted against an Indemnified Party or any actions, suits or proceedings are
commenced against an Indemnified Party for which Seller is obligated to
indemnify an Indemnified Party under this Section, then the Indemnified Party
shall give timely notice thereof to Seller in order to permit Seller the
necessary time to evaluate the merits of such demand, claim, action, suit or
proceeding and defend, settle or compromise the same so that Seller's interests
are not materially prejudiced. Within 10 business days after such notice, Seller
shall assume the defense thereof with counsel chosen by Seller or its insurer
and reasonably acceptable to the Indemnified Party. Seller shall not be liable
for any costs or expenses incurred by an Indemnified Party in connection with
any demand, claim, action, suit or proceeding for which Seller is obligated to
indemnify the Indemnified Party under this Section, provided that Seller shall
have assumed the defense thereof in accordance with this Section. The
Indemnified Parties shall be entitled to participate in (but not control) the
defense of any such action, with its counsel and at its own expense. If Seller
does not assume the defense of any such claim or litigation resulting therefrom,
(a) an Indemnified Party may defend against such claim or litigation, in such
manner as it may deem appropriate, including, but not limited to, settling such
claim or litigation, after giving notice of the same to Seller on such terms as
such Indemnified Party may deem appropriate, and (b) Seller shall be entitled to
participate in (but not control) the defense of such action, with its own
counsel and at its own expense.
16.5 Settlement and Compromise. Seller shall not settle or
compromise any demands, claims, actions, suits or proceedings for which an
Indemnified Party has sought indemnification from Seller unless it shall have
given the Indemnified Party not less than fifteen (15) days prior written notice
of the proposed settlement or compromise and afforded the Indemnified Party an
opportunity to consult with Seller regarding the proposed settlement or
compromise.
16.6 Manner of Indemnification. All indemnification by Seller
shall be effected by the payment of cash, delivery of a certified or official
bank check or, at the request of Seller, Buyer shall offset such indemnification
obligation against its obligations under the Promissory Note to the extent of
Buyer's obligations remaining thereunder. Any and all indemnification payments
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shall be deemed an adjustment to the Purchase Price. Prior to making any such
offset, Buyer shall first provide Seller with a written notice of intent to
offset ("Notice of Offset") and if such claim for indemnification is disputed by
Seller, then Seller shall give Buyer written notice of such dispute within 15
days of receipt of the Notice of Offset from Buyer. If such claim for
indemnification is disputed by Seller, then Buyer shall place any payments then
due into a segregated account pending resolution of the claim.
16.7 Non-Waiver, Non-Exclusive Remedy. Failure of the
Indemnified Parties to give reasonably prompt notice of any claim or claims
shall not release, waive or otherwise affect any of Seller's obligations with
respect thereto except to the extent that Seller can demonstrate actual loss and
prejudice as a result of such failure. The indemnification provisions contained
in this Section are in addition to, and not in derogation of, any statutory,
common law or equitable rights or remedies any party may have for breach of any
representation, warranty, covenant or agreement.
17. INDEMNIFICATION BY BUYER
17.1 Generally. Buyer shall indemnify, defend and hold
harmless Seller and each of its directors, officers, employers, agents,
consultants, representatives, successors, transferees and assigns (individually
an "Indemnified Party"; and collectively the "Indemnified Parties"), promptly
upon demand, at any time and from time to time, from, against, and in respect of
any and all claims, losses, damages, liabilities, assessments, suits, actions,
proceedings, interest, penalties, and expenses (including, without limitation,
settlement costs and any legal, accounting and other expenses for investigating
or defending any actions or threatened actions or for enforcing such rights of
indemnity and defense) incurred or suffered by the Indemnified Parties, in
connection with, arising out of or as a result of each and all of the following:
(a) any breach of any representation or warranty made by Buyer in this
Agreement or any instrument contemplated by this Agreement;
(b) the breach of any covenant, agreement or obligation of Buyer contained
in this Agreement or any other instrument contemplated by this
Agreement;
(c) any misrepresentation or omission contained in any statement or
certificate furnished by Buyer pursuant to this Agreement or in
connection with the transactions contemplated by this Agreement;
(d) the liabilities and obligations of Seller specifically assumed and
agreed to be paid by Buyer pursuant to Section 2.3 hereof and any and
all liabilities and obligations arising from ownership of the Assets,
operation of the Business and incidents and occurrences after the
Closing Date;
(e) any and all loss, injury, damage or deficiency resulting from any
non-fulfillment of any covenant or agreement on the part of Buyer under
this Agreement; and
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(f) Any and all demands, claims, actions, suits, proceedings, assessments,
judgments, costs and legal and other expenses incident to any of the
foregoing.
