EXHIBIT 2.1
EXECUTION COPY
ASSET PURCHASE AGREEMENT
among
POLAROID CORPORATION,
POLAROID ID SYSTEMS, INC.
and
DIGIMARC CORPORATION
Dated as of December 4, 2001
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, dated as of December 4, 2001, by and
among Polaroid Corporation, a Delaware corporation and a debtor and
debtor-in-possession in a case pending under Chapter 11 of the Bankruptcy Code
("Polaroid" or the "Seller"), Polaroid ID Systems, Inc., a Delaware corporation,
a wholly-owned subsidiary of Polaroid and a debtor and debtor-in-possession in a
case pending under Chapter 11 of the Bankruptcy Code (the "Company" and
collectively with Polaroid, the "Sellers") and Digimarc Corporation, a Delaware
corporation (the "Buyer").
WHEREAS, the Sellers are engaged in the Business (as defined below);
WHEREAS, the Sellers have filed voluntary petitions with the Bankruptcy
Court initiating cases under Chapter 11 of the Bankruptcy Code;
WHEREAS, Buyer has executed and delivered to the Sellers this Agreement;
and
WHEREAS, Buyer desires to purchase from the Sellers, and the Sellers
desire to sell to Buyer, subject to the approval of the Bankruptcy Court
pursuant to Sections 363 and 365 of the Bankruptcy Code, substantially all of
the assets of the Business, all on the terms and subject to the conditions set
forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the parties agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. The following terms shall have the following
meanings for the purposes of this Agreement.
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, third party claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, liens, actual
losses, expenses, and fees, including court costs and attorneys' fees and
expenses.
"Affiliate" means, with respect to any specified Person, a Person that
directly or indirectly, through one or more intermediaries, controls or is
controlled by, or is under common control with, the Person specified.
"Affiliated Group" means any affiliated group within the meaning of Code
Section 1504(a) or any similar group defined under a similar provision of state,
local or foreign Law.
"Agreement" means this Asset Purchase Agreement, including all exhibits
and schedules hereto, as it may be amended from time to time.
"Assignment and Assumption Agreements" means those certain Assignment
and Assumption Agreements executed by the Sellers or other Polaroid Seller
Entities, as applicable, and the Buyer in substantially the form of Exhibit A
hereto.
"Assumed Liabilities" has the meaning set forth in Section 2.6 below.
"Authority" means any governmental regulatory or administrative body,
governmental agency, governmental subdivision or authority, any court or
judicial authority, any public, private or industry governmental regulatory
authority, whether foreign, national, federal, state or local or otherwise, or
any Person lawfully empowered by any of the foregoing to enforce or seek
compliance with any regulation.
"Bankruptcy Code" means Title 11 of the United States Code, 11 U.S.C.
Sections 101, et seq.
"Bankruptcy Court" means the United States Bankruptcy Court for the
District of Delaware.
"Bedford Sublease" means that Sublease dated August 24, 1994 between
Computervision Corporation, as sublessor, and Polaroid, as subtenant, pursuant
to which Polaroid subleases the land and buildings located at 000 Xxxxxxxxxx
Xxxx, Xxxxxxx, XX, which contains approximately 125,000 square feet of
improvements.
"Benefit Plans" has the meaning set forth in Section 3.20 below.
"Bills of Sale" means those certain Bills of Sale, executed by the
Sellers or other Polaroid Seller Entities in substantially the form of Exhibit
B.
"Budget" means the amount of funding made available to the Business
pursuant to the debtor-in-possession financing provided to Polaroid.
"Business" means the United States government identification systems
business and foreign government digital identification systems business of
Seller, the Company and their affiliates, which includes, but is not limited to,
the programs and Purchased Assets described on Schedule D and the programs
contemplated by Schedule 5.3 of the Disclosure Schedule; provided, however, that
the Business shall not include any other business of Seller or its affiliates
including, without limitation, the following businesses of Seller and/or its
affiliates: (i) the foreign government film identification systems business,
foreign and United States commercial identification systems business, (ii) the
foreign and United States biometric fingerprint reader business or any other
identification system business of Seller or its affiliates, (iii) Guam Driver's
License Program, (iv) "off the shelf" and "out-of-box" identification systems
and/or programs, film or digital, which do not require customized software
(other than minimal and necessary customization to implement said software
programs for use with the customer's existing database system) or capital
investments to implement a system or program in excess of $100,000, (v)
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identification systems and/or programs for governmental transportation
authorities and/or agencies where used solely for the purpose of qualifying for
a reduced fare from that authority and/or agency (for example, students,
handicapped persons, senior citizens and the like, including but not limited to
current contracts and or proposals with the Chicago Transit Authority, Illinois
Regional Transit Authority and Los Angeles Transit Authority), (vi)
identification systems and/or programs for prisons/correctional authorities,
agencies, and/or facilities, and/or (vii) government film identification systems
and/or programs (other than United States state drivers license programs and
those programs identified on Schedule D) where the total aggregate revenue is
reasonably expected not to exceed $350,000 in any future 12 month period.
Solely for the purpose of determining the fields of application of the licensed
technology, "Business" shall be defined to include:
(a) those technologies, applications and services that are required
through requests for proposal ("RFPs") or similar documents to execute in a
fully compliant manner identification programs of MultiNational, National, State
or Provincial governments that include Driver License, National Identification,
Voter Identification, Social Security Identification or Eligibility, Medical
Benefits eligibility or similar credentials or identification programs that will
enroll over 1 million participants; and
(b) identification programs of all kinds that are intimately coupled
with programs of MultiNational, National, State or Provincial governments that
include Driver License, National Identification, Voter Identification, Social
Security Identification or Eligibility, Medical Benefits eligibility or similar
credentials or identification programs that will enroll over 1 million
participants. "Intimately coupled" shall mean that the RFP for the programs
require the use of substantially the same facilities, equipment, processes and
raw materials as the larger programs noted above.
"Business Confidential Information and Trade Secrets" means any
technical and/or business information that relates to the Business, that is not
already available to the public, that is not otherwise utilized by the Seller or
its Affiliates outside the Business and that is currently in the possession of
the Company or the Polaroid Seller Entities.
"Business Employees" means all salaried employees of the Business
immediately prior to the Closing Date, including any employees of Polaroid, the
Company or their Affiliates who are involved primarily in matters related to the
Business wherever located.
"Buyer" has the meaning set forth in the preface above.
"Buyer Indemnified Parties" has the meaning set forth in Section 9.2
below.
"Chapter 11 Cases" means the pending cases commenced by Sellers and
certain of their Affiliates under Chapter 11 of the Bankruptcy Code.
"Closing" has the meaning set forth in Section 2.4 below.
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"Closing Date" has the meaning set forth in Section 2.4 below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning set forth in the preamble above.
"Company Benefit Plan" means any Benefit Plan which is sponsored or
maintained by the Company.
"Company Customer Contracts" means the contracts among the Company and
the customers listed on Schedule 3.24 hereto, but shall not include any Contract
which Buyer elects not to assume pursuant to Section 2.8.
"Confidential Information" shall mean any information, regardless of the
form in which such information is communicated, about the Business, Polaroid or
any Affiliate of Polaroid furnished to the Buyer or to the Buyer's
Representatives by or on behalf of Polaroid or any of its Representatives, after
October 18, 2001, including any of the following: trade secrets; production or
manufacturing methods or processes; client or customer lists or information;
information regarding sources of supply or distribution channels; information
concerning the skills or compensation of employees; business methods; software
code; scientific and technical data; information concerning prices or fees;
information concerning product development, marketing or release plans; and
information concerning investments, strategic alliances and partnerships, joint
ventures, acquisitions and divestitures.
"Continuing Employee" has the meaning set forth in Section 5.12(a).
"Contract" means any contract, lease, commitment, understanding, sales
order, purchase order, agreement, indenture, mortgage, note, bond, right,
warrant, instrument, plan, permit or license, whether written or oral, which is
intended or purports to be binding and enforceable.
"Cure Costs" has the meaning set forth in Section 5.15 below.
"Customer Contracts" means the Polaroid Customer Contracts and the
Company Customer Contracts, but shall not include any Contract which Buyer
elects not to assume pursuant to Section 2.8.
"Designated Contracts" has the meaning set forth in Section 2.1(a)(iii),
but shall not include any Contract which Buyer elects not to assume pursuant to
Section 2.8.
"Disclosure Schedule" has the meaning set forth in Article III.
"Employee Benefit Plan" means any (a) Employee Pension Benefit Plan, (b)
Employee Welfare Benefit Plan, (c) retirement or deferred compensation plan,
incentive compensation plan, stock plan, retention plan or agreement,
unemployment compensation plan, vacation pay, severance pay, bonus or benefit
arrangement, insurance or hospitalization program or any other fringe benefit
arrangements for any current or former employee, director, consultant or agent,
whether pursuant to contract, arrangement, custom or informal understanding,
which does not
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constitute an employee benefit plan (as defined in section ERISA Section 3(3)),
or (d) material fringe benefit or other retirement, bonus, or incentive plan or
program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
Section 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Section 3(1).
"Environmental Laws" means all federal, state, local and foreign
statutes, regulations, ordinances and other provisions having the force or
effect of law, all judicial and administrative orders and determinations, all
contractual obligations and all common law concerning public health and safety,
worker health and safety, and pollution or protection of the environment,
including without limitation all those relating to the presence, use,
production, generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, release, threatened
release, control, or cleanup of any Hazardous Substances, materials or wastes,
chemical substances or mixtures, pesticides, pollutants, contaminants, toxic
chemicals, petroleum products or byproducts, asbestos, polychlorinated
biphenyls, noise or radiation, each as amended and as now or hereafter in
effect, including (but not limited to) the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act of 1986, as amended, the Resource Conservation and Recovery
Act of 1976, as amended, the Toxic Substances Control Act of 1976, as amended,
the Federal Water Pollution Control Act Amendments of 1972, the Clean Water Act
of 1977, as amended, any so-called "Superlien" law, and any other similar
federal, state or local statutes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means, with respect to any Person, any corporation,
trade or business which, together with such Person, is a member of a controlled
group of corporations or a group of trades or businesses under common control
within the meaning of Code Section 414.
"Escrow Account" means all funds held by the Escrow Agent pursuant to
the Escrow Agreement.
"Escrow Agent" means the escrow agent selected by the parties to act
pursuant to the Escrow Agreement.
"Escrow Agreement" means the Escrow Agreement, to be dated as of the
Closing Date, among Seller, Buyer and the Escrow Agent in substantially the form
of Exhibit E hereto.
"Escrow Amount" has the meaning set forth in Section 2.3 below.
"Excluded Assets" means the assets set forth on Schedule C.
"Executive Management Group" means Xxxx Xxxxxx, Xxxxxx Xxxxx, Xxxxxxx
Xxxxxxx, Xxxxx Xxxxx, Xxxxxx Xxxxx, Xxxxx Xxxxxxx, Xxx Xxxxx, Xxxxx Xxxxxxxx,
Xxxxx Xxxxxxxxx, Xxxxx Xxxxxxx, and any other employees of the Company with a
financial interest or expectancy in PIDS Holdings, Inc. or any Affiliate
thereof.
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"Filing Date" means the filing date of the Chapter 11 Cases.
"Financial Statements" means the following:
(a) the audited financial statements of the Business for the
fiscal years ended December 31, 1999 and 2000 (including all notes
thereto), which are included in Schedule 3.6 consisting of the balance
sheet at such dates and the related statements of earnings and cash
flows for the twelve month periods then ended;
(b) the unaudited financial statements of the Business as of
June 30, 2001 (which shall include, for comparative purposes, unaudited
financial statements as of June 30, 2000), which are included in
Schedule 3.6, consisting of the balance sheet at such date and the
related statements of earnings and cash flows for the six month period
then ended prepared consistently with the audited financial statements.
"Final Order" means an order or judgment of the Bankruptcy Court as to
which the time to appeal, petition for certiorari, or move for reargument or
rehearing has expired and as to which no appeal, petition for certiorari, or
other proceedings for reargument or rehearing shall then be pending or in the
event that an appeal, writ of certiorari, reargument, or rehearing thereof has
been sought, such order of the Bankruptcy Court shall have been determined by
the highest court to which such order was appealed, or certiorari, reargument or
rehearing shall have been denied and the time to take any further appeal,
petition for certiorari, or move for reargument or rehearing shall have expired.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"Hazardous Substance" means any material or substance which (a)
constitutes a hazardous substance, toxic substance or pollutant (as such terms
are defined by or pursuant to any Environmental Laws) or (b) is regulated or
controlled as a hazardous substance, toxic substance, pollutant or other
regulated or controlled material, substance or matter pursuant to any
Environmental Laws.
"Indemnified Party" has the meaning set forth in Section 9.4 below.
"Indemnifying Party" has the meaning set forth in Section 9.4 below.
"Intellectual Property" means (a) inventions (whether patentable or
unpatentable and whether or not reduced to practice), improvements thereto, and
patents, patent applications, and patent disclosures, together with reissues,
continuations, continuations-in-parts, divisions, provisional applications,
reexaminations, foreign related applications and foreign patents thereof, (b)
trademarks, service marks, trade dress, logos, trade names, and corporate names,
together with translations, adaptations, derivations, and combinations thereof
and including goodwill associated therewith, and applications, registrations,
and renewals in connection therewith, (c) copyrightable works, copyrights, and
applications, registrations, and renewals in connection therewith, (d) mask
works and applications, registrations, and renewals in connection therewith, (e)
trade secrets and Business Confidential Information and Trade Secrets (including
ideas,
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research and development, know-how, formulas, compositions, manufacturing and
production processes and techniques, technical data, designs, drawings,
specifications, customer and supplier lists, pricing and cost information, and
business and marketing plans and proposals), (f) computer software (including
data and related documentation), (g) other proprietary rights, and (h) copies
and tangible embodiments thereof (in whatever form or medium) as defined in the
Intellectual Property Assignment and License Agreement.
"Intellectual Property Assignment and License Agreement" means the
Intellectual Property Assignment and License Agreement, among the Sellers and
the Buyer, in substantially the form of Exhibit G hereto.
"Interim Business Funding" means a cash amount equal to $150,000 per day
for the number of days from and including the date of the Sale Order through and
including the Closing Date not to exceed $1,650,000.
"IRS" means the Internal Revenue Service.
"Knowledge" means actual knowledge after reasonable investigation.
"Knowledge of the Seller or the Company" means the Knowledge of the
directors of the Company, the officers of the Company, Xxxx Xxxxxxx, the chief
corporate counsel of Seller, Xxxxxx Xxxxxxxxxx, Xxxxx Xxxxx, Xxxxxxx Xxxxxxxx,
for purposes of the representations and warranties in Section 3.25, Xxxx Xxxxxx,
Xxxxx Xxxxxxx, Xxxxxx Xxxxxxxxxx, Xxxxxxxxxx Xxxxx, and the General Managers of
any other Polaroid Seller Entity, and for purposes or Section 3.11, Xxxxxx
Xxxxx, consultant to the Seller.
"Latest Balance Sheet" means the unaudited balance sheet of the Company
dated as of June 30, 2001.
"Law" means any law, statute, regulation, ordinance, rule, order,
decree, judgment, consent decree, settlement agreement or governmental
requirement enacted, promulgated, entered into, agreed or imposed by any
Authority.
"Liability" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"Lien" means any mortgage, lien, charge, pledge, security interest or
other encumbrance.
"Major Customer" means any U.S. state, foreign government or
governmental agency that is a customer of the Business pursuant to a written
agreement or otherwise.
"Major Supplier" means the 10 largest suppliers of the Business
(including Polaroid) in terms of Purchases during each of the 1999 and 2000
fiscal years.
"Material Adverse Effect" shall mean any circumstances, developments or
matters whose effect on the Business, properties, assets, results, operations
and condition (financial and other)
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of the Business, either alone or in the aggregate, is or would reasonably
expected to be materially adverse, except any such effect resulting from or
arising in connection with (i) the unwillingness of one or several Major
Customers to renew a contract relating to the Business upon such contract's
scheduled expiration or termination, and (ii) the Business not having been
awarded one or several contracts applied for prior to the Closing Date.
"Multiemployer Plan" has the meaning set forth in ERISA Section 3(37).
