ASSET PURCHASE AGREEMENT Between DG SYSTEMS ACQUISITION CORPORATION and APPLIED GRAPHICS TECHNOLOGIES, INC. Dated as of May 12, 2004
Exhibit 2.1
Asset Purchase Agreement between DG Systems Acquisition Corporation and Applied Graphics Technologies, Inc., dated as of May 12, 2004
Execution Copy
Between
DG SYSTEMS ACQUISITION CORPORATION
and
APPLIED GRAPHICS TECHNOLOGIES, INC.
Dated as of May 12, 2004
TABLE OF CONTENTS
1. | DEFINITIONS; CERTAIN RULES OF CONSTRUCTION. | 1 | ||||
2. | ACQUISITION OF ASSETS BY BUYER. | 6 | ||||
2.1. | Purchase and Sale of Assets | 6 | ||||
2.2. | Excluded Assets | 7 | ||||
2.3. | Assumption of Liabilities | 8 | ||||
2.4. | Liabilities Not Assumed | 8 | ||||
2.5. | Purchase Price | 9 | ||||
2.6. | The Closing | 9 | ||||
2.7. | Deliveries at the Closing | 9 | ||||
2.8. | Allocation of Purchase Price | 10 | ||||
2.9. | Post-Closing Working Capital Adjustment. | 10 | ||||
3. | REPRESENTATIONS AND WARRANTIES OF THE SELLER | 10 | ||||
3.1. | Organization of the Seller | 10 | ||||
3.2. | Authorization of Transaction | 10 | ||||
3.3. | Noncontravention | 11 | ||||
3.4. | Brokers’ Fees | 11 | ||||
3.5. | Financial Statements | 11 | ||||
3.6. | Title to Assets | 11 | ||||
3.7. | Legal and Other Compliance | 11 | ||||
3.8. | Taxes. | 11 | ||||
3.9. | Property, Plant and Equipment | 12 | ||||
3.10. | Intellectual Property. | 12 | ||||
3.11. | Contracts | 13 | ||||
3.12. | Litigation | 13 | ||||
3.13. | Environmental Matters | 13 | ||||
3.14. | Affiliated Transactions | 14 | ||||
3.15. | Distributors, Customers, Suppliers | 14 | ||||
3.16. | Accounts Receivable | 14 | ||||
3.17. | No Material Adverse Change | 14 | ||||
3.18. | Employee Benefits | 14 | ||||
3.19. | Employment | 15 | ||||
3.20. | Undisclosed Liabilities | 15 | ||||
3.21. | Disclaimer of other Representations and Warranties | 15 | ||||
4. | REPRESENTATIONS AND WARRANTIES OF THE BUYER | 15 | ||||
4.1. | Organization of the Buyer | 15 | ||||
4.2. | Authority for Agreement | 16 | ||||
4.3. | Noncontravention | 16 | ||||
4.4. | Brokers’ Fees | 16 | ||||
4.5. | Financing | 16 | ||||
5. | PRE-CLOSING COVENANTS | 16 | ||||
5.1. | General | 16 | ||||
5.2. | Notices and Consents | 16 | ||||
5.3. | Operation of Business | 17 | ||||
5.4. | Full Access | 17 | ||||
5.5. | Notice of Developments | 17 |
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5.6. | AGT/GM Contract | 17 | ||||
5.7. | Exclusivity | 17 | ||||
6. | CONDITIONS TO OBLIGATION TO CLOSE. | 18 | ||||
6.1. | Conditions to Obligation of the Buyer | 18 | ||||
6.2. | Conditions to Obligations of the Seller | 19 | ||||
7. | POST CLOSING COVENANTS. | 19 | ||||
7.1. | Noncompetition | 19 | ||||
7.2. | Access to Records | 20 | ||||
7.3. | Payment Received | 20 | ||||
7.4. | Transferred Employees. | 20 | ||||
7.5. | Revocable License to use AGT Trademarks | 21 | ||||
7.6. | Future Assurances | 22 | ||||
8. | INDEMNIFICATION. | 22 | ||||
8.1. | Indemnity by Seller | 22 | ||||
8.2. | Indemnity by Buyer | 22 | ||||
8.3. | Matters Involving Third Parties. | 23 | ||||
8.4. | Time for Claims | 23 | ||||
8.5. | Limitation on Amount – Seller | 24 | ||||
8.6. | Limitation of Amount – Buyer | 24 | ||||
8.7. | Adjustment | 24 | ||||
8.8. | Exclusive Remedy | 24 | ||||
9. | TERMINATION. | 24 | ||||
9.1. | Termination of Agreement | 24 | ||||
9.2. | Effect of Termination | 25 | ||||
10. | MISCELLANEOUS. | 25 | ||||
10.1. | Press Releases and Public Announcements | 25 | ||||
10.2. | Entire Agreement | 25 | ||||
10.3. | Succession and Assignment; No Third-Party Beneficiary | 25 | ||||
10.4. | Counterparts | 26 | ||||
10.5. | Headings | 26 | ||||
10.6. | Notices | 26 | ||||
10.7. | Governing Law | 27 | ||||
10.8. | Amendments and Waivers | 27 | ||||
10.9. | Severability | 27 | ||||
10.10. | Expenses | 28 | ||||
10.11. | Construction | 28 | ||||
10.12. | Incorporation of Schedules | 28 | ||||
10.13. | Bulk Transfer Laws | 28 | ||||
10.14. | Specific Performance | 28 | ||||
10.15. | Jurisdiction | 28 | ||||
10.16. | Venue | 29 | ||||
10.17. | Service of Process | 29 | ||||
10.18. | Waiver of Jury Trial | 29 |
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Schedules
Schedule 2.1(a) | — | Personal Property | ||
Schedule 2.1(b) | — | Acquired Permits | ||
Schedule 2.1(c) | — | Acquired Intellectual Property | ||
Schedule 2.1(e) | — | Leases | ||
Schedule 2.3 | — | Other Assumed Liabilities | ||
Schedule 2.4 | — | Liabilities to Affiliates | ||
Schedule 2.8 | — | Allocation of Purchase Price | ||
Schedule 6.1(c) | — | Material Consents | ||
Schedule 7.4 | — | Transferred Employees | ||
Disclosure Schedule | — | Exceptions to Representations and Warranties | ||
Exhibit A | — | GM Broadcast Services Subcontract Agreement, |
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This Asset Purchase Agreement (the “Agreement”) is entered into on May 12, 2004, by and between DG Systems Acquisition Corporation, a Delaware corporation (the “Buyer”), and Applied Graphics Technologies, Inc., a Delaware corporation (the “Seller”). The Buyer and the Seller are collectively referred to herein as the “Parties.”
