EXECUTION
DOCUNET INC.
ASSET PURCHASE AGREEMENT
FOR CERTAIN ASSETS OF
DOCUTECH, INC.
TABLE OF CONTENTS
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PRELIMINARY STATEMENTS.......................................................1
ARTICLE 1 - CERTAIN DEFINITIONS..............................................1
ARTICLE 2 - SALE AND PURCHASE OF ASSETS; CONSIDERATION;
ASSUMPTION OF LIABILITIES..................................11
2.1. Agreement to Sell and Purchase Assets...........................11
2.2. Intentionally Omitted ..........................................11
2.3. Consideration and Payment.......................................11
2.4. Payment of Purchase Price.......................................15
2.5. Allocation of Purchase .........................................16
2.6. Assumption of Liabilities.......................................16
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES OF SELLER
AND SHAREHOLDER.............................................17
3.1. Organization; Qualification; Good Standing......................17
3.2. Authorization for Agreement.....................................17
3.3. Ownership; Subsidiaries and Affiliates..........................18
3.4. Enforceability..................................................18
3.5. Legal Proceedings and Orders....................................18
3.6. Title to the Purchased Assets and Related Matters...............19
3.7. Compliance with Laws............................................19
3.8. Labor Matters...................................................19
3.9. Employee Benefit Plans..........................................20
3.10. Financial Statements...........................................22
3.11. Absence of Undisclosed Liabilities.............................23
3.12. Real Property..................................................24
3.13. Tangible Personal Property.....................................25
3.14. Contracts......................................................26
3.15. Insurance......................................................28
3.16. Proprietary Rights.............................................28
3.17. Environmental Matters..........................................29
3.18. Permits........................................................30
3.19. Regulatory Filings.............................................30
3.20. Taxes and Tax Returns..........................................30
3.21. Affiliate Transactions.........................................31
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3.22. Accounts.......................................................32
3.23. Receivables....................................................32
3.24. Solvency.......................................................32
3.25. Officers and Directors.........................................33
3.26. Brokers or Finders.............................................33
3.27. No Other Agreements to Sell Assets.............................34
3.28. Customers......................................................34
3.29. Investment Company.............................................34
3.30. Absence of Changes.............................................34
3.31. Accuracy and Completeness of Information.......................35
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES OF PURCHASER.....................36
4.1. Organization....................................................36
4.2. Authorization for Agreement.....................................36
4.3. Enforceability..................................................36
4.4. Litigation......................................................36
4.5. Registration Statement..........................................36
4.6. Brokers or Finders..............................................37
ARTICLE 5 - COVENANTS.......................................................37
5.1. Good Faith......................................................37
5.2. Approvals.......................................................37
5.3. Cooperation; Access to Books and Records........................37
5.4. Duty to Supplement..............................................38
5.5. Information Required for Purchaser Financing Transactions.......39
5.6. Performance of Conditions.......................................40
5.7. Conduct of Business.............................................40
5.8. Negative Covenants..............................................41
5.9. Exclusive Negotiation...........................................43
5.10. Public Announcements...........................................43
5.11. Amendment of Schedules.........................................43
5.12. Cooperation in Preparation of Registration Statement...........44
5.13. Examination of Final Financial Statement.......................45
5.13A Audit Opinion..................................................45
5.14. [Intentionally omitted.]........................................45
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5.15. Compliance with the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 1976 (the "Xxxx-Xxxxx Act")...............................45
5.16. Final Tax Returns...............................................45
ARTICLE 6 - CONDITIONS PRECEDENT TO CLOSING.................................46
6.1. Conditions Precedent to Purchaser's Obligations.................46
6.2. Conditions Precedent to Seller's Obligations....................49
ARTICLE 7 - CLOSING.........................................................51
ARTICLE 8 - COVENANT NOT TO COMPETE.........................................51
8.1. Confidentiality.................................................51
8.2. Covenant Not To Compete.........................................53
8.3. Specific Enforcement; Extension of Period.......................53
8.4. Disclosure......................................................54
8.5. Interpretation..................................................54
8.6. Acknowledgment..................................................54
ARTICLE 9 - SURVIVAL........................................................55
9.1. Survival of Representations, Warranties, Covenants and Agreements55
9.2. [Intentionally omitted.]........................................55
9.3. Underwriter's Benefit...........................................55
ARTICLE 10 - INDEMNIFICATION................................................56
10.1. Seller and Shareholder's Indemnification.......................56
10.2. Purchaser's Indemnification....................................57
10.3. Payment; Procedure for Indemnification.........................57
10.4. Equitable Contribution Under the Securities Act..............60
10.5. Exclusiveness of Indemnification...............................60
10.6. Limitations on Indemnification..................................60
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ARTICLE 11 - TERMINATION AND REMEDIES.......................................61
11.1. Termination...................................................61
11.2. Effect of Termination..........................................62
ARTICLE 12 - POST-CLOSING COVENANTS.........................................62
12.1. Further Cooperation............................................62
12.2. Maintenance of Books and Records...............................63
12.3. By Seller and Shareholders.....................................63
12.4. Use of Name....................................................63
12.5. Discharge of Obligations.......................................64
12.6. Receivables....................................................64
12.7. Disclosure.....................................................64
ARTICLE 13 - TAXES RELATING TO PURCHASED ASSETS.............................64
ARTICLE 14 - MISCELLANEOUS..................................................65
14.1. Notices........................................................65
14.2. No Third Party Beneficiaries...................................66
14.3. Schedules......................................................66
14.4. Expenses.......................................................66
14.5. Further Assurances.............................................66
14.6. Entire Agreement; Amendment....................................67
14.7. Section and Paragraph Titles...................................67
14.8. Binding Effect.................................................67
14.9. Counterparts...................................................67
14.10. Severability..................................................67
14.11. Governing Law.................................................67
SCHEDULES
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (as amended or supplemented from time
to time, this "Agreement") is hereby made this 9th day of September, 1997 by and
among DocuTech, Inc. (the "Seller"), a Nebraska corporation (the "Company"), Xxx
Xxxx ("Xxx") and Xxxxx Xxxx ("Xxxxx," and collectively, the "Shareholders"), and
Docunet Inc., a Pennsylvania corporation (the "Purchaser").
PRELIMINARY STATEMENTS
The Seller is engaged in the business of providing document
management services. Shareholders own one hundred percent (100%) of the issued
and outstanding shares of the Seller's capital stock. The Seller desires to sell
to the Purchaser and the Purchaser desires to purchase from the Seller all of
the Seller's assets that are used in or related to the operation of the Seller's
document management, document software and related businesses (the "Business"),
together with the goodwill related to the Business in accordance with the
provisions set forth in this Agreement. Except for those specific obligations
and liabilities of the Seller identified in this Agreement, the Purchaser is
assuming none of the Seller's obligations or liabilities.
IN CONSIDERATION of the foregoing and the mutual promises, covenants
and agreements contained in this Agreement, the parties, intending to be legally
bound, hereby agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the
meanings herein specified, unless the context otherwise requires:
1.1. Intentionally Omitted
1.2. Accounts shall have the meaning set forth in Section 3.22.
1.3. Accrued Expenses shall mean, as of any date of determination,
accrued expenses as would appear on a balance sheet of the Business as of such
date prepared in accordance with GAAP, but specifically excluding any amounts
payable to any of the Seller's or the Shareholder's Affiliates or to any of the
Seller's directors, officers or employees that is contingent upon or payable as
a result of the transactions contemplated by this Agreement.
1.4. Acquired Liabilities shall mean, as of the applicable date,
Seller's Payables, Accrued Expenses and deferred revenue under service and
maintenance agreements, as would appear on a balance sheet of the Company as of
such date prepared in accordance with GAAP and incurred in the ordinary course
of business consistent with past practices.
1.5. Acquired Net Fixed Assets shall mean, as of the applicable
date, the Seller's fixed assets as categorized on the Seller Balance Sheet
reported in accordance with GAAP.
1.6. Acquired Net Operating Assets shall mean, as of the applicable
date, the Seller's (i) Acquired Net Fixed Assets plus the Seller's Current
Assets, minus Seller's Acquired Liabilities, reported on the Seller Balance
Sheet in accordance with GAAP.
1.7. Acquired Net Working Capital shall mean, as of the applicable
date, the Seller's Current Assets minus its Acquired Liabilities, as reported on
the Seller Balance Sheet in accordance with GAAP.
1.8. Affiliate shall mean: (i) any Person that directly or
indirectly through one or more intermediaries controls, is controlled by or
under common control with the Person specified; (ii) any director, officer, or
Subsidiary of the Person specified; and (iii) the spouse, parents, children,
siblings, mothers-in-law, fathers-in law, sons-in-law, daughters-in-law,
bothers-in-law, and sisters-in-law of the Person specified. For purposes of this
definition and without limitation to the previous sentence, (x) "control" of a
Person means the power, direct or indirect, to direct or cause the direction of
management and policies of such Person, whether through ownership of voting
securities, by contract or otherwise, and (y) any Person owning more than ten
percent (10%) or more of the voting securities or similar interests of another
Person shall be deemed to be an Affiliate of that Person.
1.9. Affiliate Transaction shall have the meaning set forth in
Section 3.21.
1.10. Allocation Schedule shall have the meaning set forth in
Section 2.5.
1.11. Assignment and Assumption Agreement shall mean the Assignment
and Assumption Agreement to be executed and delivered by and between the
Purchaser and the Seller in the form attached to this Agreement as Exhibit A.
1.12. Assumed Liabilities shall have the meaning set forth in
Section 2.6.
1.13. Balance Sheet Date shall mean December 31, 1996.
1.14. Xxxx of Sale shall mean the Xxxx of Sale to be executed and
delivered by the Seller to the Purchaser in the form attached to this Agreement
as Exhibit B.
1.15. Books and Records shall mean all records, documents, lists and
files, relating to either or both of the Purchased Assets or the Business
including, without limitation, price lists, lists of accounts, customers,
suppliers and personnel, all product, business and marketing plans, historical
sales data and all books, ledgers, files and business records (including,
without limitation, all financial records and books of account) of or relating
to either or both of
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the Purchased Assets or the Business; in any of the foregoing cases, whether in
electronic form or otherwise.
1.16. Business shall have the meaning set forth in the Preliminary
Statements to this Agreement.
1.17. Cash Purchase Price shall have the meaning set forth in
Section 2.4.
1.18. Claim Notice shall have the meaning set forth in Section
10.3(c).
1.19. Closing shall have the meaning set forth in Section 7.
1.20. Closing Balance Sheet shall mean the unaudited balance sheet
delivered by the Seller to the Purchaser as of the date immediately prior to the
Closing Date, in accordance with Section 3.10(d).
1.21. Closing Date shall mean the date on which the Closing actually
takes place.
1.22. [Intentionally Omitted]
1.23. Code shall mean the Internal Revenue Code of 1986 and the
rules and regulations promulgated thereunder, as amended and supplemented from
time to time, or any successors thereto.
1.24. Confidential Information shall mean (i) with respect to any
party to this Agreement or any Affiliate of such party or any Potential Founding
Company, all financial, technical, commercial or other information, including
but not limited to Intellectual Property and information, materials, documents,
financial reports, business plans and marketing data that relate to the
business, strategies or operations of the parties hereto or a Potential Founding
Company, disclosed or otherwise made available by such party, such Affiliate or
Potential Founding Company (the "Discloser") to another party, affiliate or
Potential Founding Company (the "Recipient") in connection with the transactions
contemplated by this Agreement and (ii) each of the terms, conditions and other
provisions contained in this Agreement and in the agreements or documents to be
delivered pursuant to this Agreement. Notwithstanding the preceding sentence,
the definition of Confidential Information shall not include any information
that (i) is in the public domain at the time of disclosure to the Recipient or
becomes part of the public domain after such disclosure through no fault of the
Recipient, (ii) is possessed in writing by the Recipient at the time of
disclosure to such Recipient, (iii) is contained in the Registration Statement
on Form S-1 to be filed by Purchaser in connection with the Initial Public
Offering, or (iv) is disclosed to a party or Potential Founding Company by any
Person other than a party to this Agreement or a Potential Founding Company;
provided, that the party to whom such disclosure has been made does not have
actual knowledge that such Person is prohibited from disclosing such information
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(either by reason of contractual, or legal or fiduciary duty or obligation). For
the purposes hereof, public domain shall not include disclosure of information
to a Potential Founding Company or (except as otherwise provided herein) to any
other person in connection with the transactions contemplated hereby.
Notwithstanding any exception in this paragraph or elsewhere in this agreement,
no Recipient shall use any information regarding the software developed by
DocuTech Data Services, Inc., whether developed for its own use, for DocuTech,
Inc.'s use, or for sale to customers, for the purpose of developing competitive
software for use by Recipient, affiliates of Recipient, or others or for sale by
Recipient, affiliates of Recipient, or by others.
1.25. Consents shall mean any consents, waivers, approvals,
authorizations, certifications or exemptions from any Person or under any
Contract or Requirement of Law, as applicable.
1.26. Current Assets shall mean, as of the applicable date, the
Seller's Trade Accounts Receivables, Inventories and Prepaid Expenses.
1.27. Contracts shall mean, with respect to any Person, any
indentures, indebtedness, contracts, leases, agreements, instruments, licenses,
undertakings and other commitments, whether written or oral, to which such
Person or such Person's properties are bound.
1.28. Credit Acts shall mean (i) the Fair Debt Collection Practices
Act, 16 U.S.C. ss.1692, et seq., the Fair Credit Reporting Act, 16 U.S.C.
ss.1681 et seq., and any other provision of the Consumer Credit Protection Act,
in each case, together with the rules and regulations promulgated thereunder,
(ii) the Telemarketing and Consumer Fraud and Abuse Prevention Act of 1994, 15
U.S.C. ss.6101 et seq., together with the rules and regulations promulgated
thereunder, (iii) the Telephone Consumer Protection Act of 1991, together with
the rules and regulations promulgated thereunder, and (iv) any Requirement of
Law of any jurisdiction relating to the subject matter covered by any of the
foregoing, all as amended and supplemented from time to time, or any successors
thereto.
1.29. DocuNet Common Stock shall mean the common stock, no par
value, of DocuNet Inc., the sole shareholder of Purchaser.
1.30. Employee Benefit Plan shall mean any deferred compensation,
pension, profit sharing, stock option, stock purchase, savings, group insurance
or retirement plan, and all vacation pay, severance pay, incentive compensation,
consulting, bonus and other employee benefit or fringe benefit plans or
arrangements maintained by the Seller or any ERISA Affiliate (including, without
limitation, health insurance, life insurance and other benefit plans maintained
for retirees) within the previous six plan years or with respect to which
contributions are or were (within such six year period) made or required to be
made by the Seller or any ERISA Affiliate or with respect to which the Seller
has any liability.
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1.31. Encumbrances shall mean, with respect to any asset, any
security interests, liens, encumbrances, pledges, mortgages, conditional or
installment sales Contracts, title retention Contracts, transferability
restrictions and other claims or burdens of any nature whatsoever attached to or
adversely affecting such asset other than liens arising in the ordinary course
of business which are not incurred in connection with the borrowing of money and
which, in the aggregate, are not material.
1.32. Environmental Laws shall mean all Requirements of Law relating
to pollution or protection of the environment (including, without limitation,
ambient air, surface water, groundwater, land, or surface or subsurface strata)
including, without limitation, Requirements of Law relating to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals, or industrial, toxic or hazardous substances or wastes into the
environment and Requirements of Law relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of any of
the foregoing including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. ss. 9601 et. seq.
("CERCLA"), the Resource Conservation and Recovery Act, 42 U.S.C. ss. 6901 et.
seq., and the rules and regulations promulgated thereunder, all as amended and
supplemented from time to time, and together with any successors thereto. As
used in this Agreement, the term "hazardous substances" shall have the meaning
assigned to that term in CERCLA, and the rules and regulations promulgated
thereunder, as amended and supplemented from time to time, or any successors
thereto.
1.33. ERISA shall mean the Employment Retirement Income Security Act
of 1974 and the rules and regulations promulgated thereunder, as amended and
supplemented from time to time, or any successors thereto.
1.34. ERISA Affiliate shall mean any Person that is included with
the Seller in a controlled group or affiliated service group under Sections
414(b), (c), (m) or (o) of the Code.
1.35. Escrow Agent shall mean the individual or entity named as the
Escrow Agent in the Escrow Agreement.
1.36. Escrow Agreement shall mean the Escrow Agreement between the
Seller, the Purchaser and the Escrow Agent to hold the Escrow Amount pursuant to
the terms and conditions therein as referred to in Section 2.4, substantially in
the form attached hereto as Exhibit C.
1.37. Escrow Amount shall have the meaning set forth in Section
2.4(b).
1.38. Excluded Assets shall mean those assets listed on Schedule
2.1(b) attached to this Agreement.
1.39. [Intentionally omitted]
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1.40. Financial Statements shall have the meaning set forth in
Section 3.10(a).
1.41. Founding Companies shall mean those Potential Founding
Companies that enter into definitive acquisition agreements with the Purchaser
in anticipation of a simultaneous acquisition by Purchaser and Initial Public
Offering.
1.42. GAAP shall mean generally accepted accounting principles in
the United States set forth in the Opinions of the Accounting Principles Board
of the American Institute of Certified Public Accountants and in statements by
the Financial Accounting Standards Board or in such other statement by such
other entity as may be generally recognized as the successors for the
aforementioned; and shall also mean the accounting principles observed in a
current period are comparable in all material respects to those applied in a
preceding period unless specific exemption is noted in the financial statements
where a change of accounting method, principle or presentation has occurred.
1.43. Governmental or Regulatory Authority shall mean any court,
tribunal, arbitrator, authority, agency, commission, official or other
instrumentality of the government of the United States or of any foreign
country, any state or any political subdivision of any such government (whether
state, provincial, county, city, municipal or otherwise).
1.44. Indemnifiable Losses shall mean all liabilities, obligations,
claims, demands, damages, penalties, settlements, causes of action, costs and
expenses. Indemnifiable Losses shall include, without limitation, the actual
costs paid in connection with an Indemnified Party's investigation and
evaluation of any claim or right asserted against such Indemnified Party and all
reasonable attorneys', experts' and accountants' fees, expenses and
disbursements and court costs including, without limitation, those incurred in
connection with the Indemnified Party's enforcement of this Agreement and the
indemnification provisions of Article 10 of this Agreement.
1.45. Indemnified Party shall have the meaning set forth in Section
10.3(a).
1.46. Indemnifying Party shall have the meaning set forth in Section
10.3(a).
1.47. Indemnity Notice shall have the meaning set forth in Section
10.3(a).
1.48. Initial Public Offering shall mean the initial public offering
of the DocuNet Common Stock registered under the Securities Act.
1.49. Initial Public Offering Price shall mean the price to the
public of the DocuNet Common Stock sold in the Initial Public Offering.
1.50. Intellectual Property shall mean all patents, patent rights,
patent applications, registered trademarks and service marks, trademark rights,
trademark applications,
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service xxxx rights, service xxxx applications, trade names, registered
copyrights, copyright rights and all intellectual, industrial or proprietary
rights and trade secrets, technology and know-how relating to either or both of
the Purchased Assets or the Business, in each case together with any amendments,
modifications and supplements thereto.
1.51. Interim Financial Statements shall have the meaning set forth
in Section 3.10(b).
1.52. Inventory shall mean all inventory incremental or relating to,
or used in connection with the Business including, without limitation, all
supplies, work-in-process and finished goods identified on Annex 1 to Schedule
2.1(a) attached to this Agreement.
1.53. IRS means the Internal Revenue Service or any successor
organization thereto.
1.54. Knowledge shall mean with respect to any representation,
warranty or statement of any party in this Agreement that is qualified by such
party's "knowledge," the actual knowledge of such party or, in the case of an
entity, the actual knowledge of any officer or director of such entity, and, in
the case of any such officer or director that knowledge that a reasonably
prudent officer or director should have if such person duly performed his or her
duties as an officer or director of such party or made reasonable and diligent
inquiry and exercised due diligence with respect thereto.
1.54A. Lease shall mean the lease of Real Property.
1.55. Legal Proceeding shall mean any action, suit, arbitration,
claim or investigation by or before any Governmental or Regulatory Authority,
any arbitration or alternative dispute resolution panel, or any other legal,
administrative or other proceeding.
1.56. Material Adverse Effect shall mean an effect which is or would
be materially adverse to the Business and Properties (including Intellectual
Property), the prospects for the Business, or the condition (financial or
otherwise) or results of operation, of the Seller.
1.57. Obligations and liabilities and words of similar import
include, without limitation, any direct or indirect indebtedness, guaranty,
endorsement, claim, loss, damage, deficiency, cost, expense, obligation or
responsibility, fixed or unfixed, known or unknown, asserted or unasserted,
xxxxxx or inchoate, liquidated or unliquidated, secured or unsecured.
1.58. Order shall mean any judgment, order, writ, decree, injunction
or other determination whatsoever of any Governmental or Regulatory Authority or
any other entity or body whose finding, ruling or holding is legally binding or
is enforceable as a matter of right (in any case, whether preliminary or final).
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1.59. Payables shall mean, as of any date of determination, the
Seller's accounts payable associated with the Business as of such date in
accordance with GAAP consistently applied, other than amounts that are payable
to any Affiliate of the Seller or any of the Shareholders.
1.60. PBGC means the Pension Benefit Guaranty Corporation or any
successor organization thereto.
1.61. Permits shall mean all licenses, permits, certificates of
authority, authorizations, approvals, registrations, franchises, rights, orders,
qualifications and similar rights or approvals granted or issued by any
Governmental or Regulatory Authority relating to either or both of the Purchased
Assets or the Business.
1.62. Person shall mean any natural person, corporation, general
partnership, limited partnership, limited liability Seller, proprietorship,
joint venture, trust, association, union, entity, or other form of business
organization or any Governmental or Regulatory Authority whatsoever.
1.63. Prepaid Expenses shall mean, as of any date of determination,
payments made by Seller with respect to the Business, other than payments made
by the Seller to any Affiliate of either the Seller or the Shareholder, that
constitute prepaid expenses of the Business in accordance with GAAP consistently
applied as of such date.
1.63A Pricing shall mean the determination by Purchaser and the
Underwriters of the public offering price of the shares of DocuNet Common Stock
in the Initial Public Offering.
1.63B Pricing Date shall mean the date on which the Pricing takes
place.
1.64. Potential Founding Company shall mean any person or entity
entering into a letter of intent with the Purchaser, or its Affiliates, to
participate in the simultaneous acquisition by Purchaser and Initial Public
Offering.
1.65. Property shall mean the Real Property, Intellectual Property
and Tangible Personal Property of the Company.
1.66. Purchased Assets shall have the meaning set forth in Section
2.1.
1.67. Purchase Price shall have the meaning set forth in Section
2.3.
1.68. Purchaser Financing Transaction shall mean the Initial Public
Offering, any other offering by the Purchaser or any of its Subsidiaries of any
securities, whether debt or equity, or any other financing or credit arrangement
sought by the Purchaser or any of its Subsidiaries.
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1.69. [Intentionally omitted.]
1.70. Real Property shall mean all real property of Seller.
1.71. Receivables shall mean, as of any date of determination, the
Seller's accounts receivable, notes receivable and other miscellaneous
receivables associated with the Business at such date.
1.72. Regulatory Approvals shall mean all Consents from all
Governmental or Regulatory Authorities.
1.73. Related Companies shall have the meaning set forth in Section
8.2(a).
1.74. Requirement of Law shall mean, with respect to any Person,
such Person's articles or certificate of incorporation, by-laws or other
governing or constitutive documents, if any, and any provision of law, statute,
treaty, rule, regulation, ordinance or pronouncement having the effect of law,
or any Order, to which, in each case, such Person or any of such Person's
properties, operations, business or assets is bound or subject.
1.75. Restricted Area shall have the meaning set forth in Section
8.2(a).
1.76. Restricted Business shall have the meaning set forth in
Section 8.2(a).
1.77. Restricted Period shall mean, with respect to the Seller and
the Shareholders, the period commencing on the Closing Date and ending on the
later of (i) the first anniversary of the date on which such Shareholder's
employment with the Purchaser, if any, expires, is not renewed, or is otherwise
terminated, and (ii) the fifth anniversary of the Closing Date, as such period
may be extended pursuant to Section 8.3(b); provided that (with respect to the
Shareholders) the reference to "fifth anniversary" in this clause (ii) shall be
automatically changed to "fourth anniversary" if the average closing price of
the DocuNet Common Stock during any 20-trading day period within the 60-day
period prior to or following the date on which such Shareholder's employment
with the Purchaser terminates is less than 50% of the Initial Public Offering
Price (as adjusted proportionately for any stock splits, stock dividends or
reverse stock splits).