17.2 Limitations on Buyer's Indemnification Obligations.
Buyer's obligations to indemnify Seller under this Section to the extent based
on any misrepresentation or breach of warranty shall terminate on the second
(2nd) anniversary of the Closing Date, except (a) for any claim based on the
untruth or inaccuracy of any representation or warranty made herein or in any
statement, certificate or schedule furnished hereunder with an intent to deceive
or defraud or with reckless disregard for the truth or accuracy thereof, and (b)
that with respect to any pending claim for indemnity hereunder which shall have
been made prior to such second (2nd) anniversary, the right to indemnify shall
not terminate until the final determination and satisfaction of such claim.
17.3 Procedures. In the event any demands or claims are
asserted against Seller or any actions, suits or proceedings are commenced
against Seller for which Buyer is obligated to indemnify Seller under this
Section, then Seller shall give timely notice thereof to Buyer in order to
permit Buyer the necessary time to evaluate the merits of such demand, claim,
action, suit or proceeding and defend, settle or compromise the same so that
Buyer's interest is not materially prejudiced. Within ten (10) business days
after such notice, Buyer shall assume the defense thereof with counsel chosen by
Buyer and reasonably acceptable to Seller. Buyer shall not be liable for any
costs or expenses incurred by Seller in connection with any demand, claim,
action, suit or proceeding for which Buyer is obligated to indemnify Seller
under this Section, provided that Buyer shall have assumed the defense hereof in
accordance with this Section. Seller shall be entitled to participate in (but
not control) the defense of any such action, with its counsel and at its own
expense. If Buyer does not assume the defense of any such claim or litigation
resulting therefrom, (a) Seller may defend against such claim or litigation, in
such manner as it may deem appropriate, including, but not limited to, settling
such claim or litigation, after giving notice of the same to Buyer on such terms
as Seller may deem appropriate, and (b) Buyer shall be entitled to participate
in (but not control) the defense of such action, with their own counsel and at
its own expense.
17.4 Settlement and Compromise. Buyer shall not settle or
compromise any demands, claims, actions, suits or proceedings for which Seller
has sought indemnification from Buyer unless it shall have given Seller not less
than fifteen (15) days prior written notice of the proposed settlement or
compromise and afforded Seller an opportunity to consult with Buyer regarding
the proposed settlement or compromise.
18. TERMINATION OF AGREEMENT. This Agreement may be terminated at any
time prior to the Closing Date:
18.1 Mutual Consent. By mutual consent of Buyer and Seller.
18.2 Breach of Agreement. By Buyer giving written notice to
Seller if Seller is in breach, or by Seller giving written notice to Buyer if
Buyer is in breach, in any material respect of any representation, warranty or
covenant contained in this Agreement.
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18.3 Results of Due Diligence. By Buyer giving written notice
to Seller on or before March __, 1998 (seven (7) days after signing of this
Agreement) if Buyer is not satisfied with the results of its continuing
business, legal, and accounting due diligence regarding Seller.
18.4 Government Action. By Buyer or Seller if any court of
competent jurisdiction in the United States or other United States governmental
body shall have issued an order, decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the consummation of the
transactions contemplated by this Agreement and such order, decree, ruling or
other action shall have become final and non-appealable.
19. ASSIGNMENT. This Agreement may not be assigned by any party hereto
without the prior written consent of the other parties hereto. The terms and
provisions of this Agreement shall be binding upon and shall inure to the
benefit of the parties hereto, their successors and assigns, and no person, firm
or corporation other than the parties, their successors and assigns, shall
acquire or have any rights under or by virtue of this Agreement.
20. COVENANT OF FURTHER ASSURANCES. From time to time after the
Closing, at the request of any party hereto and without further consideration,
the other parties hereto will execute and deliver such other instruments and
take such other actions as the requesting party may reasonably require to
effectuate the transactions contemplated by this Agreement, including but not
limited to the transfer of the Assets to and vesting of title to the Assets in
Buyer and putting Buyer in possession of the Assets. In the event that it shall
be necessary for Seller to qualify to do business as a foreign corporation in
any state after the Closing in order for Buyer to enforce any material claim,
Seller shall so qualify promptly upon written request of Buyer.
21. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties contained herein, and all other written representations and
warranties of Buyer and Seller contained in the instruments executed in
connection with the consummation of the transactions provided for herein, shall
survive the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby until the second (2nd) anniversary of the
Closing Date, notwithstanding any investigation or examination at any time made
by or on behalf of any party; provided, that the foregoing shall not bar the
parties hereto, and their respective successors and assigns, from asserting at
any time thereafter any cause of action based on (a) the untruth or inaccuracy
of any representation or warranty made herein or in any statement, certificate
or schedule furnished hereunder with an intent to deceive or defraud or with
reckless disregard for the truth or accuracy thereof, and (b) any untruth or
inaccuracy of a representation made in Section 9.17 hereof; and provided
further, that no representation or warranty, the alleged untruth or inaccuracy
of which is the subject of a cause of action made prior to such second (2nd)
anniversary shall terminate until the final determination and satisfaction of
such cause of action.
22. OBLIGATIONS OF GUARANTOR. Guarantor hereby agrees that it will be
liable to Seller for the performance of Buyer's obligations under this
Agreement.
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23. PUBLIC ANNOUNCEMENT. Any and all public announcements of any kind
or nature whatsoever concerning the transactions contemplated hereby made
before, on or after the Closing Date, shall require the joint approval of Buyer
and Seller, provided that either Buyer or Seller shall nevertheless be permitted
to issue any press release or report required by applicable law or stock
exchange rules.
24. ENTIRE AGREEMENT. This Agreement, including the exhibits and
schedules attached to this Agreement, constitutes the entire agreement and
understanding between Seller and Buyer with respect to the sale and purchase of
the Assets and the other transactions contemplated by this Agreement. All prior
representations, understandings and agreements between the parties with respect
to the purchase and sale of the Assets and the other transactions contemplated
by this Agreement are superseded by the terms of this Agreement.
25. AMENDMENT AND WAIVER. Any provision of this Agreement may be
amended or waived by a writing signed by the party against which enforcement of
the amendment or waiver is sought.
26. CHOICE OF LAW. This Agreement shall be construed and interpreted
IN accordance with the laws of the State of Minnesota, without regard to its
choice of law provisions, as though all acts and omissions related to this
Agreement occurred in the State of Minnesota.
27. SEVERABILITY. The provisions of this Agreement shall, where
possible, be interpreted so as to sustain their legality and enforceability, and
for that purpose the provisions of this Agreement shall be read as if they cover
only the specific situation to which they are being applied. The invalidity or
unenforceability of any provision of this Agreement in a specific situation
shall not affect the validity or enforceability of that provision in other
situations or of other provisions of this Agreement.
28. COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be considered an original.
29. FACSIMILE EXECUTION. This Agreement may be executed by one or more
of the parties by facsimile transmitted signature and all parties agree that the
reproduction of signatures by way of telecopying device will be treated as
though such reproductions were executed originals.
30. INTERPRETATION. All references herein to Articles and Sections
refer to Articles and Sections of this Agreement. All Article and Section
headings are for reference purposes only and shall not affect the interpretation
of this Agreement. Within this Agreement, the singular shall include the plural
and the plural shall include the singular, and any gender shall include all
other genders, all as the meaning and the context of this Agreement shall
require.
31. NOTICES. All notices given pursuant to this Agreement shall be
delivered by hand or sent by United States registered mail, postage prepaid,
addressed as follows (or to another address or person as a party may specify on
notice to the other):
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If to Seller: IntraNet Distribution Group, Inc.
0000 X. 00xx Xxxxxx, Xxxxx 000
Xxxx Xxxxxxx, XX 00000
Attention: Chief Executive Officer
with a copy to: Xxxxxx Xxxxxxx Xxxxxx & Brand, LLP
00 Xxxxx 0xx Xxxxxx
0000 Xxxxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
If to Buyer Midwest Graphics & Response Systems, Inc.
or Guarantor: 00000 X-Xxx Xxxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxxxxx
with a copy to: Xxxxxxx Xxxxxx White & Xxxxxx, P.A.
1800 Xxxxx Xxxxxxx Plaza
000 Xxxxx Xxxxxx
Xx. Xxxx, XX 00000
Attention: Xxxx X. Xxxxxx, Esq.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date and year
first above written.
BUYER: MIDWEST GRAPHICS & RESPONSE
SYSTEMS, INC.
By /s/ Xxxxxxx X. Xxxxx
-------------------------
President and Chief Executive Officer
GUARANTOR:
/s/ Xxxxxxx X. Xxxxx
-------------------------
Xxxxxxx X. Xxxxx
SELLER: INTRANET DISTRIBUTION GROUP, INC.
By /s/ Xxxxxxx X. Xxxxxxx
-------------------------
Chief Financial Officer
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