This Agreement contemplates a transaction in which the Buyer will purchase the assets (and assume certain of the liabilities associated with those assets) of the Seller used exclusively in its Broadcast Division (the “Business”) in consideration of the Purchase Price (as defined below). The Seller will continue to engage in its businesses other than the Business after the consummation of the transactions contemplated hereby.
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.
1. | DEFINITIONS; CERTAIN RULES OF CONSTRUCTION. |
As used herein, the following terms will have the following meanings:
“Acquired Assets” has the meaning set forth in §2.1.
“Acquired Intellectual Property” has the meaning set forth in §2.1(c).
“Acquired Permits” has the meaning set forth in §2.1(b).
“Action” means any claim, action, cause of action or suit (whether in contract or tort or otherwise), litigation (whether at law or in equity, whether civil or criminal), controversy, assessment, arbitration, investigation, hearing, charge, complaint, demand, notice or proceeding to, from, by or before any Governmental Authority.
“Affiliate” means, as to any specified Person at any time, each Person directly or indirectly controlling, controlled by or under direct or indirect common control with such specified Person at such time.
“Agreement” has the meaning set forth in the preamble.
“AGT Trademarks” has the meaning set forth in §2.2(i).
“Assumed Liabilities” has the meaning set forth in §2.3.
“Basis” means any past or present fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident, action, failure to act or transaction that forms or could reasonably form the basis for any specified consequence.
“Xxxx of Sale” has the meaning set forth in §2.7.
“Business” has the meaning set forth in the preamble.
“Business Day” means any weekday other than a weekday on which banks in New York, New York are authorized or required to be closed.
“Buyer” has the meaning set forth in the preamble.
“Cash” means cash and cash equivalents (including marketable securities and short term investments).
“Closing” has the meaning set forth in §2.6.
“Closing Date” has the meaning set forth in §2.6.
“Code” means the federal Internal Revenue Code of 1986 or any successor statute, and the rules and regulations thereunder, and in the case of any referenced section of any such statute, rule or regulation, any successor section thereto, collectively and as from time to time amended and in effect.
“Commitment Letter” has the meaning set forth in §4.5.
“Confidential Information” means any and all information concerning the Business other than that information which is already generally or readily obtainable by the public or is publicly known or becomes publicly known through no fault of the Seller.
“Confidentiality Agreement” has the meaning set forth in §5.4.
“Contracts” has the meaning set forth in § 2.1(f).
“Contractual Obligation” means, with respect to any Person, any contract, agreement, deed, mortgage, lease, license, commitment, undertaking, arrangement or understanding, written or oral, or other document or instrument, including without limitation any document or instrument evidencing or otherwise relating to any Debt but excluding the charter and by-laws of such Person, to which or by which such Person is a party or otherwise subject or bound or to which or by which any property or right of such Person is subject or bound.
“Debt” of any Person means all obligations of such Person (i) for borrowed money, (ii) evidenced by notes, bonds, debentures or similar instruments, (iii) for the deferred purchase price of goods or services (other than trade payables or accruals incurred in the Ordinary Course of Business), (iv) under capital leases or (v) in the nature of Guarantees of the obligations described in clauses (i) through (iv) above of any other Person.
“Disclosure Schedule” has the meaning set forth in §3.
“Employee Plans” mean all compensation and benefit plans, programs, arrangements, contracts, agreements, understandings, commitments and policies sponsored, administered, maintained, or contributed to, by or on behalf of the Seller relating to the Business for the benefit of any former or current employees of the Seller who performs services for the Seller in connection with the Business or their respective dependents.
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“Enforceable” means, with respect to any Contractual Obligation stated to be Enforceable by or against any Person, that such Contractual Obligation is a legal, valid and binding obligation of such Person enforceable by or against such Person in accordance with its terms, except to the extent that enforcement of the rights and remedies created thereby is subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws of general application affecting the rights and remedies of creditors and to general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law).