1.78. Securities Act shall mean the Securities Act of 1933 and the
rules and regulations promulgated thereunder, as amended and supplemented from
time to time, or any successors thereto.
1.79. [Intentionally Omitted]
1.80. Seller Balance Sheet shall have the meaning set forth in
Section 3.11.
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1.81. Intentionally Omitted
1.82. Intentionally Omitted
1.83. Subsidiary shall mean, with respect to any Person, any Person
of which securities or other ownership interests having ordinary voting power to
select a majority of the board of directors or other persons serving similar
functions are at the time directly or indirectly owned by such Person.
1.84. Tangible Personal Property shall have the meaning set forth in
Section 3.13.
1.85. Taxes shall mean (i) any tax, charge, fee, levy or other
assessment including, without limitation, any net income, gross income, gross
receipts, sales, use, ad valorem, transfer, franchise, profits, payroll,
employment, social security, unemployment, excise, estimated, stamp, occupancy,
occupation, property or other similar taxes, including any interest or penalties
thereon, and additions to tax or additional amounts imposed by any federal,
state, local or foreign governmental authority, domestic or foreign (a "Taxing
Authority") or (ii) any liability for the payment of any taxes, interest,
penalty, addition to tax or like additional amount resulting from the
application of Treasury Regulation ss.1.1502-6 or comparable Requirement of Law.
1.86. Tax Returns shall mean any declaration, return, report,
estimate, information return, schedule, statements or other document filed or
required to be filed, with or when none is required to be filed with a Taxing
Authority, the statement or other document issued by, a Taxing Authority.
1.87. Trade Accounts Receivable shall mean, as of the applicable
date, the Seller's trade accounts receivable associated with the Business.
1.88. Transfer Taxes shall mean any applicable documentary, sales,
use, filing, transfer and similar Taxes payable as a result of the transactions
contemplated by this Agreement.
1.89. Underwriter shall have the meaning set forth for that term in
Section 2(a)(11) of the Securities Act.
1.90. Unliquidated Indemnity Notice shall have the meaning set forth
in Section 10.3(b).
1.91. Working Capital Adjustment shall have the meaning set forth in
Section 2.3.
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ARTICLE 2
SALE AND PURCHASE OF ASSETS; CONSIDERATION;
ASSUMPTION OF LIABILITIES
2.1. Agreement to Sell and Purchase Assets. Subject to the terms and
conditions set forth in this Agreement, and in reliance upon the joint and
several representations and warranties made by the Seller and the Shareholders
to the Purchaser in this Agreement, the Seller shall sell to the Purchaser and
the Purchaser shall purchase and receive from the Seller, free and clear of all
Encumbrances and all obligations and liabilities (other than the Assumed
Liabilities), all of the tangible and intangible assets of the Seller, whether
real, personal or mixed, that are incremental or relating to, or used in
connection with, the Business, wherever located, including, without limitation
(i) the assets included on the Seller Balance Sheet, (ii) the assets listed on
Schedule 2.1(a) attached to this Agreement, and (iii) all assets acquired by the
Seller after December 31, 1996 and on or prior to the Closing Date, but
excluding the Excluded Assets (as set forth on Schedule 2.1(b)) and any assets
disposed of in the ordinary course of business consistent with past practice
(collectively, the "Purchased Assets").
2.2. Intentionally Omitted
2.3. Consideration and Payment. As full consideration for the
Purchased Assets being purchased pursuant to this Agreement (in addition to the
assumption of the Assumed Liabilities), the Purchaser shall pay, deliver or
cause to be delivered to the Seller, in the manner set forth in Section 2.4 of
this Agreement, the Base Purchase Price (as hereinafter defined), less the Debt
Adjustment (as hereinafter defined), the Working Capital Adjustment (as
hereinafter defined) and, subject to Section 2.3(f) below, the Net Book Value of
Assets and Liabilities Adjustment (as hereinafter defined), on the terms and
conditions set forth below (the "Purchase Price"):
(a) Base Purchase Price. Subject to Section 2.4(d), the Purchaser
shall pay to the Seller at the Closing the sum of Two Million Seven
Hundred Thousand dollars ($2,700,000), subject to adjustments as set forth
herein (the "Base Purchase Price").
(b) Debt Adjustment. The Base Purchase Price shall be reduced, at
Closing, by 29.35 cents for each $1.00 of Debt reflected on the Closing
Balance Sheet of the Seller and DocuTech Data Systems, Inc. (the "Closing
Debt Amount"). The Debt shall mean all of the liabilities of Seller and
DocuTech Data Systems, Inc., contingent or otherwise, except Adjusted
Current Liabilities, in accordance with GAAP. The Adjusted Current
Liabilities shall mean all of the liabilities of Seller and DocuTech Data
Systems, Inc which would be classified as current liabilities in
accordance with GAAP, except current amounts of principal, interest or
penalties due and owing: (i) under promissory notes or lines of credit to
lending institutions; (ii) to an employee or an Affiliate of the Seller or
DocuTech Data Systems, Inc., or the Shareholders; (iii) to a lessor under
a capital lease; or (iv) on
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account of Taxes or earned insurance premiums. Promptly following the
Closing and in order to verify the accuracy of the adjustment made at
Closing, the Purchaser agrees to cause the internal accounting staff and
the independent certified public accountant of the Purchaser (the
"Accountants") to verify the Closing Debt Amount. The Accountants shall
issue a report as to their determination of the Closing Debt Amount (the
"Accountants' CDA Report") promptly after their determination of such
amount and the Purchaser shall deliver the Accountants' CDA Report to the
Seller not later than sixty (60) days following the Closing Date. The
determination of the Closing Debt Amount by the Accountants shall be
conclusive and binding upon the parties hereto unless the Seller shall
object to the Accountants' CDA Report within fifteen (15) days following
their receipt of the Accountants' CDA Report. The Seller's objection, if
any, to the Accountants' CDA Report (the "Seller's CDA Objection") shall
set forth in reasonable detail the Seller's objection(s) to the
Accountants' CDA Report and the Seller's calculation of the Closing Debt
Amount. Within ten (10) days after receipt of the Seller's CDA Objection,
the Purchaser will notify the Seller whether it accepts or disputes the
Seller's adjustments, if any, which notification shall set forth in
reasonable detail the adjustments made by the Seller which the Purchaser
continues to dispute (the "Purchaser's CDA Response Notice"). If the
Seller does not object to the Accountants' CDA Report, or if the Purchaser
agrees to accept the Seller's adjustments to the Accountants' CDA Report,
then the adjustment based on the then final Closing Debt Amount (the
"Final Debt Amount"), if any, shall be paid by the Seller to the Purchaser
in immediately available funds within five (5) business days of such
acceptance. If such amount is not received by Purchaser within such time
period, it shall be paid from the Escrow Amount pursuant to the Escrow
Agreement and the Seller shall be obligated to replenish the Escrow Amount
by depositing with the Escrow Agent upon such payment either cash in a
like amount or a number of shares of DocuNet Common Stock having an
aggregate Value (as defined below) equal to such amount. The term "Value"
in respect of a share of DocuNet Common Stock shall mean the lower of the
Initial Public Offering Price and the average closing price of the DocuNet
Common Stock during the 20 trading-day period ending immediately prior to
the applicable payment date. If the Seller objects to the Accountants' CDA
Report as set forth above and the Purchaser does not accept the Seller's
proposed adjustments, then an independent accounting firm mutually
satisfactory to the Seller and the Purchaser shall be engaged to determine
the amount of the Closing
Debt Amount and the Final Debt Amount, based upon the calculations of the
independent accountants, and any adjustments of Base Purchase Price based
on the amount determined as provided above shall be paid to the Purchaser
in immediately available funds within five (5) business days of the
determination of such amount by such accounting firm. If such amount is
not received by Purchaser within such time period, such amount shall be
paid from the Escrow Amount pursuant to the Escrow Agreement and the
Seller shall be obligated to replenish the Escrow Amount by depositing
with the Escrow Agent upon such payment either cash in a like amount or a
number of shares of DocuNet Common Stock having an aggregate Value equal
to such amount. The parties hereto agree to cooperate fully with such
independent accountants at their own cost and expense, including, but not
limited to, providing such
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independent accountants with access to, and copies of, all books and records
that they shall reasonably request. The Purchaser and the Seller shall each bear
one-half of all of the costs and expenses of such independent accounting firm,
and if the parties hereto are unable to agree upon an independent accounting
firm, the Seller and the Purchaser will request that one be designated by the
President of the Philadelphia office of the American Arbitration Association.
(c) Working Capital Adjustment. The Base Purchase Price shall be
reduced, at Closing, by 29.35 cents for each $1.00 that the Combined
Adjusted Working Capital of the Seller and DocuTech Data Systems, Inc. (as
hereinafter defined) is less than $400,000 on the Closing Date (the
"Closing Adjusted Working Capital Amount"). The Combined Adjusted Working
Capital shall mean the current assets of the Seller and of DocuTech Data
Systems, Inc., plus deferred revenue of the Seller and DocuTech Data
Systems, Inc. and less Adjusted Current Liabilities, calculated pursuant
to GAAP. Promptly following the Closing, and in order to verify the
accuracy of the adjustment made at the Closing, the Purchaser agrees to
cause the internal accounting staff and the independent certified public
accountant of the Purchaser (the "Accountants") to verify the amount of
the Closing Adjusted Working Capital Amount. The Accountants shall issue a
report as to their determination of the Closing Adjusted Working Capital
Amount (the "Accountants' CAWCA Report") promptly after their
determination of such amount and the Purchaser shall deliver the
Accountants' CAWCA Report to the Seller no later than sixty (60) days
following the Closing Date. The determination of the Closing Adjusted
Working Capital Amount by the Accountants shall be conclusive and binding
upon the parties hereto unless the Seller shall object to the Accountants'
CAWCA Report within fifteen (15) days following its receipt of the
Accountants' CAWCA Report. The Seller's objection to the Accountants'
CAWCA Report. The Seller's objection, if any, to the Accountants' CAWCA
Report (the "Seller's CAWCA Objection") shall set forth in reasonable
detail the Seller's objection(s) to the Accountants' CAWCA Report and the
Seller's calculation of the Closing Adjusted Working Capital Amount.
Within ten (10) days after receipt of the Seller's CAWCA Objection, the
Purchaser will notify the Seller whether it accepts or disputes the
Seller's adjustments, if any, which notification shall set forth in
reasonable detail the adjustments made by the Seller which the Purchaser
continues to dispute (the "Purchaser's CAWCA Response Notice"). If the
Seller does not object to the Accountants' CAWCA Report, or if the
Purchaser agrees to accept the Seller's adjustments to the Accountants'
CAWCA Report, then the adjustment based on the then final Closing Adjusted
Working Capital Amount (the "Final Adjusted Working Capital Amount"), if
any, shall be paid by Seller to the Purchaser in immediately available
funds within five (5) business days of such acceptance. If such amount is
not received by Purchaser within such time period, such amount shall be
paid from the Escrow Amount pursuant to the Escrow Agreement and Seller
shall be obligated to replenish the Escrow Amount by depositing with the
Escrow Agent upon such payment cash in a like amount If the Seller objects
to the Accountants' CAWCA Report as set forth above and the Purchaser does
not accept the Seller's proposed adjustments, then an independent
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accounting firm mutually satisfactory to the Seller and the Purchaser
shall be engaged to determine the amount of the Closing Adjusted Working
Capital Amount and the Final Adjusted Working Capital Amount, based upon
the calculations of the independent accountants, and any adjustments of
Base Purchase Price based on the amount discussed determined as provided
above shall be paid to the Purchaser in immediately available funds within
five (5) business days of the determination of such amount by such
accounting firm. If such amount is not received by Purchaser within such
time period, such amount shall be paid from the Escrow Amount pursuant to
the Escrow Agreement and Seller shall be obligated to replenish the Escrow
Amount by depositing with the Escrow Agent upon such payment cash in a
like amount. The parties hereto agree to cooperate fully with such
independent accountants at their own cost and expense, including, but not
limited to, providing such independent accountants with access to, and
copies of, all books and records that they shall reasonably request. The
Purchaser and the Seller shall each bear one-half of all of the costs and
expenses of such independent accounting firm, and if the parties hereto
are unable to agree upon an independent accounting firm, the Seller and
Purchaser will request that one be designated by the President of the
Philadelphia office of the American Arbitration Association.
(d) Net Book Value of Assets and Liabilities Adjustment. The Base
Purchase Price shall be further reduced, at Closing, by 29.35 cents for
each $1.00 that the Net Book Value of the Combined Acquired Assets and
Liabilities of the Seller and of DocuTech, Inc., as reflected on the
Closing Balance Sheet, is less than $700,000 on the Closing Date (the
"Closing Net Book Value Amount"). The Net Book Value of the Combined
Acquired Assets and Liabilities shall mean the assets of the Seller and
DocuTech Data Systems, Inc., plus deferred revenue of the Seller and
DocuTech Data Systems, Inc. and less (i) any intangible assets recorded by
Purchaser to reflect the purchase of the Assets hereunder and (ii)
Adjusted Current Liabilities, calculated pursuant to GAAP. Promptly
following the Closing, and in order to verify the accuracy of the
adjustment made at the Closing, the Purchaser agrees to cause the
Accountants to verify the amount of the Closing Net Book Value Amount. The
Accountants shall issue a report as to their determination of the Closing
Net Book Value Amount (the "Accountants' CNBVA Report") promptly after
their determination of such amount and the Purchaser shall deliver the
Accountants' CNBVA Report to the Seller not later than sixty (60) days
following the Closing Date. The determination of the Closing Net Book
Value Amount by the Accountants shall be conclusive and binding upon the
parties hereto unless the Seller shall object to the Accountants' CNBVA
Report within fifteen (15) days following their receipt of the
Accountants' CNBVA Report. The Seller's objection, if any, to the
Accountants' CNBVA Report (the "Seller's CNBVA Objection") shall set forth
in reasonable detail the Seller's objection(s) to the Accountants' CNBVA
Report and the Seller's calculation of the Closing Net Book Value Amount.
Within ten (10) days after receipt of the Seller's CNBVA Objection, the
Purchaser will notify the Seller whether it accepts or disputes the
Seller's adjustments, if any, which notification shall set forth in
reasonable detail the adjustments made by the Seller which the Purchaser
continues to dispute (the "Purchaser's
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CNBVA Response Notice"). If the Seller does not object to the Accountants' CNBVA
Report, or if the Purchaser agrees to accept the Seller's adjustments to the
Accountants' CNBVA Report, then the adjustment based on the then final Closing
Net Book Value Amount (the "Final Net Book Value Amount"), if any, shall be paid
by Seller to the Purchaser in immediately available funds within five (5)
business days of such acceptance. If such amount is not received by Purchaser
within such time period, such amount shall be paid from the Escrow Amount
pursuant to the Escrow Agreement and Seller shall be obligated to replenish the
Escrow Amount by depositing with the Escrow Agent upon such payment cash in a
like amount. If the Seller objects to the Accountants' CNBVA Report as set forth
above and the Purchaser does not accept the Seller's proposed adjustments, then
an independent accounting firm mutually satisfactory to the Seller and the
Purchaser shall be engaged to determine the amount of the Closing Net Book Value
Amount and the Final Net Book Value Amount, based upon the calculations of the
independent accountants, and any adjustments of Base Purchase Price based on the
amount determined as provided above shall be paid to the Purchaser in
immediately available funds within five (5) business days of the determination
of such amount by such accounting firm. If such amount is not received by
Purchaser within such time period, such amount shall be paid from the Escrow
Amount pursuant to the Escrow Agreement and Seller shall be obligated to
replenish the Escrow Amount by depositing with the Escrow Agent upon such
payment cash in a like amount. The parties hereto agree to cooperate fully with
such independent accountants at their own cost and expense, including, but not
limited to, providing such independent accountants with access to, and copies
of, all books and records that they shall reasonably request. The Purchaser and
the Seller shall each bear one-half of all of the costs and expenses of such
independent accounting firm, and if the parties hereto are unable to agree upon
an independent accounting firm, the Seller and Purchaser will request that one
be designated by the President of the Philadelphia office of the American
Arbitration Association.
(e) Multiple Adjustments. Notwithstanding anything herein to the
contrary, if a payment is due from Seller to Purchaser on account of the
Working Capital Adjustment and the Net Book Value of Assets and
Liabilities Adjustment, Seller shall only be obligated to pay the greater
of the two adjustment amounts to Purchaser.
(f) Shareholder Obligation The Shareholders hereby agree that the
Shareholders will be jointly and severally liable for all obligations of
Seller under the Purchase Price adjustments set forth in this Section 2.3
of this Agreement including, but not limited to, the obligation to
replenish the Escrow Amount.
2.4. Payment of Purchase Price.
(a) Cash Purchase Price An amount equal to $2.7 million less
the reductions, if any, to be made at Closing pursuant to Sections 2.3(b),
2.3(c), 2.3(d), 2.3(e) and 2.3(f), shall be payable at the Closing in cash to
the Seller ("Cash Purchase Price"), as reduced by
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the Escrow Amount (as described below). The specific amount of the Cash Purchase
Price shall be payable to the Seller by a wire transfer to an account to be
designated by Seller in writing not less than three (3) business days prior to
the Closing.
(b) Delivery into Escrow. Notwithstanding the foregoing,
$135,000 of the Cash Purchase Price shall be paid directly to the Escrow Agent
pursuant to the Escrow Agreement (the "Escrow Amount"). The Escrow Amount shall
be available to fund (but shall not be the sole source of funding) any
obligations of Seller under this Agreement pursuant to the terms of the Escrow
Agreement; provided, however, if the amount of cash in the Escrow Account falls
below $135,000 (the "Threshold Value") due to payment from the Escrow Account
pursuant to Section 2.3 hereof, the Seller (or the Shareholders pursuant to
Section 2.3(e)) shall contribute additional cash in an amount necessary so that
the Escrow Account would equal the Threshold Value.
2.5. Allocation of Purchase Price. Seller shall on or before thirty
(30) days after the Closing Date initially determine and send to Purchaser a
schedule containing the allocation of the Purchase Price and the Assumed
Liabilities among the Purchased Assets as is required by Section 1060 of the
Code (the "Allocation Schedule"). The Allocation Schedule will be deemed to be
accepted by Purchaser unless Purchaser provides a written notice of disagreement
to Seller within five (5) business days after receipt of the Allocation
Schedule. If Purchaser provides such written notice, Seller and Purchaser shall
proceed to negotiate in good faith to create a mutually acceptable Allocation
Schedule. If no mutually acceptable Allocation Schedule is created within ten
(10) business days of Seller's receipt of the written notice of disagreement,
then an independent accountant mutually satisfactory to the Seller and Purchaser
(the "Independent Accountant') shall be engaged to determine the Allocation
Schedule. The fees for such determination shall be borne by Purchaser, unless
the Independent Accountant disagrees materially with the Allocation Schedule
originally submitted by Seller, in which case such fees shall be borne by
Seller. Such determination by the Independent Accountant, or the original
Allocation Schedule if not objected to by the Purchaser, shall be binding and
conclusive to all parties to the Agreement and all parties shall file all
relevant tax returns consistent with such final determination, unless otherwise
required by applicable law; provided, however, that if the Purchase Price or the
Assumed Liabilities are adjusted in accordance with Section 2.3 of this
Agreement, the Allocation Schedule otherwise determined shall be adjusted
accordingly, as required by Section 1060 of the Code.
2.6. Assumption of Liabilities. At the Closing, the Purchaser will
assume only the Seller's obligations and liabilities expressly listed on
Schedule 2.6 attached to this Agreement, if any (collectively, the "Assumed
Liabilities"). Except for the Assumed Liabilities, the Purchaser shall not, by
virtue of its purchase of the Purchased Assets or otherwise, acquire, assume or
become responsible for any obligations or liabilities of the Seller. Nothing
contained in this Agreement shall be construed as an assumption of any specific
Assumed Liability until any required Consent shall have been obtained.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDERS
Except as set forth on the disclosure schedule delivered by the
Seller and the Shareholders to the Purchaser on the date hereof (the "Disclosure
Schedule"), the numbers of which are numbered to correspond to the section
numbers of this Agreement to which they refer, the Seller and the Shareholders
hereby, jointly and severally, represent and warrant to the Purchaser as
follows:
3.1. Organization; Qualification; Good Standing.
(a) The Seller (i) is a corporation duly incorporated, validly
existing and in good standing under the laws of the state of its incorporation
or organization, (ii) has the power and authority to own and operate its
properties and assets and to transact the Business and (iii) is duly qualified
and authorized to do business and is in good standing in all jurisdictions where
the failure to be duly qualified, authorized and in good standing would have a
Material Adverse Effect upon the Seller's Business, prospects, operations,
results of operations, assets, liabilities or condition (financial or
otherwise). Listed in the Disclosure Schedule is a true and complete list of all
jurisdictions in which the Seller is qualified to do business.
(b) There is no Legal Proceeding or Order pending or, to the
knowledge of either of the Seller or the Shareholders, threatened against or
affecting the Seller revoking, limiting or curtailing, or seeking to revoke,
limit or curtail the Seller's power, authority or qualification to own, lease or
operate its properties or assets or to transact the Business.
(c) True and complete copies of the Seller's articles or
certificate of incorporation, bylaws and other constitutive documents are
attached to this Agreement as part of the Disclosure Schedule. Except as set
forth in Schedule 3.1(c), the minute books of the Seller, as heretofore made
available to the Purchaser, are correct and complete in all material respects.
3.2. Authorization for Agreement.
(a) The Seller. The Seller's execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby by the Seller: (i) are within the Seller's corporate powers
and duly authorized by all necessary corporate and shareholder action on the
part of the Seller and (ii) do not (A) require any action by or in respect of,
or filing with, any Governmental or Regulatory Authority (B) contravene, violate
or constitute, whether with or without the passage of time or the giving of
notice or both, a breach or default under, any Requirement of Law applicable to
the Seller or any of its properties or any Contract to which the Seller or any
of its properties is bound or subject or (C) result in the creation of any
Encumbrance or any obligation and liability on any of the Purchased Assets.
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(b) The Shareholders. The Shareholders' execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated hereby by the Shareholders (i) are within the powers and authority,
corporate or otherwise, of the Shareholders and are duly authorized by all
necessary corporate and Shareholder action on the part of a corporate
Shareholder and (ii) do not (A) require any action by or in respect of, or
filing with, any Governmental or Regulatory Authority, or (B) contravene,
violate or constitute, whether with or without the passage of time or the giving
of notice or both, a breach or default under, any Requirement of Law applicable
to the Shareholders, any of his or its properties or any Contract to which the
Shareholders or any of his or its properties is bound or subject.
3.3. Ownership; Subsidiaries and Affiliates.
(a) Sole Shareholder. No Person other than the Shareholders
own record, beneficial or equitable ownership of any of the Seller's securities,
whether debt or equity.
(b) No Interest in Other Entities. Seller does not own,
directly or indirectly, any debt, equity or other ownership or financial
interest in any other Person. No shares or other ownership or other interests,
either of record, beneficially or equitably, in any Person are included in the
Purchased Assets.
(c) Affiliates. The Disclosure Schedule includes a complete
and accurate list of all Persons (other than the Shareholders or any of the
Persons described in the first sentence of Section 1.8, subpart (iii)) that are
Affiliates of the Seller, detailing the nature of the relationship between the
Seller and each such Person that causes such Person to be an Affiliate of the
Seller.
(d) No Acquisitions. Since the Balance Sheet Date, the Seller
has not acquired, or agreed to acquire, whether by merger or consolidation, by
purchase of equity interests or assets, or otherwise, any business or any other
Person, or otherwise acquired, or agreed to acquire, any assets other than in
the ordinary course of business that are material, either individually or in the
aggregate, to the Seller.
3.4. Enforceability. This Agreement has been duly executed and
delivered by the Seller and the Shareholders and constitutes the legal, valid
and binding obligation of the Seller and the Shareholders, enforceable against
each of them in accordance with its terms.
3.5. Legal Proceedings and Orders. Except as set forth in the
Disclosure Schedule there is no Legal Proceeding or Order pending against, or to
either of the Seller's or the Shareholders' knowledge, threatened against or
affecting, the Seller, the Business, the Purchased Assets or the Assumed
Liabilities that could reasonably be expected to have a Material Adverse Effect
or to adversely affect or restrict the ability of the Seller to consummate fully
the transactions contemplated by this Agreement or that in any manner could draw
into question the validity of this Agreement. Neither the Seller nor any of the
Shareholders has knowledge of any fact, event, condition or circumstance that
may give rise to the commencement of any Legal
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Proceeding or the entering of any Order against the Seller or any of the
Seller's properties including, without limitation, any Legal Proceeding or Order
that could adversely affect or restrict the ability of any Seller to consummate
fully the transactions contemplated by this Agreement or that in any manner
could draw into question the validity of this Agreement.