"Order" means any decree, order, injunction, rule, judgment, consent of
or by an Authority.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice of the Business prior to the Filing
Date and from the Filing Date through the Closing Date, means the ordinary
course of business consistent with past custom and practice of the Business to
the extent permitted or required by the Budget and to the extent permitted or
required by the proceedings of the Chapter 11 Cases.
"Permits" has the meaning set forth in Section 3.22 below.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"Polaroid" has the meaning set forth in the preamble above.
"Polaroid Customer Contracts" means the contracts among Polaroid or one
of the Polaroid Seller Entities and the customers listed on Schedule 3.24
hereto, but shall not include any Contract which Buyer elects not to assume
pursuant to Section 2.8.
"Polaroid Seller Entities" means Polaroid, the Company and the
Affiliates of Polaroid which as of the date hereof own the Purchased Assets
which are listed on Schedule A hereto.
"Purchase Price" is defined in Section 2.2(a).
"Purchased Assets" is defined in Section 2.1.
"Representative" means, with respect to a Person, the Person's
Affiliates and its and their respective directors, officers, employees, agents
and advisors (including financial advisors, counsel, lenders and accountants).
"Sale Procedures Order" is defined in Section 5.4(a).
"Sale Order" means an order of the Bankruptcy Court in substantially the
form attached hereto as Exhibit K, approving the consummation of the
transactions contemplated by this Agreement, under Sections 105, 363 and 365 of
the Bankruptcy Code, as adapted to reflect this transaction with the Buyer,
rather than PIDS Holdings, Inc.
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"Schedules" means the disclosure schedules accompanying this Agreement.
"Seller Indemnifying Parties" has the meaning set forth in Section 9.2
below.
"Sellers" is defined in the preamble above.
"Shared Services Agreement" means the Shared Services Agreement, to be
dated as of the Closing Date, among Polaroid and Buyer in substantially the form
of Exhibit H hereto.
"Specified Notice Parties" means, collectively, (i) each and every party
to a Designated Contract; (ii) each and every Authority applicable to the
Sellers or any of the Purchased Assets (including the Permits) or with respect
to which any of the Purchased Assets is subject; (iii) each and every holder of
a Lien on any of the Purchased Assets; (iv) the Official Committee of Unsecured
Creditors appointed in the Chapter 11 Cases; (v) the Office of the United States
Trustee for the District of Delaware; (vi) any and all other persons and
entities upon whom the Sellers are required (pursuant to the Bankruptcy Code,
the Federal Rules of Bankruptcy Procedure or any order of the Bankruptcy Court)
to serve such notice; and (vii) any and all other persons and entities upon whom
the Buyer instructs the Sellers to serve such notice.
"Subsidiary" means any corporation, partnership or limited liability
company with respect to which a specified Person (or a Subsidiary thereof) owns
a majority of the common stock or has the power to vote or direct the voting of
sufficient securities to elect a majority of the directors.
"Supply Agreement" means the ID Products Supply Agreement, to be dated
as of the Closing Date, among Polaroid and Buyer in substantially the form of
Exhibit I hereto.
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Section
59A), customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Third Party Claim" has the meaning set forth in Section 9.4 below.
"Transaction Documents" means this Agreement, Assignment and Assumption
Agreements, Bills of Sale, Escrow Agreement, Escrowed Assignment Agreements,
Intellectual Property Assignment and License Agreement, Shared Services
Agreement, Transition Services Agreement, Second Escrow Agreement and Supply
Agreement.
"Transfer Taxes" shall mean all federal, state, local or foreign sales,
use, transfer, real property transfer, mortgage recording, stamp duty,
value-added or similar Taxes including any VAT and GST Taxes, that may be
imposed in connection with the transfer of the Purchased
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Assets or assumption of Assumed Liabilities, together with any interest and
additions to Tax or penalties with respect thereto and any interest in respect
of such additions to Tax or penalties.
"Transition Services Agreement" means the Transition Services Agreement,
to be dated as of the Closing Date, among Polaroid and Buyer in substantially
the form of Exhibit I hereto, which shall have a term of no longer than 6 months
from the Closing Date.
ARTICLE II
PURCHASE AND SALE OF ASSETS
SECTION 2.1. Basic Transaction.
(a) At the Closing, on and subject to the terms and conditions of this
Agreement, the Buyer agrees to purchase from Sellers, and Sellers agree to sell,
assign, transfer, convey and deliver to the Buyer, or cause to be assigned,
transferred, conveyed and delivered by the other Polaroid Seller Entities to the
Buyer, all of the assets of the Sellers and other Polaroid Seller Entities used
primarily in the Business and necessary to conduct the Business as presently
conducted, wherever located, including the assets reflected in the Latest
Balance Sheet (other than assets disposed of since the date of the Latest
Balance Sheet in the Ordinary Course of Business), assets used in connection
with the programs listed on Schedule D, assets of the types listed below other
than Excluded Assets and all assets described on Schedule D hereto
(collectively, the "Purchased Assets") (to the extent Purchased Assets are not
owned or leased by Sellers, Seller shall cause such assets to be conveyed to
Buyer):
(i) all accounts receivable associated with the Business;
(ii) all personal property, equipment, trade fixtures, supplies
and other tangible property owned by Sellers and their Affiliates and
used primarily in the Business;
(iii) all Contracts and leases, including those listed on
Schedule D hereto, associated with, relating to or entered into in
connection with the Business, that the Buyer in its discretion causes to
be assumed by the Sellers and assigned to Buyer in accordance with
Section 2.8 hereof (the "Designated Contracts"), but not including those
listed on Schedule C hereto;
(iv) the Intellectual Property listed on Schedule D hereto and
any and all claims, causes of actions, and choses in action arising
pursuant to Intellectual Property assigned to the Buyer under the
Intellectual Property Assignment and License Agreement;
(v) all of the vehicles set forth on Schedule D;
(vi) all of the inventories existing on the Closing Date and
used in connection with the Business, including all raw materials,
components, work in process, unfinished and finished goods inventories,
wherever located, and which relate primarily to the Business, including
those set forth on Schedule D;
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(vii) all goodwill of the Business;
(viii) with respect to the Business all (a) production records,
(b) product files, (c) technical information, (d) sales records, (e)
product development techniques or plans, (f) customer lists and files
(including customer credit and collection information), (g) details of
client or consultant contracts, (h) operational methods, (i) historical
and financial records and files, (j) any and all information or
documents relating to vendors and (k) other proprietary information
relating to the Business, together with the papers and records relating
to the Business, all maintenance and production records and all plans
and designs of buildings, structures, fixtures and equipment;
(ix) all Permits relating to the Business, to the extent
transferable, including those set forth on Schedule D hereto, and any
and all claims, causes of actions, and choses in action arising pursuant
to the Permits;
(x) all purchase orders of the Business, that the Buyer in its
discretion causes to be assumed by the Sellers and assigned to Buyer in
accordance with Section 2.8 hereof; and
(xi) any and all other assets and rights that are not of the
type or character referenced in Section 2.1(i) -- (x) and which are used
primarily in the Business.
(b) The Sellers shall assign to Buyer, and Buyer shall assume from
Sellers, the Designated Contracts.
(c) The Designated Contracts of the Sellers included in the Purchased
Assets transferred to the Buyer at the Closing will have been deemed to have
been assumed by the Sellers and assigned to the Buyer in accordance with Section
365 of the Bankruptcy Code, including without limitation Section 365(a). With
regard to Escrowed Assets, particular Designated Contracts and purchase orders
included in the Purchaser Election will have been deemed to have been assumed by
the Sellers and assigned to the Buyer as of the Purchaser Election Date in
accordance with Section 365 of the Bankruptcy Code, including without limitation
Section 365(a).
SECTION 2.2. Purchase Price. In consideration for the Purchased Assets,
the Buyer shall pay the sum of $56,500,000 (the "Purchase Price") plus the
amount of Interim Business Funding in the following manner:
(a) Upon execution of this Agreement, the Buyer shall pay the amount of
$8,600,000 to Seller which, together with the amount of $1,400,000 previously
delivered to Seller in accordance with the Sale Procedures Order (collectively,
the "Good Faith Deposit"), shall be held by the Sellers in an interest-bearing
escrow account in accordance with the terms of this Agreement.
(b) On or before December 7, 2001, the Buyer shall take any one of the
following actions:
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(i) deposit the Escrow Amount into the Escrow Account pursuant to
Section 2.3;
(ii) secure performance bonds in each jurisdiction set forth in Schedule
2.2(b)(ii) and which the Buyer is assuming the Customer Contract for such
jurisdiction;
(iii) obtain and maintain a commitment letter containing customary terms
and conditions from a reputable financial institution for the procurement of
performance bonds in each jurisdiction in which the Buyer is assuming Customer
Contracts and in which the Buyer is required by such jurisdiction to maintain
performance bonds; or
(iv) obtain and maintain a letter of credit in the amount of $31,000,000
containing customary terms and conditions and reasonably agreeable to the Buyer
and Seller, including that such letter of credit would (A) remain in place until
such time as the Buyer procures performance bonds, or a commitment letter
containing customary terms and conditions from a reputable financial institution
for the procurement of performance bonds, in each jurisdiction in which the
Buyer is assuming Customer Contracts and in which the Buyer is required by such
jurisdiction to maintain performance bonds and (B) be available to Seller to
satisfy the Buyer's indemnity obligations in Section 9.3(c) hereof, but only
until the Buyer's procurement of performance bonds or a commitment letter to
procure performance bonds meeting the requirements of Section 2.2(b)(ii) or
Section 2.2(b)(iii) has been met;
provided, however, that should the Buyer initially deposit the Escrow
Amount into the Escrow Account in accordance with Section 2.2(b)(i) above and,
thereafter, meet the terms of either Section 2.2(b)(ii), Section 2.2(b)(iii) or
Section 2.2(b)(iv) prior to the Closing, the Escrow Amount plus all accrued
interest thereon shall be immediately refunded by the Seller to the Buyer.
(c) On the Closing Date, the Buyer shall pay a cash amount of
$46,500,000 plus the amount of Interim Business Funding, less interest accrued
through the Closing Date on the Good Faith Deposit, and the Seller may retain
the Good Faith Deposit as payment towards the Purchase Price.
(d) Pursuant to the terms of Section 5.15, at the Closing the Buyer
shall pay the Cure Costs for the Designated Contracts transferred to the Buyer.
(e) All cash amounts to be paid to the Seller by the Buyer shall be paid
by means of wire transfers of immediately available funds to an account or
accounts designated by Seller at least two (2) business days prior to the
Closing or the applicable payment date.
SECTION 2.3. Escrow. If applicable pursuant to Section 2.2(b), the Buyer
shall pay $31,000,000 (the "Escrow Amount") into escrow on or before December 7,
2001. The Escrow Amount shall be released on the date and terms set forth in the
Escrow Agreement; provided, however, that if the Escrow Amount plus all accrued
interest thereon has not been refunded to the Buyer prior to the Closing, the
Escrow Amount and such accrued interest shall only be distributed to the Buyer
when, as and if the performance bonds are secured in each jurisdiction
12
set forth in Schedule 2.2(b)(ii) and which the Buyer is assuming the Customer
Contract for such jurisdiction.
SECTION 2.4. The Closing. The closing of the transactions contemplated
by this Agreement (the "Closing") shall take place at the offices of Xxxxxxxx &
Xxxxxxxx LLP, 1290 Avenue of the Americas, Xxx Xxxx, Xxx Xxxx 00000-0000,
commencing at 9:00 a.m. local time (or at such other time and place as the
parties mutually agree to) on or before the third business day following the
expiration or early termination of the waiting period under the HSR Act and
satisfaction or waiver of all other conditions to the obligations of the parties
to consummate the transactions contemplated hereby (other than conditions with
respect to actions the respective parties will take at the Closing itself) or
such other date as the parties may mutually determine (the "Closing Date").
SECTION 2.5. Casualty and Condemnation. In the event of any damage or
destruction by reason of any casualty to any of the Purchased Assets after the
date hereof and prior to the Closing Date, or if prior to the Closing Date there
shall be any taking by condemnation or eminent domain of any of the Purchased
Assets, the Sellers shall (i) in the case of damage or destruction, pay over to
Buyer at Closing any insurance proceeds received by the Polaroid Seller Entities
prior to the Closing Date and assign to Buyer all of the Polaroid Seller
Entities' right, title and interest in and to any additional proceeds related to
such damage or destruction and (ii) in the case of condemnation or eminent
domain, pay over to Buyer all awards received by the Polaroid Seller Entities on
account of such condemnation or eminent domain prior to the Closing Date and
assign to Buyer all of the Polaroid Seller Entities' right to receive any
additional awards related to such condemnation or eminent domain; provided, that
if all such casualties and takings by condemnation or eminent domain have,
collectively, a Material Adverse Effect, Buyer shall have the right to terminate
this Agreement prior to the Closing Date.
SECTION 2.6. Assumption. Except for any and all Liabilities arising
under or related to the assumed Customer Contracts and the Liabilities set forth
on Schedule E (collectively, the "Assumed Liabilities"), Buyer shall not assume
any other Liabilities relating to the Business, including any claim by Sigma
Systems, Inc. against Polaroid, the Company or any other Polaroid Seller
Entities.
SECTION 2.7. No Other Liabilities Assumed. Seller acknowledges and
agrees that pursuant to the terms and provisions of this Agreement, Buyer will
not assume any obligation or Liability of Sellers or other Polaroid Seller
Entities, other than the Assumed Liabilities.
SECTION 2.8. Buyer Election to Cause Assumption or Rejection of
Contracts.
(a) Notwithstanding any provision of this Agreement (or any Schedule
hereto) to the contrary, all Designated Contracts as well as all purchase orders
of the Business relating to obligations arising prior to the Filing Date shall,
except for all Customer Contracts other than Contracts with the State of
Minnesota, the State of Oregon and the State of New Hampshire, be placed in
escrow pursuant to this Section 2.8 (the "Escrowed Assets"), which such Escrowed
Assets (i) shall neither be deemed "Purchased Assets" nor "Excluded Assets"
except as provided in this Section 2.8 and (ii) with regard to the Contracts
with the State of New Hampshire and the
13
State of Oregon, the Buyer may only choose not to include such Contracts in the
Purchaser Election (described below) if, in accordance with the understanding of
the particular state, the Sellers and the Buyer as of the date hereof, an
amendment to the particular state's Contracts, in form and substance acceptable
to the Sellers, the applicable state and the Buyer, is not executed and
delivered in lieu of the payment of any Cure Costs under the original Contracts.
(b) The Sellers and the Buyer shall, at the Closing, execute a Second
Escrow Agreement, substantially in the form attached hereto as Exhibit C (the
"Second Escrow Agreement"), and the Sellers shall, and shall cause the other
Polaroid Seller Entities to, deliver to the Escrow Agent (as defined in the
Second Escrow Agreement, hereinafter, the "Second Escrow Agent") Assignment and
Assumption Agreements and/or any other documents necessary to transfer title to
the Buyer of the Escrowed Assets (collectively, the "Escrowed Assignment
Agreements"), each duly executed by the Sellers or the other Polaroid Seller
Entities, as applicable, and in the forms attached hereto as Exhibit D, relating
to the Escrowed Assets. The Second Escrow Agreement shall terminate on the tenth
(10th) day following the Closing (the "Second Escrow Closing Date"). From the
Closing Date to and including the Second Escrow Closing Date, as applicable, the
Sellers shall, or, if applicable, the Sellers shall cause the other Polaroid
Seller Entities to, hold the Escrowed Assets in trust (and as a fiduciary) for
the Buyer and the Buyer shall, as the subcontractor to the Sellers or, if
applicable, as subcontractor to the other Polaroid Seller Entities, perform all
the obligations of the Sellers or other Polaroid Seller Entities, as applicable,
with regard to such Escrowed Assets for such period of time until the Buyer
elects to make the Purchaser Election with regard to such assets or such assets
are deemed "Excluded Assets" pursuant to the terms of this Agreement. The Buyer
may at any time after the Closing Date, but only once on or before the Second
Escrow Closing Date (the "Purchaser Election Date"), direct the Second Escrow
Agent to add particular Escrowed Assets to the exhibits to the Escrowed
Assignment Agreements in order to designate the Escrowed Assets Buyer desires to
acquire (the "Purchaser Election"), provided that, with regard to such
particular Escrowed Assets, the Buyer has paid to the party entitled to a Cure
Cost, if any, an amount equal to the Cure Cost or objection amount, as
applicable and if any, or the Buyer has made another arrangement with the party,
in each case in accordance with the Sale Order and the Purchase Agreement.