“Environmental, Health and Safety Requirements” shall mean all federal, state, local and foreign statutes, regulations, and ordinances 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 materials, substances or wastes, as such requirements are enacted and in effect on or prior to the Closing Date.
“Estimated Working Capital” has the meaning set forth in §2.9(b).
“Excluded Assets” has the meaning set forth in §2.2.
“Final Working Capital” has the meaning set forth in §2.9(b).
“Financial Statements” has the meaning set forth in §3.5.
“GM Purchase Order” means the purchase order No. GMB07107 from General Motors Corporation and the related Statement of Work Broadcast Distribution which describes the services to be performed by the Business for General Motors Corporation.
“Governmental Authority” any United States federal, state or local or any foreign government, or political subdivision thereof, or any multinational organization or authority or any authority, agency or commission entitled to exercise any administrative, executive, judicial, legislative, police, regulatory or taxing authority or power, any court or tribunal (or any department, bureau or division thereof), or any arbitrator or arbitral body.
“Guarantee” means (i) any guarantee of the payment or performance of, or any contingent obligation in respect of, any Debt or other obligation of any other Person, (ii) any other arrangement whereby credit is extended to one obligor on the basis of any promise or undertaking of another Person (A) to pay the Debt or other obligation of such obligor, (B) to purchase any obligation owed by such obligor, (C) to purchase or lease assets (other than inventory in the Ordinary Course of Business) under circumstances that would enable such obligor to discharge one or more of its obligations or (D) to maintain the capital, working capital, solvency or general financial condition of such obligor or (iii) any liability as a general partner of a partnership or as a venturer in a joint venture in respect of indebtedness or other obligations of such partnership or venture.
“Hazardous Substances” has the meaning set forth in §3.13.
“Indemnified Party” has the meaning set forth in §8.3(a).
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“Indemnifying Party” has the meaning set forth in §8.3(a).
“Instrument of Assumption” has the meaning set forth in §2.7.
“Intellectual Property” means the following types of proprietary rights: patents, copyrights, Trademarks, mask works, software, trade secrets and proprietary information (including without limitation proprietary ideas, research and development, know-how, processes and techniques, technical data, specifications, customer and supplier lists, pricing and cost information, and business and marketing plans and proposals), all applications for any of the foregoing, all copies and tangible embodiments of any of the foregoing in Seller’s possession or control, and any Contractual Obligations granting rights related to the foregoing (i) subsisting in, covering, reading on, directly applicable to, used in the production of or existing in the Technology used in the Business or (ii) that are owned, licensed or controlled in whole or in part by the Seller and relate to the Business.
“Knowledge” means actual knowledge of Xxx Xxxxxxxxxx, Xxxx Xxxxxxx, Xxxxx Xxxxxx, or Xxxxxx Xxxxxxxxxx after reasonable investigation.
“Leases” has the meaning set forth in §2.1(e).
“Legal Requirement” means any federal, state, local or foreign law, statute, standard, ordinance, code, order, rule, regulation, resolution or promulgation, or any order, judgment or decree of any Governmental Authority, or any license, franchise, permit or similar right granted under any of the foregoing, or any similar provision having the force and effect of law.
“Liability” means any liability or obligation (whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, whether incurred or consequential and whether due or to become due), including any liability for Taxes.
“Lien” means any mortgage, pledge, lien, security interest, charge, adverse or prior claim, encumbrance, restriction on transfer, conditional sale or other title retention device or arrangement (including without limitation a capital lease), transfer for the purpose of subjection to the payment of any Debt or other obligation, or restriction on the creation of any of the foregoing, whether relating to any property or right or the income or profits therefrom; provided, however, that the term “Lien” shall not include (i) statutory liens for Taxes to the extent that the payment thereof is not in arrears or otherwise due, (ii) encumbrances in the nature of zoning restrictions, easements, rights or restrictions of record on the use of real property if the same do not impair its use in the Business as currently conducted, (iii) statutory or common law liens to secure landlords, lessors or renters under leases or rental agreements confined to the premises rented to the extent that no payment or performance under any such lease or rental agreement is in arrears or is otherwise due, (iv) deposits or pledges made in connection with, or to secure payment of, worker’s compensation, unemployment insurance, old age pension programs mandated under applicable Legal Requirements or other social security and (v) statutory or common law liens in favor of carriers, warehousemen, mechanics and materialmen, statutory or common law liens to secure claims for labor, materials or supplies and other like liens, which secure obligations to the extent that payment thereof is not in arrears or otherwise due.
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“Losses” has the meaning set forth in §8.1.
“Material Adverse Change” means any change or event reasonably likely to have a Material Adverse Effect.
“Material Adverse Effect” means any change in or effect on the Acquired Assets or Assumed Liabilities that, when considered either singly or in the aggregate would result in a material adverse effect on the condition (financial or otherwise), operations, or results of operations of the Business.
“Ordinary Course of Business” means the ordinary course of business consistent with past custom and practice (including with respect to quantity and frequency).
“Party” and “Parties” have the meanings set forth in the preamble above.
“Person” means an individual, a partnership, a corporation, an association, a joint stock company, a limited liability company, a trust, a joint venture, an unincorporated organization, or a Governmental Authority.
“Personal Property” has the meaning set forth in §2.1(a).