3.6. Title to the Purchased Assets and Related Matters. Except for
the items of Tangible Personal Property leased by the Seller and disclosed in
the Disclosure Schedule and except as otherwise set forth in the Disclosure
Schedule, the Seller owns and has good and valid legal and beneficial title to
all of the Purchased Assets free and clear of all Encumbrances. All of the
Purchased Assets are in the possession or under the control of the Seller and
consist of all of the assets that are incremental or relating to, or used in
connection with, the Business. Except for those items of Tangible Personal
Property leased by the Seller and disclosed in the Disclosure Schedule and
except as otherwise set forth in the Disclosure Schedule, no Person other than
the Seller owns any of the Tangible Personal Property located on any of the Real
Property (other than immaterial items of personal property that are owned by the
Seller's employees).
3.7. Compliance with Laws. The Seller is operating in compliance
with all Requirements of Law applicable to it or any of its properties or to
which the Seller or its properties is bound or subject including, without
limitation, the Credit Acts. Except as set forth on the Disclosure Schedule
attached to this Agreement, since January 1, 1992, none of the Seller or the
Shareholders has received any notice from any Person concerning alleged
violations of, or the occurrence of any events or conditions resulting in
alleged noncompliance with, any Requirement of Law applicable to the Seller or
any of its properties or to which the Seller or any of its properties is bound
or subject including, without limitation, any of the Credit Acts. None of the
Seller, the Shareholders, any of their respective Affiliates (other than a
Person who is an Affiliate solely by virtue of clause (iii) of the definition
thereof), or any of such Affiliates' respective Affiliates (other than a Person
who is an Affiliate solely by virtue of clause (iii) of the definition thereof)
has made any illegal kickback, bribe, gift or political contribution to or on
behalf of any customer, or to any officer, director, employee of any customer,
or to any other Person.
3.8. Labor Matters.
(a) Attached to the Disclosure Schedule is a complete and
accurate list of all consulting or similar Contracts to which the Seller is a
party or may otherwise be bound or subject, and the compensation to which each
consultant is entitled under its respective Contract. The Seller has delivered
or caused to be delivered to the Purchaser true and complete copies of all such
Contracts, each of which is attached to the Disclosure Schedule. Since the
Balance Sheet Date, the Seller has not increased the compensation payable to its
consultants or the rate of compensation payable to its consultants. No
individuals retained by the Seller as an independent contractor or consultant
would be reclassified by the IRS, the U.S. Department of Labor or any other
Governmental or Regulatory Authority as an employee of the Seller for any
purpose whatsoever.
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(b) Attached to the Disclosure Schedule is a complete and
accurate list of the name of each employee of the Seller, together with such
employee's position or function, the rate of hourly, monthly or annual
compensation (as the case may be) paid or to be paid to such employee in 1995,
1996 and, to the extent known, 1997, any accrued sick leave or pay or vacation
and any incentive or bonus arrangement with respect to any such employee. Except
as is set forth on the Disclosure Statement, since the Balance Sheet Date, the
Seller has not increased the compensation payable to its employees or the rate
of compensation payable to its employees. The Disclosure Schedule also
identifies those employees with whom the Seller has entered into an employment
Contract or a Contract obligating the Seller to pay severance or similar
payments to any employee. The Seller and the Shareholders have delivered or
caused to be delivered to the Purchaser true and complete copies of such
Contracts, all of which are attached or listed on the Disclosure Schedule.
(c) The Seller is not a party to or bound by any collective
bargaining agreement and no collective bargaining agreement covering any of such
employees is currently being negotiated. To the knowledge of either of the
Seller or the Shareholders, there are no threatened or contemplated attempts to
organize for collective bargaining purposes any of the employees of the Seller.
(d) There is no, and since January 1, 1992 there has been no,
work stoppage, strike, slowdown, picketing or other labor disturbance or
controversy by or with respect to any of the Seller's employees or former
employees. In addition, no dispute with or claim against the Seller relating to
any labor or employment matter including, without limitation employment
practices, discrimination, terms and conditions of employment, or wages and
hours is outstanding or, to either of the Seller's or the Shareholders'
knowledge, is threatened. There is no claim or petition pending before, and at
no time since January 1, 1992 has there been, any claim or petition made to, any
Governmental or Regulatory Authority including, without limitation, the National
Labor Relations Board or the Equal Employment Opportunity Commission against the
Seller with respect to any labor or employment matter.
3.9. Employee Benefit Plans.
(a) The Disclosure Schedule sets forth a complete and accurate
list and description of each Employee Benefit Plan. With respect to each
Employee Benefit Plan, the Seller and the Shareholders have delivered or caused
to be delivered to the Purchaser true and complete copies of (i) the plan
document, trust agreement and any other document governing such Employee Benefit
Plan, (ii) the summary plan description, (iii) all Form 5500 annual reports and
attachments, and (iv) the most recent IRS determination letter, if any, for such
plan.
(b) Each of the Employee Benefit Plans has been operated and
administered in compliance with their respective terms and all applicable
Requirements of Law including, without limitation, ERISA and the Code. The
Seller has not incurred any "accumulated funding deficiency" within the meaning
of ERISA or incurred any liability to the PBGC in
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connection with any Employee Benefit Plan (or other class of benefits that the
PBGC has elected to insure).
(c) Each Employee Benefit Plan that is intended to be tax
qualified under the Code is identified as such in the Disclosure Schedule
attached to this Agreement. Each such Employee Benefit Plan has received, or the
Seller has applied for or will in a timely manner apply for, a favorable
determination letter from the IRS stating that such Employee Benefit Plan meets
the requirements of the Code and that any trust or trusts associated therewith
are tax exempt under the Code.
(d) The Seller does not maintain any "defined benefit plan"
covering employees of the Seller within the meaning of Section 3(35) of ERISA
subject to Title IV of ERISA or any "Multiemployer Plan" within the meaning of
Section 401(a)(3) of ERISA.
(e) All contributions and payments of insurance premiums
required to be made with respect to the Employee Benefit Plans including,
without limitation, the payment of the applicable premiums on any insurance
Contract funding an Employee Benefit Plan, have been fully paid in such a manner
as not to cause any interest, penalties or other amounts that have not been
satisfied or discharged to be assessed against the Seller with respect thereto.
(f) The Seller has complied with the reporting and disclosure
requirements of ERISA applicable to the Employee Benefit Plans and the
continuation coverage requirements of the Code and ERISA applicable to any of
the Employee Benefit Plans.
(g) There has been no "prohibited transaction" or "reportable
event" within the meaning of the Code or ERISA within the last sixty (60)
months, or breach of fiduciary duty with respect to any of the Employee Benefit
Plans that could subject the Purchaser or, the Seller to any Tax, penalty or
other liability under the Code or ERISA.
(h) No Employee Benefit Plan has been terminated within the
past sixty (60) months. There are no Legal Proceedings or claims with respect to
any of the Employee Benefit Plans (other than routine claims for benefits from
eligible participants or beneficiaries in the normal and ordinary course of
business) pending or, to the knowledge of either of the Seller or the
Shareholders threatened, and to the knowledge of the Seller or any of the
Shareholders, there are no facts, events, conditions or circumstances that could
give rise to any such Legal Proceeding or claim (other than routine claims for
benefits from eligible participants or beneficiaries in the normal and ordinary
course).
(i) Neither the Seller or any ERISA Affiliate has ever
sponsored, maintained or contributed to, or been obligated to contribute to, any
employee benefit plan subject to Title IV of ERISA or the minimum funding
requirements of Code Section 412.
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(j) No Employee Benefit Plan provides post retirement medical
benefits, post retirement death benefits or any post retirement welfare benefits
of any fund whatsoever.
(k) There are no current or former employees of the Seller who
are on leave of absence under either of the Uniformed Services Employment or
Reemployment Rights Act or the Family Medical Leave Act.
(l) None of the Seller or any of its respective officers,
directors or significant employees (as such term is defined in Regulation S-K of
the Securities Act), or any other Person has made any statement or communication
or provided any materials to any employee or former employee of the Seller that
provides for or could be construed as a contract, agreement or commitment by the
Purchaser or any of its Affiliates to provide for any pension, welfare, or other
employee benefit or fringe benefit plan or arrangement to any such employee or
former employee, whether before or after retirement or separation or otherwise.
(m) The execution and delivery of this Agreement and the
consummation of the transactions contemplated by this Agreement will not result
in any increase in or acceleration of any obligation or liability under any
Employee Benefit Plan or to any employee or former employee of the Seller.
3.10. Financial Statements.
(a) The Seller and the Shareholders have delivered or caused
to be delivered to the Purchaser a copy of the combined balance sheets of the
Seller and DocuTech Data Systems, Inc. as of December 31, 1995 and 1996 and the
related statements of operations, shareholders' equity and cash flows for the
years then ended, together with all proper exhibits, schedules and notes
thereto, (collectively, the "Financial Statements"). A true and complete copy of
the Financial Statements is attached to in the Disclosure Schedule. The
Financial Statements have been prepared in accordance with GAAP consistently
applied throughout the periods involved (except for changes required or
permitted by GAAP and noted thereon) and fairly represent the combined financial
position of the Seller and DocuTech Data Systems, Inc. as of the date of such
Financial Statements and the combined results of operations and changes in
shareholders' equity and cash flows for the periods covered thereby.
(b) The Seller and the Shareholders have also delivered or
caused to be delivered to the Purchaser a true and complete copy of the
unaudited interim combined financial statements of the Seller and DocuTech Data
Systems, Inc. consisting of a balance sheet as of June 30, 1997, and the related
combined statements of operations, shareholders' equity and cash flows for the
period then ended (collectively, the "Interim Financial Statements"). A true and
complete copy of Interim Financial Statements is attached to this Agreement in
the Disclosure Schedule. The Interim Financial Statements are in accordance with
the books and records of the Seller and DocuTech Data Systems, Inc., all of
which have been maintained in accordance with good business practice and in the
normal and ordinary course of business, were prepared in accordance
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with GAAP applied on a consistent basis (except for the absence of notes and
subject to normal year-end audit adjustments), and present fairly the financial
position of the Seller and DocuTech Data Systems, Inc. as of the date thereof
and the results of its operations and changes shareholders' equity and cash
flows for the periods covered thereby. The books and records of the Seller and
DocuTech Data Systems, Inc. accurately and fairly reflect, in reasonable scope
and detail and in accordance with good business practice, the transactions and
assets and liabilities of the Seller and DocuTech Data Systems, Inc. and such
other information as is contained therein.
(c) Since the Balance Sheet Date: (i) the Seller has operated,
and the Shareholders have caused the Seller to operate, the Businesses in the
normal and ordinary course in a manner consistent with past practices; (ii)
there has been no development, event, condition, or circumstance that has had,
or could reasonably be expected to have, a Material Adverse Effect upon the
Seller; (iii) there has not been any change in the accounting methods or
practices followed by the Seller, except as required by GAAP and disclosed on
the Disclosure Schedule; (iv) the Seller has not sustained any material damage,
destruction, theft, loss or interference with the Purchased Assets or the
Business, whether or not covered by insurance; (v) the Seller has not (x) except
as set forth in the Disclosure Schedule, paid or declared any dividends or made
any distributions or payment in respect of, or made any payment on account of,
or set apart assets for a sinking or another analogous fund for, the purchase
redemption, defeasance, retirement or other acquisition of, the Seller's
securities, whether debt or equity, and whether in cash or in property or in
obligations of the Seller or (y) paid any management or similar fee to any
Person; (vi) no development, event, condition or circumstance that constitutes,
whether with or without the passage of time or the giving of notice or both, a
default under any of the Seller's outstanding debt obligations has occurred;
(vii) the Seller has not created, incurred, assumed or guaranteed any
indebtedness (except for the endorsement of negotiable instruments for deposit
or collection or similar transactions in the normal and ordinary course of the
Business) other than (x) for trade indebtedness incurred in the normal and
ordinary course of the Business and (y) as described in the Disclosure Schedule;
(iv) the Seller has not made or committed to make any capital expenditure or
capital addition or betterments in excess of an aggregate of $10,000; and (v)
the Seller has not made a gift or contribution (charitable or otherwise) to any
Person (other than gifts made since the Balance Sheet Date which, in the
aggregate, do not exceed $5,000).
(d) On the Closing Date, the Seller and the Shareholders will
also deliver or caused to be delivered to the Purchaser a true and complete copy
of the Closing Balance Sheet. The Closing Balance Sheet will be prepared in
accordance with the books and records of the Seller, DocuTech Data Systems, Inc.
and their Subsidiaries, all of which have been maintained in accordance with
good business practice and in the normal and ordinary course of business, and
will be prepared in accordance with GAAP applied on a consistent basis (except
for the absence of notes and subject to normal year-end audit adjustments).
3.11. Absence of Undisclosed Liabilities. Except as and to the
extent reflected on, or fully reserved against in, the balance sheet of the
Seller set forth in the Adjusted Balance Sheet at December 31, 1996, prepared in
accordance with GAAP and attached hereto as Schedule 3.14
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(the "Seller Balance Sheet"), the Seller has no liabilities or obligations,
whether direct or indirect, matured or unmatured, contingent or otherwise as of
such date required to be disclosed in the Seller Balance Sheet in accordance
with GAAP, and has incurred no such liabilities or obligations since such date,
except for liabilities or obligations that were incurred consistently with past
business practice in or as a result of the normal and ordinary course of
business since December 31, 1996.
3.12. Real Property.
(a) The Purchased Assets do not include any Real Property. The
Disclosure Schedule includes a complete and accurate list of all the locations
of all Real Property and the name and address of the lessor and, if a Person
different than such lessor, the manager thereof. The Seller and the Shareholders
have delivered or caused to be delivered to the Purchaser true and complete
copies of all Contracts relating to Real Property (including, without
limitation, all leases and all management, service, supply, security,
maintenance and similar Contracts, and all attornment Contracts, subordination
Contracts or similar Contracts, and all other Contracts affecting or relating to
the use and quiet and peaceful enjoyment of the Real Property) to which the
Seller is a party or is otherwise bound or subject, and all certificates of
occupancy required to be obtained and maintained with respect to any of such
Real Property, and, in each case, all amendments thereof, which relate to or
affect any of the Real Property. Except for the leases pertaining to the Real
Property identified in and attached to the Disclosure Schedule, neither the
Seller nor any of the Shareholders is a party to any Contract that commits or
purports to commit the Seller to purchase or otherwise acquire or lease any real
property including, without limitation, the Real Property.
(b) Each Contract relating to or affecting the Real Property
(i) is in full force and effect, (ii) affords the Seller peaceful, undisturbed
and exclusive possession of the applicable Real Property, (iii) is free of all
Encumbrances, and (iv) constitutes a valid and binding obligation of, and is
enforceable in accordance with its terms against, the respective parties
thereto.
(c) The Seller has performed the obligations required to be
performed by it to date under all Contracts relating to or affecting the Real
Property and is not in default or breach thereof. In addition, no party to any
such Contract (i) has provided any notice to the Seller of its intent to
terminate or not renew any such Contract, (ii) to the knowledge of the Seller
and the Shareholders, has threatened to terminate or not renew any such Contract
or (iii) is to the knowledge of the Seller and the Shareholders, in breach or
default under any provision thereof, and to the knowledge of the Seller and the
Shareholder, no event or condition has occurred, whether with or without the
passage of time or the giving of notice, or both, that would constitute such a
breach or default.
(d) The Real Property is in good condition and repair (ordinary wear
and tear excepted) and there has been no damage, destruction or loss to any of
the Real Property that
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remains unremedied to date, and the Real Property is suitable to carry out the
Business as conducted thereon.
(e) There are no condemnation, appropriation or other
proceedings involving any taking of the Real Property pending, or to the
knowledge of either the Seller or any of the Shareholders, threatened, against
any of the Real Property.
(f) The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby will not (i) result
in or give to any Person any right of termination, non-renewal, cancellation,
withdrawal, acceleration or modification in or with respect to any Contract
relating to or affecting the Real Property, (ii) result in or give to any Person
any additional rights or entitlement to increased, additional, accelerated or
guaranteed rent or payments under any such Contract or (iii) result in the
creation or imposition of any obligation and liability upon the Seller or any
Encumbrance upon any of the Purchased Assets under the terms of any such
Contract.
(g) The Disclosure Schedule indicates a summary description of
all plans or projects involving the opening of new physical locations, expansion
of any existing operating locations or the acquisition of any Real Property, the
lease of Real Property or acquisition of new businesses, with respect to which
the Seller has made any expenditure in the two-years prior to the date of this
Agreement in excess of $10,000, or which if pursued by the Seller would require
additional expenditures of capital in excess of $10,000.
3.13. Tangible Personal Property.
(a) The Seller either owns or leases all properties as are
presently used in the conduct of the Businesses and the Seller's operations. The
Seller and the Shareholders have delivered or caused to be delivered to the
Purchaser true and complete copies of all Contracts (including, without
limitation, leases and service, supply, maintenance and similar Contracts) to
which the Seller is a party or is otherwise bound or subject, and all amendments
thereto, which relate to or affect any of the tangible personal property owned,
possessed or used by the Seller (the "Tangible Personal Property"). A complete
and accurate list of all such Contracts set forth in, and true and complete
copies of such Contracts are attached to the Disclosure Schedule. Except (i) for
those assets disposed of in the normal and ordinary course of business since the
Balance Sheet Date, (ii) with respect to Tangible Personal Property that is
leased or rented by the Seller, and (iii) as otherwise set forth on the
Disclosure Schedule, the Seller, as the case may be, has good and valid title to
all of its Tangible Personal Property, including all items of Tangible Personal
Property reflected on the Seller Balance Sheet, free of all Encumbrances.
(b) Since the Balance Sheet Date, the Seller has not incurred
or suffered any material physical damage, destruction, theft or loss of their
respective tangible items of material personal property, whether owned or
leased. All material Tangible Personal Property including, without limitation,
all computer hardware and software (including all operating and
-25-
application systems), is in good working order, condition and repair (ordinary
wear and tear excepted) and suitable to carry out the Business as conducted
therewith.
(c) Each Contract relating to or affecting the Tangible
Personal Property (i) is in full force and effect, (ii) affords the Seller
peaceful, undisturbed and exclusive possession of the applicable Tangible
Personal Property, (iii) is free of all Encumbrances and (iv) constitutes a
valid and binding obligation of, and is enforceable in accordance with its terms
against, the respective parties thereto.
(d) The Seller has performed the obligations required to be
performed by it to date under all Contracts relating to or affecting the
Tangible Personal Property and is not in default or breach thereof. In addition,
no party to any such Contract (i) has provided any notice to the Seller of its
intent to terminate or not renew any such Contract, (ii) to the knowledge of the
Seller and Shareholders, threatened to terminate or not renew any such Contract
or (iii) is, to the knowledge of the Seller and Shareholders, in breach or
default under any provision thereof, and, to the knowledge of the Seller and
Shareholders, no event or condition has occurred, whether with or without the
passage of time or the giving of notice, or both, that would constitute such a
breach or default.
(e) The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby will not (i) result
in or give to any Person any right of termination, non-renewal, cancellation,
withdrawal, acceleration or modification in or with respect to any Contract
relating to or affecting the Tangible Personal Property, (ii) result in or give
to any Person any additional rights or entitlement to increased, additional,
accelerated or guaranteed rent or payments under any such Contract or (iii)
result in the creation or imposition of any obligation and liability upon the
Seller or any Encumbrances upon any of the Purchased Assets under the terms of
any such Contract.
3.14. Contracts.
(a) Attached to the Disclosure Schedule is a complete and
accurate list of each Contract described below to which the Seller or any of its
properties is party or is otherwise bound or subject:
(i) each Contract with the Company's or any of its
Subsidiaries', as applicable, customers (but only if such customers are among
the Company's twenty-five highest, in terms of dollar value of purchases, for
the twelve-month period ending on the Balance Sheet Date), dealers, brokers,
value added resellers or vendors (but only if such vendors are among the
Company's twenty-five highest, in terms of dollar value of sales, for the
twelve-month period ending on the Balance Sheet Date);
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(ii) any Contract that creates a partnership or a joint
venture or arrangement that involves a sharing of profits (whether through
equity ownership, Contract or otherwise) with any other Person;
(iii) any Contract that purports to or has the effect of
limiting either Seller's right to engage in, or compete with any Person in, any
business;
(iv) any Contract involving a pledge or encumbering of
Seller's assets or the incurrence by the Seller of liabilities (other than
liabilities to render services to customers in the ordinary course of business)
in any one transaction or series of related transactions in excess of $10,000,
or that extend beyond one year from the date of this Agreement;
(v) any material Contract pursuant to which either
Seller has created, incurred, assumed or guaranteed any indebtedness other than
for trade indebtedness incurred in the normal and ordinary course of the
Business;
(vi) any Contract not made in the normal and ordinary
course of the applicable Seller's or Subsidiary's Business;
(vii) any Contract creating any Encumbrance on any of
the Purchased Assets; and
(viii) any Contract that (A) either (x) does not fit
within one of the foregoing categories described in (i) through (vii) above or
(y) is not otherwise identified in the Disclosure Schedule and (B) would be
required by Item 601(b)(10) of Regulation S-K promulgated under the Securities
Act to be attached as an exhibit to any registration statement on Form S-1 filed
by the Seller under the Act if the Seller were to file such a registration
statement under the Act on the date on which this representation and warranty is
made.
(b) Each material Contract to which the Seller or any of its
properties is a party or is otherwise bound or subject (i) is valid and binding
on each of the parties thereto in accordance with its terms, (ii) was made in
the normal and ordinary course of the Business and (iii) contains no provision
or covenant prohibiting or limiting the ability of the Seller or any Subsidiary
to operate their respective Businesses.
(c) No party to any material Contract to which the Seller or
any of its properties is a party or is otherwise bound or subject (i) has
provided any notice to the Seller of its intent to terminate or withdraw its
participation in any such Contract, (ii) has, to the knowledge of the Seller and
Shareholders, threatened to terminate or withdraw from participation in any such
Contract or (iii) is, to the knowledge of the Seller and Shareholders, in breach
or default under any provision thereof, and, to the knowledge of the Seller and
Shareholders, no
-27-
event or condition has occurred, whether with or without the passage of time or
the giving of notice, or both, that would constitute such a breach or default.
(d) Except as set forth in the Disclosure Schedule, no Consent
of any party to any material Contract to which the Seller or any of its
properties is a party or is otherwise bound or subject is required in connection
with the transactions contemplated by this Agreement.
(e) The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby will not (i) result
in or give to any Person any right of termination, non-renewal, cancellation,
withdrawal, acceleration or modification in or with respect to any material
Contract to which the Seller or any of its properties is a party or is otherwise
bound or subject, (ii) result in or give to any Person any additional rights or
entitlement to increased, additional, accelerated or guaranteed payments under
any such Contract or (iii) result in the creation or imposition of any
obligation and liability upon the Seller or any Encumbrances upon any of the
Purchased Assets under the terms of any such Contract.
3.15. Insurance. The Disclosure Schedule includes a complete and
accurate list of all insurance policies held by the Seller identifying all of
the following for each such policy: (i) the type of insurance; (ii) the insurer;
(iii) the policy number; (iv) the applicable policy limits, (v) the applicable
periodic premium; and (vi) the expiration date. Each such insurance policy is
valid and binding and is and has been in effect since the date of its issuance.
All premiums due thereunder have been paid, and the Seller has not received any
notice of any cancellation, non-renewal or termination in respect of any such
policy. The Seller is not in default under any such policy. To the knowledge of
either the Seller or any of the Shareholders, no such insurer is the subject of
insolvency proceedings. Neither the Seller nor the Person to whom any such
insurance policy has been issued has received notice that any insurer under any
policy referred to in the Disclosure Schedule is denying liability with respect
to a claim thereunder or defending under a reservation of rights clause. The
Seller has notified its insurance carriers of all litigation, claims and facts
which could reasonably be expected to give rise to a claim, all of which are
disclosed in the Disclosure Schedule (including worker's compensation claims).
The liability insurance maintained by the Seller is and has at all times prior
to the date of this Agreement been on an "occurrence" basis.
3.16. Proprietary Rights.
(a) Included in the Disclosure Schedule is a complete and
accurate list and full description of each item of the Seller's Intellectual
Property together with, in the case of registered Intellectual Property: the (i)
applicable registration number; (ii) filing, registration, issue or application
date; (iii) record owner; (iv) country; (v) title or description; and (vi)
remaining life. In addition, the Disclosure Schedule identifies whether each
item of Intellectual Property is owned by the Seller or possessed and used by
the Seller under any Contract. The Intellectual Property constitutes valid and
enforceable rights and does not infringe or conflict with the rights of any
other Person; provided that to the extent the foregoing relates to Intellectual
Property used but
-28-
not owned by the Seller, such representation and warranty is given solely to the
knowledge of the Seller and Shareholders.
