EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
by, between and among:
TOPAC U.S.A., INC.
a Delaware corporation,
CONNECTED OFFICE PRODUCTS, INC.
a Pennsylvania corporation,
and
XxXXX INDUSTRIES, INC.,
a Delaware corporation,
XxXXX OFFICE SOLUTIONS, INC.,
a North Carolina corporation
Dated as of September 9, 2004
TABLE OF CONTENTS
Page
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ARTICLE 1 - PURCHASE AND SALE OF ASSETS; ASSUMPTION OF LIABILITIES.............. 1
1.1 Assets to be Sold................................................... 1
1.2 Liabilities to be Assumed........................................... 3
1.3 Consideration....................................................... 4
1.4 Adjustments......................................................... 5
1.5 Payment of Purchase Price........................................... 6
1.6 Closing............................................................. 7
1.7 Closing Conditions and Deliveries................................... 7
ARTICLE 2 - REPRESENTATIONS AND WARRANTIES OF MI AND SELLER..................... 8
2.1 Due Organization; No Subsidiaries................................... 9
2.2 Authority; Binding Nature of Agreements............................. 9
2.3 Non-Contravention; Consents......................................... 10
2.4 Financial Statements................................................ 10
2.5 Absence Of Changes.................................................. 10
2.6 Title To Assets..................................................... 12
2.7 Bank Accounts....................................................... 12
2.8 Receivables......................................................... 12
2.9 Customers........................................................... 13
2.10 Inventory........................................................... 13
2.11 Equipment........................................................... 13
2.12 Real Property....................................................... 13
2.13 Intellectual Property............................................... 14
2.14 Contracts........................................................... 14
2.15 Liabilities; Books and Records...................................... 15
2.16 Compliance with Legal Requirements.................................. 15
2.17 Tax Matters......................................................... 15
2.18 Employment Matters.................................................. 16
2.19 Benefit Plans; ERISA................................................ 17
2.20 Environmental Matters............................................... 17
2.21 Insurance........................................................... 17
2.22 Proceedings; Orders................................................. 18
2.23 Bulk Sales; Fraudulent Transfers.................................... 18
2.24 Absence of Undisclosed Liabilities.................................. 18
2.25 Broker's Commissions or Finder's Fees............................... 18
2.26 Certain Payments.................................................... 19
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES OF PURCHASER AND TOPAC............... 19
3.1 Organization........................................................ 19
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3.2 Authority Relative to this Agreement................................ 19
3.3 Broker's Commissions or Finder's Fees............................... 20
3.4 Non-Contravention; Consents......................................... 20
3.5 Proceedings; Orders................................................. 20
ARTICLE 4 - COVENANTS........................................................... 20
4.1 Noncompetition; Nonsolicitation..................................... 20
4.2 Confidential Information............................................ 22
4.3 Governmental Filings................................................ 23
4.4 Legal Conditions.................................................... 23
4.5 Additional Actions.................................................. 23
4.6 Tax Matters......................................................... 23
4.7 Employment Matters.................................................. 24
4.8 Retention of and Access to Books and Records........................ 24
ARTICLE 5 - INDEMNIFICATION..................................................... 24
5.1 Indemnification..................................................... 24
5.2 Third Party Claims, Notice and Opportunity to Settle................ 25
5.3 Obligation to Offset................................................ 26
5.4 Non-Third Party Claims.............................................. 27
5.5 Payments............................................................ 27
ARTICLE 6 - DISPUTE RESOLUTION.................................................. 27
6.1 Notice.............................................................. 27
6.2 Arbitrator.......................................................... 27
6.3 Pre-Hearing Conference.............................................. 28
6.4 Discovery........................................................... 28
6.5 Briefs and Hearing.................................................. 28
6.6 Decision............................................................ 28
6.7 Costs............................................................... 28
ARTICLE 7 - GENERAL PROVISIONS.................................................. 29
7.1 Public Announcements................................................ 29
7.2 Notices............................................................. 29
7.3 Section Headings, Construction...................................... 29
7.4 Counterparts........................................................ 30
7.5 Integration......................................................... 30
7.6 Governing Law....................................................... 30
7.7 Amendment........................................................... 30
7.8 Assignment.......................................................... 30
7.9 Severability........................................................ 30
7.10 Attorney's Fees..................................................... 30
7.11 Expenses............................................................ 30
7.12 Waiver.............................................................. 31
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7.13 No Strict Construction.............................................. 31
EXHIBITS:
EXHIBIT A - DEFINITIONS......................................................... A-1 -- A-10
EXHIBIT B - XXXX OF SALE, GENERAL ASSIGNMENT AND ASSUMPTION AGREEMENT
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "AGREEMENT") is entered into as of
September 9, 2004 by, between and among, TOPAC U.S.A., INC., a Delaware
corporation ("TOPAC"), CONNECTED OFFICE PRODUCTS, INC., a Pennsylvania
corporation and a wholly owned subsidiary of TOPAC ("PURCHASER"), XxXxx
Industries, Inc., a Delaware corporation ("MI"), and XxXxx Office Solutions,
Inc., a North Carolina corporation ("MOS,"or "SELLER"). Capitalized terms used
in this Agreement are defined in EXHIBIT A attached hereto and incorporated by
reference.