Unless and until the Purchaser Election occurs, particular Escrowed Assets shall
neither be "Excluded Assets" nor Purchased Assets, notwithstanding the execution
and delivery to the Second Escrow Agent of the Escrowed Assignment Agreements.
If the Purchaser Election occurs, the Escrowed Assets identified in such
Purchaser Election shall thereupon become Purchased Assets and all other
Escrowed Assets shall be rejected by the Sellers, shall not become Designated
Contracts, shall not create any Assumed Liabilities for the Buyer, and shall be
deemed "Excluded Assets" for purposes of this Agreement. Notwithstanding any
other provision in this Agreement, if the Purchaser Election occurs, the parties
hereto agree that the Second Escrow Agent shall deliver to the Buyer the
Escrowed Assignment Agreements with completed exhibits thereto reflecting the
Escrowed Assets as to which the Purchaser Election has been made. If at the time
of the Second Escrow Closing Date no Purchaser Election has been made, the
Escrowed Assignment Agreements shall be null and void and all Escrowed Assets
shall be rejected by the Sellers, shall not become Designated Contracts, shall
not create any Assumed Liabilities for the Buyer, and shall be deemed "Excluded
Assets" for purposes of this Agreement.
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(c) With regard to Customer Contracts included in the Escrowed Assets,
the Buyer acknowledges and agrees that it will perform any and all obligations
of the Sellers or other Polaroid Seller Entities, as applicable, in order to
continue the performance of the obligations of the Sellers or other Polaroid
Seller Entities, as applicable, under such Customer Contracts that are Escrowed
Assets for the period from the Closing Date through and including the Purchaser
Election Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE SELLERS
Polaroid hereby represents and warrants to the Buyer that the statements
contained in this Article III are correct and complete as of the date of this
Agreement, and, except as amended pursuant to Section 5.8, will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Article
III), except as set forth in the disclosure schedule attached to this Agreement
(the "Disclosure Schedule"), which shall be deemed to be representations and
warranties as if made hereunder. The mere listing (or inclusion of a copy) of a
document or other item in the Disclosure Schedule shall not be deemed adequate
to disclose an exception to a representation or warranty made herein (unless the
representation or warranty has to do with the existence of the document or other
item itself). The Disclosure Schedule will be arranged in paragraphs and/or
sections corresponding to the section numbers of this Agreement. An item
disclosed in any Schedule shall be deemed disclosed for purposes of any
Schedules as to which reasonably particular cross references have been included.
SECTION 3.1. Authorization of Transaction. Each Seller has full
corporate or similar power and authority to execute and deliver the Transaction
Documents, as applicable, and to perform its obligations thereunder. Except as
required by the Bankruptcy Court or Bankruptcy Code, Sellers need not give any
notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order to consummate the
transactions contemplated by the Transaction Documents.
SECTION 3.2. Brokers' Fees. Except as set forth on Schedule 3.2 Sellers
have no Liability or obligation to pay any fees or commissions to any broker,
finder, or agent with respect to the transactions contemplated by this Agreement
for which the Buyer could become liable or obligated.
SECTION 3.3. Title to Purchased Assets.
(a) Ownership. At the time of the conveyance of the Purchased Assets,
the applicable Polaroid Seller Entity is the sole and exclusive owner of and
holds good and marketable title thereto, free of any Lien; and upon execution
and delivery of the Assignment and Assumption Agreements or Bills of Sale, Buyer
shall have all of the right, title and interest of the Sellers in and to the
Purchased Assets, free of any Lien.
15
(b) Files. The Sellers will deliver or cause to be delivered to Buyer on
the Closing Date all documents, certificates, agreements, instruments and files
in the Polaroid Seller Entities' possession relating to each Purchased Asset.
SECTION 3.4. Organization, Qualification, and Corporate Power. Each
Seller is a corporation duly organized, validly existing, and in good standing
under the Laws of its jurisdiction of incorporation listed on Schedule 3.4.
Polaroid and the Company are duly authorized to conduct the Business and are in
good standing under the Laws of each jurisdiction where the Business is
conducted listed on Schedule 3.4.
SECTION 3.5. Noncontravention. Neither the execution and the delivery of
this Agreement and the Transaction Documents, nor the consummation of the
transactions contemplated hereby and thereby, will (i) violate in any material
respect any applicable constitution, Law, settlement agreement, regulation,
rule, injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which any of the Polaroid
Seller Entities is subject or any provision of the articles of incorporation or
bylaws of Seller or the Company, except insofar as the transactions contemplated
hereby relating to Customer Contracts, including the assignment, or assignment
of any rights or obligations pursuant to or in connection with such Customer
Contracts may be deemed to be a violation of Law, or (ii) except as set forth on
Schedule 3.5 conflict with, result in a breach of, constitute a default under,
result in the acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under any material Contract,
lease, license, instrument, or other arrangement to which any of the Polaroid
Seller Entities is a party or by which it is bound or to which any of its assets
is subject (or result in the imposition of any Lien upon any of its assets),
except insofar as the transactions contemplated hereby relating to Customer
Contracts, including the assignment, or assignment of any rights or obligations
pursuant to or in connection with such Customer Contracts may result in a breach
or default thereunder. Except as set forth on Schedule 3.5 and the issuance of
the Sale Order, neither Seller nor any of the Polaroid Seller Entities needs to
give any notice to, make any filing with, or obtain any authorization, consent,
or approval of any government or governmental agency in order for the parties to
consummate the transactions contemplated by this Agreement.
SECTION 3.6. Financial Statements. The Financial Statements of the
Business are set forth on Schedule 3.6. The Financial Statements as well as the
unaudited financial statements of the Business as of September 30, 2001
(consisting of the balance sheet at such date and the related statement of
earnings for the nine month period then ended and, for comparative purposes, the
balance sheet and related statement of earnings as of September 30, 2000) have
been prepared in accordance with GAAP (except for the absence of notes in the
interim statements) consistently applied, are true, correct and complete, and
present fairly the financial position, cash flows and income of the Business in
accordance with GAAP (except for the absence of notes in the interim statements)
as of the dates thereof and the revenues, expenses and results of operations of
the Business for the periods covered thereby. The Financial Statements as well
as the unaudited financial statements of the Business as of September 30, 2001
are part of the books and records of the Business and of the Company and do not
reflect any transactions which are not bona fide transactions.
16
SECTION 3.7. Events Subsequent to Latest Balance Sheet. Since the date
of the Latest Balance Sheet, other than the actions taken in connection with
this Agreement and the Chapter 11 Cases, there has not been any change in the
business, financial condition, operations or results of operations of the
Business, which would have a Material Adverse Effect on the Business, provided,
however, that for purposes of determining whether there has been any such
Material Adverse Effect, any adverse change resulting from the taking of any
action contemplated by this Agreement or set forth on Schedule 3.7 of the
Disclosure Schedule shall be disregarded. Without limiting the generality of the
foregoing, since that date:
(a) the Company has not sold, leased, transferred, or assigned any of
its assets, tangible or intangible, other than for a fair consideration in the
Ordinary Course of Business;
(b) except as set forth on Schedule 3.7(b), the Company has not entered
into any Contract, lease, or license (or series of related Contracts, leases,
and licenses) involving more than $50,000 and outside the Ordinary Course of
Business;
(c) except as set forth on Schedule 3.7(c), no party (including the
Company) has accelerated, terminated, modified, or canceled any agreement,
Contract, lease or license (or series of related Contracts, leases and licenses)
to which the Company is a party or by which it is bound outside the Ordinary
Course of Business;
(d) the Company has not delayed or postponed the payment of accounts
payable and other Liabilities outside the Ordinary Course of Business;
(e) the Company has not cancelled, compromised, waived, or released any
right or claim (or series of related rights and claims) either involving more
than $50,000 or outside the Ordinary Course of Business;
(f) the Company has not granted any license or sublicense of any rights
under or with respect to any Intellectual Property;
(g) there has been no change made or authorized in the articles of
incorporation or by-laws of the Company;
(h) except for hourly employees and except as set forth on Schedule
3.7(h), the Company has not granted any increase in the base compensation of any
of its directors, officers, and employees or made any other change in employment
terms for any of its directors, officers, and employees, in each case, with
respect to those directors, officers and employees, whose annual compensation,
including any bonuses, equals or exceeds $50,000;
(i) except as set forth on Schedule 3.7(i), the Company has not adopted,
amended, modified, or terminated any bonus, profit-sharing, incentive,
severance, or other plan, Contract, or commitment for the benefit of any of its
directors, officers, and employees (or taken any such action with respect to any
other Employee Benefit Plan);
(j) there has not been any other occurrence, event, incident, action,
failure to act, or transaction outside the Ordinary Course of Business involving
the Company; and
17
(k) the Company has not committed to any of the foregoing.
SECTION 3.8. Legal Compliance. Except as set forth on Schedule 3.11,
each Seller has complied in all material respects with, and is not in material
violation of, all material Laws to which the Purchased Assets or Assumed
Liabilities are subject of federal, state, local, and foreign governments (and
all agencies thereof) (excepting Environmental Laws, Laws related to Taxes and
Intellectual Property and any Laws referred to in Sections 3.18 and 3.19).
SECTION 3.9. Tax Matters. (a) All Tax Returns with respect to the
Purchased Assets or income attributable therefrom that are required to be filed
before the Closing Date have been or will be filed, the information provided on
such Tax Returns is or will be complete and accurate in all material respects,
and all Taxes shown to be due on such Tax Returns have been or will be paid in
full, to the extent that a failure to file such Tax Returns or pay such Taxes,
or an inaccuracy in such Tax Returns, could result in the Buyer being liable for
such Taxes or could give rise to a Lien on the Purchased Assets.
(b) No Seller that is transferring to the Buyer a "United States real
property interest" as defined in Section 897(c) of the Code is a "foreign
person" as defined in Section 1445(f)(3) of the Code.
SECTION 3.10. Real Property.
(a) The Company does not own any real property.
(b) Schedule 3.10(b) lists and describes briefly all real property
leased or subleased to the Company (the "Leased Property"). Seller has delivered
to the Buyer correct and complete copies of the leases and subleases and other
agreements for occupancy, including all amendments, extensions and other
modifications thereto ("Leases") with respect to each Leased Property, as listed
in Schedule 3.10(b). Except as otherwise set forth in Schedule 3.10(b) of the
Disclosure Schedule, with respect to each Lease listed in Schedule 3.10(b):
(i) the lease or sublease is legal, valid, binding, enforceable,
and in full force and effect except as such enforcement may be limited
or prohibited by bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of rights generally and by
general principles of equity (whether applied in a proceeding, at law or
in equity);
(ii) the lease or sublease will continue to be legal, valid,
binding, enforceable, and in full force and effect on identical terms
following the consummation of the transactions contemplated hereby
except as such enforcement may be limited or prohibited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
enforcement of rights generally and by general principles of equity
(whether applied in a proceeding, at law or in equity);
(iii) to the Knowledge of the Seller and the Company no party to
the lease or sublease is in breach or default, and no event has occurred
which, with notice or lapse of
18
time, would constitute a breach or default or permit termination,
modification, or acceleration thereunder;
(iv) to the Knowledge of the Seller and the Company no party to
the lease or sublease has repudiated any provision thereof;
(v) there are no disputes, oral agreements, or forbearance
programs in effect as to the lease or sublease;
(vi) with respect to each sublease, the representations and
warranties set forth in subsections (i) through (v) above are true and
correct with respect to the underlying lease;
(vii) the Company has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the leasehold
or subleasehold;
(viii) all facilities leased or subleased thereunder have
received all material approvals of governmental Authorities (including
licenses and permits) required in connection with the operation thereof
and have been operated and maintained in all material respects in
accordance with applicable Laws, rules, and regulations; and
(ix) all facilities leased or subleased thereunder are supplied
with utilities and other services necessary for the operation of said
facilities in connection with the Business.
(c) Except for agreements set forth on Schedule 3.10(c), there are no
agreements or understandings pertaining to the Company's occupancy of 000 X. Xxx
Xxxx Xxxx, Xxxxxxxxxx, Xxxxxxxxxx which have not been disclosed to the Buyer in
writing.
SECTION 3.11. Intellectual Property.
(a) Except as set forth on Schedule 3.11(a), the Sellers own or have the
right to use pursuant to license, sublicense, Contract, or permission, and Buyer
will own or have the right to use pursuant to the Intellectual Property
Assignment and License Agreement, and the Trade Name License Agreement, all
Intellectual Property necessary for the operation of the Business as presently
conducted or as proposed (in response to pending RFPs) to be conducted. Each
item of Intellectual Property owned or used by the Sellers in the operation of
the Business on or prior to the Closing hereunder will be owned or available for
use by the Buyer on the terms and conditions set forth in the Intellectual
Property Assignment and License Agreement and the Trade Name License Agreement.
The Sellers have taken all reasonably necessary action to maintain and protect
each item of Intellectual Property that it owns or uses in the operation of the
Business.
(b) Except as set forth on Schedule 3.11(b), to the Knowledge of Seller
(and employees with responsibility for Intellectual Property matters) and the
Company, the Sellers have not interfered with, infringed upon, misappropriated,
or otherwise come into conflict with any Intellectual Property rights of third
parties, and neither Seller nor the directors and officers (and employees with
responsibility for Intellectual Property matters) of the Company have ever
19
received any charge, complaint, claim, demand, or notice alleging any such
interference, infringement, misappropriation, or violation (including any claim
that the Sellers must license or refrain from violating any Intellectual
Property rights of any third party). To the Knowledge of Seller (and employees
with responsibility for Intellectual Property matters) and the Company, no third
party has interfered with, infringed upon, misappropriated, or otherwise come
into conflict with any Intellectual Property rights of the Business.
(c) Schedule 3.11(c) identifies each patent, registration, or
certificate which has been issued to the Sellers with respect to any
Intellectual Property, identifies each pending patent application or application
for registration which the Sellers have made with respect to any Intellectual
Property, and identifies each license, Contract or other permission which the
Sellers have granted to any third party with respect to any Intellectual
Property (together with any exceptions). Seller has delivered to the Buyer
correct and complete copies of all such patents, registrations, applications,
licenses, Contracts and permissions (as amended to date) and has made available
to the Buyer correct and complete copies of all other written documentation
evidencing ownership, maintenance and prosecution (if applicable) of each such
item in accordance with the terms of the Intellectual Property Assignment and
License Agreement Schedule 3.11(c) identifies each trade name or unregistered
trademark used by the Sellers in connection with its Business. With respect to
each item of Intellectual Property identified on Schedule 3.11(c):
(i) the Sellers possess all right, title, and interest in and to
the item, free and clear of any Lien, license, or other restriction
except for liens and encumbrances arising from the Chapter 11 Cases
which shall be released or terminated as of the Closing Date;
(ii) the item is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge except for liens and
restrictions arising from the Chapter 11 Cases which shall be released
or terminated as of the Closing Date;
(iii) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending or, to the Knowledge of
Seller (and employees with responsibility for Intellectual Property
matters) and the Company, is threatened which challenges the legality,
validity, enforceability, use, or ownership of the item; and
(iv) the Sellers have not agreed to indemnify any Person for or
against any interference, infringement, misappropriation, or other
conflict with respect to the item.