(b) There is neither pending, nor to either the Seller's or
any of the Shareholders knowledge, threatened, any Legal Proceeding against the
Seller contesting the validity or right of the Seller to use any of the
Intellectual Property, and the Seller has not received any notice of
infringement upon or conflict with any asserted right of others nor, to either
the Seller's or any of the Shareholders 'knowledge, is there a basis for such a
notice. To either the Seller's or any of the Shareholders' knowledge, no Person
is infringing the Seller's rights to the Intellectual Property.
(c) Except as otherwise provided in the Disclosure Schedule,
the Seller does not have any obligation to compensate others for the use of any
Intellectual Property. In addition, except as otherwise provided on the
Disclosure Schedule, the Seller has not granted any license or other right to
use, in any manner, any of the Intellectual Property, whether or not requiring
the payment of royalties.
(d) The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby will not (i) result
in or give to any Person any right of termination, non-renewal, cancellation,
withdrawal, acceleration or modification in or with respect to any Contract
relating to or affecting the Intellectual Property, (ii) result in or give to
any Person any additional rights or entitlement to increased, additional,
accelerated or guaranteed payments under any such Contract or (iii) result in
the creation or imposition of any obligation and liability upon the Seller or
any Encumbrances upon any of the Purchased Assets under the terms of any such
Contract.
3.17. Environmental Matters.
(a) The Seller and the operation of the Business is and has
been in compliance with all applicable Environmental Laws.
(b) There have occurred no and there are no events,
conditions, circumstances, activities, practices, incidents, or actions on the
part of, or caused by, the Seller or Shareholders (or to the knowledge of the
Seller or Shareholders, caused by a third party) that may give rise to any
common law or statutory liability, or otherwise form the basis of any Legal
Proceeding, Order or action involving or relating to the Seller, based upon or
related to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling, or the emission, discharge, release or
threatened release into the environment, of any pollutants, contaminants,
chemicals, or industrial, toxic or hazardous substance or wastes.
(c) To the knowledge of the Seller and Shareholders, there is
no asbestos contained in or forming a part of any building, structure or
improvement comprising a part of any of the Real Property. To the knowledge of
the Seller and Shareholders, no polychlorinated
-29-
byphenyls (PCBs) are present, in use or stored on any of the Real Property. No
radon gas or the presence of radioactive decay products of radon are present on,
or underground at any of the Real Property at levels beyond the minimum safe
levels for such gas or products prescribed by applicable Environmental Laws.
3.18. Permits.
(a) Each of the Seller and its employees, independent
contractors and agents has obtained and holds in full force, and the Disclosure
Schedule sets forth a complete and accurate list of, all Permits that are
necessary for the operation of their respective Businesses. Neither the Seller
nor any such employee, independent contractor or agent is in noncompliance with
the terms of any such Permit. Any Permits that cannot be transferred to the
Purchaser are identified as such on the Disclosure Schedule.
(b) The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby will not (i) result
in or give to any Person any right of termination, non-renewal, cancellation,
acceleration or modification in or with respect to any such Permit, (ii) result
in or give to any Person any additional rights or entitlement to increased,
additional, accelerated or guaranteed payments under any such Permit or (iii)
result in the creation or imposition of any obligation and liability upon the
Seller or any Encumbrance upon any of the Purchased Assets under the terms of
any Permit.
(c) Except as set forth in the Disclosure Schedule there is no
Order outstanding against the Seller, nor is there now pending, or to either the
Seller's or any of the Shareholders' knowledge, threatened, any Legal
Proceeding, which could adversely affect any Permit required to be obtained and
maintained by the Seller.
3.19. Regulatory Filings. The Seller has filed all registrations,
filings, reports, or submissions that are required by any Requirement of Law.
All such filings were made in compliance with applicable Requirements of Law
when filed and no deficiencies have been asserted by any Governmental or
Regulatory Authority with respect to such filings and submissions that have not
been finally resolved.
3.20. Taxes and Tax Returns.
(a) The Seller has duly and timely filed all Tax Returns. Each
such Tax Return is true, accurate and complete. The Seller has paid in full all
Taxes for the period covered by such Tax Return. All Taxes not yet due and
payable have been withheld or reserved for or, to the extent that they relate to
periods on or prior to the date of the Seller Balance Sheet, are reflected as a
liability thereon. The Seller duly and properly filed an election to be an S
corporation and such election is currently in effect, under section 1362 of the
Code and the rules and regulations promulgated thereunder. Such election has
been in effect without interruption, including without limitation any
inadvertent termination which has been reinstated, since January
-30-
1, 1992. Since January 1, 1992, all of the current and former stockholders of
the Seller are and have been permitted stockholders under Section 1362 of the
Code and the rules and regulations promulgated thereunder. Except for its
initial short period ended December 31, 1991, the Seller has never had a taxable
year in which it was other than an S corporation. The Seller's federal S
election is recognized and given effect or the Seller has made an appropriate
and timely election to be treated as an S corporation for state income taxation
purposes in Nebraska. Such election was effective as of January 1, 1992.
(b) The Seller has complied with all applicable Requirements
of Law relating to the payment and withholding of Taxes (including, without
limitation, withholding of Taxes pursuant to Section 1441 and 1442 of the Code,
or similar provisions under any foreign Requirements of Law) and have, within
the time and in the manner prescribed by applicable Requirements of Law,
withheld from employee wages and paid over, in a timely manner, to the proper
Taxing Authorities all amounts required to be so withheld and paid over under
applicable Requirements of Law.
(c) No deficiency for any Taxes has been asserted or assessed
against the Seller that has not been resolved and paid in full or fully reserved
for and identified on the Seller Balance Sheet and, to the knowledge of the
Seller and Shareholders, no deficiency for any Taxes has been proposed that has
not been fully reserved for and identified on the Seller Balance Sheet. The
Seller has not received any outstanding and unresolved notices from the IRS or
any other Taxing Authority of any proposed examination or of any proposed change
in reported information relating to the Seller. Except as set forth in the
Disclosure Schedule (which sets forth the nature of the proceeding, the type of
Tax Return, the deficiencies proposed or assessed and the amount thereof, and
the taxable year in question), no Legal Proceeding or audit or similar foreign
proceedings is pending with regard to any of the Seller's Taxes or Tax Returns.
(d) No waiver or comparable consent given by the Seller
regarding the application of the statute of limitations with respect to any
Taxes or Tax Returns is outstanding, nor, to the knowledge of the Seller and the
Shareholders, is any request for any such waiver or consent pending.
(e) None of the Purchased Assets is required to be treated as
owned by any other person pursuant to the "safe harbor lease" provisions of
former Section 168(f)(8) of the Code.
(f) No state of facts exists or has existed that would
constitute grounds for the assessment of Tax liability with respect to period
that have not been audited by the IRS or any other Taxing Authority.
3.21. Affiliate Transactions. The Disclosure Schedule lists and
fully describes each Contract, transaction or series of transactions, whether
written or oral (other than for the compensation arrangements described in the
Disclosure Schedule under Section numbers 3.8, 3.9
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and 3.25), pursuant to which the Seller is, or, at any time during the previous
five (5) years has been, a party or otherwise bound with any Affiliate of any or
all of the Seller and the Shareholders (an "Affiliate Transaction"). Each
Affiliate Transaction (i) has been entered into the normal and ordinary course
of the Business.
3.22. Accounts. The Disclosure Schedule attached to this Agreement
completely and accurately states the names and addresses of each bank, financial
institution, fund, investment or money manager, brokerage house and similar
institution in which the Seller maintains any account (whether checking,
savings, investment, trust or otherwise), lock box or safe deposit box
(collectively, the "Accounts"), and the account numbers and name of the Persons
having authority to affect transactions with respect thereto or other access
thereto.
3.23. Receivables. Except as disclosed in the Disclosure Schedule,
since the Balance Sheet Date, the Seller has not written-off any Receivables.
All Receivables currently owing to the Seller are completely and accurately
listed and aged in the Disclosure Schedule. The Receivables arose from bona fide
transactions in the normal and ordinary course of business and reflect credit
terms consistent with past practice. The Seller has good, valid and marketable
title to its Receivables, free and clear of all Encumbrances. The Seller has not
sold, factored, securitized, or consummated any similar transaction with respect
to any of its Receivables. Subject to proper reserves taken into account in
accordance with GAAP as reflected in the Disclosure Schedule, each Receivable is
fully collectable in the normal and ordinary course of business (i.e., without
resort to litigation or assignment to a collection agency), and is not subject
to any dispute, counterclaim, defense, set-off or other claim.
3.24. Solvency. On and as of the date of this Agreement, and after
giving effect to the Closing and any other transactions contemplated by this
Agreement, (i) the sum of the Seller's obligations and liabilities is not
greater than all of the assets of the Seller at a fair valuation, (ii) the
present fair salable value of the Seller's assets is not less than that will be
required to pay the probable liability of the Seller on its obligations and
liabilities (excluding those to be assumed by the Purchaser) as they become
absolutely mature, (iii) the Seller has not incurred, will not incur, does not
intent to incur and does not believe that it will incur, obligations and
liabilities beyond the Seller's ability to pay such obligations and liabilities
as they mature, (iv) the Seller is not engaged in, and is not about to engage
in, a business or transaction for which the Seller's assets constitutes or would
constitute unreasonably small capital, and (v) the Seller is not insolvent as
defined in, or otherwise in a condition which could in any circumstances then or
subsequently render any transfer or conveyance made by it voidable or fraudulent
pursuant to, any Requirements of Law pertaining to bankruptcy, insolvency or
creditors' rights generally including, without limitation the Bankruptcy Code of
1978, 11 U.S.C. ss.101, et. seq., as amended, or any other applicable
Requirements of Law relating to fraudulent conveyances, fraudulent transfers or
preferences. The Seller is receiving reasonably equivalent value and
consideration from the Purchaser for the Purchased Assets and is not selling the
Purchased Assets to the Purchaser with intent to hinder, delay or defraud any of
its creditors.
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3.25. Officers and Directors.
(a) The Disclosure Schedule accurately and completely lists
the names of the Seller's directors, executive officers, and any of the Seller's
significant employees (as such terms are defined in Regulation S-K under the
Securities Act) (a "significant employee"), and the compensation payable to each
of them to serve as such.
(b) Except as set forth in the Disclosure Schedule, none of
the Shareholders or any of the current directors, current executive officers or
current significant employees (as such term is defined in Section 3.25(a)) of
the Seller or any Shareholder has, within the past five (5) years:
(i) (x) filed or had filed against it, him or her a
petition under the Federal bankruptcy laws or any state insolvency or similar
law, or (y) had a receiver, conservator, fiscal agent or similar officer
appointed by a court for the business, property or assets of such individual or
corporation, or any partnership in which it, he or she was a general partner or
any other Person of which he or she was a director or an executive officer or
had a position having similar powers and authority at or within two (2) years of
the date of such filing;
(ii) been convicted of, or pled guilty or no contest to,
any crime (other than traffic offenses and other minor offenses);
(iii) been named as a subject of any criminal Legal
Proceeding (other than for traffic offenses and other minor offenses);
(iv) been the subject of any Order or sanction relating
to an alleged violation of, or otherwise found by any Governmental or Regulatory
Authority to have violated: (x) any Requirement of Law relating to securities or
commodities, (y) any Requirement of Law respecting financial institutions,
insurance companies, or fiduciary duties owed to any Person, (z) any Requirement
of Law prohibiting fraud (including, without limitation, mail fraud or wire
fraud);
(v) been the subject of any Order enjoining or otherwise
prohibiting it, him or her from engaging in any type of business activity; or
(vi) been the subject of any Order or sanction by (x) a
self- regulatory organization (as defined in Section 3(a)(26) of the Exchange
Act), (y) a contract market designated pursuant to Section 5 of the Commodity
Exchange Act, as amended, or (z) any substantially equivalent foreign authority
or organization.
3.26. Brokers or Finders. Except as set forth in the Disclosure
Letter, neither the Seller nor the Shareholders has engaged the services of any
broker or finder with respect to the transactions contemplated by this
Agreement, and no Person has or will have, as a result of the
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consummation of the transaction contemplated by this Agreement, any right,
interest or valid claim against or upon the Purchaser for any commission, fee or
other compensation as a finder or broker thereof on account of any action on the
part of the Seller or Shareholders. Without degradation to any of the foregoing,
the Seller and the Shareholders are solely responsible for the payment of the
commissions, fees and other compensation payable to the Person having any such
right, interest or claim on account of any action on the part of the Seller or
Shareholders.
3.27. No Other Agreements to Sell Assets. Neither the Seller nor any
of the Shareholders have granted, and there is not outstanding any option,
right, agreement, Contract or other obligation or commitment pursuant to which
any other Person could reasonably claim a right to acquire in any way the
Purchased Assets or any ownership or other material interest in either the
Seller or the Business.
3.28. Customers. The Disclosure Schedule accurately and completely
lists the names of the twenty-five largest customers (in terms of dollar volume
of purchases) of the Seller and details the Seller's total revenue attributable
to each such customer for the fiscal years ended 1994, 1995 and 1996 and the
current fiscal year to date. Except as set forth in the Disclosure Schedule,
there has been no adverse change in the Seller's business relationship with any
such customer that, in the aggregate, would have a Material Adverse Effect upon
the Seller or the Business.
3.29. Investment Company. The Seller is not an "investment company"
within the meaning of the Investment Company Act of 1940 and the rules and
regulations promulgated thereunder, as amended from time to time, or any
successors thereto.
3.30. Absence of Changes. Since the Balance Sheet Date, except as
set forth on the Disclosure Schedule there has not been with respect to the
Seller:
(i) any event or circumstance (either singly or in the
aggregate) which would constitute a Material Adverse Effect;
(ii) any change in its authorized capital, or securities
outstanding, or ownership interests or any grant of any
options, warrants, calls, conversion rights or commitments.
(iii) any declaration or payment of any dividend or
distribution in respect of its capital stock or any direct or
indirect redemption, purchase or other acquisition of any of
its capital stock, except any declaration of dividends payable
by the Seller.
(iv) any increase in the compensation, bonus, sales
commissions or fee arrangement payable or to become payable by
it to any of its respective officers, directors, stockholders,
employees, consultants or agents, except
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for ordinary and customary bonuses and salary increases for
employees in accordance with past practice;
(v) any work interruptions, labor grievances or claims
filed, or any similar event or condition of any character that
would have a Material Adverse Effect;
(vi) any distribution, sale or transfer, or any
agreement to sell or transfer, any material assets, property
or rights of any of its business to any person, including,
without limitation, the Shareholders and their Affiliates,
other than distributions, sales or transfers in the ordinary
course of business to persons other than the Shareholders and
their Affiliates;
(vii) any cancellation, or agreement to cancel, any
material indebtedness or other material obligation owing to
it, including without limitation any indebtedness or
obligation of the Shareholders or any Affiliate thereof, other
than the negotiation and adjustment of bills in the course of
good faith disputes with customers in a manner consistent with
past practice;
(viii) any plan, agreement or arrangement granting any
preferential rights to purchase or acquire any interest in any
of its assets, property or rights or requiring consent of any
party to the transfer and assignment of any such assets,
property or rights;
(ix) any purchase or acquisition of, or agreement, plan
or arrangement to purchase or acquire, any property, rights or
assets outside of the ordinary course of business;
(x) any waiver of any of its material rights or claims;
(xi) any transaction by the Seller outside the ordinary
course of its respective businesses; or
(xii) any cancellation or termination of a material
Contract.
3.31. Accuracy and Completeness of Information. To the knowledge of
the Seller and Shareholders, all information furnished, to be furnished or
caused to be furnished to the Purchaser by either the Seller or the Shareholders
with respect to the Purchased Assets, the Assumed Liabilities, the Business, the
Seller or the Shareholders for the purposes of or in connection with this
Agreement, or any transaction contemplated by this Agreement is or, if furnished
after the date of this Agreement, will be true and complete in all material
respects and does not, and, if furnished after the date of this Agreement, will
not, contain any untrue statement
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of material fact or fail to state any material fact necessary to make such
information not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PURCHASER
4.1. Organization. The Purchaser (i) is a corporation duly
incorporated, validly existing and in good standing under the laws of the state
of its incorporation, (ii) has the power and authority to own and operate its
properties and assets and to transact its business as currently conducted and
(iii) is duly qualified and authorized to do business and is in good standing in
all jurisdictions where the failure to be duly qualified, authorized and in good
standing would have a material adverse effect upon the Purchaser's businesses,
prospects, operations, results of operations, assets, liabilities or condition
(financial or otherwise).
4.2. Authorization for Agreement. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby by the Purchaser (i) are within the Purchaser's corporate
powers and duly authorized by all necessary corporate action on the part of the
Purchaser and (ii) do not (A) require any action by or in respect of, or filing
with, any governmental body, agency or official, except as set forth in this
Agreement or (B) contravene, violate or constitute, whether with or without the
passage of time or the giving of notice or both, a breach or default under, any
Requirement of Law applicable to Purchaser or any of its properties or any
Contract to which the Purchaser or any of its properties is bound, except
filings and approvals in connection with the Initial Public Offering.
4.3. Enforceability. This Agreement has been duly executed and
delivered by the Purchaser and constitutes the legal, valid and binding
obligation of the Purchaser, enforceable against the Purchaser in accordance
with its terms.
4.4. Litigation. There is no Legal Proceeding or Order pending
against or, to the knowledge of the Purchaser, threatened against or affecting,
the Purchaser or any of its properties or otherwise that could adversely affect
or restrict the ability of the Purchaser to consummate fully the transactions
contemplated by this Agreement or that in any manner draws into question the
validity of this Agreement.
4.5. Registration Statement. The Registration Statement on Form S-1
and any amendment thereto which is filed with the Securities and Exchange
Commission in connection with the Initial Public Offering will have been
prepared in all material respects in compliance with the requirements of the
Securities Act and will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein; provided, however,
that insofar as the foregoing relates to information in the Registration
Statement that relates to the Seller, the Shareholders or any of the other
Founding Companies, such representation and warranty shall be deemed based on
the knowledge of the Purchaser.
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4.6. Brokers or Finders. The Purchaser has not engaged the services
of any broker or finder with respect to the transactions contemplated by this
Agreement, and no Person has or will have, as a result of the consummation of
the transaction contemplated by this Agreement, any right, interest or valid
claim against or upon the Seller or Shareholders for any commission, fee or
other compensation as a finder or broker thereof on account of any action on the
part of the Purchaser. Without degradation to any of the foregoing, the
Purchaser is solely responsible for the payment of the commissions, fees and
other compensation payable to any Person having any such right, interest or
claim on account of any action on the part of the Purchaser.
ARTICLE 5
COVENANTS
5.1. Good Faith. Each of the Seller, the Shareholders and the
Purchaser shall perform each and every of their respective obligations under
this Agreement and shall perform the transactions contemplated by this Agreement
in good faith and in a commercially reasonable manner.
5.2. Approvals. Each of the Seller, the Shareholders and the
Purchaser shall use their respective commercially reasonable best efforts to
obtain all Regulatory Approvals and Consents from such other third parties
including, without limitation, Consents required under any Contract, Permit or
Requirement of Law, that are necessary or advisable in connection with the
consummation of the transactions contemplated by this Agreement. The
Shareholders shall use their commercially reasonably best efforts to cause the
Seller to cooperate with the Purchaser to the fullest extent practicable in
seeking to obtain all such Regulatory Approvals and Consents, and shall provide,
and shall cause the Seller to provide, such information and communications to
all Governmental or Regulatory Authorities as they or the Purchaser may request
from time to time in connection therewith. Nothing contained herein shall
require either of the Seller or the Purchaser to amend the provisions of this
Agreement, to pay or cause any of its Affiliates to pay any money, or to provide
or cause any of its Affiliates to provide any guaranty to obtain any such
Regulatory Approvals or Consents.
5.3. Cooperation; Access to Books and Records.
(a) The Seller will, and the Shareholders will and will cause
the Seller to, cooperate with the Purchaser in connection with the transactions
contemplated by this Agreement and any Purchaser Financing Transaction,
including, without limitation, cooperating in the determination of which
Regulatory Approvals and Consents are required or advisable to be obtained prior
to the Closing Date. Until the Closing Date, the Seller will, and the
Shareholders will and will cause the Seller to, afford to the Purchaser, its
agents, legal advisors, accountants, auditors, commercial and investment banking
advisors and other authorized representatives, agents and advisors reasonable
access to all of the properties and books and records of the Seller
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(including those in the possession or control or their accountants, attorneys
and any other third party), as the case may be, for the purpose of permitting
the Purchaser to make such investigation and examination of the business and
properties of the Seller as the Purchaser, in its discretion, shall deem
necessary, appropriate or desirable. Any such investigation, access and
examination shall be conducted upon reasonable prior notice under the
circumstances. The Seller will, and the Shareholders will cause the Seller to,
cause each of their respective directors, officers, employees and
representatives, including, without limitation, their respective counsel and
accountants, to cooperate fully with the Purchaser in connection with such
investigation, access and examination. The results of such investigation and
examination is for the Purchaser's sole benefit, and shall not (i) impair or
reduce any representation or warranty made by any or all of the Seller or the
Shareholders in this Agreement, (ii) relieve the Seller or the Shareholders from
its or their obligations with respect to such representations and warranties
(including, without limitation, the indemnification obligations under Article
10), or (iii) mitigate the Seller's or the Shareholders' obligations to disclose
all material facts to the Purchaser with respect to the Seller and the Business.
(b) The Purchaser will cooperate with the Seller in connection
with the transactions contemplated by this Agreement and any Purchaser Financing
Transaction, including, without limitation, cooperating in the determination of
which Regulatory Approvals and Consents are required or advisable to be obtained
prior to the Closing Date. Until the Closing Date, the Purchaser will afford to
the Seller and its agents, legal advisors and accountants reasonable access to
all of the properties and books and records of the Purchaser (including those in
the possession or control or their accountants, attorneys and any other third
party), as the case may be, for the purpose of permitting the Seller to make
such investigation and examination of the business and properties of the
Purchaser and any of its Subsidiaries as the Seller, in its discretion, shall
deem necessary, appropriate, or desirable. Any such investigation, access and
examination shall be conducted upon reasonable prior notice under the
circumstances. Purchaser will cause each of its directors, officers, employees
and representatives, including, without limitation, its counsel and accountants,
to cooperate fully with the Seller, in connection with such investigation,
access and examination. The results of such investigation and examination is for
the Seller's sole benefit, and shall not (i) impair or reduce any representation
or warranty made by the Purchaser in this Agreement, (ii) relieve the Purchaser
from its obligations with respect to such representations and warranties
(including, without limitation, the Purchaser's obligations under Article 10),
or (iii) mitigate the Purchaser's obligations to otherwise disclose all material
facts to the Seller with respect to the Purchaser.
5.4. Duty to Supplement.
(a) Promptly upon the Seller's or the Shareholders' discovery
of the occurrence of any development, event, circumstance or condition that,
individually or in the aggregate, may have a Material Adverse Effect upon the
Purchased Assets, or the business, prospects, operations, results of operations,
assets, liabilities or condition (financial or otherwise) of the Seller, the
Shareholders shall, and shall cause the Seller to, as the case may be, notify
the
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Purchaser of such development, event, circumstance or condition. In the event
that the Purchaser receives such notice or otherwise discovers the fact of any
such development, event, circumstance or condition, the Purchaser shall be
entitled, in its sole discretion, to terminate this Agreement within ten (10)
days after so discovering without further obligation or liability upon the
delivery of written notice to the Seller to that effect; provided, however, that
before Purchaser may exercise its termination right, it must afford the Seller
the opportunity to cure the matter giving rise to the termination right (but for
no longer than five days following the date Purchaser notifies the Seller of its
intent to terminate) unless, in the judgement of the managing underwriter of the
Initial Public Offering, any such cure period might adversely affect the Initial
Public Offering.
(b) Promptly upon the Seller's or the Shareholders' discovery
of any fact, event, condition or circumstance that causes any representation or
warranty made by any or all of the Seller or the Shareholders to the Purchaser
in this Agreement to become untrue or inaccurate at any time after the date of
this Agreement, the Shareholders shall, and shall cause the Seller to, notify
the Purchaser of such fact, event, condition or circumstance.