“Purchase Price” has the meaning set forth in §2.5.
“Purchase Price Adjustment” has the meaning set forth in §2.9(b).
“Purchase Price Increase” has the meaning set forth in §2.9(b).
“Purchase Price Reduction” has the meaning set forth in §2.9(b).
“Restricted Region” means any location on the United States of America and Canada, it being acknowledged that the nature of the Business renders meaningless the use of geographic scope restrictions.
“Seller” has the meaning set forth in the preamble.
“Tax” or “Taxes” 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 §59A), customs duties, capital stock, franchise, profits, withholding, social security (or similar, including FICA), 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.
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“Technology” means all inventions, copyrightable works, discoveries, innovations, know-how, information (including ideas, research and development, know-how, formulas, compositions, processes and techniques, technical data, designs, drawings, specifications), and all other forms of technology, including improvements, modifications, derivatives or changes, whether or not protectible or protected by patent, copyright, mask work right, trade secret law or otherwise.
“Third Party Claim” has the meaning set forth in §8.3(a).
“Trademarks” means any trademarks, service marks, trade dress, and logos, together with all translations, adaptations, derivations, and combinations thereof and including all goodwill associated therewith.
“Transferred Employees” has the meaning set forth in §7.4.
“Working Capital Statement” has the meaning set forth in §2.9(a).
2. | ACQUISITION OF ASSETS BY BUYER. |
(a) (i) all tangible personal property (other than those set forth in §2.1(a)(ii)) (such as machinery, equipment, computer and office equipment and furniture) owned by the Seller as of the date hereof and used exclusively in the conduct of the Business, including without limitation the items set forth on Schedule 2.1(a) (provided, however, that the Seller makes no representation that any of the items listed on the fixed asset register included in Schedule 2.1(a) that have a net book value of zero are actually included in the Acquired Assets) and such other personal property as may be acquired by Seller after the date hereof and prior to the Closing for use exclusively in connection with the conduct of the Business, and (ii) all inventories, raw materials, supplies, works in progress, and finished goods, owned by the Seller as of the Closing Date for use exclusively in connection with the conduct of the Business (collectively with items set forth in §2.1(a)(i), “Personal Property”);
(b) all rights of the Seller under transferable licenses (other than as set forth in §2.1(c)), permits, authorizations, orders, registrations, certificates, approvals, consents and franchises used exclusively in connection with the conduct of the Business or any pending applications relating to any of the foregoing, except in each case those which would not be required by the Buyer to own and operate the Acquired Assets and conduct the Business as presently conducted, including without limitation the governmental permits, licenses, authorizations, approvals and consents described on Schedule 2.1(b) (collectively, the “Acquired Permits”);
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(c) all Intellectual Property used exclusively in connection with the conduct of the Business, goodwill associated therewith, licenses and sublicenses granted in respect thereto and rights thereunder, remedies against infringements thereof and rights to protection of interest therein, including without limitation the Intellectual Property described on Schedule 2.1(c) (collectively, the “Acquired Intellectual Property”);
(d) all customer and supplier lists used exclusively in connection with the conduct of the Business;
(e) all rights with respect to leasehold interests and subleases and rights thereunder relating to all real property and to such personal property as is used exclusively in the Business including, without limitation, those set forth on Schedule 2.1(e) (collectively, the “Leases”);
(f) all rights of the Seller under Contractual Obligations relating exclusively to the conduct of the Business (the “Contracts”), including without limitation the Contractual Obligations described in § 3.11 of the Disclosure Schedule but excluding those Contractual Obligations identified on the Disclosure Schedule as not being assignable;
(g) all books and records of the Seller exclusively related to the conduct of the Business; and
(h) all accounts receivable as of the Closing Date related exclusively to the Business.