(d) Schedule 3.11(d) identifies each item of Intellectual Property that
any third party owns and that the Sellers use pursuant to license, sublicense,
Contract or permission. Seller has delivered to the Buyer correct and complete
copies of all such licenses, sublicenses, Contracts and permissions (as amended
to date). With respect to each item of Intellectual Property owned by a third
party that the Company uses pursuant to license, sublicense, Contract or
permission, the Seller to its knowledge represents that:
(i) the license, sublicense, Contract or permission covering the
item is legal, valid, binding, enforceable, and in full force and effect
except as may be limited or
20
prohibited by bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of rights generally and by
general principles of equity (whether applied in a proceeding, at law or
in equity);
(ii) the license, sublicense, Contract or permission will
continue to be legal, valid, binding, enforceable, and in full force and
effect on identical terms following the consummation of the transactions
contemplated hereby except as may be limited or prohibited by
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of rights generally and by general principles
of equity (whether applied in a proceeding, at law or in equity);
(iii) no party to the license, sublicense, Contract or
permission is in breach or default, and no event has occurred which with
notice or lapse of time would constitute a breach or default or permit
termination, modification, or acceleration thereunder;
(iv) no party to the license, sublicense, Contract or permission
has repudiated any provision thereof;
(v) with respect to each sublicense, the representations and
warranties set forth in subsections (i) through (iv) above are true and
correct with respect to the underlying license;
(vi) the underlying item of Intellectual Property is not subject
to any outstanding injunction, judgment, order, decree, ruling, or
charge;
(vii) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending or, to the Knowledge of
Seller (and employees with responsibility for Intellectual Property
matters) and the Company, is threatened which challenges the legality,
validity, or enforceability of the underlying item of Intellectual
Property;
(viii) the Company has not granted any sublicense or similar
right with respect to the license, sublicense, agreement, or permission;
and
(ix) the Company has timely made all scheduled royalty payments
set forth in such licenses, sublicenses or Contracts.
SECTION 3.12. Tangible Assets. Each tangible asset included in the
Purchased Assets has been maintained in accordance with normal industry
practice, (taking into account the value and age of such tangible asset and the
current condition and actual use of the same), is in good operating condition
and repair (subject to normal wear and tear), is suitable for the purposes for
which it presently is used and, to the Knowledge of Seller and the Company, free
from material defects (patent and latent). The Purchased Assets at the Closing
and the Transaction Documents (except to the extent of any Transition Services
or Polaroid Services (as defined in the Transition Services Agreement and the
Shared Services Agreement, respectively) that were offered to the Buyer, but not
contracted for by the Buyer), will be sufficient to permit the Buyer to operate
the Business in substantially the same manner as conducted prior to the date
hereof.
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SECTION 3.13. Inventory. The inventory of the Business consists of raw
materials and supplies, manufactured and purchased parts, goods in process, and
finished goods, all of which is merchantable and fit for the purpose for which
it was procured or manufactured and is currently of an amount required to be on
site under the Customer Contracts, and none of which is slow-moving, obsolete,
damaged, or defective, subject only to the reserve for inventory writedown set
forth on the face of the Latest Balance Sheet (including in any notes thereto)
as adjusted for the passage of time through the Closing Date in accordance with
the past custom and practice of the Business.
SECTION 3.14. Contracts. Schedule 3.14 lists the following Contracts and
other agreements to which the Company is a party other than Customer Contracts
which are set forth on Schedule 3.24 (and which constitute all Contracts with
Major Customers), real estate leases and subleases, which are set forth on
Schedule 3.10(b), and contracts relating to Intellectual Property rights set
forth on Schedule 3.11:
(a) any Contract (or group of related Contracts) for the lease of
personal property to or from any Person providing for lease payments in excess
of $50,000 per annum;
(b) any Contract (or group of related contracts) between the Company and
any Major Supplier;
(c) any capitalized lease, pledge, conditional sale or title retention
agreement involving the payment of more than $50,000 in the aggregate;
(d) any Contract concerning a partnership or joint venture;
(e) any Contract with a sales representative, manufacturer's
representative, distributor, dealer, broker, sales agency, advertising agency or
other Person engaged in sales, distributing or promotional activities, or any
agreement to act as one of the foregoing on behalf of any Person;
(f) any form of Contract concerning confidentiality or noncompetition or
otherwise prohibiting the Company from freely engaging in any business;
(g) any Contract among Seller or any Affiliate thereof;
(h) any license, royalty or other Contract relating to Intellectual
Property;
(i) any collective bargaining agreement;
(j) any Contract for the employment of any individual on a full-time,
part-time, consulting, or other basis (other than for contract employees)
providing annual compensation in excess of $50,000 or providing severance
benefits;
(k) any Contract, whether or not fully performed, relating to any
acquisition or disposition of the Company or any predecessor in interest or any
acquisition or disposition of any subsidiary, division, line of business, or
real property;
22
(l) any Contract under which it has advanced or loaned any amount to any
of its directors, officers, and employees;
(m) any Contract under which the consequences of a default or
termination could have an adverse effect on the business, financial condition,
operations, results of operations, or future prospects of the Company;
(n) any other Contract (or group of related Contracts) the performance
of which involves consideration in excess of $50,000;
(o) any commitment to do any of the foregoing described in clauses (a)
through (q).
Seller has delivered to the Buyer a correct and complete copy (or form of
Contract for certain Contracts so identified on Schedule 3.14) of each written
Contract listed in Schedule 3.14 and each written Customer Contract (in each
case as amended to date) and a written summary setting forth the terms and
conditions of each oral Contract referred to in Schedule 3.14 and each oral
Customer Contract. With respect to each such Contract and the Customer Contracts
listed on Schedule 3.24: (A) the Contract is legal, valid, binding, enforceable,
and in full force and effect except as such enforcement may be limited or
prohibited by bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of rights generally and by general principles of
equity (whether applied in a proceeding, at law or in equity); (B) the Contract
will continue to be legal, valid, binding, enforceable, and in full force and
effect on identical terms following the consummation of the transactions
contemplated hereby except as such enforcement may be limited or prohibited by
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of rights generally and by general principles of equity (whether
applied in a proceeding, at law or in equity); (C) other than breaches by Seller
or the Company disclosed in Schedule 3.14 of the Disclosure Schedule, including
breaches under contracts with Major Customers, Polaroid is not in breach or
default and, to the Knowledge of Polaroid, no third party, is in breach or
default, and no event has occurred which with notice or lapse of time would
constitute a breach or default, or permit termination, modification, or
acceleration, under the Contract; and (D) only as of the date hereof, to the
Knowledge of Polaroid, no party has repudiated any provision of the Contract.
SECTION 3.15. Notes and Accounts Receivable. All notes and accounts
receivable of the Business are reflected properly on Seller's or the Company's
books and records in accordance with GAAP and arose from bona fide transactions
in the Ordinary Course of Business. Except as set forth on Schedule 3.15 of the
Disclosure Schedule, all notes and accounts receivable are valid receivables and
are current and collectible, subject only to the reserve for bad debts set forth
on the face of the Latest Balance Sheet (rather than in any notes thereto) as
adjusted for operations and transactions through the Closing Date in accordance
with GAAP and the past custom and practices of the Company, and to the Knowledge
of the Seller and the Company are not subject to any setoffs or counterclaims.
SECTION 3.16. Insurance. Schedule 3.16 sets forth the following
information with respect to each insurance policy (including policies providing
property, casualty, Liability, and workers' compensation coverage and bond and
surety arrangements) to which Seller or the
23
Company has been a party, a named insured, or otherwise the beneficiary of
coverage relating to the Business:
(a) the name, address, and telephone number of the agent;
(b) the name of the insurer, the name of the policyholder, and the name
of each covered insured;
(c) the policy number and the period of coverage;
(d) the scope (including an indication of whether the coverage was on a
claims made, occurrence, or other basis) and amount (including a description of
how deductibles and ceilings are calculated and operate) of coverage; and
(e) a description of any retroactive premium adjustments or other
loss-sharing arrangements.
With respect to each such insurance policy: (A) the policy is legal, valid,
binding, enforceable, and in full force and effect except as such may be limited
or prohibited by bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the enforcement of rights generally and by general principles of
equity (whether applied in a proceeding, at law or in equity); (B) neither the
Company nor, to the Knowledge of the Seller or the Company, any other party to
the policy is in breach or default (including with respect to the payment of
premiums or the giving of notices), and no event has occurred which, with notice
or the lapse of time, would constitute such a breach or default, or permit
termination, modification or acceleration under the policy; and (C) to the
Knowledge of the Seller or the Company, no party to the policy has repudiated
any provision thereof. Schedule 3.16 describes any self-insurance arrangements
affecting the Company. Schedule 3.16 sets forth known pending claims, if any,
made against the Company that are covered by insurance. Such claims have been
disclosed to and accepted by the appropriate insurance companies and are being
defended by such appropriate insurance companies. Except as set forth on
Schedule 3.16, no claims have been denied coverage during the last five years.
SECTION 3.17. Litigation. Schedule 3.17 sets forth each instance in
which the Company (i) is subject to any outstanding injunction, judgment, order,
decree, ruling, or charge or (ii) is a party or to the Knowledge of Seller or
the Company and the Company, is threatened to be made a party to any action,
suit, proceeding, hearing, or investigation of, in, or before any court or
quasi-judicial or administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator. To the Knowledge of Seller and the
Company, neither the Seller nor the Company have any reason to believe that any
such action, suit, proceeding, hearing, or investigation may be brought or
threatened against the Company. Neither Seller nor the Company have any
Liability with respect to any claims or threatened claims by third parties
relating to any sale or proposed sale of the Company (whether structured as a
sale of stock, a sale of assets, a merger or otherwise) or any division of the
Company. Neither Seller nor the Company is a party to any litigation relating to
such claims and, to the Knowledge of Seller (and
24
employees with responsibility for litigation matters) and the Company, no such
litigation is threatened.
SECTION 3.18. Product Warranty, Liability.
(a) Except as set forth on Schedule 3.18, each product manufactured,
sold, leased, or delivered by the Company in conducting the Business has been in
conformity with all applicable contractual commitments and all express and
implied warranties, and the Company has no Liability for replacement or repair
thereof or other damages in connection therewith.
(b) The Company has no Liability arising out of any injury to
individuals or property as a result of the ownership, possession, or use of any
product manufactured, sold, leased, or delivered by the Company.
(c) The Company has accrued a warranty liability reserve for any
customer or product obligations in accordance with GAAP.
SECTION 3.19. Employees. Schedule 3.19 contains a true, complete and
accurate list of the names, titles, annual compensation and all bonuses and
similar payments made for the current and preceding fiscal years for all
directors, officers, employees and consultants of the Business. The Company is
not a party to or bound by any collective bargaining agreement, nor has it
experienced any strikes, grievances, claims of unfair labor practices, or other
collective bargaining disputes. The Company has not committed any material
unfair labor practice. Neither Seller nor the Company have any Knowledge of any
organizational effort presently being made or threatened by or on behalf of any
labor union with respect to employees of the Company. The Company has not
engaged in any plant closing or employee layoff activities that would violate or
require notification pursuant to, the Worker Adjustment Retraining and
Notification Act of 1988, as amended, or any similar state, local or foreign
plant closing or mass layoff statute, rule or regulation.
SECTION 3.20. Employee Benefits.
(a) General. Except as set forth on Schedule 3.20, the Company is not a
party to, does not participate in and does not have any Liability with respect
to any Employee Benefit Plan or any employment or consulting agreement.
(b) Plan Documents and Reports. A true and correct copy of each of the
plans, programming policies, arrangements, and agreements listed on Schedule
3.20 (referred to hereinafter as "Benefit Plans"), and all Contracts relating
thereto, or to the funding thereof, including, without limitation, all trust
agreements, insurance Contracts, administration Contracts, investment management
agreements, subscription and participation agreements, and recordkeeping
agreements, each as in effect on the date hereof, has been supplied to the
Buyer. In the case of any Benefit Plan which is not in written form, the Buyer
has been supplied with an accurate description of such Benefit Plan as in effect
on the date hereof. A true and correct copy of the most recent annual report,
actuarial report, accountant's opinion of the plan's financial statements,
summary plan description and Internal Revenue Service determination letter with
25
respect to each Benefit Plan, to the extent applicable, and a current schedule
of assets (and the fair market value thereof assuming liquidation of any asset
which is not readily tradable) held with respect to any funded Benefit Plan has
been supplied to the Buyer, and there have been no material changes in the
financial condition in the respective plans other than market gains or losses to
date from that stated in the annual reports and actuarial reports supplied.
(c) Compliance with Employee Benefit Laws; Liabilities. As to all
Benefit Plans:
(i) All Benefit Plans comply and have been administered in form
and in operation in all material respects with all applicable
requirements of Law, and no event has occurred which will or could cause
any such Employee Benefit Plan to fail to comply with such requirements
and no notice has been issued by any governmental Authority questioning
or challenging such compliance.
(ii) Each Benefit Plan which is an Employee Pension Benefit Plan
is the subject of a favorable determination letter issued by the IRS
with respect to the qualified status of such plan under section 401(a)
of the Code and the tax-exempt status of any trust which forms a part of
such plan under section 501(a) of the Code; all amendments to any such
plan for which the remedial amendment period (within the meaning of
section 401(b) of the Code and applicable regulations) has expired are
covered by a favorable IRS determination letter; and no event has
occurred which will or could give rise to disqualification of any such
plan under such sections or to a tax under section 511 of the Code.
(iii) None of the assets of any Benefit Plan is invested in
employer securities or employer real property.
(iv) There have been no "prohibited transactions" (as described
in section 406 of ERISA or section 4975 of the Code) with respect to any
Benefit Plan and neither the Company nor any of its ERISA Affiliates has
engaged in any prohibited transaction.
(x) There have been no acts or omissions which have given rise
to or may give rise to fines, penalties, taxes or related charges under
section 502 of ERISA or Chapters 43, 47, 68 or 100 of the Code for which
the Company may be liable.
(vi) There are no actions, suits or claims (other than routine
claims for benefits) pending or, to the Knowledge of Seller and the
Company, threatened involving any Benefit Plan or the assets thereof
and, to the Knowledge of Seller and the Company, no facts exist which
could give rise to any such actions, suits or claims (other than routine
claims for benefits).
(vii) None of the Company Benefit Plans is subject to Title IV
of ERISA. With respect to each other Benefit Plan that is subject to
Title IV of ERISA:
(A) no steps have been taken to terminate any such plan;
26
(B) there has been no withdrawal (within the meaning of
section 4063 of ERISA) of a "substantial employer" (as defined
in section 4001(a)(2) of ERISA);
(C) no event or condition has occurred which would
constitute grounds under section 4042 of ERISA for the
termination of or the appointment of a trustee to administer any
such plan; and
(D) all required contributions to such plan have been
made as required by Section 302(e) of ERISA and Section 412 of
the Code.
(viii) The Company has no Liability or contingent Liability for
providing, under any Benefit Plan or otherwise, any post-retirement
medical or life insurance benefits, other than statutory Liability for
providing group health plan continuation coverage under Part 6 of Title
I of ERISA and section 4980B of the Code.
(ix) There has been no act or omission by the Company or any of
its ERISA Affiliates that would impair the ability of the Company (or
any successor thereto) to unilaterally amend or terminate (in compliance
with and subject to applicable Laws) any Company Benefit Plan.
(d) Multiemployer Plans. The Company does not contribute to, has not
contributed to, and does not have any Liability or contingent Liability with
respect to any Multiemployer Plan.
SECTION 3.21. Environmental Matters. In connection with the conduct of
the Business, except as set forth in Schedule 3.21 of the Disclosure Schedule:
(a) Each of Seller and its Subsidiaries are in material compliance with
all Environmental Laws which compliance includes, but it is not limited to, the
possession by Seller and its Subsidiaries of all Permits required under all
applicable Environmental Laws, and compliance with the terms and conditions
thereof.
(b) Neither Seller nor any subsidiary of Seller has received any written
communication, whether from a Governmental Entity or Person, that alleges that
Seller or any of its subsidiaries is not in compliance with any Environmental
Laws, which has not been resolved, and to the Knowledge of Seller, there are no
conditions existing at the Purchased Assets that could reasonably be expected to
prevent or interfere with such full compliance in the future.
(c) To the Knowledge of Seller, there are no past are present facts,
circumstances or conditions, including the Release of Hazardous Substances, that
could reasonably be expected to result in a Claim under Environmental Laws
against Seller or any subsidiary of Seller.
(d) Seller has made available to Buyer prior to the execution of this
Agreement all environmental audits, assessments and documentation in Seller's
possession regarding environmental matters pertaining to, or the environmental
condition of, the Purchased Assets or the compliance (or non-compliance) by
Seller or any of its subsidiaries with any Environmental Laws.