5.5. Information Required for Purchaser Financing Transactions. The
Seller shall, and the Shareholders shall and shall cause the Seller to, furnish
the Purchaser with the following information:
(a) the Seller's audited balance sheet as of December 31,
1994, 1995 and 1996 and the related statements of operations, shareholders'
equity and cash flows for the year then ended, together with all proper
exhibits, schedules and notes thereto, audited by Xxxxxx Xxxxxxxx LLP, all of
which shall be prepared in accordance with GAAP consistently applied with prior
periods and shall present fairly the financial position of the Seller for the
years ended December 31, 1994, 1995 and 1996 and the results of operations and
changes in shareholders' equity and cash flows for the periods covered thereby;
(b) any unaudited interim financial statements requested by
the Purchaser or any Underwriter to be included in any registration statement,
prospectus, document or other item, or any amendment or supplement thereof,
relating any Purchaser Financing Transaction, all of which shall (i) be in
accordance with the Books and Records maintained in accordance with good
business practice and in the normal and ordinary course of business, (ii) be
prepared in accordance with GAAP applied on a consistent basis (except for the
absence of notes and subject to normal year-end audit adjustments), (iii)
present fairly the financial position of the Seller as of the date thereof and
the results of operations and changes in shareholders' equity and cash flows for
the periods covered thereby, and (iv) include comparable interim financial
statements for the prior year period; and
(c) such other written information with respect to themselves
as the Purchaser or any Underwriter may reasonably deem necessary, desirable or
appropriate in connection with any Purchaser Financing Transaction or the
preparation of any registration statement, prospectus, document or other item
relating thereto.
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5.6. Performance of Conditions. The Seller, the Shareholders and the
Purchaser shall, and the Shareholders shall cause the Seller to, take all
reasonable steps necessary or appropriate and use all commercially reasonable
efforts to effect as promptly as practicable the fulfillment of the conditions
required to be obtained that are necessary or advisable for the Seller and the
Purchaser to consummate the transactions contemplated by this Agreement
including, without limitation, all conditions precedent set forth in Article 6.
5.7. Conduct of Business. During the period of time from and after
the date of this Agreement to the Closing Date, the Seller shall, and the
Shareholders shall cause the Seller to, operate the Business in the normal and
ordinary course in a manner consistent with past practice including, without
limitation, to do the following:
(a) to maintain the Seller's corporate existence and all
Permits, bonds, franchises and qualifications to do business;
(b) to comply with all Requirements of Law;
(c) to use its commercially reasonable best efforts to
preserve intact the Seller's business relationships with its agents, customers,
employees, creditors and others with whom the Seller has a business
relationship;
(d) to preserve the Seller's assets, properties and rights
(including, without limitation, the Purchased Assets) necessary or advisable to
the profitable conduct of the Business;
(e) to pay when due all Taxes lawfully levied or assessed
against the Seller before any penalty or interest accrues on any unpaid portion
thereof and to file all Tax Returns when due (including after applicable
extensions) provided that no such payment shall be required which is being
contested in good faith and by proper proceedings and for which appropriate
reserves as may be required by GAAP have been established;
(f) to maintain in full force and effect all policies of
insurance adequate (both in terms of coverage and amount of coverage) to insure
against risks as are customarily and prudently insured against by companies of
established repute engaged in the same or a similar business;
(g) to perform all material obligations under all Contracts to
which the Seller is a party or by which it or its properties are bound or
subject;
(h) to maintain present debt and lease instruments and not
enter into new or amended debt or lease instruments over ($10,000), without the
knowledge and consent of the Purchaser, which consent shall not be unreasonably
withheld; and
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(i) to collect Receivables and pay Accrued Expenses in a
manner consistent with past practices.
5.8. Negative Covenants. During the period from and after the date
of this Agreement until the Closing Date, the Seller shall not, and the
Shareholders shall not cause the Seller to do, and shall not permit the Seller
to do, directly or indirectly, any of the following without the express prior
written consent of the Purchaser, which consent shall not be unreasonably
withheld:
(a) make or adopt any changes to or otherwise alter the
Seller's certificate or articles of incorporation, by-laws or any other
governing or constitutive documents;
(b) purchase or enter into any Contract or commitment to
purchase or lease any real property;
(c) grant any salary increase or permit any advance to any
director, officer or employee or enter into any new, or amend or otherwise
alter, any Employee Benefit Plan, or any employment or consulting Contract, or
any Contract providing for the payment of severance;
(d) make any borrowings or otherwise create, incur, assume or
guaranty any indebtedness (except for the endorsement of negotiable instruments
for deposit or collection or similar transactions in the normal and ordinary
course of the Business), issue any commercial paper or refinance any existing
borrowings or indebtedness other than in the ordinary course of business;
(e) enter into any Permit other than in the normal and
ordinary course of business;
(f) enter into any Contract, other than in the ordinary course
of the Business; provided that any Contract permitted to be entered into
pursuant to this Section 5.8(f) shall not (i) involve a pledge of or an
encumbrance on any of the Seller's assets or the incurrence by the Seller of
liabilities (other than in the performance of services for customers in the
ordinary course of business) in any one transaction or series of related
transactions in excess of ($10,000) and cause the aggregate commitment under all
such new Contracts to exceed ($100,000), or (ii) involve a term of more than one
(1) year;
(g) make, or enter into any commitment to make, any
contribution (charitable or otherwise) to any Person;
(h) enter into any transaction with any Affiliate of either or
both of the Seller or the Shareholders including, without limitation the
purchase, sale or exchange of property with, the rendering of any service to, or
the making of any loans to, any such Affiliate (provided that the foregoing will
not restrict the Seller's ability to pay dividends on its common stock to pay
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estimated tax liability of the Shareholders with respect to the S corporation
income and to distribute trade receivables more than 100 days old);
(i) grant or issue any subscription, warrant, option or other
right to acquire any of the Seller's securities, whether debt or equity, and
whether by conversion or otherwise, or make any commitment to do so;
(j) merge or consolidate, or agree to merge or consolidate,
with or into any other Person or acquire or agree to acquire or be acquired by
any Person;
(k) mortgage, pledge, hypothecate or grant a security interest
in, or otherwise permit or suffer to exist any Encumbrance upon, any of the
Purchased Assets;
(l) sell, lease, exchange, transfer or otherwise dispose of,
or agree to sell, lease, exchange, transfer or otherwise dispose of, any of the
Seller's assets with an individual fair market value of $5,000 or more, except
for the disposition of obsolete or worn-out assets in the normal and ordinary
course of business, which assets do not exceed, in the aggregate, 5% of the
Seller's assets as reflected on the Seller Balance Sheet;
(m) (i) change any of its methods of accounting in effect as
at the Balance Sheet Date, or (ii) make or rescind any express or deemed
election relating to Taxes, or change any of its methods of reporting income or
deductions for income tax purposes from those employed in the preparation of
income Tax Returns for the taxable year ended December 31, 1996, except, in
either case, as may be required by any applicable Requirement of Law, the IRS or
GAAP;
(n) enter into any Contract or make any commitment to make any
capital expenditures or capital additions or betterments in excess of an
aggregate of $10,000;
(o) cause or permit the Seller or any such Subsidiary to (i)
terminate any Employee Benefit Plan, (ii) permit any "prohibited transaction"
involving any Employee Benefit Plan, (iii) fail to pay to any Employee Benefit
Plan any contribution which it is obligated to pay under the terms of such
Employee Benefit Plan, whether or not such failure to pay would result in an
"accumulated funding deficiency" or (iv) allow or suffer to exist any occurrence
of a "reportable event" or any other event or condition, which presents a
material risk of termination by the PBGC of any Employee Benefit Plan. As used
in this Agreement, the terms "accumulated funding deficiency" and "reportable
event" shall have the respective meanings assigned to them in ERISA, and the
term "prohibited transaction" shall have the meaning assigned to it in the Code
and ERISA;
(p) enter into any transaction or conduct any operations not
in the normal and ordinary course of business; or
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(q) enter into any Contract or make any commitment to do any
of the foregoing.
5.9. Exclusive Negotiation. The Seller and the Shareholders shall
not: (i) provide any information about the Seller or the Business to any Person
(other than the Purchaser or its representatives) with a view to sell, exchange
or dispose or solicit an offer for the acquisition of any of the Purchased
Assets or any ownership or other material interest in the Seller or the
Business; (ii) solicit or accept any other offers for the sale, exchange or
other disposition of any of the Purchased Assets or any ownership or other
material interest in the Seller or the Business; (iii) negotiate or discuss with
any Person (other than the Purchaser or any of its representatives) the possible
sale, exchange or other disposition of any of the Purchased Assets or any
ownership or other material interest in the Seller or the Business; or (iv)
sell, exchange or otherwise dispose of any of the Purchased Assets or any
ownership or other material interest in the Seller or the Business, in any of
the foregoing cases, whether by equity sale, merger, consolidation, equity
exchange, sale of assets or otherwise. The Seller shall, and the Shareholders
shall and shall cause the Seller to, advise the Purchaser promptly of its or his
receipt of any written offer or written proposal concerning any of the Purchased
Assets, the Seller, or the Business or any material interest therein, and the
terms thereof.
5.10. Public Announcements. Prior to the Closing, neither the Seller
nor any Shareholder shall issue any public report, statement, press release or
similar item or make any other public disclosure with respect to the substance
of this Agreement prior to the consultation with and approval of the Purchaser.
In addition, prior to Closing, before the Purchaser issues a public statement
that refers to the Seller or Shareholders (other than in the Registration
Statement) the Purchaser will endeavor to consult with the Seller to the extent
time permits. Nothing contained herein shall restrict the ability of the Seller
from contacting a third party in order to obtain a Consent to the transactions
contemplated hereby.
5.11. Amendment of Schedules. Each party hereto agrees that, with
respect to the representations and warranties of such party contained in this
Agreement, such party shall have the continuing obligation until the Closing to
supplement or amend promptly the Disclosure Schedule or any other Schedule
hereto with respect to any matter hereafter arising or discovered which, if
existing or known at the date of this Agreement, would have been required to be
set forth or described in the Schedules, provided that no amendment or
supplement to a Schedule prepared by the Seller that constitutes or reflects an
event or occurrence that would have a Material Adverse Effect shall be effective
unless the Purchaser consents to such amendment or supplement. For all purposes
of this Agreement, including without limitation for purposes of determining
whether the conditions set forth in Articles 6 and 7 have been fulfilled, the
Schedules hereto shall be deemed to be the Schedules as amended or supplemented
pursuant to this Section 5.11. Except as otherwise provided herein, no amendment
of or supplement to a Schedule shall be made later than 24 hours prior to the
anticipated effectiveness of the Registration Statement in connection with the
Initial Public Offering (the "Registration Statement").
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5.12. Cooperation in Preparation of Registration Statement.
(a) The Seller and the Shareholders shall furnish or cause to
be furnished to the Purchaser and the underwriters of the Initial Public
Offering (the "Underwriters") all of the information concerning the Seller or
the Shareholders reasonably requested by the Purchaser and the Underwriters, and
will cooperate with the Purchaser and the Underwriters in the preparation of,
any registration statement (or similar document) relating to the Purchaser
Financing Transaction and the prospectus (or similar document) included therein
(including audited financial statements, prepared in accordance with generally
accepted accounting principles). The Seller and the Shareholders agree promptly
to advise the Purchaser if at any time during the period in which a prospectus
relating to the Purchaser Financing Transaction is required to be delivered
under the Securities Act, any information contained in the prospectus concerning
the Seller or the Shareholders becomes incorrect or incomplete in any material
respect, and to provide the information needed to correct such inaccuracy. The
Purchaser agrees to use its commercially reasonable best efforts to prepare and
file the Registration Statement as promptly as practicable, to furnish the
Seller with a copy thereof and each amendment thereto in substantially the form
in which it is to be filed as promptly as reasonably practicable prior to such
filing (it being understood that neither the Seller nor any of the Shareholders
has any obligation to review the same other than with respect to information
regarding the Company or the Seller) and to diligently seek to cause the
Registration Statement to be declared effective and the Initial Public Offering
to be completed. The Purchaser agrees that neither the Seller nor any of the
Shareholders shall have any responsibility for pro forma adjustments that may be
made to the Financial Statements.
(b) The Seller and each of the Shareholders acknowledge and
agree (i) that, prior to the execution and delivery of a definitive underwriting
agreement, the Underwriters have made no firm commitment, binding agreement, or
promise or other assurance of any kind, whether express or implied, oral or
written, that the Registration Statement will become effective or that the
Initial Public Offering pursuant thereto will occur at a particular price or
within a particular range of prices or occur at all, (ii) that none of the
prospective Underwriters of the Purchaser's common stock, in the Initial Public
Offering nor any officers, directors, agents or representatives of such
Underwriters shall have any liability to the Shareholders, the Seller or any
other person affiliated or associated with the Seller for any failure of the
Registration Statement to become effective, the Initial Public Offering to occur
at a particular price or within a particular range of prices or occur at all,
and (iii) the decision of the Shareholders and the Seller to enter into this
Agreement and, if applicable, to vote in favor of or consent to the transactions
contemplated hereby, has been or will be made independent of, and without
reliance upon, any statements, opinions or other communications of, or due
diligence investigation which have been or will be made or performed by any
prospective Underwriter, relative to the Purchaser or the prospective Initial
Public Offering. The Seller acknowledges that shares of DocuNet Common Stock
received as a part of the Purchase Price, if any, will not be issued pursuant to
the Registration Statement; and, therefore, the Underwriters shall have no
obligation to the Seller or the Shareholders with respect to any disclosure
contained in the Registration Statement and
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neither Seller nor any Shareholder may assert any claim against the Underwriters
relating to the Registration Statement on account thereof.
5.13. Examination of Final Financial Statement. The Seller shall
provide to Purchaser prior to the Closing Date, the unaudited consolidated
balance sheets of the Seller for each month and fiscal quarter end between the
date of this Agreement and the Closing Date, and the unaudited consolidated
statements of income, cash flows and retained earnings of the Seller for such
subsequent fiscal months and quarters. In addition, the Seller shall prepare and
deliver to the Purchaser at Closing, the Closing Balance Sheet. Such financial
statements, which shall be deemed to be Financial Statements (as defined herein)
shall have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods indicated
(except for the absence of notes and subject to normal year-end audit
adjustments).
5.13A Audit Opinion. The parties acknowledge that the Financial
Statements identified in Section 3.10(a) have been received by Xxxxxx Xxxxxxxx
LLP in anticipation of rendering its unqualified opinion thereon prior to
consummation of the Initial Public Offering.
5.14. [Intentionally omitted.]
5.15. Compliance with the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976 (the "Xxxx-Xxxxx Act"). All parties to this Agreement hereby
recognize that one or more filings under the Xxxx-Xxxxx Act may be required in
connection with the transactions contemplated herein. If it is determined by the
parties to this Agreement that filings under the Xxxx-Xxxxx Act are required,
then: (i) each of the parties hereto agrees to cooperate and use its best
efforts to comply with the Xxxx-Xxxxx Act, (ii) such compliance by the Seller
and the Stockholder shall be deemed a condition precedent in addition to the
conditions precedent set forth in Section 6 of this Agreement, and such
compliance by Purchaser shall be deemed a condition precedent in addition to the
conditions precedent set forth in Article 6 of this Agreement, and (iii) the
parties agree to cooperate and use their best efforts to cause all filings
required under the Xxxx-Xxxxx Act to be made. If filings under the Xxxx-Xxxxx
Act are required, the costs and expenses thereof (including filing fees) shall
be borne by Purchaser. The obligation of each party to consummate the
transactions contemplated by this Agreement is subject to the expiration or
termination of the waiting period under the Xxxx-Xxxxx Act, if applicable.
5.16. Final Tax Returns. The Seller shall arrange for the timely
filing of all federal and state income tax returns for periods ending through
the Closing Date and shall deliver a copy of each such return to the Purchaser
at least 45 days prior to the due date for the filing of such return (including
applicable extensions) for the review and approval of the Purchaser, which
approval shall not be unreasonably withheld. The Seller shall select the
accountants responsible for the preparation of such returns, which accountants
are to be reasonably acceptable to the Purchaser. The Seller shall be
responsible for the costs of preparing such returns, and such returns shall be
prepared in a manner consistent with all prior such returns. Purchaser shall
cooperate with the Seller and their accountants in providing access to all
books, records, and
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other information reasonably required to prepare such returns. If the Purchaser
objects to an item or items in a tax return submitted for approval, it will
notify the Seller of such a disagreement in writing within ten days after the
receipt of such return (the "Return Notice"). If the parties cannot reach
agreement within ten days after the Sellers receive the Return Notice the issue
shall be submitted to Xxxxxx Xxxxxxxx LLP for its review, and the decision of
Xxxxxx Xxxxxxxx LLP as to the correct reporting of the item shall be final and
conclusive and the tax return shall be filed consistently with that decision;
provided, however, that if the Xxxxxx Xxxxxxxx LLP position has a negative
financial impact on Seller, Seller can require Xxxxxx Xxxxxxxx LLP and Seller's
accountant to choose a mutually agreeable third independent accountant whose
decision will be binding on the parties.
ARTICLE 6
CONDITIONS PRECEDENT TO CLOSING
6.1. Conditions Precedent to Purchaser's Obligations. The
Purchaser's obligation to consummate the transactions contemplated by this
Agreement is subject to the satisfaction of, or waiver in writing by the
Purchaser of, prior to or at the Closing, each and every of the following
conditions precedent:
(a) Representations and Warranties. Each of the
representations and warranties of the Seller and the Shareholders contained in
this Agreement shall be true and correct on and as of the Closing Date with the
same force and effect as though such representations and warranties had been
made on and as of the Closing Date except for those representations and
warranties that by their terms relate to an earlier date, which representations
and warranties shall be true and correct in all material respects with regard to
such earlier date. The Seller and each of the Shareholders shall execute and
deliver to the Purchaser a certificate dated the Closing Date, certifying that
all of the Seller's and the Shareholders' representations and warranties
contained in this Agreement are true and correct on and as of the Closing Date
as though such representations and warranties had been made on and as of the
Closing Date.
(b) Compliance with Covenants and Conditions. The Seller and
the Shareholders shall have each performed and complied in all material respects
with each and every covenant, agreement and condition required by this Agreement
to be performed or satisfied by the Seller and the Shareholders, as the case may
be, at or prior to the Closing Date. Each of the Seller and the Shareholders
shall execute and deliver to the Purchaser a certificate dated as of the Closing
Date, certifying that the Seller and the Shareholders have fully performed and
complied in all material respects with all the duties, obligations and
conditions required by this Agreement to be performed and complied with by them
at or prior to the Closing Date.
(c) Delivery of Documents. The Seller and the Shareholders
shall have each delivered to the Purchaser all documents, certificates,
instruments and items required to be delivered by him or it at or prior to the
Closing Date pursuant to this Agreement.
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(d) Consents. All proceedings, if any, to have been taken and
all Consents including, without limitation, all Regulatory Approvals, necessary
or advisable in connection with the transactions contemplated by this Agreement
shall have been taken or obtained.
(e) Financing. The Registration Statement on Form S-1 relating
to the Initial Public Offering shall have been declared effective by the
Securities and Exchange Commission and the closing of the sale of DocuNet Common
Stock to the Underwriters in the Initial Public Offering shall have occurred
simultaneously with the Closing Date hereunder.
(f) Closing Balance Sheet The Seller shall have delivered to
the Purchaser a true and complete copy of the Closing Balance Sheet together
with a certificate dated the Closing Date, signed by the Seller's chief
financial officer that the Closing Balance Sheet is in accordance with the Books
and Records and with GAAP applied on a consistent basis (except for the absence
of notes and subject to normal year-end audit adjustments) and presents fairly
the financial position of the Seller as of the Closing Date.
(g) No Material Adverse Change. From and after the date of
this Agreement, there shall not have occurred or be threatened any development,
event, circumstance or condition that could reasonably be expected, individually
or in the aggregate, to have a Material Adverse Effect upon the Purchased
Assets, or the business, prospects, operations, results of operations, assets,
liabilities or condition (financial or otherwise) of the Seller.
(h) No Legal Proceeding Affecting Closing. There shall not
have been instituted and there shall not be pending or threatened any Legal
Proceeding, and no Order shall have been entered (i) imposing or seeking to
impose limitations on the ability of the Purchaser to acquire or hold or to
exercise full rights of ownership of any of the Purchased Assets; (ii) imposing
or seeking to impose limitations on the ability of the Purchaser to combine and
operate the business, operations and assets of the Seller with the Purchaser's
business, operations and assets; (iii) imposing or seeking to impose other
sanctions, damages or liabilities arising out of the transactions contemplated
by this Agreement on the Purchaser or any of the Purchaser's directors, officers
or employees; (iv) requiring or seeking to require divestiture by the Purchaser
of all or any material portion of the business, assets or property of the
Seller; or (v) restraining, enjoining or prohibiting or seeking to restrain,
enjoin or prohibit the consummation of transactions contemplated by this
Agreement.
(i) Secretary's Certificate. The Seller shall have delivered
to the Purchaser a certificate or certificates dated as of the Closing Date and
signed on its behalf by its Secretary to the effect that (I)(A) the copy of the
Seller's articles or certificate of incorporation attached to the certificate is
true, correct and complete, (B) no amendment to such articles or certificate of
incorporation has occurred since the date of the last amendment annexed (such
date to be specified), (C) a true and correct copy of the Seller's bylaws as in
effect on the date thereof and at all times since the adoption of the resolution
referred to in (D) is annexed to such certificate, (D) the resolutions by the
Seller's board of directors and shareholders authorizing the actions taken in
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connection with the sale of the Purchased Assets, including, without limitation,
the execution, delivery and performance of this Agreement, were duly adopted and
continue in force and effect (a copy of such resolutions to be annexed to such
certificate); (ii) setting forth the Seller's incumbent officers and including
specimen signatures on such certificate or certificates as their genuine
signatures; and (iii) the Seller is in good standing in all jurisdictions where
the ownership or lease of property or the conduct of its business requires it to
qualify to do business, except for those jurisdictions where the failure to be
duly qualified, authorized and in good standing would not have a material
adverse effect upon the business, prospects, operations, results of operations,
assets, liabilities or condition (financial or otherwise) of the Seller. The
certification referred to above in (iii) shall attach certificates of good
standing certified by the Secretaries of State or other appropriate officials of
such states, dated as of a date not more than a five (5) days prior to the
Closing Date.
(j) Opinion of Counsel of Seller. Xxxxxx X. Xxxxxx, counsel
for the Seller and the Shareholders, shall have delivered to the Purchaser their
favorable opinion concerning the matters set forth in Schedule 6.1(j), dated the
Closing Date and in form and substance reasonably satisfactory to the Purchaser
and its counsel. In rendering such opinion, counsel may rely to the extent
recited therein on certificates of public officials and of the Seller's officers
as to matters of fact, and as to any matter that involves other than federal or
Nebraska law, such counsel may rely upon the opinion of local counsel reasonably
satisfactory to the Purchaser and its counsel.
(k) Termination of Related Party Agreements. All existing
agreements between the Seller and the Shareholders or Affiliates of the Seller
or Shareholders, other than those set forth on Schedule 6.1(k), shall have been
canceled.
(l) Employment Agreements. Each of the persons listed on
Schedule 6.1(l) shall have entered into an employment or consulting agreement
(collectively, the "Employment Agreements") with the Purchaser substantially in
the form of Exhibit E attached hereto.
(m) Repayment of Indebtedness. Prior to the Closing Date, the
Shareholders shall have repaid the Seller in full all amounts owing by the
Shareholders or employees of the Seller to the Seller.
(n) FIRPTA Certificate. Each Shareholder shall have delivered
to the Purchaser a certificate to the effect that he is not a foreign person
pursuant to Section 1.1445-2(b) of the Treasury regulations.
(o) Escrow Agreement. Shareholders and the Seller shall have
executed the Escrow Agreement substantially in the form of Exhibit C attached
hereto.
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(p) Closing of DocuTech Data Systems, Inc. Transaction. The
Merger of DocuTech Data Systems, Inc. pursuant to that certain Agreement and
Plan of Reorganization by and among Purchaser, DocuTech Data Systems, Inc. and
certain sellers dated as of the date hereof.
6.2. Conditions Precedent to Seller's Obligations. The Seller's
obligation to consummate the transactions contemplated by this Agreement is
subject to the satisfaction of, or waiver in writing by the Seller of, prior to
or at the Closing, each and every of the following conditions precedent:
(a) Representations and Warranties. Each of the
representations and warranties of the Purchaser contained in this Agreement
shall be true and correct in all material respects on and as of the date of the
Closing Date with the same force as though such representations and warranties
had been made on and as of the Closing Date except for those representations and
warranties that by their terms relate to an earlier date, which representations
and warranties shall be true and correct in all material respects with regard to
such earlier date. The Purchaser shall execute and deliver to the Seller a
certificate dated as of the Closing Date, certifying that all of its
representations and warranties contained in this Agreement are true and correct
on and as of the Closing Date as though such representations and warranties had
been made on and as of the Closing Date.