(a) the consideration delivered to Seller by Buyer pursuant to this Agreement, all Cash, and the inter-company accounts receivables of the Business;
(b) any assets of the Seller not used exclusively in the conduct of the Business;
(c) all real property owned by the Seller, buildings thereon, and easements, rights-of way, and other appurtenant rights thereto (such as appurtenant rights in and to public streets);
(d) all rights with respect to leasehold interests and subleases and rights thereunder relating to all real property and to such personal property as is not used exclusively in the Business;
(e) all claims, deposits, prepayments, refunds, causes of action, choses in action, rights of recovery, rights of set off and rights of recoupment which have arisen in
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connection with the conduct of the Business by the Seller and do not relate specifically to the Acquired Assets;
(f) all rights in and with respect to the assets associated with all employee benefit plans including, without limitation, each Employee Plan;
(g) all rights in and with respect to insurance policies, except for any proceeds of such insurance and claims relating to the Acquired Assets made after the date hereof but prior to the Closing Date;
(h) all corporate, financial, computer and human resource records and systems not used exclusively in the conduct of the Business;
(i) all rights to the name “Applied Graphics”, “Applied Graphics Technologies” and “AGT” (collectively, the “AGT Trademarks”); and
(a) all Liabilities of the Seller set forth on the face of the unaudited March 31, 2004 Balance Sheet of the Business and all Liabilities that have arisen after March 31, 2004 in the Ordinary Course of Business;
(b) all Liabilities of the Seller under the Contracts or Leases included in the Acquired Assets;
(c) all Liabilities for services rendered by the Buyer with respect to the Business after the Closing;
(d) all accounts payable as of the Closing Date related to the Business;
(e) all Liabilities expressly assumed pursuant to § 7.4(d); and
(f) all other Liabilities relating to the conduct of the Business or the ownership of the Acquired Assets; and
(g) all Liabilities specified on Schedule 2.3 hereof;
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(a) any Liability of the Seller for Taxes (i) not relating to the Business or (ii) incurred prior to the Closing;
(b) any Liability of the Seller for costs and expenses incurred in connection with this Agreement, the making or performance of this Agreement and the transactions contemplated hereby;
(c) any Liability of the Seller to indemnify any Person except to the extent arising under the Contracts after Closing;
(d) any Liability associated with any Employee Plan, except as expressly assumed by the Buyer pursuant to Section 7.4(d);
(e) any Liability under Environmental, Health and Safety Requirements related to, associated with or arising out of (A) the occupancy, operation, use or control of any real property leased or owned by the Seller or any of its Affiliates prior to the Closing or (B) the operation of the Business prior to the Closing, including, without limitation, any release or storage of any Hazardous Substances;
(f) any Liability of the Seller under this Agreement;
(g) any Liability arising out of or relating to the Excluded Assets;
(h) except as disclosed on Schedule 2.4, any Liability to Affiliates of Seller;
(i) any obligation arising out of the letter agreements, dated April 14, 2004, between the Seller and each of Xxxxxxx Xxxxxxx and Xxxxxx Xxxx; and
(j) any Liability relating to former employees of Seller no longer employed by Seller as of the close of business on the Closing Date, except to the extent that Buyer has specifically assumed or agreed to assume responsibility for such obligations in this Agreement.
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counsel may reasonably request, and (iii) the a xxxx of sale in a form mutually satisfactory to both Parties (the “Xxxx of Sale”). At the Closing, the Buyer will deliver (i) the various certificates, instruments and documents referred to in §6.2 below, (ii) an instrument of assumption in a form mutually satisfactory to both Parties (the “Instrument of Assumption”) and (iii) the Purchase Price specified in §2.5 above.
2.9. Post-Closing Working Capital Adjustment.
(a) As soon as practicable, but in no event later than 45 days after the Closing Date, the Seller shall cause to be prepared and delivered to the Buyer a statement of the working capital of the Business as of the Closing (the “Working Capital Statement”). The working capital set forth on the Working Capital Statement shall be determined by subtracting current liabilities from current assets, all as of the Closing Date. The working capital set forth on the Working Capital Statement shall be calculated in accordance with GAAP, and the internal format and accounting policies and practices used by the Seller in connection with preparing the Financial Statements.
(b) If and to the extent working capital shown on the Working Capital Statement (the “Final Working Capital”) exceeds $4,753,000 (the “Estimated Working Capital”) and such excess is greater than $50,000, then the Buyer shall pay such excess to the Sellers as an adjustment to the Purchase Price (the “Purchase Price Increase”). If and to the extent the Final Working Capital is less than the Estimated Working Capital and such shortfall is greater than $50,000, then the Seller shall pay such shortfall to the Buyer as an adjustment to the Purchase Price (the “Purchase Price Reduction”). Whichever shall be applicable of the Purchase Price Increase and the Purchase Price Reduction is referred to herein as the “Purchase Price Adjustment”. The Purchase Price Adjustment, if any, shall be paid in cash, within five Business Days of the delivery of the Working Capital Statement.
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and authority (including full corporate power and authority) to execute and deliver this Agreement and has taken all actions necessary to authorize the consummation of the transactions contemplated hereby and the performance of its obligations hereunder. This Agreement has been duly executed and delivered by the Seller and is Enforceable against the Seller.
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(a) The Seller has filed all Tax Returns it was required to file with respect to the conduct of the Business. All such Tax Returns were correct and complete in all material respects. All Taxes due and payable by the Seller with respect to the conduct of the Business have been paid. The Seller has no Knowledge that any claim has ever been made by an authority in a jurisdiction where the Seller does not file Tax Returns with respect to the conduct of the Business that the Seller may be subject to taxation by that jurisdiction with respect to the conduct of the Business. There are no Liens on any of the Acquired Assets that arose in connection with any failure (or alleged failure) to pay any Tax.
(b) There are no tax liens upon the Business or the Acquired Assets except liens for current Taxes not yet due or delinquent or the validity of which is being contested by Seller in good faith by appropriate proceedings.
(c) None of the Acquired Assets (i) is required to be treated as being owned by any other person pursuant to the so-called safe harbor lease provisions of former section 168(f)(8) of the Code, (ii) secures any debt the interest on which is tax-exempt under section 103(a) of the Code, (iii) is tax-exempt use property within the meaning of section 168(h) of the Code or (iv) is subject to a 467 rental agreement as defined in section 467 of the Code.