27
SECTION 3.22. Permits. Schedule 3.22 is a true and accurate list of all
licenses, certificates, permits, franchises, rights, code approvals
(collectively, "Permits") held by the Company or any of the Polaroid Seller
Entities used in the conduct of the Business. Except for the Permits listed on
Schedule 3.22 of the Disclosure Schedule to the Knowledge of the Seller and the
Company. there are no Permits, whether federal, state, local or foreign, which
are necessary for the lawful operation of the Business as presently conducted.
SECTION 3.23. Bank Accounts. Schedule 3.23 sets forth the names and
locations of each bank or other financial institution at which the Company has
accounts (giving the account numbers) or safe deposit box and the names of all
Persons authorized to draw thereon or have access thereto, and the names of all
Persons, if any, now holding powers of attorney or comparable delegation of
authority from the Company and a summary statement thereof.
SECTION 3.24. Customers and Suppliers. The Cure Costs do not exceed the
amounts specified on Schedule 3.24. Other than (i) $557,500 claimed by the State
of New Hampshire and (ii) amounts shown on the Notice of Amounts Necessary to
Cure Defaults Under Contracts and Leases Proposed to Be Assumed and Assigned to
Potential Purchasers of Polaroid I.D. Business filed and served by the Sellers
on or about October 19, 2001 (as amended by the Notice of Revised Amounts
Necessary to Cure Defaults Under Contracts and Leases Proposed to Be Assumed and
Assigned to Potential Purchaser of Polaroid I.D. Business filed and served by
the Sellers on or about November 26, 2001) (as amended, the "Cure Notice"), the
Company does not presently owe, and will not owe as of the Closing Date, any
liquidated damages to a Major Customer pursuant to a default under any Customer
Contract existing as of the Closing Date. The Sellers gave (i) notice of the
motion seeking approval of the Sale Procedures Order and (ii) the Cure Notice to
all Major Customers, Major Suppliers (to the extent such Major Suppliers are
parties to executory contracts) and all other Specified Notice Parties in
accordance with Bankruptcy Rules 6006 and 9014. Schedule 3.24 sets forth:
(i) a list of the Major Customers of the Company and the
Business, showing the total revenue received in each of fiscal years
1999 and 2000; and
(ii) a list of the Major Suppliers of the Company and the
Business and showing the approximate total purchases in each of fiscal
years 1999 and 2000.
SECTION 3.25. Improper and Other Payments. To the Knowledge of the
Company and Seller.
(a) neither Seller, the Company, any Polaroid Seller Entity, any
director, officer, employee, agent or representative of the Seller or the
Company, their respective Affiliates nor any Person acting on behalf of any of
them, has made, paid or received any bribes, kickbacks or other similar payments
to or from any Person, whether lawful or unlawful, relating to the Business;
(b) no contributions have been made, directly or indirectly, to a
domestic or foreign political party or candidate by any of the foregoing; and
28
(c) no improper foreign payment (as defined in the Foreign Corrupt
Practices Act) has been made by any of the foregoing.
SECTION 3.26. Seller Financing. As of the date hereof, the Polaroid
budget submitted to the Bankruptcy Court which was the basis for the approval of
the debtor-in-possession financing available to Polaroid included financing for
the Company for the period October 1, 2001 through December 31, 2001 of $12.0
million, including $2.3 million allocated for capital expenditures with the
balance allocated to payroll, payments to third party vendors and purchase of
inventory for resale or consumption.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to Seller that the statements
contained in this Article IV are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of this
Agreement throughout this Article IV).
SECTION 4.1. Organization of the Buyer. The Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware and under the Laws of each jurisdiction except where the failure to be
so qualified would not have a material adverse effect on the Buyer. The Buyer is
not in default under or in violation of any provision of its certificate of
incorporation or bylaws.
SECTION 4.2. Authorization of Transaction; Consents. The Buyer has full
power and authority (including full corporate power and authority) to execute
and deliver this Agreement and to perform its obligations hereunder. This
Agreement constitutes the valid and legally binding obligation of the Buyer,
enforceable in accordance with its terms and conditions. The Buyer need not give
any notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order to consummate the
transactions contemplated by this Agreement.
SECTION 4.3. Noncontravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated hereby,
will (i) violate any constitution, Law, settlement agreement regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which the Buyer is subject or any
provision of its certificate of incorporation or bylaws or (ii) conflict with,
result in a breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify, or cancel,
or require any notice or consent under any agreement, Contract, lease, license,
instrument, or other arrangement to which the Buyer is a party or by which it is
bound or to which any of its assets is subject.
29
SECTION 4.4. Brokers' Fees. The Buyer has no Liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which Seller could become liable
or obligated.
SECTION 4.5. Financing. The funds available to the Buyer are and will be
sufficient to consummate the transactions contemplated by this Agreement.
SECTION 4.6. Business Restrictions. Neither the Buyer, any Affiliate or
Subsidiary of the Buyer, any director, officer, employee, agent or
representative of the Buyer has received notification from a party to a contract
with an Authority that the Buyer, or any Affiliate or Subsidiary of the Buyer,
or any director, officer, employee, agent or representative of the Buyer has
been banned, prohibited, debarred or otherwise precluded from doing or
conducting business with or for an Authority (or within the jurisdiction of said
Authority) for any reason, other than suspension of a qualification to conduct
business which may be cured by filing of reinstatement documentation and payment
of any required fees or penalties.
ARTICLE V
COVENANTS
SECTION 5.1. General. Each of the parties will use his or its
commercially reasonable efforts to take all action and to do all things
necessary in order to consummate and make effective the transactions
contemplated by this Agreement (including satisfaction of the closing conditions
set forth in Articles VII and VIII below). With regard to any assets or rights
placed in escrow pursuant to the terms of Section 2.8(b), each of the Sellers
agrees, and agrees to cause the other Polaroid Seller Entities, to cooperate in
good faith with the Buyer to take all steps necessary to cause the transfer of
such assets and rights to the Buyer prior to the Second Escrow Closing Date.
SECTION 5.2. Notices and Consents. The Seller will cause each applicable
Polaroid Seller Entity to give any notices to third parties, and will use
commercially reasonable efforts to obtain all third party consents (if any)
necessary to consummate the transactions contemplated hereby, in each case as
necessary to the extent such consents are not provided for or satisfied by the
Sale Order. Each of the parties will (and the Seller will cause its Affiliates)
give any notices to, make any filings with, and use its commercially reasonable
efforts to obtain any authorizations, consents, and approvals of governments and
governmental agencies in connection with the matters referred to in Sections 3.5
and 4.3 above, in each case as necessary to the extent such authorizations,
consents and approvals are not provided for or satisfied by the Sale Order;
provided, however, that if any consent is not obtained by Seller in order to
convey Customer Contracts assumed by Buyer hereunder or other Purchased Assets,
such assets shall nevertheless be conveyed pursuant to this Agreement to Buyer
subject to any breach arising from such conveyance which shall be Assumed
Liabilities.
SECTION 5.3. Operation of Business.
30
(a) Except as otherwise provided in this Agreement, from the date of
this Agreement until the Closing Date, the Business shall be operated in the
ordinary course of business for the Business for the four month period prior to
and ending on the Filing Date and from the Filing Date through the Closing Date,
to the extent permitted or required by the Budget and to the extent permitted or
required by the proceedings of the Chapter 11 Cases (the "Recent Ordinary Course
of Business"). To the extent permitted or required by the Budget and to the
extent permitted or required by the proceedings of the Chapter 11 Cases, each of
the Sellers shall use commercially reasonable efforts to preserve intact the
present business organization, goodwill and personnel of the Business, keep
available the services of its current officers and employees, preserve the
business relationships of the Business with other Persons material to the
operation of the Business, including with all suppliers, customers, landlords,
creditors, licensors, and licensees having business relationships with the
Sellers, and not permit any action or omission which would cause any of the
representations or warranties of the Seller contained herein to become
inaccurate or any of the covenants of the Seller to be breached. The Sellers
shall ensure that, in connection with the Business through the Closing Date,
they (i) make all payments, other than Cure Costs, when and as they become due
and payable in accordance with the Contracts that are necessary or appropriate
for the conduct of the Business, (ii) take all actions when and as necessary or
appropriate in conducting the Business in the Recent Ordinary Course of
Business, (iii) procure inventories and other assets of the Business and make
financial investments, capital expenditures and other similar commitments in
connection with the Business in the Recent Ordinary Course of Business, (iv) use
commercially reasonable efforts to seek to retain or re-employ former Business
Employees who have voluntarily terminated their employment with the Sellers
after the date of this Agreement, (v) use commercially reasonable efforts to
seek to retain consultants and temporary employees of the Business, and (vi)
give the Buyer prompt notice of any bidding opportunities in connection with the
Business.
Without limiting the generality of the foregoing, except as set forth in
Schedule 5.3 or as contemplated by this Agreement, prior to the Closing, the
Company and the Polaroid Seller Entities will not, without the prior written
consent of the Buyer, take any of the following actions with regard to the
Business: (i) enter into any Contract, agreement or transaction other than in
the Recent Ordinary Course of Business; (ii) sell or otherwise dispose of any
assets or inventory other than in the Recent Ordinary Course of Business; (iii)
waive, release or cancel any claims against third parties or debts owing to it,
or any rights which have any value involving more than $50,000 or otherwise
outside the Recent Ordinary Course of Business; (iv) make any changes in its
accounting systems, policies, principles or practices other than those described
on Schedule 5.3; (v) other than in the Recent Ordinary Course of Business, enter
into, authorize, or permit any transaction with any Seller or any Affiliate
thereof, or enter into any Contract relating to compensation or benefits with
any Person, or, modify any compensation amounts or levels of any officer or
employee (other than as permitted by Section 5.3(b) below); (vi) make any loans,
advances or capital contributions to, or investments in, any other Person; (vii)
except to the extent permitted or required by the Budget and except to the
extent permitted or required by the proceedings of the Chapter 11 Cases, amend
any employment agreements, trusts, plans, funds or other arrangements for the
benefit or welfare of any current or former director, manager, officer or
employee, or increase in any manner the fringe benefits of any current or former
director, manager, officer or employee or pay any benefit not required by any
existing plan and
31
arrangement or enter into any Contract, agreement, commitment or arrangement to
do any of the foregoing; (viii) acquire, lease, encumber or otherwise impose a
Lien on any Purchased Assets or assets of the Company or the Polaroid Seller
Entities, whether tangible or intangible other than Liens imposed pursuant to
Polaroid's current debt facilities; (ix) terminate, modify, amend or otherwise
alter or change any of the terms or provisions of any Customer Contract or
vendor Contract or, outside the Recent Ordinary Course of Business, any other
agreement; (x) take, whether directly or indirectly, any actions, or omit to
take any actions, outside the Recent Ordinary Course of Business, the result of
which would cause (a) any notes or accounts receivable relating to the Business
to be collected in advance of when such notes or accounts receivable would be
collected in the Recent Ordinary Course of Business, (b) any accounts payable or
other Liabilities relating to the Business to be deferred beyond the date when
such accounts payable or other Liabilities would otherwise be paid in the Recent
Ordinary Course of Business, or (c) any inventory or other assets of the
Business to be depleted or otherwise sold, leased, transferred or assigned other
than in the Recent Ordinary Course of Business including with regard to timing;
or (xi) fail or omit to take any actions the Sellers and the other Polaroid
Seller Entities would otherwise have taken in the Recent Ordinary Course of
Business in connection with any financial investments or capital expenditures
and other similar commitments.
(b) To the extent permitted or required by the Budget and to the extent
permitted or required by the proceedings of the Chapter 11 cases, Seller will
use commercially reasonable efforts to support management to deploy current
human resources in support of the programs described on Schedule 5.3.
SECTION 5.4. Bankruptcy Actions.
(a) On October 15, 2001, Seller filed a motion seeking an order
approving bidding procedures in the form attached hereto as Exhibit J (such
order, as entered by the Bankruptcy Court on November 19, 2001, the "Sale
Procedures Order"). The Sellers (i) notified, in accordance with the
requirements of the Bankruptcy Code, all parties entitled to notice of the
motion seeking approval of the assumption and assignment of the Designated
Contracts to the Buyer (including the Specified Notice Parties), and (ii) shall
use commercially reasonable efforts to obtain Bankruptcy Court approval of the
same.
(b) On October 15, 2001, Sellers filed a motion (the "365 Motion") with
the Bankruptcy Court seeking approval of the assumption and assignment of the
potential Designated Contracts to the Buyer. As part of the 365 Motion with the
Bankruptcy Court, the Sellers also shall seek assumption of the Bedford Sublease
and, thereafter, the Sellers shall not, and shall not permit any other Person,
to terminate, reject, amend or otherwise modify the Bedford Sublease without the
prior written consent of the Buyer. Without limiting the foregoing, in no event
shall the Sellers at any time file any motion to reject the Bedford Sublease;
provided, however, that, at the request of Buyer, Polaroid agrees to assist
Buyer prior to, at or after the Closing in negotiating a new sublease with
Computervision Corporation, as sublessor, in order to cause the termination of
the Bedford Sublease. Sellers shall (i) notify, in accordance with the
requirements of the Bankruptcy Code, all parties entitled to notice of the
Section 365 Motion, as modified by orders in respect of notice which may be
issued at any time and from time to time by the
32
Bankruptcy Court, and (ii) use commercially reasonable efforts to obtain
Bankruptcy Court approval of same, subject to Buyer's rights under Section 2.8
hereof.
(c) Seller shall seek the entry of the Sale Order, and supporting
papers, in form and substance satisfactory to Buyer and attached hereto as
Exhibit K.
(d) As promptly as practicable, Seller will provide Buyer with copies of
all motions, applications, and supporting papers prepared by Seller in
connection with this Agreement and the Purchased Assets (including forms of
Orders and notices to interested parties) prior to the filing thereof in the
Chapter 11 Cases.
(e) Seller shall immediately notify Buyer of any order of the Bankruptcy
Court entered in the Chapter 11 Cases that affects or will affect the operation
of the Business or the Purchased Assets and promptly deliver a copy of any such
order, proposal or filing to Buyer.
SECTION 5.5. Adequate Assurance Data. Buyer agrees that it shall deliver
to Seller written evidence of its ability to provide adequate assurance of
future performance in accordance with Section 365(f)(B) of the Bankruptcy Code
in the event of an objection on such grounds by any Person that is party to an
Assumed Contract. In addition, Buyer agrees to cooperate with reasonable
requests for additional evidence thereof that are made by any Person who is a
party to any Assumed Contract.
SECTION 5.6. Full Access.
(a) Seller will permit and cause the Company to permit representatives
of the Buyer to have full access to all premises, properties, personnel, books,
records (including Tax records), Contracts, and documents of or pertaining to
Polaroid, the Company and the Business and shall make the officers and employees
of the Company and Polaroid available to the Buyer and its representatives as
the Buyer and their representatives shall from time to time reasonably request,
in each case to the extent that such access and disclosure would not obligate
Polaroid or the Company to take any actions that would unreasonably disrupt the
normal course of its business or violate the terms of any agreement to which the
Company or Polaroid and the Business is bound or any applicable Law or
regulation.
(b) Through the Closing, the Buyer and the Buyer's Representatives will
not use any of the Confidential Information that they received from the Company
or Polaroid except in connection with this Agreement and, if this Agreement is
terminated for any reason whatsoever on or prior to the Closing Date, the Buyer
and the Buyer's Representatives will return to the Company or Polaroid, as
applicable, or destroy all tangible embodiments (and all summaries and copies,
including electronically stored information) of the Confidential Information
that they receive from the Company or Polaroid or copied from Confidential
Information received from the Company or Polaroid which are in its possession
and will only use such Confidential Information, to the extent such Confidential
Information is in its possession, in the defense of any litigation related to
this Agreement. For purposes of this Section 5.6, Confidential Information shall
not include any information that (i) is publicly known at the time of its
disclosure to the Buyer, (ii) is lawfully received by the Buyer from a third
party not bound in a confidential
33
relationship with Polaroid, (iii) becomes generally available to the public
other than as a result of a disclosure by the Buyer or the Buyer's
Representatives in violation of a confidentiality agreement between the Buyer
and Polaroid, or (iv) was of written record in the files of the Buyer at the
time of its disclosure to the Buyer, provided such information is not subject to
another confidentiality agreement with or for the benefit of Polaroid or its
Affiliates.