(b) Compliance with Covenants and Conditions. The Purchaser
shall have performed and complied in all material respects with each and every
covenant, agreement and condition required by this Agreement to be performed or
satisfied by the Purchaser at or prior to the Closing Date. The Purchaser shall
execute and deliver to the Seller a certificate dated as of the Closing Date,
certifying the Purchaser has fully performed and complied in all material
respects with all the duties, obligations and conditions required by this
Agreement to be performed and complied with by it at or prior to the Closing
Date.
(c) Delivery of Documents. The Purchaser shall have delivered
to the Shareholders all documents, certificates, instruments and items required
to be delivered by it at or prior to the Closing.
(d) No Legal Proceeding Affecting Closing. There shall not
have been instituted and there shall not be pending or threatened any Legal
Proceeding, and no Order shall have been entered (i) imposing or seeking to
impose limitations on the ability of the Seller to sell any of the Purchased
Assets; (ii) imposing or seeking to impose other sanctions, damages or
liabilities arising out of the transactions contemplated by this Agreement on
the Seller or any of its directors, officers or employees or on the Shareholder;
or (iv) restraining, enjoining or prohibiting or seeking to restrain, enjoin or
prohibit the consummation of transactions contemplated by this Agreement.
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(e) Escrow Agreement. The Purchaser shall have executed the
Escrow Agreement substantially in the form of Exhibit C attached hereto.
(f) Employment Agreements. The Purchaser shall have entered
into an employment agreement (collectively, the "Employment Agreements") with
each of the persons listed on Schedule 6.1(l).
(g) Secretary's Certificate. The Purchaser shall have
delivered to the Seller a certificate or certificates dated as of the Closing
Date and signed on its behalf by its Secretary to the effect that (I)(A) the
copy of the Purchaser's articles or certificate of incorporation attached to the
certificate is true, correct and complete, (B) no amendment to such articles or
certificate of incorporation has occurred since the date of the last amendment
annexed (such date to be specified), (C) a true and correct copy of the
Purchaser's bylaws as in effect on the date thereof and at all times since the
adoption of the resolution referred to in (D) is annexed to such certificate,
(D) the resolutions by the Purchasers's board of directors authorizing the
actions taken in connection with the purchase of the Purchased Assets including,
without limitation, the execution, delivery and performance of this Agreement
were duly adopted and continue in force and effect (a copy of such resolutions
to be annexed to such certificate) and (ii) setting forth the incumbent officers
of the Purchaser and including specimen signatures on such certificate or
certificates of such officers executing this Agreement on behalf of the
Purchaser as their genuine signatures.
(h) Financing. The registration statement on Form S-1 relating
to the Initial Public Offering shall have been declared effective by the
Securities and Exchange Commission and the closing of the sale of DocuNet Common
Stock to the Underwriters in the Initial Public Offering shall have occurred
simultaneously with the Closing Date hereunder.
(i) Opinion of Counsel of Purchaser. Pepper, Xxxxxxxx &
Xxxxxxx LLP, counsel for Purchaser, shall have delivered to the Seller and
Shareholder its favorable opinion, dated the Closing Date, as to the matters
covered in Schedule 6.2(I). In rendering such opinion, counsel may rely to the
extent recited therein on certificates of public officials and of officers of
Purchaser as to matters of fact, and such opinion may be limited to federal laws
and the laws of the Commonwealth of Pennsylvania.
(j) Closing of DocuTech Data Systems, Inc. Transaction. The
Merger of DocuTech Data Systems, Inc. pursuant to that certain Agreement and
Plan of Reorganization by and among Purchaser, DocuTech Data Systems, Inc. and
certain sellers dated as of the date hereof.
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ARTICLE 7
CLOSING
At or prior to the Pricing, the parties shall take all
administrative actions necessary to prepare to effect the sale of the Purchased
Assets and the assumption of the Assumed Liabilities referred to herein;
provided, that such actions shall not include the actual completion of the sale
and purchase of the Purchased Assets and the assumption of the Assumed
Liabilities, the delivery of the Xxxx of Sale and the Assignment and Assumption
Agreement, and the delivery of the check(s) (or wire transfers) referred to in
Article 2 hereof, each of which actions shall only be taken upon the Closing
Date as herein provided. In the event that there is no Closing Date and this
Agreement terminates, Purchaser hereby covenants and agrees to do all things
required by Pennsylvania law and all things which counsel for the Seller advises
Purchaser are required by applicable laws of the State of Nebraska in order to
rescind any actions taken in furtherance of the sale of the Purchased Assets and
the assumption of the Assumed Liabilities as described in this Section. The
taking of the actions described above shall take place on the Pricing Date at
the offices of Pepper, Xxxxxxxx & Xxxxxxx LLP, 3000 Two Xxxxx Square, 00xx xxx
Xxxx Xxxxxxx, Xxxxxxxxxxxx, XX 00000. On the Closing Date (i) (a) the Seller's
duly executed Xxxx of Sale, (b) the Seller's duly executed counterpart to the
Assignment and Assumption Agreement and (c) all such endorsements, assignments
and other instruments of transfer and conveyance including, without limitation,
waivers or consents of lessors and other third Persons, and releases,
satisfactions and termination statements from secured parties, as may be
necessary to vest in the Purchaser indefeasible and marketable legal and
beneficial title to the Purchased Assets, free and clear of all Encumbrances, to
effect the assignment and assumption of the Assumed Liabilities and to
consummate the transactions contemplated by this Agreement, all of which shall
be in form and substance reasonably satisfactory to the Purchaser, (ii) all
transactions contemplated by this Agreement, the delivery of a bank check or
checks or a wire transfer in an amount equal to the cash portion of the
consideration which the Seller shall be entitled to receive pursuant to Article
2 hereof, and the delivery of the documents contemplated to be delivered by
Purchaser, Seller and Shareholders pursuant to Article 6 hereof, and (iii) the
closing with respect to the Initial Public Offering shall occur and be deemed to
be completed. The date on which the actions described in the preceding clauses
(I), (ii) and (iii) occurs shall be referred to as the "Closing Date." Except as
otherwise provided in Article 11 hereof, during the period from the Pricing Date
to the Closing Date, this Agreement may only be terminated by the parties if the
underwriting agreement in respect of the Initial Public Offering is terminated
pursuant to the terms thereof.
ARTICLE 8
COVENANT NOT TO COMPETE
8.1. Confidentiality.
(a) Each party to this Agreement shall use Confidential
Information only in connection with the transactions contemplated hereby
(including the Initial Public Offering) and not disclose any Confidential
Information about any other party to any Person unless the party
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desiring to disclose such Confidential Information receives the prior written
consent of the party about whom such Confidential Information pertains, except
(i) to any party's directors, officers, employees, agents, advisors and
representatives who have a need to know such Confidential Information for the
performance of their duties as employees, agents or representatives, (ii) to the
extent strictly necessary to obtain any Consents including, without limitation,
any Regulatory Approvals, that may be required or advisable to consummate the
transactions contemplated by this Agreement, (iii) to enforce such party's
rights and remedies under this Agreement, (iv) with respect to disclosures that
are compelled by any Requirement of Law or pursuant to any Legal Proceeding;
provided, that the party compelled to disclose Confidential Information
pertaining to any other party shall notify such other party thereof and use his
or its commercially reasonable efforts to cooperate with such other party to
obtain a protective order or other similar determination with respect to such
Confidential Information; (v) made to any party's legal counsel, independent
auditors, investment bankers or financial advisors under an obligation of
confidentiality; (vi) to other Founding Companies or Potential Founding
Companies; or (vii) as otherwise permitted by Section 5.10 of this Agreement.
(b) In the event that the transactions contemplated by this
Agreement are not consummated in accordance with the terms of this Agreement,
each party shall, upon the request of the other party, return to the other party
or destroy all Confidential Information and any copies thereof previously
delivered by such requesting party, except to the extent that such party deems
such Confidential Information necessary or desirable to enforce his or its
rights under this Agreement.
(c) The obligation of confidentiality contained in this
Section 8.1 shall, (i) from and after the date of this Agreement, supersede all
of the obligations contained in that certain letter agreement among the
Purchaser, the Seller and the Shareholders dated July 7, 1997, and (ii) survive
the termination of this Agreement, or the Closing, as applicable, for a period
of two years after the date of such termination or the Closing Date,
respectively; provided, that, if the Closing shall occur, then the Purchaser's
obligation of confidentiality shall terminate upon the Closing.
(d) The parties hereto acknowledge and agree that they may
become aware of potential acquisition targets of the Purchaser, including but
not limited to the Potential Founding Companies (collectively, the "Purchaser
Targets"), in the course of discussions with Purchaser or a Potential Founding
Company. Accordingly, the parties hereto each agree not to directly or
indirectly seek to acquire or merge with, or pursue or respond to, with an
intent to acquire or merge with, any Purchaser Targets until the later of 300
days after the date of this Agreement or 180 days after termination of this
Agreement.
(e) The Purchaser will cause each of the Founding Companies
other than the Seller to enter into a provision similar to this Section 8.1
requiring each such Founding Company to keep confidential any information
obtained by such Founding Company.
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8.2. Covenant Not To Compete. As a material inducement to the
Purchaser's consummation of the transactions contemplated by this Agreement,
each of the Seller and the Shareholders shall not, during the Restricted Period,
do any of the following, directly or indirectly, without the prior written
consent of the Purchaser in its sole discretion:
(a) compete, directly or indirectly, with the Purchaser or any
of its Affiliates or Subsidiaries, or any of their respective successors or
assigns, whether now existing or hereafter created or acquired (collectively,
the "Related Companies"), or otherwise engage or participate, directly or
indirectly, in the business conducted by Purchaser or a Subsidiary (the
"Restricted Business") within any geographic area located within the United
States of America, its possessions or territories (the "Restricted Area");
(b) become interested (whether as owner, stockholder, lender,
partner, co-venturer, director, officer, employee, agent, consultant or
otherwise), directly or indirectly, in any Person that engages in the Restricted
Business within the Restricted Area; provided, that nothing contained in this
Section 8.2(b) shall prohibit the Shareholders from owing, as a passive
investor, not more than five percent (5%) of the outstanding securities of any
class of any publicly-traded securities of any publicly held company listed on a
well-recognized national securities exchange or on an interdealer quotation
system of the National Association of Securities Dealers, Inc; or
(c) solicit, call on, divert, take away, influence, induce or
attempt to do any of the foregoing, in each case within the Restricted Area,
with respect to the Purchaser's or any of the Related Companies' (A) customers
or distributors or prospective customers or distributors (wherever located) with
respect to goods or services that are competitive with those of the Purchaser or
any of the Related Companies, (B) suppliers or vendors or prospective suppliers
or vendors (wherever located) to supply materials, resources or services to be
used in connection with goods or services that are competitive with those of the
Purchaser or any of the Related Companies, (C) distributors, consultants,
agents, or independent contractors to terminate or modify any contract,
arrangement or relationship with the Purchaser or any of the Related Companies
or (D) employees (other than family members) to leave the employ of the
Purchaser or any of the Related Companies.
8.3. Specific Enforcement; Extension of Period.
(a) The Seller and each of the Shareholders acknowledges that
any breach or threatened breach by it or him of any provision of Sections 8.1 or
8.2 will cause continuing and irreparable injury to the Purchaser and the
Related Companies for which monetary damages would not be an adequate remedy.
Accordingly, the Purchaser and any of the Related Companies shall be entitled to
injunctive relief from a court of competent jurisdiction, including specific
performance, with respect to any such breach or threatened breach. In connection
therewith, none of the Seller nor any of the Shareholders shall, in any action
or proceeding to so enforce any provision of this Article 8, assert the claim or
defense that an adequate remedy at law exists or that injunctive relief is not
appropriate under the circumstances. The rights and remedies of
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the Purchaser and any of the Related Companies set forth in this Section 8.3 are
in addition to any other rights or remedies to which the Purchaser or any of the
Related Companies may be entitled, whether existing under this Agreement, at law
or in equity, all of which shall be cumulative.
(b) The periods of time set forth in this Article 8 shall not
include, and shall be deemed extended by, any time required for litigation to
enforce the relevant covenant periods. The term "time required for litigation"
as used in this Section 8.3(b) shall mean the period of time from the earlier of
the Seller's or the Shareholders' as applicable, first breach of the provisions
of Sections 8.1 or 8.2 or service of process upon the Seller or the
Shareholders, as applicable, through the expiration of all appeals related to
such litigation.
8.4. Disclosure. The Seller and each of the Shareholders acknowledge
that the Purchaser or any of the Related Companies may provide a copy of this
Agreement or any portion of this Agreement to any Person with, through or on
behalf of which any of the Seller or the Shareholders may, directly or
indirectly, breach or threaten to breach any of the provisions of Section 8.2.
8.5. Interpretation. It is the desire and intent of the parties that
the provisions of this Article 8 shall be enforceable to the fullest extent
permissible under applicable law and public policy. Accordingly, if any
provision of this Article 8 shall be determined to be invalid, unenforceable or
illegal for any reason, then the validity and enforceability of all of the
remaining provisions of this Article 8 shall not be affected thereby. If any
particular provision of this Article 8 shall be adjudicated to be invalid or
unenforceable, then such provision shall be deemed amended to delete therefrom
the portion thus adjudicated to be invalid or unenforceable, such amendment to
apply only to the operation of such provision in the particular jurisdiction in
which such adjudication is made; provided that, if any provision contained in
this Article 8 shall be adjudicated to be invalid or unenforceable because such
provision is held to be excessively broad as to duration, geographic scope,
activity or subject, then such provision shall be deemed amended by limiting and
reducing it so as to be valid and enforceable to the maximum extent compatible
with the applicable laws and public policy of such jurisdiction, such amendment
only to apply with respect to the operation of such provision in the applicable
jurisdiction in which the adjudication is made.
8.6. Acknowledgment. The Seller and each of the Shareholders
acknowledges that it or he has carefully read and considered the provisions of
this Article 8. The Seller and each of the Shareholders acknowledges and
understands that the restrictions contained in this Article 8 may limit their
respective ability to conduct a business similar to that of the Purchaser or any
of the Related Companies, but the Seller and each of the Shareholders
nevertheless believes that it and he has received and will receive sufficient
consideration and other benefits to justify such restrictions. The Seller and
each of the Shareholders also acknowledges and understands that these
restrictions are reasonably necessary to protect the Purchaser's and the Related
Companies' interests, and the Seller and each of the Shareholders does not
believe that such restrictions will
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prevent it or him from conducting businesses that are not competitive with those
of the Purchaser or any of the Related Companies during the term of such
restrictions in the Restricted Area.
ARTICLE 9
SURVIVAL
9.1. Survival of Representations, Warranties, Covenants and
Agreements. Subject to the last three (3) sentences of this Section 9.1, the
representations and warranties of the Seller and the Shareholders on the one
hand, and the Purchaser on the other hand, contained in this Agreement shall
survive until the second anniversary of the Closing Date, except that the
representations and warranties set forth in each of Section 3.9, Section 3.17,
Section 3.20 and Section 3.25 shall survive until the expiration of the statute
of limitations applicable to the subject matter addressed thereunder. The
covenants and agreements of the Seller and the Shareholders on the one hand, and
of the Purchaser on the other hand, contained in this Agreement will survive the
Closing until, by their own respective terms, they have been fully performed.
Any representation, warranty, covenant or agreement that would otherwise
terminate in accordance with this Article 9 will continue to survive if an
Indemnity Notice, an Unliquidated Indemnity Notice or a Claim Notice (as
applicable) shall have been given in good faith based on facts reasonably
expected to establish a valid claim under Article 10 on or prior to the date on
which such representation, warranty, covenant or agreement would have otherwise
terminated, until the related claim for indemnification has been satisfied or
otherwise resolved as provided in Article 10. Any breach of representation or
warranty contained in this Agreement made by any party or any written
information furnished by any party that was made by such party fraudulently or
with intent to defraud or mislead or with gross negligence shall indefinitely
survive the Closing. Any representation or warranty made by any or all of the
Seller or the Shareholders in this Agreement or any information furnished or
caused to be furnished by any or all of the Seller or the Shareholders to the
Purchaser that is incorporated in, or is the basis for omitting information
from, the Registration Statement, prospectus or other document, or any amendment
or supplement thereof in connection with any Purchaser Financing Transaction
shall survive until the expiration of all applicable statutes of limitations
regarding claims brought by investors in such Purchaser Financing Transaction
alleging material misstatements or omissions in such documents.
9.2. [Intentionally omitted.]
9.3. Underwriter's Benefit. The representations and warranties and
covenants made by any or all of the Seller or the Shareholders contained in this
Agreement or any document, instrument, certificate or other item furnished or to
be furnished to Purchaser pursuant hereto or thereto or in connection with the
transactions contemplated by this Agreement shall run to the benefit of any
Underwriter of the Purchaser's common stock subject to the Initial Public
Offering in addition to the benefit of the Purchaser. Accordingly, any such
Underwriter, and each person, if any, who controls any such Underwriter within
the meaning of the Securities Act or the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission
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thereunder, shall be (i) an intended beneficiary of this Agreement, and (ii)
deemed to be an Indemnified Party for the purposes of the indemnification
provided for in Article 10.
ARTICLE 10
INDEMNIFICATION
10.1. Seller and Shareholder's Indemnification. From and after the
Closing Date, the Seller and the Shareholders shall, jointly and severally,
indemnify and hold harmless the Purchaser and any of its Affiliates, and each
Person who controls (within the meaning of the Securities Act) the Purchaser or
any such Affiliate, and each of their respective directors, officers, employees,
agents, successors and assigns and legal and accounting representatives, from
and against all Indemnifiable Losses that may be imposed upon, incurred by or
asserted against any of them resulting from, related to, or arising out of (i)
any misrepresentation, breach of any warranty or non-fulfillment of any covenant
to be performed by any or all of the Seller or the Shareholders under this
Agreement or any document, instrument, certificate or other item required
furnished or to be furnished to the Purchaser pursuant hereto or thereto or in
connection with the transactions contemplated by this Agreement; (ii) any untrue
statement of any material fact contained in any registration statement,
prospectus, document or other item, or any amendment or supplement thereof,
prepared, filed, distributed or executed in connection with any Purchaser
Financing Transaction, or any omission to state in any such registration
statement, prospectus, document, item, amendment or supplement a material fact
required to be stated therein or necessary to make the statements therein not
misleading, that is based upon any misrepresentation or breach of any warranty
made by any or all of the Seller or the Shareholders pursuant to this Agreement
or upon any untrue statement or omission contained in any information furnished
or caused to be furnished by any or all of the Seller or the Shareholders to the
Purchaser (provided that the Seller and Shareholders shall not be liable with
respect to a prospectus that is distributed after they have notified the
Purchaser in writing to correct a misstatement or omission and, provided
further, that the Seller and the Shareholders hereby acknowledge that the
information concerning the Seller and the Shareholders in the Registration
Statement shall be deemed to be provided to the Purchaser for the purposes
hereof); (iii) any obligation and liability of the Seller or the Shareholders of
any nature whatsoever, whether now existing or hereafter arising or incurred,
except for the Assumed Liabilities; (iv) any non-compliance with applicable
Requirements of Law relating to bulk sales, bulk transfers and the like or to
fraudulent conveyances, fraudulent transfers, preferential transfers and the
like by the Seller; (v) any action, claim or demand by any holder of the
Seller's securities, whether debt or equity, in such holder's capacity as such,
whether now existing or hereafter arising or incurred; (vi) any non-compliance
with the Worker Adjustment and Retraining Act, 29 U.S.C. ss.2101, et. seq., as
amended, and the rules and regulations promulgated thereunder and any similar
Requirement Law; and (vii) any Legal Proceeding or Order, arising out of any of
the foregoing even though such Legal Proceeding or Order may not be filed,
become final, or come to light until after the Closing Date.
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10.1A No Indemnification of Projected Information. Notwithstanding
any possible interpretation of Paragraph 10.1 or any other provision of this
Agreement, the failure of the Purchaser or any successor to achieve after the
Closing Date any projected financial information, including, without limitation,
sales of software and costs of software development, in and of itself shall not
result in an Indemnifiable Loss to Purchaser.
10.2. Purchaser's Indemnification. From and after the Closing Date,
the Purchaser shall indemnify and hold harmless the Seller and the Shareholders
and each of their respective legal and accounting representatives, successors
and assigns from and against all Indemnifiable Losses imposed upon, incurred by
or asserted against, the Seller or the Shareholders resulting from, related to,
or arising out of: (i) any misrepresentation, breach of any warranty or
non-fulfillment of any covenant to be performed by the Purchaser under this
Agreement or any document, instrument, certificate or other item furnished or to
be furnished to the Seller or the Shareholders pursuant hereto or thereto or in
connection with the transactions contemplated by this Agreement; (ii) Assumed
Liabilities; (iii) any untrue statement of any material fact contained in any
registration statement, prospectus, document or other item, or any amendment or
supplement thereof, prepared, filed, distributed or executed in connection with
any Purchaser Financing Transaction, or any omission to state in any such
registration statement, prospectus, document, item, amendment or supplement a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except for any untrue statement or omission contained in
any information furnished or caused to be furnished by the Seller or
Shareholders; and (iv) any Legal Proceeding or Order, arising out of any of the
foregoing even though such Legal Proceeding or Order may not be filed, become
final, or come to light until after the Closing Date.
10.3. Payment; Procedure for Indemnification.
(a) In the event that the Person seeking indemnification under this
Article 10 (the "Indemnified Party") shall suffer an Indemnifiable Loss, he, she
or it shall, within fourteen (14) days after obtaining knowledge of the
incurrence of any such Indemnifiable Loss, give written notice to the party from
whom indemnification under this Article 10 is sought (the "Indemnifying Party")
of the amount of the Indemnifiable Loss, together with reasonably sufficient
information to enable the Indemnifying Party to determine the accuracy and
nature of the claimed Indemnifiable Loss (the "Indemnity Notice"). The failure
of any Indemnified Party to give the Indemnifying Party the Indemnity Notice
shall not release the Indemnifying Party of liability under this Article 10;
provided, however that the Indemnifying Party shall not be liable for
Indemnifiable Losses incurred by the Indemnified Party that would not have been
incurred but for the delay in the delivery of, or the failure to deliver, the
Indemnity Notice. Within thirty (30) days after the receipt by the Indemnifying
Party of the Indemnity Notice, the Indemnifying Party shall either (i) pay to
the Indemnified Party an amount equal to the Indemnifiable Loss or (ii) object
to such claim, in which case the Indemnifying Party shall give written notice to
the Indemnified Party of such objection together with the reasons therefor, it
being understood that the failure of the Indemnifying Party to so object shall
preclude the Indemnifying Party from asserting any claim,
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defense or counterclaim relating to the Indemnifying Party's failure to pay any
Indemnifiable Loss. The Indemnifying Party's objection shall, in and of itself,
not relieve the Indemnifying Party from its obligations under this Article 10.
In the event that the parties are unable to resolve the subject of the Indemnity
Notice, the issue shall be submitted for determination to a neutral third party
designated by the President of the Philadelphia Office of the American
Arbitration Association.
(b) In the event that any Indemnified Party shall have
reasonable grounds to believe that an Indemnifiable Loss may be incurred, such
Indemnified Party shall promptly, and in any event, within fourteen (14) days
after obtaining sufficient information to articulate such grounds, give written
notice to the applicable Indemnifying Party thereof, together with such
information as is reasonably sufficient to describe the potential or contingent
claim to the extent then feasible (an "Unliquidated Indemnity Notice"). The
failure of an Indemnified Party to give the Indemnifying Party the Unliquidated
Indemnity Notice shall not release the Indemnifying Party of liability under
this Article 10; provided, however that the Indemnifying Party shall not be
liable for Indemnifiable Losses incurred by the Indemnified Party that would not
have been incurred but for the delay in the delivery of, or the failure to
deliver, the Unliquidated Indemnity Notice. Promptly, but in any event, within
sixty (60) days after the amount of such claim shall be finalized, resolved, or
liquidated, the Indemnified Party shall give the Indemnifying Party an Indemnity
Notice, and the Indemnifying Party's obligations under this Article 10 with
respect to such Indemnity Notice shall apply.