(a) The Acquired Intellectual Property constitutes all Intellectual Property necessary for the operation of the Business as presently conducted except for generally available shrink-wrapped software. Each item of Acquired Intellectual Property will be owned or available for use by the Buyer on substantially identical terms and conditions immediately subsequent to the Closing hereunder. Except as disclosed on §3.10 of the Disclosure Schedule, (i) the Seller either owns the entire right, title and interest in and to the Acquired Intellectual Property, free and clear of any Liens, or has the valid right and license to use the Acquired Intellectual Property in the conduct of the Business, (ii) all patents and registrations identified on Schedule 2.1(c) are in force, and to the Seller’s Knowledge, all applications identified on Schedule 2.1(c) are pending without challenge (other than office actions that may be pending before the Patent and Trademark Office or its foreign equivalents), (iii) each patent or registered trademark included in the Acquired Intellectual Property is, to the Seller’s Knowledge, valid and enforceable; and (iv) the
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Seller has not sold, licensed or otherwise transferred any of the Acquired Intellectual Property to any person or entity nor agreed to indemnify any person or entity for any patent, trademark or copyright infringement other than in the Ordinary Course of Business.
(b) Seller has not interfered with, infringed upon, misappropriated, or otherwise come into conflict with any Intellectual Property rights of third parties in connection with the conduct of the Business, and to Seller has never received any charge, complaint, claim demand or notice alleging any such interference, infringement, misappropriation or conflict is pending or has been threatened. To the Knowledge of the Seller, no third party has interfered with, infringed upon, misappropriated, or otherwise come into conflict with any of the Acquired Intellectual Property.
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Requirement. For purposes of this Section 3.13. “Hazardous Substances” means (i) those substances defined in or regulated as hazardous under the following federal statutes and their state counterparts and all applicable regulations thereunder: the Hazardous Materials Transportation Act, the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act, the Clean Water Act, the Safe Drinking Water Act, the Federal Insecticide, Fungicide, and Rodenticide Act and the Clean Air Act; (ii) petroleum and petroleum products, including crude oil and any fractions thereof, (iii) natural gas, synthetic gas, and any mixtures thereof; (iv) polychlorinated biphenyls, asbestos and radon; (v) any other contaminant; and (vi) any substance, material or waste regulated as hazardous by any federal, state, local or foreign Governmental Authority pursuant to any Environmental, Health and Safety Requirement.
3.15. Distributors, Customers, Suppliers. §3.15 of the Disclosure Schedule sets forth a complete and accurate list of (i) the ten largest customers (by dollar volume) of the Business during the 2003 fiscal year, indicating any existing Contractual Obligation with each such customer and (ii) all suppliers of significant materials or services to the Seller in connection with the conduct of the Business, indicating any Contractual Obligation for continued supply from such Person.
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Section 414(f) of the Code which withdrawal could impose liability on the Buyer. No Employee Plan is a multiple employer plan within the meaning of Section 413(c) of the Code or a multiple employer welfare arrangement as defined in Section 3(40) of ERISA. With respect to each Employee Plan, summaries of each such plan or copies of the following materials have been made available or provided to Buyer; (i) all current plan documents, or in the case of an unwritten plan, a written description thereof, (ii) all current determination letters, where applicable, from the IRS; and (iii) all current summary plan descriptions and summaries of any material modifications to the summary plan descriptions.
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5. PRE-CLOSING COVENANTS. The Parties agree as follows:
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commercially reasonable efforts in good faith to cooperate, and to cause each of their respective Affiliates to cooperate, in effecting any lawful arrangement to provide to Buyer the economic benefits of the Acquired Asset(s) for which third party consents, approvals, and waivers are being sought after Closing.
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agents or Affiliates will remain free to participate in any discussions or negotiations regarding, furnish information with respect to, assist or participate in, or facilitate in any other manner any effort or attempt by any Person to do or seek any of the foregoing to the extent legal counsel has informed them in writing that their fiduciary duties require.
6. CONDITIONS TO OBLIGATION TO CLOSE.
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The Buyer may waive any condition specified in this §6.1 by written notice to the Seller.
The Seller may waive any condition specified in this § 6.2.
(a) The Seller agrees that, in consideration of the purchase by the Buyer hereunder, neither Seller nor any Affiliate of Seller shall, on or prior to the date that is
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five (5) years after the Closing Date (the “Noncompetition Period”), directly or indirectly, (a) operate, control, or invest in any business, venture or activity which competes with the Business in the Restricted Region; provided, however, that ownership of less than 5% of the outstanding stock of any publicly traded corporation shall not be deemed to violate this § 7.1, (b) solicit, make any offer to employ, or employ, either directly or indirectly, as an employee, independent contractor or otherwise, any individual during any period in which he or she is an employee of Buyer or any of its Affiliates, or solicit or induct such individual to terminate such employment or become employed by any person or entity other than Buyer or its Affiliates, or (c) induce any of the Buyer’s customers to terminate their relationship with the Buyer with respect to services provided by the Business in favor of any Person other than the Buyer or its Affiliates.
(b) Seller acknowledges and agrees that the provisions of this §7.1 (i) will not impose an undue hardship on it, and (ii) that breach of this §7.1 will cause irreparable injury and damage to Buyer, the exact amount of which will be difficult to ascertain and that remedies at law for any such breach would be inadequate and that therefore, in the event of such a breach, Buyer shall be entitled, in addition to all remedies available at law, to equitable relief without posting any bond or undertaking.