SECTION 5.7. Maintenance of Insurance. Sellers will continue to carry
its existing insurance pertaining to the Business, including its existing
insurance on the Purchased Assets through the Closing Date, and shall not allow
any material breach, default or cancellation (other than expiration and
replacement of policies in the Ordinary Course of Business) of such insurance
policies or agreements to occur or exist.
SECTION 5.8. Notice and Supplemental Information. Seller, the Company
and the Buyer shall each give prompt notice to the other parties of any material
adverse development causing a breach of any of its own representations and
warranties in Articles III and IV respectively. In addition, Seller will (i)
immediately notify Buyer in writing of any development that would have a
Material Adverse Effect on the Business, including without limitation, any loss
of the Purchased Assets, (ii) immediately if the initially approved Budget is
amended or modified or additional restrictions relating to the Budget are
imposed by the lenders under Seller's debtor in possession financing, and (iii)
by notice in accordance with the terms of this Agreement, supplement or amend
the Schedules, including one or more supplements or amendments to correct any
matter which would constitute a breach of any representation, warranty,
agreement or covenant contained herein. No such supplement or amendment shall
limit in any manner (i) any right that Buyer may have to indemnification
pursuant to Article IX with respect to any such breach without giving effect to
any such notice, supplement, amendment or correction, or (ii) any condition to
Buyer's closing obligations pursuant to Article VIII.
SECTION 5.9. Transition. Seller and the Company will not take any (and
Seller and the Company will use reasonable efforts to cause the Company's
management to take no) action that is designed or intended to have the effect of
discouraging any lessor, licensor, customer, supplier, or other business
associate of the Business from maintaining the same business relationships with
the Business after the Closing as it maintained with the Business prior to the
Closing. Upon the reasonable request of the Buyer, the Seller shall use
commercially reasonable efforts to coordinate introductory and periodic meetings
between the Buyer and (i) customers of the Business (to the extent such
customers agree to meet with the Buyer and solely for introductory and/or
transition purposes) and (ii) the Business Employees (solely for introductory
and/or transition purposes). The Sellers will refer all customer inquiries
relating to the Business to the Buyer from and after the Closing. The Sellers
shall cooperate with the Buyer in addressing and resolving all issues relating
to the transition of the Business from the Sellers to the Buyer.
SECTION 5.10. Confidentiality. Seller will treat and hold as
confidential all of the Business Confidential Information and Trade Secrets,
refrain from using any of the Business Confidential Information and Trade
Secrets except in connection with this Agreement, and, in the event of a
Closing, deliver promptly to the Buyer or destroy, at the request and option of
the Buyer, all tangible embodiments (and all copies) of the Business
Confidential Information and Trade Secrets which are in their possession. In the
event that Seller is requested or required (by
34
oral question or request for information or documents in any legal proceeding,
interrogatory, subpoena, civil investigative demand, or similar process) to
disclose any Business Confidential Information and Trade Secrets, Seller will
notify the Buyer promptly of the request or requirement so that the Buyer may
seek an appropriate protective order or waive compliance with the provisions of
this Section 5.10. If, in the absence of a protective order or the receipt of a
waiver hereunder, a party is, on the advice of counsel, compelled to disclose
any Business Confidential Information and Trade Secrets to any tribunal or else
stand liable for contempt, Seller may disclose the Business Confidential
Information and Trade Secrets to the tribunal; provided, however, that Seller
shall use its commercially reasonable efforts to obtain, at the request of the
Buyer, an order or other assurance that confidential treatment will be accorded
to such portion of the Business Confidential Information and Trade Secrets
required to be disclosed as the Buyer shall designate. The foregoing provisions
shall not apply to any confidential information which is generally available to
the public immediately prior to the time of disclosure.
SECTION 5.11. Major Customer Contracts. The Company and the Seller,
together with the Executive Management Group, shall use commercially reasonable
efforts to maintain all Major Customer Contracts. Seller will immediately notify
Buyer of any termination or anticipated termination of any Major Customer
Contract listed on Schedule 3.24 by a customer. If any such termination or
anticipated termination occurs, Seller shall use commercially reasonable efforts
to cause the applicable customer to either (x) consent to assignment of their
Customer Contract to Buyer on the Closing Date or (y) enter into a Customer
Contract with Buyer on the same terms and conditions set forth in the pertinent
Customer Contract on the date hereof.
SECTION 5.12. Continued Employees.
(a) With the exception of up to fifty (50) Business Employees (of which
not more than thirty-nine (39) Business Employees will be from the Fort Xxxxx,
Indiana facility and thirty-two (32) Business Employees will be from the
Bedford, Massachusetts facility) who may be selected at the Buyer's sole
discretion and not retained as Business Employees (the "Non-Continued
Employees"), whom Buyer agrees to identify as soon as practicable, but in no
event fewer than two (2) business days prior to the Closing Date, Buyer shall
extend to all Business Employees who are employed by Seller or the Company
offers of employment with the Buyer. With the exception of the Non-Continued
Employees and any other Business Employees who voluntarily decline employment,
all Business Employees shall be employed (the "Continuing Employees") on
substantially the same terms and conditions as governed such Business Employees'
employment with the Company or Seller immediately prior to the Closing Date,
subject to: (i) changes as may be made by Buyer in the ordinary course of
business after the Closing Date; (ii) each Continuing Employee's execution of
Buyer's non-competition, confidentiality and proprietary rights agreement; and
(iii) each Continuing Employee's employment being terminable at-will by the
Buyer. Nothing in this Section 5.12(a) shall obligate Buyer to offer employment
to a Continuing Employee in the identical job or with the identical
responsibilities as such Continuing Employee was provided by Seller or the
Company. No Business Employee will, on the Closing Date, be entitled to any
compensation (x) for services performed as a broker or finder in connection with
the transaction contemplated by this Agreement or (y) solely by virtue of the
consummation of the transactions contemplated hereby.
35
Seller will be responsible for all severance payments (if any) due to
Non-Continued Employees and Continuing Employees as a result of their receipt
and acceptance of Buyer's offer of employment. Buyer shall have no liability for
any accrued vacation or sick time or any unpaid wages or other compensation or
benefits of any sort that may be owed to the Business Employees as a result of
their employment with Seller or the Company prior to the Closing Date.
(b) Buyer will ensure that any past service of Continuing Employees as a
result of their employment with Seller or the Company prior to the Closing Date
is recognized and credited to such Continuing Employees under the Buyer's
vacation policy after the Closing Date.
SECTION 5.13. Post-Closing Covenants. Seller and the Buyer agree as
follows with respect to the period following the Closing:
(a) In case at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement, each of the
parties will take such further action (including the execution and delivery of
such further instruments and documents) as any other party hereto reasonably may
request, all at the sole cost and expense (unless the requesting party is
entitled to indemnification therefor under Article IX) of the requesting party.
From and after the Closing, the Buyer will be entitled to reasonable access to
all documents, books, records, agreements, and financial data of any sort
relating to the Business. If after the Closing any payments are made to the
Seller, the Company or any of their Affiliates in connection with any of the
Designated Contracts or any of the accounts receivable acquired by Buyer
pursuant to this Agreement, it is agreed and acknowledged that such payments
shall constitute the sole and exclusive property of the Buyer, and the Seller
and the Company shall promptly (and in any event within five (5) business days
after receipt thereof) forward the full amount of such payments to the Buyer,
without any offset or holdback in respect of any amount owed or claimed to be
owed to the Seller, the Company or any of their Affiliates by the Buyer.
(b) In the event and for so long as any party hereto or any Person who
may be entitled to indemnification hereunder actively is contesting or defending
against any charge, complaint, action, suit, proceeding, hearing, investigation,
claim, or demand in connection with (i) any transaction contemplated under this
Agreement or (ii) any fact, situation, circumstance, status, condition,
activity, practice, plan, occurrence, event, incident, action, failure to act,
or transaction on or prior to the Closing Date involving the Business, each of
the other parties hereto will cooperate with him, her or it and his, her or its
counsel in the contest or defense, make available their personnel, and provide
such testimony and access to their books and records as shall be necessary in
connection with the contest or defense, all at the sole cost and expense (unless
the contesting or defending party is entitled to indemnification therefor under
Article IX) of the contesting or defending party.
(c) Access to Records After Closing. Following the Closing, the Buyer
shall give to the Seller, without charge, reasonable access upon reasonable
notice and during business hours to (and the right to make copies at the expense
of the Seller of) the books, files and records of the Company and the Business
to the extent that such relate to the business and operations of the Business on
or prior to the Closing Date and are delivered to Buyer pursuant to this
Agreement on the Closing Date or subsequently come into the Buyer's possession,
but any access pursuant
36
to this Section 5.13 shall be conducted by the Seller in good faith, with a
reasonable purpose and in such manner as not to interfere unreasonably with the
operations of the Buyer following the Closing. For a period of five years after
the closing, the Buyer shall maintain such books, files and records tax returns
and thereafter, prior to destroying or disposing of any of them, the Buyer shall
give, or shall cause the Business to give thirty (30) days' advance notice to
the Seller of their intended destruction or disposition, and during such thirty
(30) day period the Seller shall have the right to take possession of the same
or to make copies of the same, all at the Seller's expense. Notwithstanding the
foregoing, in the event there is a conflict between the provisions of this
Section 5.13(c) and those of Section 10.3 and Section 10.4, the provisions of
Section 10.3 and Section 10.4 shall control.
(d) Distribution Agreement. Promptly after the Closing Date, the parties
shall negotiate in good faith to negotiate, execute and deliver by a date which
is 60 days from the Closing Date an international film distribution agreement
between Seller and Buyer that provides, on terms mutually acceptable to Buyer
and Seller, for the distribution by Buyer of certain products of Seller related
to the Business.
(e) Performance Bonds. The Buyer agrees to reasonably cooperate with the
Sellers, at the Sellers' request, to cause the Sellers' performance bonds in
each jurisdiction set forth in Schedule 2.2(b)(ii) and which the Buyer is
assuming the Customer Contract for such jurisdiction to be replaced with the
Buyer's performance bonds.
SECTION 5.14. [INTENTIONALLY OMITTED]
SECTION 5.15. Amounts Due Under Executory Contracts and Unexpired
Leases; Cure Costs. Buyer shall pay or otherwise satisfy any and all cure and
reinstatement costs or expenses of or relating to the assumption and assignment
of the Designated Contracts, whether by negotiation or as determined by the
Bankruptcy Court, as the case may be (the "Cure Costs"). In no event shall Buyer
have any obligation with respect to any Contract which Buyer elects not to
assume pursuant to Section 2.8. Sellers agree to cooperate with Buyer in
attempting to resolve the correct and appropriate amount for curing any
Designated Contracts or Escrowed Assets.
SECTION 5.16. Tax Matters. Sellers shall cooperate with Buyer to
minimize any and all Transfer Taxes actually due and payable as a result of the
transaction contemplated by this Agreement relating to the Purchased Assets,
which such liability assumption is limited to $1,350,000 pursuant to Schedule E.
In the event that Buyer establishes non-U.S. subsidiaries for the purposes of
minimizing Liability for Taxes owed to non-U.S. sources, the Sellers agree to
cooperate with Buyer in conveying any Purchased Assets owned by the Sellers'
non-U.S. subsidiaries to Affiliates of Buyer that Buyer may designate.
SECTION 5.17. Antitrust Matters. As promptly as practicable, the Sellers
and the Buyer shall make all filings and submissions under the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended, and the rules and regulations
thereunder (the "HSR Act"), as may be reasonably required to be made in
connection with this Agreement and the Transaction Documents. Each of the
Sellers and the Buyer shall elect early termination of the waiting period under
the HSR Act and each of the Sellers and the Buyer shall use all reasonable
efforts to cause
37
early termination of the waiting period under the HSR Act. The Sellers will
furnish to the Buyer, and the Buyer will furnish to the Sellers, such
information and assistance as the other may reasonably request in connection
with the preparation of any such filings or submissions. The Sellers will
provide to the Buyer, and the Buyer will provide to the Sellers, copies of all
correspondence, filings or communications (or memoranda setting forth the
substance thereof) between such party or any of its representatives, on the one
hand, and any governmental Authority or members of their respective staffs, on
the other hand, with respect to this Agreement and the Transaction Documents,
except (i) to the extent that the Buyer or the Sellers are advised by
independent counsel that the provision of such information would be inadvisable
under applicable antitrust laws, (ii) upon the advice of counsel or (iii)
confidential information which is not needed or necessary in connection with the
other party's filings or submissions under the HSR Act.
SECTION 5.18. Intellectual Property. Prior to, at or after the Closing,
the Sellers shall use commercially reasonable efforts to cause the License
Agreement executed by Polaroid and the National Aeronautics and Space
Administration, effective as of May 26, 1999, to be reinstated in full force and
effect.
ARTICLE VI
OVERBID PROCEDURES
[INTENTIONALLY OMITTED]
ARTICLE VII
CONDITIONS TO OBLIGATION OF BUYER
The obligation of the Buyer to consummate the transactions to be
performed by it in connection with the Closing is subject to satisfaction of the
following conditions:
SECTION 7.1. Representations and Warranties True as of Closing Date. The
representations and warranties set forth in Article III shall have been
accurate, true and correct in all material respects on and as of the date of
this Agreement, and shall also be accurate, true and correct in all material
respects on and as of the Closing Date with the same force and effect as though
made on and as of the Closing Date except for any breach that would not
reasonably be expected to have a Material Adverse Effect.
SECTION 7.2. Compliance by Seller. Sellers shall have performed and
complied with all of the covenants, agreements and conditions contained herein
in all material respects on or prior to the Closing.
SECTION 7.3. Sale Order. The Sale Order shall have become a Final Order.
38
SECTION 7.4. No Injunction; Etc. No action, proceeding, investigation,
regulation, or legislation shall be pending or threatened which seeks to enjoin,
restrain, or prohibit Buyer, or to obtain substantial damages from Buyer, in
respect of the consummation of the transactions contemplated hereby, or which
seeks to enjoin the operation of all or a material portion of the Business
which, in the reasonable judgment of Buyer, would make it inadvisable to
consummate the transactions contemplated by this Agreement.
SECTION 7.5. Certificate. Seller shall have delivered to the Buyer a
certificate to the effect that each of the conditions specified above in
Sections 7.1-7.2 is satisfied in all respects.
SECTION 7.6. Financing. [INTENTIONALLY OMITTED]
SECTION 7.7. FIRPTA Certificate. The Buyer shall have received from the
Seller and any other Seller that is a "United States person" within the meaning
of Section 7701(a)(30) of the Code a duly executed certificate in the form
specified by Treasury Regulation Section 1.1445-2(b)(2).
SECTION 7.8. No Material Adverse Effect. Since the date of this
Agreement, no event has occurred which would reasonably be expected to have a
Material Adverse Effect.
SECTION 7.9. Documents. All actions to be taken by Seller in connection
with consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to the
Buyer.
SECTION 7.10. Transaction Documents. Seller and Buyer shall have entered
into the Transaction Documents, and the Transaction Documents shall be in full
force and effect, subject only, in the case of Transaction Documents which by
their terms are to take effect as of the Closing, to the occurrence of the
Closing.
SECTION 7.11. [INTENTIONALLY OMITTED]
SECTION 7.12. Release of Liens. Seller shall have caused all Liens on
the Purchased Assets to be discharged and extinguished to the fullest extent
permissible under Section 363(f) of the Bankruptcy Code and shall cause its
lenders to deliver a release letter on the Closing Date of Liens on all such
assets in form and substance satisfactory to Buyer.
SECTION 7.13. Modification of Assumed Liabilities. Seller shall not have
modified, amended or otherwise altered in any material respect the terms or
provisions of the Assumed Liabilities except to the extent ordered by the
Bankruptcy Court and consented to by Buyer.
SECTION 7.14. Foreign Purchased Assets. Seller shall execute and
deliver, or cause its non-U.S. subsidiaries that are not debtors in the Chapter
11 Cases to execute and deliver, a Xxxx of Sale, dated the Closing Date or a
date prior thereto, to convey any Purchased Assets owned by such non-U.S.
subsidiaries of Seller to Buyer (or Buyer's designated Affiliate) on the Closing
Date.