(c) In the event the facts giving rise to the claim for
indemnification under this Article 10 shall involve any action, or threatened
claim or demand by any third Person against the Indemnified Party, the
Indemnified Party, within the earlier of, as applicable, ten (10) days after
receiving notice of the filing of a lawsuit or fourteen (14) days after
receiving notice of the existence of a claim or demand giving rise to the claim
for indemnification (which shall include a notice from any Government Authority
of an intent to audit with respect to Taxes), shall send written notice of such
claim to the Indemnifying Party (the "Claim Notice"). The failure of the
Indemnified Party to give the Indemnifying Party the Claim Notice shall not
release the Indemnifying Party of liability under this Article 10; provided,
however, that the Indemnifying Party shall not be liable for Indemnifiable
Losses incurred by the Indemnified Party that would not have been incurred but
for the delay in the delivery of, or the failure to deliver, the Claim Notice.
Subject to the provision contained in the third sentence immediately following
this sentence, and except for claims resulting from, relating to or arising out
of any Purchaser Financing Transaction or the provisions of Section 3.20, the
Indemnifying Party shall be entitled to defend such claim in the name of the
Indemnified Party at its own expense and through counsel of its own choosing but
which is reasonably satisfactory to the Indemnified Party; provided, that if the
applicable claim or demand is against, or if the defendants in any such Legal
Proceeding shall include, both the Indemnified Party and the Indemnifying Party
and the Indemnified Party reasonably concludes that there are defenses available
to it that are different or additional to those available to the Indemnifying
Party or if the interests of the Indemnified Party may be reasonably deemed to
conflict with those of the Indemnifying Party, then the Indemnified Party shall
have the right to select separate counsel and to assume the Indemnified Party's
defense of such claim at its own
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expense. The Indemnifying Party shall give the Indemnified Party notice in
writing within ten (10) days after receiving the Claim Notice from the
Indemnified Party in the event of litigation, or otherwise within thirty (30)
days, of its intent to do so. In the case of any claim resulting from, relating
to or arising out of any Purchaser Financing Transaction or the provisions of
Section 3.20, the Purchaser shall have right to control the defense thereof at
the Indemnifying Party's expense; provided, however, that the Indemnifying Party
shall have the right, at its own expense, to retain its own counsel to
participate in the defense of the claim and to promote the defenses of the
Indemnifying Party in the proceedings. Whenever the Indemnifying Party is
entitled to defend any claim hereunder, the Indemnified Party may elect, by
notice in writing to the Indemnifying Party, to continue to participate through
its own counsel, at its own expense, but the Indemnifying Party shall have the
right to control the defense of the claim or the litigation; provided, that the
Indemnifying Party retains counsel reasonably satisfactory to the Indemnified
Party and pursuant to an arrangement satisfactory to the Indemnified Party;
otherwise, the Indemnified Party shall have the right to control the defense of
the claim or the litigation. Notwithstanding any other provision contained in
this Agreement, the party controlling the defense of the claim or the litigation
shall not settle any such claim or litigation without the written consent of the
other party; provided, that if the Indemnified Party is controlling the defense
of the claim or the litigation and shall have, in good faith, negotiated a
settlement thereof, which proposed settlement contains terms that are reasonable
under the circumstances, then the Indemnifying Party shall not withhold or delay
the giving of such consent (and in the event the Indemnifying Party and
Indemnified Party are unable to agree as to whether the proposed settlement
terms are reasonable, the Indemnifying Party and Indemnified Party will request
that the disagreement be resolved by a neutral third party designated by the
President of the Philadelphia office of the American Arbitration Association).
In the event that the Indemnifying Party is controlling the defense of the claim
or the litigation and shall have negotiated a settlement thereof, which proposed
settlement is substantively final and unconditional as to the parties thereto
(other than the consent of the Indemnified Party required under this Section
10.3(c)) and contains an unconditional release of the Indemnified Party and does
not include the taking of any actions by, or the imposition of any restrictions
on the part of, the Indemnified Party and the Indemnified Party shall refuse to
consent to such settlement, the liability of the Indemnifying Party under this
Article 10, upon the ultimate disposition of such litigation or claim, shall be
limited to the amount of the proposed settlement; provided, however, that in the
event the proposed settlement shall require that the Indemnified Party make an
admission of liability, a confession of judgment, or shall contain any other
non-financial obligation which, in the reasonable judgment of the Indemnified
Party, renders such settlement unacceptable, then the Indemnified Party's
failure to consent shall not give rise to the limitation of Indemnifying Party's
liability as provided for in this Section 10.3(c), and the Indemnifying Party
shall continue to be liable to the full extent of such litigation or claim and
provided further, that notwithstanding any provision to the contrary, no
Indemnifiable Losses with respect to Taxes shall be settled without the prior
written consent of the Purchaser.
(d) Notwithstanding any other provisions of this Agreement,
the Shareholders shall control all federal and state tax controversies with
respect to periods ending on or before the Closing Date. The Shareholders shall
be permitted to resolve all such controversies
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to their own satisfaction; provided, however, that if such resolution (or any
later positions consistent therewith) could result in a change to the income tax
liabilities or positions of Purchaser for periods after the closing date, the
Shareholders shall obtain the advance consent or Purchaser to such resolution)
which consent shall not be unreasonably withheld. Should Purchaser receive any
communications from federal or state tax authorities with respect to tax periods
ending on or before the closing date, Purchaser shall notify the Shareholders of
such communication by facsimile within two business days after receipt, and
shall forward the original of such communication if in writing within five
business days.
10.4. Equitable Contribution Under the Securities Act. To provide
for just and equitable contribution to joint liability under the Securities Act
in any case in which the Purchaser or any controlling Person of the Purchaser
(within the meaning of the Securities Act) makes a claim for indemnification
pursuant to Section 10.1(ii) but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
Section 10.1(ii) provides for indemnification in such case, then, the Purchaser,
each controlling Person, the Seller and the Shareholders will contribute to the
aggregate Indemnifiable Losses to which the Purchaser or any such controlling
Person may be subject (after contribution from others) as is appropriate to
reflect the relative fault of the Purchaser, such controlling Person, the
Seller, and the Shareholders in connection with the statements or omissions
which resulted in such Indemnifiable Losses, as well as the relative benefit
received by the Purchaser, such controlling Person, the Seller and the
Shareholders as a result of the issuance of the securities to which such
Indemnifiable Losses relate, it being understood that the parties acknowledge
that the overriding equitable consideration to be given effect in connection
with this provision is the ability of one party or the other to correct the
statement or omission which resulted in such Indemnifiable Losses, and that it
would not be just and equitable if contribution pursuant hereto were to be
determined by pro rata allocation or by any other method of allocation which
does not take into consideration the foregoing equitable considerations;
provided, however, that, in any such case, no Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
will be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
10.5. Exclusiveness of Indemnification. The indemnification rights
of the parties under this Article 10 are exclusive of other rights and remedies
that the parties may have under this Agreement (but for this provision), at law
or in equity or otherwise.
10.6. Limitations on Indemnification. Purchaser and the other
Persons or entities indemnified pursuant to Section 10.1 shall not assert any
claim for indemnification hereunder against the Seller or the Shareholders until
such time as the aggregate of all claims which such persons may have against the
Seller or the Shareholders shall exceed $27,000 (the "Indemnification
Threshold"), whereupon such claims shall be indemnified in full. None of the
Seller or the Shareholders shall assert any claim for indemnification hereunder
against Purchaser until such time as the aggregate of all claims which Seller or
the Shareholders may have against
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Purchaser shall exceed $27,000, whereupon such claims shall be indemnified in
full. The limitation on assertion of claims for indemnification contained in
this paragraph shall apply only to claims based on inaccuracies in, or breaches
of, representations and warranties contained in this Agreement or any document,
instrument, certificate or other item required to be furnished pursuant to this
Agreement or in connection with the transaction contemplated by this Agreement.
No person shall be entitled to indemnification under this Article 10 if
and to the extent that such person's claim for indemnification is directly or
indirectly related to a breach by such person of any representation, warranty,
covenant or other agreement set forth in this Agreement.
Notwithstanding any other term of this Agreement, the Seller and the
Shareholders shall not be liable under this Article 10 for an amount which
exceeds the aggregate amount of proceeds received by the Seller in connection
with the transactions contemplated herein. For purposes of calculating the value
of the DocuNet Stock received by Seller, the DocuNet Common Stock shall be
valued at the Initial Public Offering Price. No claim under this Article 10
shall be made unless an Indemnity Notice, an Unliquidated Indemnity Notice or a
Claim Notice (as applicable) has been given prior to the applicable survival
period.
ARTICLE 11
TERMINATION AND REMEDIES
11.1. Termination. This Agreement may be terminated, and the
transactions contemplated by this Agreement may be abandoned:
(a) at any time before the Closing, by the mutual written
agreement among the Seller, the Shareholders and the Purchaser;
(b) at any time before the Closing, by the Purchaser pursuant
to Section 5.4(a), or if any of the Seller's or any of the Shareholders'
representations or warranties contained in this Agreement were materially
incorrect when made or become materially incorrect;
(c) at any time before the Closing, by the Seller if any of
the Purchaser's representations or warranties contained in this Agreement were
materially incorrect when made or become materially incorrect;
(d) at any time before the Closing, by the Seller on the one
hand, or by the Purchaser, on the other hand, upon any material breach by
other(s) of such other party's covenants or agreements contained in this
Agreement and the failure of such other party to cure such breach, if curable,
within ten (10) days after written notice thereof is given by the non-breaching
party to the breaching party; or
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(e) at any time after the date which is 270 days after the
date of this Agreement, by the Seller on the one hand, or by the Purchaser on
the other hand, upon notification to the non-terminating party by the
terminating party if the Closing shall not have occurred on or before such date
and such failure to consummate is not caused by a breach of this Agreement by
the terminating party.
11.2. Effect of Termination.
(a) Subject to Section 11.2(b) of this Agreement, if this
Agreement is validly terminated pursuant to Section 11.1, then this Agreement
shall forthwith become void, and, subject to such Section 11.2(b), there shall
be no liability under this Agreement on the part of the Seller, the Shareholders
or the Purchaser and all rights and obligations of each party to this Agreement
shall cease; provided, that (i) the provisions with respect to expenses in
Section 14.4 shall indefinitely survive any such termination, (ii) the
provisions with respect to confidentiality of Section 8.1 shall survive any such
termination until it, by its own terms, is no longer operative, (iii) the
provisions with respect to exclusivity of negotiations of Section 5.9 shall
survive for 180 days after such termination, but only if the termination is made
by Purchaser pursuant to Section 11.1(b) or Section 11.1(d) and (iv) this
Section 11.2 shall indefinitely survive such termination.
(b) If this Agreement is validly terminated as a result of a
misrepresentation or a breach of any warranty made by any party to this
Agreement or as a result of a material breach by a party of any of such party's
covenants or agreements contained in this Agreement, or, if all conditions to
the obligations of a party at Closing contained in Article 6 of this Agreement
have been satisfied (or waived by the party entitled to waive such conditions)
and such party does not proceed with the Closing, then any and all rights and
remedies available to the non-breaching parties, whether under this Agreement,
at law or in equity or otherwise shall be preserved and shall survive the
termination of this Agreement.
ARTICLE 12
POST-CLOSING COVENANTS
12.1. Further Cooperation. From and after the Closing Date, the
Seller shall, and the Shareholders shall and shall cause the Seller to, assist
and cooperate with the Purchaser in effecting the orderly transfer of the
Purchased Assets to the Purchaser. In addition, at the Purchaser's request from
time to time, the Seller shall, and the Shareholders shall and shall cause the
Seller to, execute and deliver to the Purchaser such further endorsements,
assignments and instruments of transfer and conveyance and take such other
actions as the Purchaser reasonably requests to transfer, vest or perfect the
Purchaser's rights in and to the Purchased Assets free and clear of all
Encumbrances and otherwise to accomplish the orderly transfer of the Purchased
Assets to the Purchaser and to consummate the transactions contemplated by this
Agreement. In addition, the Seller and each of the Shareholders shall (i)
provide or cause to be provided such written information with respect to
themselves, (ii) execute and deliver or cause to be executed
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and delivered such other documents, certificates or instruments, and (iii) take
or cause to be taken such actions, in each of the foregoing cases, as the
Purchaser, any Underwriter or any auditor reasonably deems necessary or
desirable to complete any audit of the Seller's financial statements (including,
but not limited to, the execution of management representation letters to any
auditor by the Seller's management or the Shareholders) or in connection with
any Purchaser Financing Transaction; provided, that none of the Shareholders
shall be required to execute any guaranty of any indebtedness obtained by the
Purchaser.
12.2. Maintenance of Books and Records. For a period of three (3)
years after the Closing Date, the Purchaser shall maintain all Books and Records
maintained by the Seller on or prior to the Closing Date which are transferred
to the Purchaser and shall permit any or all of the Seller or the Shareholders
or their respective representatives and agents access, at the Seller's or the
Shareholders' sole cost and expense, to all such Books and Records, upon
reasonable notice by the Seller or the Shareholders, as applicable, and on terms
not disruptive to the business, operation or employees of the Purchaser or any
of the Purchaser's Affiliates to assist the Seller or the Shareholders, as
applicable, in (i) completing any tax or regulatory filings or financial
statements required or appropriate to be made by any or all of the Seller or the
Shareholders after the Closing Date or in completing any other reasonable and
customary business objective, (ii) prosecuting or defending on behalf of any or
all of the Seller or the Shareholders any litigation controlled by any or all of
the Seller or the Shareholders under Section 10.3(c) of this Agreement or (iii)
complying with requests made of any or all of the Seller or the Shareholders by
any Taxing Authority or any Governmental or Regulatory Authority conducting an
audit, investigation or inquiry relating to the Seller's activities during
periods prior to the Closing Date. The Seller and the Shareholders will hold all
information provided to them pursuant to this Article 12 (and any information
derived therefrom) in confidence to the same extent as required by Section 5.5
of this Agreement with respect to Confidential Information.
12.3. By Seller and Shareholders. For a period of three (3) years
after the Closing Date, the Seller shall, and the Shareholders shall and shall
cause the Seller to, maintain all Books and Records possessed or to be possessed
by any or all of the Seller and the Shareholders that relate to the Business
prior to the Closing Date. The Seller shall, and the Shareholders shall and
shall cause the Seller to, permit the Purchaser or its representatives and
agents access, at the Purchaser's sole cost and expense, to all of such Books
and Records upon reasonable prior written notice for any reasonable business
purpose.
12.4. Use of Name. From and after the Closing Date, the Seller
shall, and the Shareholders shall cause the Seller to: (i) sign such consents
and take such other actions as the Purchaser shall reasonably request to permit
the Purchaser to use the name DocuTech, Inc. and all variants thereof (the
"Name"); (ii) cease to use the Name; and (iii) take all necessary action to
change its corporate and trade names to such name or names that are
substantially different from and not confusingly similar to the Name.
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12.5. Discharge of Obligations. From and after the Closing Date, the
Seller shall, and the Shareholders shall cause the Seller to, pay and discharge
diligently, in accordance with past practice but not less than on a timely
basis, all of the Seller's obligations and liabilities (other than the Assumed
Liabilities) including, without limitation, any obligations and liabilities to
employees, trade creditors and customers.
12.6. Receivables. If, at any time after the Closing Date, the
Seller or the Shareholders shall receive any payments on account of any of the
Receivables or other rights to payment constituting a part of the Purchased
Assets, then the Seller or the Shareholders, as applicable, shall hold such
funds in trust for, and shall promptly remit (and the Shareholders shall cause
the Seller to remit promptly) such funds to the Purchaser immediately upon
receipt thereof. The Seller hereby, effective from and after the Closing Date,
authorizes and grants to the Purchaser (acting through any one or more of the
Purchaser's authorized representatives or agents) a power of attorney to endorse
the Seller's name on any check or any other remittances received by the
Purchaser on account of the Receivables. The foregoing power of attorney is
coupled with an interest and is irrevocable.
12.7. Disclosure. If, subsequent to the effective date of the
registration statement relating to the Initial Public Offering and prior to the
25th day after the date of the final prospectus of Purchaser utilized in
connection with the Initial Public Offering, the Shareholders or the Seller
become aware of any fact or circumstance which would change (or, if after the
Closing Date, would have changed) a representation or warranty of Seller or the
Shareholders in this Agreement or would affect any document delivered pursuant
hereto in any material respect, the Seller and the Shareholders shall promptly
give notice of such fact or circumstance to Purchaser.
ARTICLE 13
TAXES RELATING TO PURCHASED ASSETS
The Seller shall, and the Shareholders shall cause the Seller to
pay, and the Seller and the Shareholders shall jointly and severally indemnify
and hold harmless the Purchaser from and against all Transfer Taxes. All Taxes
on the ownership or use of the Purchased Assets (specifically excluding Taxes
measured by the net income of any party) that accrue on or prior to the Closing
Date shall be paid by the Seller, and all such Taxes that accrue after the
Closing Date shall be paid by the Purchaser; provided, that all such Taxes shall
be prorated to the Closing Date. Should Purchaser pay any Taxes that are to be
prorated in accord with the prior sentence, the Seller shall pay to the
Purchaser its prorated portion within ten (10) days of receipt of request for
payment made by the Purchaser.
ARTICLE 14
-64-
MISCELLANEOUS
14.1. Notices. All notices required to be given to any of the
parties to this Agreement shall be in writing and shall be deemed to have been
sufficiently given, subject to the further provisions of this Section 14.1, for
all purposes when presented personally to such party or sent by certified or
registered mail, return receipt requested, with proper postage prepaid, or any
national overnight delivery service, with proper charges prepaid, to such party
at its address set forth below:
(a) If to the Seller:
DocuTech, Inc.
0000 Xxxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Attention: Xxx Xxxx
with a copy to:
Xxxxxx X. Xxxxxx
Attorney at Law
0000 Xxxxxxx Xxxx
Xxxxx 000
Xxxxxxx, XX 00000
(b) If to the Shareholders:
(i) Xxx Xxxx
Xxxxx Xxxx
c/o DocuTech, Inc.
0000 Xxxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Attention: Xxx Xxxx
with a copy to:
Xxxxxx X. Xxxxxx
Attorney at Law
0000 Xxxxxxx Xxxx
Xxxxx 000
Xxxxxxx, XX 00000
-65-
(c) If to the Purchaser:
DocuNet Inc.
000 Xxxxxx'x Xxxx Xxxx
Xxxxxxxxx, XX 00000
with a copy to:
Pepper, Xxxxxxxx & Xxxxxxx LLP
3000 Two Xxxxx Square
00xx & Xxxx Xxxxxxx
Xxxxxxxxxxxx, XX 00000-0000
Attn: Xxxxx X. Xxxxxxx
Such notice shall be deemed to be received when delivered if delivered
personally, the next business day after the date sent if sent by a national
overnight delivery service, or three (3) business days after the date mailed if
mailed by certified or registered mail. Any notice of any change in such address
shall also be given in the manner set forth above. Whenever the giving of notice
is required, the giving of such notice may be waived in writing by the party
entitled to receive such notice.
14.2. No Third Party Beneficiaries. Except as is otherwise expressly
provided in this Agreement, this Agreement is not intended to, and does not,
create any rights in or confer any benefits upon anyone other than the parties
hereto.
14.3. Schedules. All schedules attached to this Agreement are
incorporated by reference into this Agreement for all purposes.
14.4. Expenses. The parties to this Agreement shall pay their own
expenses incident to the preparation, negotiation and execution of this
Agreement including, without limitation, all fees and costs and expenses of
their respective accountants and legal counsel. The parties acknowledge that all
fees and expenses of Xxxxxx Xxxxxxxx LLP incurred in auditing the Seller's
financial statements in connection with the transactions contemplated hereby
shall be the responsibility of Purchaser, provided that, notwithstanding the
foregoing, Seller shall be responsible to pay $5,000 of such fees and expenses.
14.5. Further Assurances. Any or all of the Seller or the
Shareholders on the one hand, and the Purchaser on the other hand, shall, at
their own respective expense, from time to time upon the request of the other
party, execute and deliver, or cause to be executed and delivered, at such times
as may reasonably be requested by such other party, such other documents,
certificates and instruments and take such actions as such other party deem
reasonably necessary to consummate more fully the transactions contemplated by
this Agreement.
-66-
14.6. Entire Agreement; Amendment. This Agreement and any other
documents, instruments or other writings delivered or to be delivered pursuant
to this Agreement constitute the entire agreement among the parties with respect
to the subject matter of this Agreement and supersede all prior agreements,
understandings, and negotiations, whether written or oral, with respect to the
subject matter of this Agreement. None of the terms and provisions contained in
this Agreement can be changed without a writing signed by all parties hereto.
14.7. Section and Paragraph Titles. The section and paragraph titles
used in this Agreement are for convenience only and are not intended to define
or limit the contents or substance of any such section or paragraph.
14.8. Binding Effect. This Agreement shall be binding upon and inure
to the benefit of each of the parties to this Agreement and their respective
heirs, personal representatives, and successors and permitted assigns. Neither
the Seller, the Shareholders nor the Purchaser shall have the right to assign
this Agreement without the prior written consent of the others, except that
Purchaser may assign its rights and obligations under this Agreement prior to
the Closing to any wholly-owned Subsidiary of the Purchaser or entity owning all
of the capital stock of Purchaser, provided that such assignment shall not
relieve the Purchaser of any of its obligations hereunder.
14.9. Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute one and the same
instrument.
14.10. Severability. Any provision of this Agreement (other than
those contained in Article 8 of this Agreement, in which case, Section 8.5 of
this Agreement shall govern with respect to the invalidity, unenforceability, or
illegality of any such provision) that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions of this Agreement or such provision, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
14.11. Governing Law. This Agreement shall be governed and construed
as to its validity, interpretation and effect by the laws of the Commonwealth of
Pennsylvania notwithstanding the choice of law rules of Pennsylvania or any
other jurisdiction, except that the provisions in Section 8.2 shall be governed
by Nebraska law.
-67-
IN WITNESS WHEREOF, the Shareholders, the Purchaser and the Seller
have caused this Agreement to be duly executed as of the date first written
above.
DOCUNET INC.
By: /s/ Xxxxx Xxxxxx
-----------------------------------
Xxxxx Xxxxxx
DOCUTECH, INC.
By: /s/ Xx. Xxx Xxxx
-----------------------------------
Xx. Xxx Xxxx,
President
Witness: Xx. Xxx Xxxx
----------------------- -------------------------------
Xx. Xxx Xxxx, Individually
Witness: Xx. Xxxxx Xxxx
----------------------- -------------------------------
Xx. Xxxxx Xxxx, Individually
-68-
EXHIBIT A
Assignment and Assumption Agreement
To be delivered at a later date.
-69-
EXHIBIT B
Xxxx of Sale
To be delivered at a later date.
-70-
Schedule 2.1(a)
Purchased Assets
1. Real Property Leases. Seller's interest, as lessee, in the real property that
is the subject matter of the leases listed in the Disclosure Schedule under
section number 3.12.
2. Personal Property Leases. Seller's interest, as lessee or otherwise, in all
personal property that is the subject matter of any leases listed in the
Disclosure Schedule under section number 3.13.
3. Equipment, Machinery and Other Tangible Personal Property. All machinery,
equipment, leasehold improvements, trucks, automobiles, supplies, office
furniture, leasehold improvements, leasehold improvements, computing and
telecommunications equipment and other items of personal property that are owned
by Seller and used in connection with the Business including, without
limitation, all Contracts with the Seller's customers or clients.
4. Contracts. All of the interest in all Contracts relating to the acquisition
or ownership by Seller of any of the Purchased Assets or the operation of the
Business including, without limitation, those listed in the Disclosure Schedule
under section number 3.14.
5. Books and Records. All of Seller's Books and Records relating to the
Business.
6. Permits. All of Seller's interest in all Permits relating to the Business
including, without limitation, those listed on in the Disclosure Schedule under
section number 3.18, to the extent assignable or transferrable.
7. Intellectual Property. All of Seller's right, title and interest in and to
the Intellectual Property including, without limitation, that listed in the
Disclosure Schedule under section number 3.16.
8. Property. Personnel and Accounting Records. All of Seller's records relating
to the Business including, without limitation, property records and personnel
records of Seller's employees who become employees of the Purchaser.
9. Business and Goodwill. All of Seller's right, title and interest in and to
the Business as a going concern and all of the goodwill incident to the
Business.
10. Inventory. All Inventory of the Business on the Closing Date.
11. Receivables. All of Seller's Receivables associated with the Business
existing at the Closing Date, other than Trade Accounts Receivables that are
greater than 100 days past the original invoice date.
12. Cash. All of Seller's cash and cash equivalents on hand or in Accounts.
13. Prepaid Expenses. All Prepaid Expenses at the Closing Date including,
without limitation, those listed and fully described in Annex A to this Schedule
2.1(a)
14. Computer Software. All computer applications software, owned or licensed by
Seller, whether for general business sage (e.g., accounting, word processing,
graphics, spreadsheet analysis, etc.) or specific, unique-to-the-business usage
(e.g., order processing, manufacturing, process control, design, shipping, etc.)
and all computer operating, security or programming software, owned or licensed
by Seller.