(a) The Seller shall (i) on the Closing Date release for hiring by the Buyer, the persons employed by the Seller to work exclusively in connection with the Business including, without limitation, to the extent employed by the Seller on the Closing Date, those listed on Schedule 7.4 (collectively the “Transferred Employees”) and, if the Buyer hires any or all of the Transferred Employees pursuant to § 7.4(b) or otherwise, the Buyer agrees to pay all salary, wages, pension, retirement, savings, health, welfare and other benefits (whether arising by contract, plan, statute or otherwise) with respect to all periods following the Closing Date, and (ii) provide to all Transferred Employees any notice required under any Legal Requirement, including without limitation, COBRA to the extent and in the manner provided by such Legal Requirement.
(b) Buyer agrees to offer each Transferred Employee listed on Schedule 7.4 a position with the Buyer that provides such Transferred Employee with comparable base pay and job responsibilities as the position held by such Transferred Employee as of the date hereof. Buyer further agrees, for a period of one year after the Closing Date, to provide benefits (other than equity-based plans) to the Transferred Employees listed on
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Schedule 7.4 that accept offers of employment with the Buyer and satisfy any eligibility requirements during such period that are not less favorable in the aggregate to such Transferred Employees than those benefits provided pursuant to Employee Plans in effect for such Transferred Employees by the Seller on the date of this Agreement; provided, however, that in no case shall Buyer become liable to any Transferred Employee upon such employee’s termination for severance of any kind in excess of two-week’s pay and the continuation of such employee’s benefits for a two-week period.
(c) Subject the other provisions of this Section 7.4, with respect to any “employee benefit plan”, as defined in Section 3(3) of ERISA, maintained by Buyer (including any severance plan), for all purposes, including determining eligibility to participate and vesting, service with the Seller or any subsidiary or predecessor of the Seller shall be treated as service with Buyer or any of its subsidiaries; provided, however, that such service need not be recognized to the extent that such recognition would result in any duplication of benefits.
(d) The Buyer shall assume liability for up to a maximum of two (2) weeks of the vacation, sick pay, holiday and other similar accruals set forth in the Working Capital Statement and attributable to each employee of the Business who is employed by the Buyer, and the Buyer shall provide such employees with the accrued vacation, sick and holiday leave corresponding thereto. Alternatively, in the event the Seller is required to by Legal Requirement or any applicable policy or plan to pay any such accruals, the Buyer shall reimburse the Seller therefor.
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(a) the inaccuracy of any representation or warranty made by the Seller herein;
(b) any Liability (i) of the Seller which is not an Assumed Liability or (ii) which is an Excluded Liability; or
(c) the breach by Seller of any of its covenants contained herein.
The Buyer shall provide the Seller written notice for any claim made in respect of the indemnification provided in this §8.1, whether or not arising out of a claim by a third party and Seller shall not be liable for such Loss to the extent arising out of Buyer’s failure to provide or delay in providing notice.
(a) the inaccuracy of any representation or warranty made by Buyer herein;
(b) any Assumed Liability;
(c) the breach by Buyer of any of its covenants contained herein; or
(d) the use or sale of the Acquired Assets after the Closing Date.
The Seller shall provide the Buyer written notice for any claim made in respect of the indemnification provided in this §8.2, whether or not arising out of a claim by a third party and Buyer shall not be liable for such Loss to the extent arising out of Seller’s failure to provide or delay in providing notice.
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8.3. Matters Involving Third Parties.
(a) If any third party shall notify either Party (the “Indemnified Party”) with respect to any matter (a “Third Party Claim”) that may give rise to a claim for indemnification against the other Party (the “Indemnifying Party”) under this §8, then the Indemnified Party shall promptly notify the Indemnifying Party thereof in writing; provided, however, that no delay on the part of the Indemnified Party in notifying the 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) The 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 (i) the Indemnifying Party notifies the Indemnified Party in writing within 20 days after the Indemnified Party has given notice of the Third Party Claim, (ii) 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 adverse to the continuing business interests of the Indemnified Party, and (iii) 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 §8.3(b) above, (i) the Indemnified Party may retain separate co-counsel at its sole cost and expense and participate in the defense of the Third Party Claim, (ii) 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 (which consent shall not unreasonably be withheld), and (iii) the Indemnifying Party will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim unless written agreement is obtained releasing the Indemnified Party from all liability thereunder.
(d) If the Indemnifying Party does not deliver the notice contemplated by clause (b) of this §8.3 within 20 days after the Indemnified Party has given notice of the Third Party Claim, or otherwise at any time fails to conduct the defense of the Third Party Claim actively and diligently, the Indemnified Party may defend, and may consent to the entry of any judgment or enter into any compromise or settlement with respect to, the Third Party Claim in any manner it may deem. In the event that the Indemnified Party conducts the defense of the Third Party Claim pursuant to this clause (d), the Indemnifying Party will remain responsible for any and all Losses that the Indemnified Party may incur or suffer resulting from, arising out of, relating to or caused by the Third Party Claim to the extent provided in this §8.
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(a) at any time (subject to the applicable statute of limitations), in the case of any inaccuracy in the representations and warranties set forth in §3.1, §3.2, §3.4, §3.19, §4.1, §4.2 or §4.4; or
(b) at any time prior to May 12, 2005 in the case of any inaccuracy in any other representation or warranty in this Agreement.
Claims for indemnification pursuant to any other provision of §8.1 or §8.2 are not subject to the limitations set forth in this §8.4.