39
SECTION 7.15. Sale Approved; Assumption and Assignment of Contracts. The
sale of the Purchased Assets by the Sellers to the Buyer and the assumption and
assignment by the Sellers of the Designated Contracts as contemplated by this
Agreement shall have been approved by the Bankruptcy Court pursuant to the Sale
Order, and such Sale Order as of the Closing Date shall be in full force and
effect, and not stayed, modified, vacated, amended or revoked.
SECTION 7.16. Antitrust Clearance. As of the Closing, the Sellers shall
have taken, or caused to be taken, all actions, if any, and done, or caused to
be done, all things, if any, necessary, proper or advisable to comply with all
requirements of the HSR Act, and all waiting periods, if any, under the HSR Act
shall have expired.
ARTICLE VIII
CONDITIONS TO OBLIGATION OF SELLER
The obligation of Seller to consummate the transactions to be performed
by them in connection with the Closing is subject to satisfaction of the
following conditions:
SECTION 8.1. Representations and Warranties True as of Closing. The
representations and warranties set forth in Article IV shall have been accurate,
true and correct in all material respects on and as of the date of this
Agreement, and shall also be accurate, true and correct in all material respects
on and as of the Closing Date with the same force and effect as though made on
and as of the Closing Date except for any breach that would not reasonably be
expected to have a material adverse effect on Buyer's ability to perform its
obligations hereunder.
SECTION 8.2. Compliance with Covenants. The Buyer shall have performed
and complied with all of its covenants hereunder in all material respects
through the Closing.
SECTION 8.3. Actions or Proceedings. No action, suit, or proceeding
shall be pending before any court or quasi-judicial or administrative agency of
any federal, state, local, or foreign jurisdiction wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would (A) prevent
consummation of any of the transactions contemplated by this Agreement or (B)
cause any of the transactions contemplated by this Agreement to be rescinded
following consummation (and no such injunction, judgment, order, decree, ruling,
or charge shall be in effect).
SECTION 8.4. Certificate. The Buyer shall have delivered to Seller a
certificate to the effect that each of the conditions specified above in
Sections 8.1 - 8.2 is satisfied in all respects.
SECTION 8.5. Documents. All actions to be taken by the Buyer in
connection with the consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to effect the
transactions contemplated hereby will be reasonably satisfactory in form and
substance to Seller.
SECTION 8.6. Transaction Documents. Sellers and the Buyer shall have
entered into the Transaction Documents.
40
SECTION 8.7. [INTENTIONALLY OMITTED]
SECTION 8.8. Sale Order. The Sale Order shall have become a Final Order,
provided, however, that this Section 8.8 shall not continue to be a condition to
the Seller's obligation to proceed with the Closing if the Buyer waives Section
7.3 as a condition to close.
SECTION 8.9. Antitrust Clearance. As of the Closing, the Buyer shall
have taken, or caused to be taken, all actions, if any, and done, or caused to
be done, all things, if any, necessary, proper or advisable to comply with all
requirements of the HSR Act and all waiting periods, if any, under the HSR Act
shall have expired.
ARTICLE IX
SURVIVAL AND REMEDY; INDEMNIFICATION
SECTION 9.1. Survival of Representations and Warranties. All of the
terms and conditions of this Agreement, together with the warranties,
representations, agreements and covenants contained herein or in any Transaction
Documents or closing document contemplated hereby or thereby shall survive the
execution of this Agreement and the Closing Date; provided, however, that unless
otherwise stated, the agreements and covenants set forth in this Agreement shall
survive and continue until all obligations set forth therein shall have been
performed and satisfied. Notwithstanding the foregoing, (a) the representations
and warranties contained in Sections 3.3 [Title to Purchased Assets] of this
Agreement shall survive the Closing and continue in full force and effect until
the expiration of the statute of limitations applicable thereto; (b) the
representations and warranties of Seller contained in Sections 3.4 [Authority]
and 3.10 [Taxes] shall survive the Closing and continue in full force and effect
until the expiration of the applicable statute of limitations (including any
extensions or waivers thereof); and (c) all other representations and
warranties, and the related agreements of Seller, the Company and the Buyer to
indemnify each other set forth in this Article IX, shall survive and continue
for, and all indemnification claims with respect thereto shall be made prior to
the end of, twelve (12) months from the Closing Date, except for
representations, warranties and related indemnities for which an indemnification
claim shall be pending as of the end of the applicable period referred to above,
in which event such indemnities shall survive with respect to such
indemnification claim until the final disposition thereof (the "Indemnification
Period").
SECTION 9.2. Indemnification by Seller.
(a) In the event that, during the Indemnification Period there is (i) a
breach of any of the representations or warranties made by, or any breach of or
failure to perform any covenant, agreement or obligation of, the Company or
Seller in this Agreement, any Transaction Document or closing document
contemplated hereby or thereby, (ii) any Liabilities other than Assumed
Liabilities, Adverse Consequences or remediation, clean-up or similar
obligations or costs under Environmental Laws and relating to the Business and
activities or the ownership, operation or lease by the Company of facilities in
respect of any periods prior to the Closing, (iii) any demands, assessments,
judgments, costs and reasonable legal and other expenses or other
41
Adverse Consequences arising from, or in connection with, Employee Benefit Plans
of Seller or the Company, or (iv) any demands, assessments, judgments, costs and
reasonable legal and other expenses or other Adverse Consequences arising from,
or in connection with, any Liabilities of Sellers other than Assumed
Liabilities, (v) any demands, assessments, judgments, costs and reasonable legal
and other expenses or other Adverse Consequences arising from, or in connection
with, any investigation, action, suit, proceeding or other claim incident to any
of the foregoing and, if there is an applicable survival period pursuant to
Section 9.1, then, in each case, provided that the Buyer makes a written claim
for indemnification against the Seller within such survival period, the Sellers
(the "Seller Indemnifying Parties") agree (subject to the limitations set forth
in this Section 9.2) to, jointly and severally, indemnify the Buyer and its
Affiliates, directors, officers. employees, stockholders, representatives and
agents (collectively the "Buyer Indemnified Parties") from and against the
entirety of any Adverse Consequences the Buyer Indemnified Parties may suffer
through and after the date of the claim for indemnification (including any
Adverse Consequences the Buyer Indemnified Parties may suffer through and after
the end of the applicable survival period) resulting from, arising out of,
relating to, in the nature of, or caused by any breach of the foregoing;
provided, however, that (A) except for breaches of the representations and
warranties contained in Sections 3.10 [Taxes] and 3.21 [Environmental] of this
Agreement, the Seller Indemnifying Parties shall not have any obligation to
indemnify the Buyer Indemnified Parties from and against any Adverse
Consequences resulting from, arising out of, relating to, in the nature of, or
caused by any breach (or alleged breach) by the Sellers until the Buyer
Indemnified Parties have suffered Adverse Consequences by reason of all such
breaches in excess of a $200,000 aggregate threshold (at which point the Seller
Indemnifying Parties will be obligated to indemnify the Buyer Indemnified
Parties from and against all such Adverse Consequences which exceed $100,000)
subject to Section 9.6.
(b) Subject to the provisions of Section 9.2(a) (including any
applicable threshold and ceiling provisions), the Sellers and the Polaroid
Seller Entities agree to indemnify the Buyer, jointly and severally, from and
against the entirety of any Adverse Consequences the Buyer may suffer resulting
from, arising out of, relating to, in the nature of, or caused by any Liability
of the Company (x) for any Taxes of the Company and any entities owned by or
affiliated with the Company with respect to any Tax year or portion thereof
ending on or before the Closing Date (or for any Tax period beginning before and
ending after the Closing Date to the extent allocable (determined in a manner
consistent with Section 9.3) to the portion of such period beginning before and
ending on the Closing Date), to the extent such Taxes are not reflected in the
reserve for Tax Liability (rather than any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) shown on
the face of the Latest Balance Sheet, except as otherwise agreed in this
Agreement, or (y) for the unpaid Taxes of any Person (other than the Company)
under Reg. Section 1.1502-6 (or any similar provision of state, local, or
foreign Law), as a transferee or successor, by Contract, or otherwise.
(c) Except with respect to Liabilities and/or Adverse Consequences
involving fraud or willful misconduct, in no event shall any indemnification for
Liabilities and/or Adverse Consequences pursuant to this Section 9.2 include
consequential, indirect, punitive, special or non-compensating demises of any
kind and shall only include actual Liability and/or Adverse Consequences.
42
SECTION 9.3. Indemnification by the Buyer.
(a) Provided that Seller makes a written claim for indemnification
against the Buyer within the survival period set forth in Section 9.1, the Buyer
(the "Buyer Indemnifying Parties") agrees to indemnify Seller and its
Affiliates, directors, officers, employees, stockholders, representatives and
agents (collectively, the "Seller Indemnified Parties") against, and agrees to
hold it harmless from, any and all Adverse Consequences Seller may suffer
through and after the date of the claim for indemnification (including any
Adverse Consequences Seller may suffer through and after the end of the
applicable survival period) resulting from, arising out of, relating to, in the
nature of, or caused by (i) any breach of or any inaccuracy in any
representation or warranty made by the Buyer pursuant to this Agreement, any
agreement, or instrument contemplated hereby, any document relating hereto or
thereto or contained in any exhibit or Schedule to this Agreement; (ii) any
breach of or failure by the Buyer to perform any agreement, covenant or
obligation of the Buyer set out in this Agreement, any agreement, or instrument
contemplated hereby, any document relating hereto or thereto or contained in any
exhibit or Schedule to this Agreement; (iii) any Assumed Liabilities; (iv)
Liabilities or other obligations expressly assumed by the Buyer pursuant to this
Agreement, the Transaction Documents or any closing documents; and (v)
Liabilities or other obligations arising after the Closing Date relating to the
Business, and/or the Purchased Assets.
(b) With regard to Contracts with the State of New Hampshire and the
State of Oregon, should either of such Contracts not be assumed by the Buyer,
the Buyer agrees to indemnify and hold the Sellers harmless for all costs, if
any, the Sellers would not otherwise have incurred in connection with the
maintenance of such Contracts from the date upon which the Sale Order is entered
through the date such Contracts are deemed "Excluded Assets" pursuant to the
terms of Section 2.8.
(c) With regard to any maintenance costs (including any pro rata
premiums) associated with, or any draws made on, the performance bonds of the
Sellers, if any, in a jurisdiction in which (i) the Buyer has assumed Customer
Contracts, (ii) the Buyer is required by such jurisdiction to maintain
performance bonds and (iii) such maintenance costs (including any pro rata
premiums) or draws arise after the Closing Date, the Buyer shall indemnify and
hold the Sellers harmless for all such maintenance costs (including any pro rata
premiums) and draws, provided that such draws relate to the breach of the
Buyer's obligations after the Closing with regard to the Customer Contracts
pursuant to which such performance bonds were secured by the Sellers in such
jurisdiction, and provided that such maintenance costs (including any pro rata
premiums) relate to the maintenance of a performance bond after the Closing and
prior to the date upon which the Buyer has procured a replacement bond.
(d) To the extent the Buyer is performing Customer Contracts included in
the Escrowed Assets on behalf of the Sellers or other Polaroid Seller Entities,
as applicable, the Buyer shall indemnify and hold harmless the Sellers and other
Polaroid Seller Entities, as applicable, for any or all of their obligations
arising under such Customer Contracts in the period from the Closing Date
through and including the Purchaser Election Date.
SECTION 9.4. Third-Party Claims.
43
(a) If any third party shall notify any party (the "Indemnified Party")
with respect to any matter (a "Third Party Claim") which may give rise to a
claim for indemnification against any other party (the "Indemnifying Party")
under this Article IX, then the Indemnified Party shall promptly notify each
Indemnifying Party thereof in writing; provided, however, that no delay on the
part of the Indemnified Party in notifying any Indemnifying Party shall relieve
the Indemnifying Party from any obligation hereunder unless (and then solely to
the extent) the Indemnifying Party thereby is prejudiced.
(b) Any Indemnifying Party will have the right to defend the Indemnified
Party against the Third Party Claim with counsel of its choice reasonably
satisfactory to the Indemnified Party so long as (A) the Indemnifying Party
notifies the Indemnified Party in writing within 15 days after the Indemnified
Party has given notice of the Third Party Claim that the Indemnifying Party will
indemnify the Indemnified Party from and against the entirety of any Adverse
Consequences the Indemnified Party may suffer resulting from, arising out of,
relating to, in the nature of, or caused by the Third Party Claim, (B) the
Indemnifying Party provides the Indemnified Party with evidence reasonably
acceptable to the Indemnified Party that the Indemnifying Party will have the
financial resources to defend against the Third Party Claim and fulfill its
indemnification obligations hereunder, (C) the Third Party Claim involves only
money damages and does not seek an injunction or other equitable relief, (D)
settlement of, or an adverse judgment with respect to, the Third Party Claim is
not, in the good faith judgment of the Indemnified Party, likely to establish a
precedential custom or practice materially adverse to the continuing business
interests of the Indemnified Party, and (E) the Indemnifying Party conducts the
defense of the Third Party Claim actively and diligently.
(c) So long as the Indemnifying Party is conducting the defense of the
Third Party Claim in accordance with Section 9.4(b) above, (A) the Indemnified
Party may retain separate co-counsel at its sole cost and expense and
participate in the defense of the Third Party Claim, (B) the Indemnified Party
will not consent to the entry of any judgment or enter into any settlement with
respect to the Third Party Claim without the prior written consent of the
Indemnifying Party (not to be withheld unreasonably), and (C) the Indemnifying
Party will not consent to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim without the prior written consent of the
Indemnified Party (not to be withheld unreasonably).
(d) In the event any of the conditions in Section 9.4(b) above is or
becomes unsatisfied in the reasonable judgment of the Indemnified Party,
however, (A) the Indemnified Party may defend against, and consent to the entry
of any judgment or enter into any settlement with respect to, the Third Party
Claim in any manner it reasonably may deem appropriate (and the Indemnified
Party need not consult with, or obtain any consent from, any Indemnifying Party
in connection therewith), (B) the Indemnifying Parties will reimburse the
Indemnified Party promptly and periodically for the reasonable costs of
defending against the Third Party Claim (including attorneys' fees and
expenses), and (C) the Indemnifying Parties will remain responsible for any
Adverse Consequences the Indemnified Party may suffer resulting from, arising
out of, relating to, in the nature of, or caused by the Third Party Claim to the
fullest extent provided in this Article IX.
44
SECTION 9.5. Other Indemnification Provisions.
(a) The indemnification provisions set forth in this Article IX are the
sole and exclusive remedy of a Buyer Indemnified Party and a Seller Indemnified
Party resulting from, arising out of, relating to, in the nature of, or caused
by any breach of any of the matters for which such person may seek
indemnification pursuant to this Article IX (notwithstanding any provision to
the contrary, or inconsistent with the foregoing, contained in any Transaction
Document); provided, however, the liability of any party under this Article IX
shall be in addition to, and not exclusive of any other liability that such
party may have at law or equity based on a party's fraudulent acts or omissions.
None of the provisions of this Agreement shall be deemed a waiver of any
defenses which may be available in respect of actions or claims for fraud,
including but not limited to, defenses of statutes of limitations or limitations
of damages.
(b) Indemnification claims shall be reduced, by and to the extent, that
an Indemnified Party shall be entitled to receive proceeds under insurance
policies, risk sharing pools, or similar arrangements specifically as a result
of, and in compensation for, the subject matter of an indemnification claim by
such Indemnified Party, net of any increased premiums or similar costs arising
out of the making of such claims against such arrangements; provided, however,
that indemnification claims shall not be reduced by Tax benefits, if any.
SECTION 9.6. Escrow/Maximum Recovery. Buyer agrees that to the fullest
extent permitted by Law, after the Closing and with respect to any amounts owed
by the Seller Indemnifying Parties pursuant to this Article IX, such amounts
will be satisfied only out of an escrow amount which is zero dollars ($0.00).
Such escrow amount shall be the Buyer's sole and exclusive remedy against the
Seller Indemnifying Parties for amounts owed pursuant to this Article IX and the
Seller Indemnifying Parties' aggregate liability hereunder shall not exceed such
escrow amount, provided, however, that amounts owed hereunder from the Seller
Indemnified Parties for claims of fraud and claims under Sections 3.3 [Title to
Purchased Assets] shall not be subject to the foregoing cap on recovery. The
parties hereby agree that the terms of this Section 9.6 shall not prevent the
Buyer from exercising any and all rights the Buyer has to equitable remedies and
injunctive relief against the Sellers.