15. Other Intangible Assets. All other assets (including causes of action,
rights of action, contract rights and warranty and product liability claims
against third parties) relating to the Purchased Assets, the Assumed Liabilities
and the Business.
16. Lease. Seller's right as tenant under the Lease.
-2-
Schedule 2.1(b}
Excluded Assets
1. Insurance Policies. Any insurance policies maintained by Seller with respect
to the Business.
2. Cash Consideration. The aggregate cash consideration paid by Purchaser to
Seller pursuant to this Agreement.
3. Corporate Records. Seller's corporate minute book and stock books and
records.
4. Certain Claims. Any of Seller's claims and rights against third parties
(including, without limitation, insurance carriers), to the extent they relate
to obligations and liabilities that are not a part of the Assumed Liabilities
(except to the extent that Purchaser shall have incurred costs and expenses with
respect to such claims and rights).
5. Benefit Plan Assets. Assets constituting any pension or other funds for the
benefit of Seller's employees including, without limitation, any Employee
Benefit Plan.
6. Tax Refunds. All of Seller's claims for refunds of Taxes and other
governmental charges to the extent such refunds relate to periods ending on or
prior to the Closing Date.
7. Affiliate Loans. All of the promissory notes relating to indebtedness of the
Shareholders, the Seller's employee's or their Affiliates to the Seller.
8. Certain Trade Receivables. Trade Receivables over 100 days old.
Schedule 2.6
Assumed Liabilities
Acquired Liabilities incurred in the ordinary course of business
consistent with (i) past practices, and (ii) the representations and warranties
contained herein, provided that Acquired Liabilities shall not include any
liability for the payment of taxes that accrued or relate to the period of time
prior to the Closing Date.
All obligations of the Seller accruing subsequent to the Closing
Date under the Real Property Leases comprising part of the Purchased Assets.
All obligations included in the Closing Debt Amount pursuant to
Section 2.3(b).
Schedule 6.1(j)
____________ 1997
DocuNet Inc.
000 Xxxxxx'x Xxxx Xxxx
Xxxxxxxxx, XX 00000
Ladies and Gentlemen:
We have acted as counsel to __________________, a ______________
corporation (the "Company"), in connection with the transactions contemplated by
that certain [Purchase Agreement] dated as of ___________,1997 (the "Purchase
Agreemen"), among the Company, DocuNet Inc., a Pennsylvania corporation (the
"Purchaser"), and _______________ ("Stockholders"). This opinion is furnished to
you pursuant to Section _______ of the Purchase Agreement.
In connection with rendering this opinion, we have examined the
Purchase Agreement and the Escrow Agreement (collectively the "Transaction
Documents"). We have also examined the [Certificate] [Articles] of Incorporation
and Bylaws of the Company. We have also made such examinations of laws,
certificates of public officials, instruments, documents, and corporate records
and have made such other investigations as we have deemed necessary m connection
with the opinions hereinafter set forth. In such examination we have assumed (i)
the genuineness of all signatures on certificates and documents other than those
signed by the Company and the Stockholders, (ii) the accuracy, completeness and
authenticity of all records and documents submitted to us as originals, (iii)
the conformity to the original of all documents submitted to us as certified,
conformed or photostatic copies, and (iv) the legal capacity of all natural
persons who are parties to the Transaction Documents.
Capitalized terms used herein and not otherwise defined herein have
the meanings set forth in the Purchase Agreement.
Our opinion is limited to the laws of the State of____________ and
the federal laws of the United States and we do not purport to express any
opinion herein with respect to the laws of any other state or jurisdiction.
We note that the Transaction Documents contain clauses selecting
Pennsylvania law as governing law. For purposes of this opinion, we have
assumed, with your permission, that such clauses selected __________ law,
without regard for principles of choice of law, and that such documents are
being executed and delivered and will be performed in, and that the applicable
property is and will be held in, the State of ________________.
Based on the foregoing and subject to the qualifications set forth
herein, it is our opinion that:
A. The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of _______________ and has all
necessary corporate power and authority to enter into the Transaction Documents
and to consummate the transactions contemplated thereby.
B. The execution, delivery and performance of the Transaction
Documents have been duly authorized by all requisite corporate action on the
part of the Company.
C. The Transaction Documents have been duly and validly executed by
the Company and the Stockholders and constitute the legal, valid and binding
obligations of the Company and the Stockholders, respectively, and are
enforceable against them in accordance with their respective terms.
D. Neither the execution and the delivery of the Transaction
Documents, nor the consummation of the transactions contemplated thereby,
violate the [Certificates] [Articles] of Incorporation or Bylaws of the Company.
All of the opinions set forth in this letter are further subject to:
(i) the effect of any applicable bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or other laws affecting or relating to
creditors' rights, (ii) as to any covenants not to compete, the unenforceability
of, or limitation on, certain provisions when such provisions are found
unreasonable in scope, (iii) the requirement that, to the extent that provisions
of the Transaction Documents and any other documents delivered in connection
therewith permit the parties to make certain determinations, such determinations
may be subject to a requirement that they be made on a reasonable basis and in
good faith, (iv) the effect of general principles of equity, equitable defenses
and the discretion of the court regarding the enforcement of remedies
(regardless of whether considered in a proceeding in equity or at law), and (v)
the unenforceability of or limitation on the enforceability of certain
provisions, including without limitation indemnification provisions, when such
provisions are found to be contrary to public policy.
This opinion is rendered as of the date hereof and we assume no
obligation to modify, update or supplement this opinion to reflect any facts or
circumstances which may hereafter come to our attention, or any changes in laws
which may hereafter occur.
Our opinion, as expressed herein, is solely for the benefit of the
addressees, their successors and assigns, and unless we give our prior written
consent, neither our opinion nor this opinion letter may be quoted in whole or
in part or be relied upon by any other person.
Schedule 6.1(k)
None
Schedule 6.1(l)
None, except for Xxx Xxxx in connection with the DocuTech Data
System, Inc. agreement.
Schedule 6.2(i)
[______] __, 1997
[NAME AND ADDRESS]
Ladies and Gentlemen:
We have acted as counsel to DocuNet Inc., a Pennsylvania corporation
(the "Purchaser"), in connection with the transactions contemplated by that
certain [Purchase Agreement] dated as of ______________, 1997 (the "Purchase
Agreement"), among the Purchaser, __________, a corporation (the "Seller"), and
_____________________ ("Stockholders"). This opinion is furnished to you
pursuant to Section _____ of the Purchase Agreement.
In connection with rendering this opinion, we have examined the
Purchase Agreement and the Escrow Agreement (collectively the "Transaction
Documents"). We have also examined the Articles of Incorporation and Bylaws of
the Purchaser. We have also made such examinations of laws, certificates of
public officials, instruments, documents, and corporate records and have made
such other investigations as we have deemed necessary in connection with the
opinions hereinafter set forth. In such examination we have assumed (i) the
genuineness of all signatures on certificates and documents other than those
signed by the Purchaser, (ii) the accuracy, completeness and authenticity of all
records and documents submitted to us as originals, (iii) the conformity to the
original of all documents submitted to us as certified, conformed or photostatic
copies, and (iv) the legal capacity of all natural persons who are parties to
the Transaction Documents.
Capitalized terms used herein and not otherwise defined herein have
the meanings set forth in the Purchase Agreement.
Our opinion is limited to the laws of the Commonwealth of
Pennsylvania and the federal laws of the United States and we do not purport to
express any opinion herein with respect to the laws of any other state or
jurisdiction.
Based on the foregoing and subject to the assumptions and
qualifications set forth herein, it is our opinion that:
E. The Purchaser is a corporation duly organized, validly existing
and presently subsisting under the laws of the Commonwealth of Pennsylvania and
has all necessary corporate power and authority to enter into the Transaction
Documents and to consummate the transactions contemplated thereby.
F. The execution, delivery and performance of the Transaction
Documents have been duly authorized by all requisite corporate action on the
part of the Purchaser.
G. The Transaction Documents have been duly and validly executed by
the Purchaser and constitute the legal, valid and binding obligations of the
Purchaser enforceable against it in accordance with their respective terms.
H. Neither the execution and the delivery of the Transaction
Documents, nor the consummation of the transactions contemplated thereby,
violate the Articles of Incorporation or Bylaws of the Purchaser.
All of the opinions set forth in this letter are further subject to:
(i) the effect of any applicable bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or other laws affecting or relating to
creditors' rights, (ii) as to any covenants not to compete, the unenforceability
of, or limitation on, certain provisions when such provisions are found
unreasonable in scope, (iii) the requirement that, to the extent that provisions
of the Transaction Documents and any other documents delivered in connection
therewith permit the parties to make certain determinations, such determinations
may be subject to a requirement that they be made on a reasonable basis and in
good faith, (iv) the effect of general principles of equity, equitable defenses
and the discretion of the court regarding the enforcement of remedies
(regardless of whether considered in a proceeding in equity or at law), and (v)
the unenforceability of or limitation on the enforceability of certain
provisions, including without limitation indemnification provisions, when such
provisions are found to be contrary to public policy.
This opinion is rendered as of the date hereof and we assume no
obligation to modify, update or supplement this opinion to reflect any facts or
circumstances which may hereafter come to our attention, or any changes in laws
which may hereafter occur.
Our opinion, as expressed herein, is solely for the benefit of the
addressees, their successors and assigns, and unless we give our prior written
consent, neither our opinion nor this opinion letter may be quoted in whole or
in part or be relied upon by any other person.
PEPPER, XXXXXXXX & XXXXXXX LLP
------------------------------
A Partner
EXHIBIT A
ESCROW AGREEMENT
This Escrow Agreement ("Agreement") dated as of this ____ day of
______, 1997, by and among Xxx Xxxx and Xxxxx Xxxx (collectively "Sellers," and
each, a "Seller"), DocuNet Inc., a Pennsylvania corporation ("Purchaser") and
______ (the "Escrow Agent"). The Purchaser, the Sellers and the Escrow Agent are
sometimes collectively referred to herein as the "Parties" and individually as a
"Party."
W I T N E S S E T H :
WHEREAS, pursuant to the Purchase Agreement (as hereinafter defined),
it is a condition to the consummation of the transactions contemplated thereby
that at the Closing, this Escrow Agreement be entered into by the Parties.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements hereinafter set forth, and of other good and valuable
consideration, the Parties, intending to be legally bound, hereby agree as
follows:
1. Definitions. All defined or capitalized terms used in this
Agreement will have the meanings set forth in the Purchase Agreement unless such
terms are defined herein or unless the context clearly indicates to the
contrary.
(a) Common Stock shall mean the common stock, $ ____ par value,
of the Purchaser.
(b) Market Price shall mean the average closing price of Common
Stock during the twenty (20) day trading period immediately preceding the Price
Determination Date.
(c) Price Determination Date shall mean any date on which (i)
payment of an Indemnity Amount (as hereinafter defined) is made, (ii) payment of
a Covered Amount (as hereinafter defined) is made or (iii) an additional deposit
of Common Stock to restore the Combined Value (as hereinafter defined) to the
Threshold Value is made.
(d) Purchase Agreement shall mean that certain Stock Purchase
Agreement, Asset Purchase Agreement or Agreement and Plan of Reorganization, as
the case may be, between the Seller and the Purchaser.
(e) Purchase Price shall mean the amount payable by the Purchaser
pursuant to Article 2 of the Purchase Agreement.
(f) Share Value shall mean the lesser of (i) the Initial Public
Offering Price or (ii) the Market Price.
2. Appointment of Escrow Agent. The Purchaser and the Sellers hereby
appoint the Escrow Agent as the escrow agent for the purposes set forth herein
and the Escrow Agent hereby accepts such appointment on the terms herein
provided. The Escrow Agent hereby acknowledges receipt from the other Parties of
an executed copy of the Purchase Agreement.
-1-
3. Deposit of Escrow Account. Pursuant to Article 2 of the Purchase
Agreement, there is being deposited into an account (the "Escrow Account")
maintained by the Escrow Agent either (i) a number of shares of Common Stock
valued at the Initial Public Offering Price, (ii) cash or (iii) a combination of
Common Stock and cash comprising part of the Purchase Price equal to $_______,
(the "Threshold Value"). The Escrow Account will be held, invested, reinvested
and disbursed by Escrow Agent in accordance with the terms hereof.
4. Additional Deposits. In the event that the combined (i) value of
any shares of Common Stock (valued at the Initial Public Offering Price) which
may be on deposit in the Escrow Account and (ii) the amount of cash which may be
on deposit in the Escrow Account ("Cash Value") (collectively, the "Combined
Value") falls below the Threshold Value, due to payment from the Escrow Account
pursuant to a Purchase Price adjustment pursuant to Article 2 of the Purchase
Agreement, the Sellers shall, within one (1) business day, deposit additional
shares of Common Stock or cash, as the case may be, to the Escrow Account in an
amount such that the Combined Value in the Escrow Account equals the Threshold
Value.
5. Pledge of Common Stock; Restriction on Transferability.
(a) In the event that the Escrow Account includes shares of
Common Stock, each Seller hereby pledges for the benefit of the Purchaser, and
grants the Purchaser a security interest in, such deposited Common Stock. In
addition, each Seller depositing Common Stock in the Escrow Account has also
delivered to the Escrow Agent stock powers endorsed in blank with respect to the
deposited Common Stock registered in the name of each Seller. The Escrow Agent
shall hold all such deposited Common Stock, not as an agent of each Seller, but
rather as a pledgeholder.
If blank stock powers with respect to any Common Stock deposited
into the Escrow Account and registered to a Seller are delivered by the Escrow
Agent to the Purchaser, such Seller shall promptly deliver to the Escrow Agent
stock powers endorsed in blank with respect to the remaining Common Stock on
deposit in the Escrow Account (together with stock powers with respect thereto
endorsed in blank), pledged to the Purchaser.
(b) In the event that the Escrow Account includes shares of
Common Stock, each such certificate representing Common Stock on deposit therein
shall have the following legend noted conspicuously thereon:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
A LIEN IN FAVOR OF THE ISSUER PURSUANT TO THAT CERTAIN ESCROW
AGREEMENT DATED ________ ___, 1997 BY AND AMONG THE PURCHASER,
CERTAIN PERSONS, AND ___________ AS ESCROW AGENT. THIS
CERTIFICATE IS SUBJECT TO RESTRICTIONS ON TRANSFER UNTIL
RELEASED FROM SUCH RESTRICTIONS IN ACCORDANCE WITH THE TERMS
OF SUCH ESCROW AGREEMENT.
(c) Up until any disbursement of any shares of Common Stock
deposited into the Escrow Account, Sellers shall be entitled to vote said shares
in any meeting of shareholders, and shall be entitled to all dividends paid
thereon.
-2-
6. Purpose of the Escrow Account.
(a) Adjustments to Purchase Price. To the extent provided in
Article 2 of the Purchase Agreement, the Parties have specified a mechanism for
the final determination of the Purchase Price of the Company (the "Purchase
Price Provision"). The amounts that may be payable by the Sellers to the
Purchaser under the Purchase Price Provision are herein called the "Covered
Amounts." One purpose of the Escrow Account is, to the extent herein provided,
to provide a source of funds for the payment of the Covered Amounts.
(b) Indemnification. The Escrow Account further serves to secure
the indemnification obligations of the Sellers under Article 10 of the Purchase
Agreement (the "Indemnification Provision"). The amounts that may be payable to
the Purchaser under the Indemnification Provision are herein called the
"Indemnity Amounts."
7. Application of Escrow Account. The Escrow Account will be
retained by the Escrow Agent and shall be distributed as follows:
(a) Adjustments to Purchase Price. Upon the final determination
of the Purchase Price pursuant to Article 2 of the Purchase Agreement, the
Sellers and the Purchaser shall give a joint written notice to the Escrow Agent
indicating whether and to what extent the Escrow Account is to be disbursed to
the Purchaser and on receipt of such joint instructions, the Escrow Agent shall
disburse the Escrow Account in accordance with such instructions. The Sellers
and the Purchaser agree to cause the Escrow Account to be disbursed so as to
give effect to the final determination of the Purchase Price pursuant to Article
2 of the Purchase Agreement.
(b) Indemnification. In the event the Purchaser suffers an
Indemnifiable Loss and is entitled to payment of an Indemnity Amount, the
Sellers and Purchaser shall give a joint written notice to the Escrow Agent
directing that a combination of cash and Common Stock (value at the Share Value)
equal to the Indemnity Amount be disbursed from the Escrow Account and on
receipt of such joint instructions, the Escrow Agent shall so disburse such
Indemnity Amount.
8. Investment of Escrow Account. As soon as possible after its
receipt of the Escrow Account, the Escrow Agent shall invest any cash deposited
in the Escrow Account (the "Cash Investment") as set forth on Exhibit "A"
attached hereto, or as otherwise directed in writing from time to time by the
Sellers. All income earned on the Cash Investment will be owned by the Sellers
and shall be distributed at least once every 365 days. The Escrow Agent will not
be liable or responsible for any loss resulting from any investment or
reinvestment made as provided in this Agreement at the written direction of the
Sellers.
9. Liability of the Escrow Agent. The duties of the Escrow Agent
hereunder will be limited to the observance of the express provisions of this
Agreement. The Escrow Agent will not make any payment or disbursement from or
out of the Escrow Account except as provided by this Agreement. The Escrow Agent
may rely upon and act upon any instrument received by it pursuant to the
provisions of this Agreement which it reasonably believes to be in conformity
with the requirements of this Agreement. The Escrow Agent agrees to use the same
degree of care and skill as is customary for an escrow agent in similar
circumstances. The Escrow Agent will not be liable for any action taken or not
taken by it under the terms hereof in the absence of breach of its obligations
hereunder or gross negligence or willful misconduct on its part.
-3-
In receiving the amounts deposited into the Escrow Account, the Escrow
Agent acts only as a depository for the Purchaser and the Sellers and assumes no
responsibility except pursuant to the provisions of this Agreement. No
withdrawals shall be permitted from the Escrow Account except as provided herein
or as required by law or court order.
All of the terms and conditions in connection with the Escrow Agent's
duties and responsibilities, and the rights of the Purchaser and the Sellers or
anyone else, with respect to the Escrow Account, are contained solely in this
Agreement and in any signature card required by the Escrow Agent pertaining to
the Escrow Account, and the Escrow Agent is not expected or required to be
familiar with the provisions of any other agreement, and shall not be charged
with any responsibility or liability in connection with the observance of the
provisions of any such other agreement.
The Escrow Agent may act or refrain from acting in respect of any
matter referred to herein in full reliance upon and by and with the advice of
counsel which may be selected by it, and shall be fully protected in so acting
or in refraining from acting upon the advice of such counsel.
Except as herein expressly provided, none of the provisions of this
Agreement shall require the Escrow Agent to expend or risk its own funds or
otherwise incur financial liability or expense in the performance of any of its
duties hereunder.
The Escrow Agent is hereby authorized to comply with and obey all
orders, judgements, decrees or writs entered or issued by any court, and in the
event the Escrow Agent obeys or complies with any such order, judgment, decree
or writ of any court, in whole or in part, it shall not be liable to any of the
Parties hereto, nor to any other person or entity, by reason of such compliance,
notwithstanding that it shall be determined that any such order, judgment,
decree or writ be entered without jurisdiction or be invalid for any reason or
be subsequently reversed, modified, annulled or vacated.
Should any controversy arise between the Purchaser and the Sellers or
between the Sellers, the Purchaser and any other person or entity with respect
to this Agreement, or with respect to the ownership of or the right to receive
any sums from the Escrow Account, the Escrow Agent shall have the right to
institute a xxxx of interpleader in any court of competent jurisdiction to
determine the rights of the Parties.
The Purchaser and the Sellers agree that the Escrow Agent is acting
solely as an escrow agent hereunder and not as a trustee, and that the Escrow
Agent has no fiduciary duties, obligations or liabilities under this Agreement.
10. Indemnification of the Escrow Agent. The Sellers and the
Purchaser will indemnify and hold the Escrow Agent harmless from and against any
and all losses, costs, damages or expenses (including reasonable attorneys'
fees) the Escrow Agent may sustain by reason of its service as escrow agent
hereunder, except to the extent such loss, cost, damage or expense (including
reasonable attorneys' fees) was incurred solely by reason of such acts or
omissions for which the Escrow Agent is liable or responsible under Section 9
hereunder.
11. Fees of Escrow Agent. All fees, if any, of the Escrow Agent for
service as escrow agent hereunder shall be paid by the Purchaser.
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12. Designations. The Sellers and the Purchaser may each, by notice
to the Escrow Agent, designate one or more persons who will execute notices and
from whom the Escrow Agent may take instructions hereunder or to whom the Escrow
Agent may give notices. Such designations may be changed from time to time upon
notice to Escrow Agent from the respective parties. The Escrow Agent will be
entitled to rely conclusively on any action taken by such persons or their
respective successor designees.
13. Resignation of the Escrow Agent. The Escrow Agent may resign as
escrow agent by giving each of the Parties not less than thirty (30) days' prior
written notice of the effective date of such resignation. If on or prior to the
effective date of such resignation the Escrow Agent has not received joint
written instructions from the parties hereto, it will thereupon deposit the
Escrow Account into the registry of a court of competent jurisdiction. The
Parties intend that a substitute escrow agent will be appointed to fulfill the
duties of the Escrow Agent hereunder for the remaining term of this Agreement in
the event of the Escrow Agent's resignation, and if the Purchaser and the
Sellers cannot agree on a substitute escrow agent, they will use their best
efforts to derive a procedure to appoint a substitute escrow agent.
14. Notices. All notices, requests, instructions and demands which
may be given by any party hereto to any other party in the course of the
transactions herein contemplated will be given to each party hereto, will be in
writing, will be delivered by posting in the United States mail, certified mail,
return receipt requested, addressed to the respective parties as set forth
below, and will be deemed given when actually received.
A. If to Purchaser:
DocuNet Inc.
000 Xxxxxx'x Xxxx Xxxx
Xxxxxxxxx, XX 00000
With a copy to:
Pepper, Xxxxxxxx & Xxxxxxx LLP
0000 Xxx Xxxxx Xxxxxx
00xx & Xxxx Xxxxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx, Esquire
B. If to any of the Sellers, to their attention:
c/o DocuTech Inc.
0000 Xxxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Attention: Xxx Xxxx
With a copy to:
Xxxxxx X. Xxxxxx
Attorney at Law
0000 Xxxxxxx Xxxx
Xxxxx 000
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Xxxxxxx, XX 00000
C. If to the Escrow Agent:
With a copy to:
Copies of any notices sent by the Escrow Agent shall be sent to all
other parties hereto.
15. Binding Effect. This Agreement will be binding upon and inure to
the benefit of the parties hereto and their respective representatives,
successors and assigns.
16. Amendment and Termination. This Agreement may be amended or
canceled by and upon written notice to the Escrow Agent at any time given
jointly by the Purchaser and the Sellers, but the duties and responsibilities of
the Escrow Agent may not be increased without its consent.
17. Applicable Law. This Agreement will be governed by and construed
in accordance with the laws of the Commonwealth of Pennsylvania.
18. Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
19. Captions and Paragraph Headings. Captions and paragraph headings
used herein are for convenience only and are not part of this Agreement and will
not be used in construing it.
20. Term. The escrow established by this Agreement shall continue
until the earlier of (i) the mutual agreement of the Parties or (ii) one hundred
eighty (180) days following the Closing whereupon all amounts and shares of
Common Stock then on deposit in the Escrow Account shall be paid and delivered
to the Sellers; provided, however, that in the event there is an asserted but
unresolved claim ("Claim") pursuant to Article 2 or Article 10 of the Purchase
Agreement on such 180th day, then any combination of cash and Common Stock
(valued at the Share Value) equal, in combination, to the amount of any and all
such Claims shall remain in the Escrow Account. Such cash and/or Common Stock so
remaining in the Escrow Account shall remain subject to this Agreement until the
final resolution of the applicable Claim(s) that required the retention of such
cash and/or Common Stock; provided, however, that in all events all Common Stock
held in the Escrow Account shall be distributed to the Sellers within five (5)
years from the Closing and, to the extent such Common Stock is distributed,
Sellers shall replenish the Escrow Account with cash in a like amount, valued at
the Share Value.
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IN WITNESS WHEREOF, the parties hereto have hereunto caused this
Agreement to be executed by their respective officers hereunto duly authorized,
as of the day and year first above written.
DOCUNET INC.
By:_____________________________________
Name:
Title:
----------------------------------------
Xxx Xxxx
----------------------------------------
Xxxxx Xxxx
[ESCROW AGENT]
By:_____________________________________
Name:
Title:
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