RECITALS
WHEREAS, MOS, a wholly-owned subsidiary corporation of MI, is a
corporation engaged in the business of selling and servicing copiers, facsimile
machines, duplicators, other office equipment, document solutions and software
and related spare parts and supplies; and
WHEREAS, MI owns all of the shares of stock of MOS; and
WHEREAS, MI and Seller wish to sell, transfer and assign all of the
Acquired Assets and Assumed Liabilities to Purchaser, and Purchaser wishes to
purchase, acquire, and assume all of the Acquired Assets and Assumed Liabilities
on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the promises and mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows.
AGREEMENT
The parties to this Agreement, intending to be legally bound, agree as
follows:
ARTICLE 1 - PURCHASE AND SALE OF ASSETS; ASSUMPTION OF LIABILITIES
1.1 Assets to be Sold. Subject to the provisions of Section 1.4(e),
Seller shall sell, assign, transfer, convey and deliver to Purchaser, at the
Closing, good and valid title to the Acquired Assets, free and clear of any
Encumbrances, on the terms and subject to the conditions set forth in this
Agreement. For purposes of this Agreement, "ACQUIRED ASSETS" shall mean and
include the properties, rights, interests and other tangible and intangible
assets, wherever located, owned by Seller, and whether or not required to be
reflected on a balance sheet prepared in accordance with GAAP, related to, used
in, or necessary for the conduct of the Acquired Business; provided, however,
that the Acquired Assets shall not include any Excluded Assets. Without limiting
the generality of the foregoing, the Acquired Assets shall include the following
assets of Seller:
(a) all Seller's accounts receivable and notes receivable;
(b) all inventories of Seller, and all rights to collect from
customers (and to retain) all fees and other amounts payable, or that may become
payable, to Seller with respect to
services performed by or on behalf of Seller on or prior to the Closing Date in
each case to the extent related to, used in, arising from, or necessary for the
conduct of the Acquired Business;
(c) all equipment, machinery, materials, personal property, tools,
supplies, spare parts, vehicles, furniture, fixtures, improvements and other
tangible assets of Seller related to, used in, or necessary for the conduct of
the Acquired Business (including the Acquired Business Leased Equipment);
(d) all leasehold interests in the Real Property Leases;
(e) all advertising and promotional materials, customer lists,
supplier lists, mailing addresses, telephone numbers, e-mail addresses and other
sales-related materials possessed by Seller related to, used in, or necessary
for the conduct of the Acquired Business;
(f) all Intellectual Property Rights of Seller related to, used
in, or necessary for the conduct of the Acquired Business, including all of
Seller's internet websites;
(g) all rights of Seller and MI under the Acquired Business
Contracts;
(h) all claims (including claims for past infringement of the
Intellectual Property Rights and Intellectual Property) and causes of action of
Seller against other Persons (regardless of whether or not such claims and
causes of action have been asserted by Seller) pertaining to or arising out of
the Acquired Assets or the Acquired Business, and all rights of indemnity,
warranty rights, rights of contribution, rights to refunds, rights of
reimbursement and other rights of recovery possessed by Seller (regardless of
whether such rights are currently exercisable) pertaining to or arising out of
the Acquired Assets or the Acquired Business;
(i) all Books and Records relating to the Acquired Assets and
Acquired Business;
(j) all rights of Seller relating to deposits and prepaid
expenses, claims for refunds and rights to offset related to the Acquired
Business;
(k) all other assets contained on the Reference Balance Sheet,
including cash, other than any such assets sold or otherwise disposed of by
Seller in the Ordinary Course of Business after the date of the Reference
Balance Sheet, and the proceeds of any such sales or dispositions;
(l) all goodwill of the Acquired Business; and
(m) all other intangible assets owned by Seller in connection with
the conduct of the Acquired Business.