9.1. Termination of Agreement. The Parties may terminate this Agreement as provided below:
(a) the Parties may terminate this Agreement by mutual written consent at any time prior to the Closing;
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(b) the Buyer may terminate this Agreement by giving written notice to the Seller at any time prior to the Closing (i) in the event the Seller has breached any representation, warranty, or covenant contained in this Agreement in any material respect, the Buyer has notified the Seller of the breach, and, if curable, the breach has continued without cure for a period of 30 days after the notice of breach or (ii) if the Closing shall not have occurred on or before July 15, 2004 and the Buyer is not then in breach of any representation, warranty or covenant contained in this Agreement; and
(c) the Seller may terminate this Agreement by giving written notice to the Buyer at any time prior to the Closing (1) in the event the Buyer has breached any representation, warranty, or covenant contained in this Agreement in any material respect, the Seller has notified the Buyer of the breach, and, if curable, the breach has continued without cure for a period of 30 days after the notice of breach or (ii) if the Closing shall not have occurred on or before July 15, 2004 and the Seller is not then in breach of any representation, warranty or covenant contained in this Agreement.
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which such successors and permitted assigns will be deemed to be a party hereto for all purposes hereof. No Party may assign, delegate or otherwise transfer either this Agreement or any of its rights, interests, or obligations hereunder without the prior written approval of the other Party. Except as expressly provided herein, this Agreement is for the sole benefit of the Parties and their permitted successors and assignees and nothing herein expressed or implied will give or be construed to give any Person, other than the Parties and such successors and assignees, any legal or equitable rights hereunder.
(a) by hand (in which case, it will be effective upon delivery); or
(b) by overnight delivery by a nationally recognized courier service (in which case, it will be effective on the Business Day after being deposited with such courier service);
in each case, to the address (or facsimile number) listed below:
If to the Seller:
Applied Graphics Technologies, Inc.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Phone: (000) 000-0000
Attn: Xxxxxx X. Xxxxxxxxxx
Copy to:
Ropes & Xxxx
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Phone: (000) 000-0000
Attention: Xxxxxx X. Xxxxx, Esq.
If to the Buyer:
Digital Generation Systems, Inc.
000 Xxxx Xxxx Xxxxxxxxx Xxxxxxx
Xxxxx 000
Xxxxxx, XX 00000
Phone: (000) 000-0000
Attention: Xxxx Xxxxxxxx
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Copy to:
Xxxxxx & Xxxxxxx LLP
000 Xxxxxxxx Xxxxxx, X.X.
Xxxxx 0000
Xxxxxxxxxx, X.X. 00000
Phone: (000) 000-0000
Attention: Xxxx X. Xxxxxxxx, Esq.
Either 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, telex, 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. Either Party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other Party notice in the manner herein set forth.
10.7. Governing Law. This Agreement, the rights of the parties and all Actions arising in whole or in part under or in connection herewith, will be governed by and construed in accordance with the domestic substantive 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 other jurisdiction.
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so as to be valid and enforceable to the maximum extent compatible with, and possible under, applicable law.
10.15. Jurisdiction. Each Party to this Agreement, by its execution hereof, (a) hereby irrevocably submits to the exclusive jurisdiction of the federal or New York State courts located in the County of New York for the purpose of any Action between the Parties arising in whole or in part under or in connection with this Agreement, (b) hereby waives to the extent not prohibited by applicable law, and agrees not to assert, by way of motion, as a defense or otherwise, in any such Action, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that any such Action brought in one of the above-
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named courts should be dismissed on grounds of forum non conveniens, should be transferred or removed to any court other than one of the above- named courts, or should be stayed by reason of the pendency of some other proceeding in any other court other than one of the above-named courts, or that this Agreement or the subject matter hereof may not be enforced in or by such court and (c) hereby agrees not to commence any such Action other than before one of the above-named courts. Notwithstanding the previous sentence a Party may commence any Action in a court other than the above-named courts solely for the purpose of enforcing an order or judgment issued by one of the above-named courts.
10.16. Venue. Each Party agrees that for any Action between the Parties arising in whole or in part under or in connection with this Agreement, such Party bring Actions only in the County of New York. Each Party further waives any claim and will not assert that venue should properly lie in any other location within the selected jurisdiction.
10.17. Service of Process. Each Party hereby (a) consents to service of process in any Action between the Parties arising in whole or in part under or in connection with this Agreement in any manner permitted by New York law, (b) agrees that service of process made in accordance with clause (a) or made by registered or certified mail, return receipt requested, at its address specified pursuant to § 10.6, will constitute good and valid service of process in any such Action and (c) waives and agrees not to assert (by way of motion, as a defense, or otherwise) in any such Action any claim that service of process made in accordance with clause (a) or (b) does not constitute good and valid service of process.
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THE BUYER: |
DG SYSTEMS ACQUISITION CORPORATION | |||||||
By: | /s/ Xxxxx X. Xxxxxxxx | |||||||
Name: |
Xxxxx X. Xxxxxxxx | |||||||
Title: |
Chairman and Chief Executive Officer |
THE SELLER: |
APPLIED GRAPHICS TECHNOLOGIES, INC. | |||||||
By: | /s/ Xxxx X. Xxxxxx | |||||||
Name: |
Xxxx X. Xxxxxx | |||||||
Title: |
Chief Executive Officer |