ARTICLE X
TAX MATTERS
SECTION 10.1. Tax Matters. The following provisions shall govern the
allocation of responsibility as between Buyer and Seller for certain tax matters
following the Closing Date:
SECTION 10.2. Proration of Taxes. Liability for all real property taxes,
personal property taxes and similar ad valorem obligations levied with respect
to the Purchased Assets for a taxable period which includes (but does not end
on) the Closing Date (the "Apportioned Obligations") shall be apportioned
between the Sellers and the Buyer based on the number of days of such taxable
period included in the period ending on the Closing Date (the "Pre-Closing Tax
Period") and the number of days of such taxable period included in the period
after the Pre-
45
Closing Tax Period (the "Post-Closing Tax Period"). The Sellers shall be liable
for the proportionate amount of such Apportioned Obligations that is
attributable to the Pre-Closing Tax Period. The Buyer shall be liable for the
proportionate amount of such Apportioned Obligations that is attributable to the
Post-Closing Tax Period.
SECTION 10.3. Tax Periods Beginning Before and Ending After the Closing
Date. The Buyer shall prepare or cause to be prepared and file or cause to be
filed any Tax Returns relating to the Purchased Assets for Tax periods which
begin before the Closing Date and end after the Closing Date. The Buyer shall
permit the Sellers to review and comment on each such Tax Return described in
the preceding sentence prior to filing for no more than five (5) business days.
The Buyer and the Sellers shall attempt in good faith to resolve any
disagreements regarding such Tax Returns; provided, however, that the final
decision regarding any such Tax Return shall rest with the Buyer. The Sellers
shall pay to the Buyer within fifteen (15) days before the date on which Taxes
are due with respect to such periods an amount equal to the portion of such
Taxes that is attributable to the Pre-Closing Tax Period. The Buyer shall pay to
the Sellers the amount, if any, by which Taxes prepaid by the Sellers exceed the
portion of such Taxes that is attributable to the Pre-Closing Tax Period. For
purposes of this Section 10.3, in the case of any Taxes that are imposed on a
periodic basis and are payable for a Tax period that includes (but does not end
on) the Closing Date, the portion of such Tax that is attributable to the
Pre-Closing Tax Period shall be deemed to be the amount of such Tax for the
entire Tax period multiplied by a fraction the numerator of which is the number
of days in the Pre-Closing Tax Period and the denominator of which is the number
of days in the entire Tax period. Any credits relating to a Tax period that
begins before and ends after the Closing Date shall be taken into account as
though the relevant Tax period ended on the Closing Date. All determinations
necessary to give effect to the foregoing allocations shall be made in a manner
consistent with prior practice of the Company.
SECTION 10.4. Allocation of Purchase Price to Purchased Assets
Transferred on or after the Closing Date. The Buyer and the Sellers agree to
allocate the Purchase Price (including the amount of Assumed Liabilities and all
other capitalizable costs) among the Purchased Assets for all purposes
(including financial accounting and tax purposes) in accordance with the
allocation schedule attached as Schedule 10.4, which allocation shall be
prepared by the Buyer within 60 days after the Closing Date. The Buyer and the
Sellers, in connection with their respective U.S. federal, state and local Tax
Returns and other filings (including without limitation IRS Form 8594), shall
not take any position inconsistent with such treatment and allocation. Any
adjustment to the Purchase Price shall be allocated as provided in Treas.
Regulation Section 1.1060-1(c).
SECTION 10.5. Cooperation on Tax Matters.
(a) The Buyer and the Sellers shall cooperate fully, as and to the
extent reasonably requested by the other party, in connection with the filing of
Tax Returns and the application for Tax credits pursuant to this Article X and
any audit, litigation or other proceeding with respect to Taxes relating to the
Purchased Assets. Such cooperation shall include the retention and (upon the
other party's request) the provision of records and information relating to the
Purchased Assets which are reasonably relevant to any such audit, litigation or
other proceeding relating to the Purchased Assets and making employees available
on a mutually convenient basis to provide
46
additional information and explanation of any material provided hereunder. The
Buyer and the Sellers agree (A) to retain all books and records with respect to
Tax matters pertinent to the Purchased Assets relating to any taxable period
beginning before the Closing Date until the expiration of the statute of
limitations (and, to the extent notified by the Buyer or the Sellers, any
extensions thereof) of the respective taxable periods, and to abide by all
record retention agreements entered into with any taxing Authority, and (B) to
give the other party reasonable written notice prior to transferring, destroying
or discarding any such books and records and, if the other party so requests,
the Buyer or the Sellers, as the case may be, shall allow the other party to
take possession of such books and records.
(b) The Buyer and the Sellers further agree, upon request, to use their
reasonable efforts to obtain any certificate or other document from any
governmental Authority or any other Person as may be necessary to mitigate,
reduce or eliminate any Tax relating to the Purchased Assets that could be
imposed (including, but not limited to, with respect to the transactions
contemplated hereby); provided, however, that no party shall be required to take
any action which would reasonably be expected to have an adverse effect on such
party.
ARTICLE XI
TERMINATION
SECTION 11.1. Termination of Agreement. Subject to the terms of the Bid
Requirements included in Exhibit 2 to the Order Approving (A) Bidding Procedures
In Connection With The Sale Of Substantially All Of The Assets Of The Debtors'
I.D. Business and (B) Termination Fee In Connection Therewith, dated November
19, 2001, certain of the parties may terminate this Agreement as provided below:
(a) the Buyer and Seller may terminate this Agreement by mutual written
consent at any time prior to the Closing;
(b) the Buyer may terminate this Agreement by giving written notice to
Seller at any time prior to the Closing in the event any Seller has breached any
material representation, warranty or material covenant contained in this
Agreement in a manner such that the conditions to closing set forth in Section
7.1 or 7.2 could not be satisfied;
(c) Buyer or Seller may terminate this Agreement upon five business days
notice in the event that any event, circumstance or change occurs or exists such
that the conditions to the other's obligations to Closing set forth in Article
VII and Article VIII, respectively, would not be satisfied as of the Closing
Date unless the other party whose obligations to close are subject to such
closing condition has waived compliance therewith; provided, however, that
neither Buyer nor Seller shall be entitled to terminate the Agreement pursuant
to this Section 11(1)(c) if the event, circumstance or change rendering the
closing condition at issue incapable of being satisfied results from such
party's breach of its obligations hereunder;
47
(d) Seller may terminate this Agreement by giving written notice to the
Buyer at any time prior to the Closing in the event that the Buyer has breached
any material representation, warranty, or covenant contained in this Agreement
in a manner such that the conditions to closing set forth in Section 8.1 or 8.2
could not be satisfied;
(e) the Buyer may terminate this Agreement by giving written notice to
Seller at any time prior to the Closing in the event Seller or the Company
supplement or amend the Schedules with facts or circumstances that would
reasonably be expected to have a Material Adverse Effect;
(f) [INTENTIONALLY OMITTED];
(g) [INTENTIONALLY OMITTED];
(h) [INTENTIONALLY OMITTED];
(i) [INTENTIONALLY OMITTED];
(j) the Buyer may terminate this Agreement by giving written notice to
Seller at any time prior to the Closing in the event Seller has filed or
supported a plan of liquidation relating to Seller that seeks to transfer or
dispose of the Purchased Assets;
(k) the Buyer may terminate this Agreement by giving written notice to
Seller at any time prior to the Closing in the event Seller's Chapter 11 is
converted to a case under chapter 7 of the Bankruptcy Code;
(l) [INTENTIONALLY OMITTED]; or
(m) the Seller may terminate this Agreement if, by January 15, 2002 (the
"Applicable Due Date"), all waiting periods, if any, under the HSR Act shall not
have expired; provided, however, that if Buyer notifies the Seller at any time
that it is prepared to make a filing or other complete submission in response to
requests for additional information under the HSR Act as of a particular date
certain (the "Applicable Filing Date"), and should the Seller be unable to make
its corresponding filing or other complete submission in response to requests
for additional information under the HSR Act as of the Applicable Filing Date,
then for each day from and including such Applicable Filing Date through and
including the date upon which the Seller in fact makes its filing or other
complete submission in response to requests for additional information under the
HSR Act, the Applicable Due Date shall be extended by an equal number of days
and the right of the Seller to terminate this Agreement under this Section
11.1(m) shall be extended accordingly; provided, however, that the Applicable
Due Date shall not be extended merely as a result of the receipt by the Buyer or
the Sellers of a second request for additional information under the HSR Act.
SECTION 11.2. Effect of Termination. If any party terminates this
Agreement pursuant to Section 11.1 above, all rights and obligations of the
parties hereunder shall terminate other than those set forth in Sections 5.10
[Confidentiality] and 12.1 [Expenses], without any Liability of any party to any
other party (except for any Liability of any party then in breach).
48
ARTICLE XII
MISCELLANEOUS
SECTION 12.1. Expenses.
(a) Except as otherwise provided herein, each party will bear his or its
own costs and expenses (including legal fees and expenses or expenses of other
representatives and consultants) incurred in connection with this Agreement
other than as specifically set forth herein and the transactions contemplated
hereby (whether consummated or not). Buyer shall pay all Transfer Taxes arising
as a result of the transactions contemplated hereby relating to the Purchased
Assets, not to exceed $1,350,000, for which the Buyer does not obtain relief
under Section 1146(c) of the Bankruptcy Code and Seller shall pay all such
Transfer Taxes in excess of $1.35 million; provided, however, that Sellers shall
request from the Bankruptcy Court relief from all transfer and stamp taxes to
the extent permitted by Section 1146(c) of the Bankruptcy Code.
(b) In the event that this Agreement is rightfully terminated by Seller
pursuant to 11.1(d) or 11.1(m), then Buyer shall forfeit to the Seller the Good
Faith Deposit. In the event this Agreement is terminated by Buyer (x) as a
result of a material breach by Seller of its obligations, representations,
warranties or other agreements hereunder in a manner such that the conditions to
closing set forth in Sections 7.1 or 7.2 could not be satisfied or (y) pursuant
to Sections 11.1(j) or 11.1(k), then, in each such case, Seller shall return to
Buyer promptly, but in no event more than two business days following the date
of the termination event, by wire transfer of immediately available funds, to
such account as Buyer shall designate, all of Buyer's actual reasonable
expenses, not to exceed $960,000, based on reasonably detailed documentation
incurred by it in connection with the transactions contemplated by this
Agreement. In the event this Agreement is terminated by Buyer pursuant to
Sections 11.1(a), 11.1(b), 11.1(c), 11.1(e), 11.1(j) or 11.1(k) or by Seller
pursuant to Sections 11.1(a) or 11.1(c), then, in each such case, Seller shall
return to Buyer promptly, but in no event more than two business days following
the date of the termination event, by wire transfer of immediately available
funds, to such account as Buyer shall designate, the Good Faith Deposit,
including all interest accrued with regard to such amount.
SECTION 12.2. Press Releases and Public Announcements. Prior to the
Closing, no party shall issue any press release or make any public announcement
relating to the subject matter of this Agreement without the prior written
approval of the Buyer and Seller; provided, however, that any party may make any
public disclosure it believes in good faith is required by applicable Law or any
listing or trading agreement concerning its publicly-traded securities (in which
case the disclosing party will use its best efforts to advise the other parties
prior to making the disclosure).
SECTION 12.3. No Third-Party Beneficiaries. Subject to the provisions of
Section 12.5, this Agreement shall not confer any rights or remedies upon any
Person other than the parties and their respective successors and permitted
assigns.
SECTION 12.4. Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the parties and
supersedes any prior
49
understandings, agreements, or representations by or among the parties, written
or oral, to the extent they related in any way to the subject matter hereof.
SECTION 12.5. Succession and Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties named herein and their respective
successors and assigns. The parties may assign this Agreement or any of the
rights, interests, or obligations hereunder without the prior written approval
of the other parties; provided, however, that such assignment by the Buyer shall
not relieve the Buyer thereupon of its obligations under this Agreement and,
provided, further, that, upon the request of the Seller, the Buyer shall provide
a guarantee of the obligations of any assignee of the Buyer.
SECTION 12.6. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
SECTION 12.7. Headings. The section headings contained in this Agreement
are inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 12.8. Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
(a) If to Seller, addressed as follows:
Polaroid Corporation
000 Xxxxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xx. Xxxxxx Xxxxxxxxxx
Facsimile No.: (000) 000-0000
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
Xxx Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx
Facsimile No.: (000) 000-0000
50
and
Xxxxxx & Xxxxxxxxxx LLP
Xxxxx Xxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Attention: Xxxx X. Xxxxxx
Facsimile No.: (000) 000-0000
(b) If to the Buyer, addressed as follows:
Digimarc Corporation
00000 XX 00xx Xxx., Xxxxx 000
Xxxxxxxx, Xxxxxx 00000
Attention: Xxxxx Xxxxx
Telecopy No.: (000) 000-0000
with a copy to:
Xxxxxxxx & Xxxxxxxx LLP
000 Xxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxxx
Telecopy No.: (000) 000-0000
Any party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, ordinary mail, or electronic mail), but no such notice, request,
demand, claim, or other communication shall be deemed to have been duly given
unless and until it actually is received by the intended recipient. Any party
may change the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other parties notice
in the manner herein set forth.
SECTION 12.9. Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic Laws of the State of New York without
giving effect to any choice or conflict of Law provision or rule that would
cause the application of the Laws of any jurisdiction other than the State of
New York.
SECTION 12.10. Amendments and Waivers. No amendment of any provision of
this Agreement shall be valid unless the same shall be in writing and signed by
the Buyer and Seller. No waiver by any party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
SECTION 12.11. Severability. Any term or provision of this Agreement
that is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability
51
of the remaining terms and provisions hereof or the validity or enforceability
of the offending term or provision in any other situation or in any other
jurisdiction.
SECTION 12.12. Construction. The parties have participated jointly in
the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or Law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation.
SECTION 12.13. Incorporation of Exhibits, Annexes, and Schedules. The
Exhibits, Annexes, and Schedules identified in this Agreement are incorporated
herein by reference and made a part hereof.
SECTION 12.14. Submission to Jurisdiction. Each of the parties submits
to the jurisdiction of any state or federal court sitting in New York, New York
in any action or proceeding arising out of or relating to this Agreement and
agrees that all claims in respect of the action or proceeding may be heard and
determined in any such court. Each party also agrees not to bring any action or
proceeding arising out of or relating to this Agreement in any other court. Each
of the parties waives any defense of inconvenient forum to the maintenance of
any action or proceeding so brought and waives any bond, surety, or other
security that might be required of any other party with respect thereto. Any
party may make service on any other party by sending or delivering a copy of the
process to the Party to be served at the address and in the manner provided for
the giving of notices in Section 12.8 above. Nothing in this Section 12.14,
however, shall affect the right of any party to bring any action or proceeding
arising out of or relating to this Agreement in any other court or to serve
legal process in any other manner permitted by law or at equity. Each party
agrees that a final judgment in any action or proceeding so brought shall be
conclusive and may be enforced by suit on the judgment or in any other manner
provided by law or at equity.
52
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
POLAROID CORPORATION
By: /s/ Xxx Xxxxxx
---------------------------------
Name:
Title:
POLAROID ID SYSTEMS, INC.
By: /s/ Xxxxxx Xxxxxxxxxx
---------------------------------
Name:
Title:
DIGIMARC CORPORATION
By: /s/ Xxxxx Xxxxx
---------------------------------
Name: Xxxxx Xxxxx
Title: CEO
List of Schedules and Exhibits to the Asset Purchase Agreement
1. Form of Assignment and Assumption Agreement
2. Form of Xxxx of Sale
3. Form of Second Escrow Agreement
4. Form of Escrowed Assignment Agreements
5. Form of Escrow Agreement
6. Form of Intellectual Property Assignment and License Agreement
7. Form of Shared Services Agreement
8. Form of Transition Services Agreement
9. Sale Procedures Order
10. Sale Order
11. Form of ID Products Supply Agreement
12. Disclosure Schedule