(n) Notwithstanding anything herein to the contrary, the following
assets of Seller shall not be sold or transferred hereunder, shall be excluded
from the definition of Acquired Assets and Acquired Business, and shall remain
the property of Seller (the "EXCLUDED ASSETS"):
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(i) stock books, stock ledgers, minute books, Tax Returns
and Tax records of Seller;
(ii) those Seller Contracts, if any, listed on Schedule
1.1(x);
(iii) all rights to causes of action, lawsuits, judgments,
claims and demands of any nature, and all counterclaims, rights of setoff,
rights of indemnification and affirmative defenses to any claims that may be
brought against Seller by third parties, of Seller against other Persons
(regardless of whether or not such claims and causes of action have been
asserted by Seller) pertaining to or arising out of the Excluded Assets or the
Excluded Liabilities, and all rights of indemnity, warranty rights, rights of
contribution, rights to refunds, rights of reimbursement and other rights of
recovery possessed by Seller (regardless of whether such rights are currently
exercisable) pertaining to or arising out of the Excluded Assets or the Excluded
Liabilities;
(iv) all right, title and interest in and to (A) the
Retained Trademarks, (B) all domain names owned by MI or Seller, together with
the registrations thereof, and (C) all email addresses, owned by MI or Seller,
that incorporate any such domain name in any manner (all of the foregoing, the
"EXCLUDED INTELLECTUAL PROPERTY"); provided, however, that on the Closing Date,
MI, Seller, Purchaser and TOPAC shall execute and deliver an agreement (the
"LICENSE AGREEMENT") pursuant to which Purchaser and TOPAC shall be granted a
temporary license to use certain Excluded Intellectual Property, including the
name "XxXxx Office Solutions, Inc." and the domain name "xxxxxxx.xxx", on the
terms and conditions set forth in the License Agreement;
(v) all rights under any Transaction Agreement; and
(vi) those assets, if any, listed on Schedule 1.1(x).
1.2 Liabilities to be Assumed. For purposes of this Agreement "ASSUMED
LIABILITIES" shall mean ONLY the following liabilities of Seller, which
Purchaser will assume and agree to pay, perform or discharge:
(a) Those liabilities, trade accounts payable, accrued and unpaid
expenses of Seller on the Reference Balance Sheet or incurred in the Ordinary
Course of Business following the date of the Reference Balance Sheet; and
(b) The obligations of Seller and MI to be performed after the
Closing Date under the Acquired Business Contracts, but only to the extent such
obligations (i) do not arise from, or relate to, any Breach by Seller of any
provision of any of the Acquired Business Contracts (other than a Breach arising
from failure to obtain any required Consent from any third party in connection
with the assignment and transfer of such Acquired Business Contracts to
Purchaser pursuant to this Agreement), (ii) do not arise from or relate to any
event, circumstance or condition occurring or existing on or prior to the
Closing Date that, with notice or lapse of time, would constitute or result in a
Breach of any of the Acquired Business Contracts, or (iii) are ascertainable (in
nature and amount) solely by reference to the express terms of the Acquired
Business Contracts;
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(c) Notwithstanding anything herein to the contrary, except as set
forth in this Section 1.2, the Assumed Liabilities shall not include, Purchaser
shall not be required to assume or to pay, perform or discharge, and Seller
shall be solely responsible to pay, perform and discharge the following:
(i) any Liability of Seller arising out of or relating to
the execution, delivery or performance of any of the Transaction Agreements;
(ii) any Liability of Seller arising from or relating to
any action taken by Seller, or any failure on the part of Seller to take any
action, at any time after the Closing Date not related to an Acquired Asset or
Assumed Liability;
(iii) any Liability of Seller for the payment of any Tax
(except those specifically allocable or assumed by Purchaser pursuant to Section
4.6(d)), to the extent that such Liability is not on the Reference Balance
Sheet;
(iv) any Liability of Seller to any employee or former
employee of Seller under or with respect to any Employee Benefit Plan, profit
sharing plan, dental plan, or for severance pay, or otherwise, to the extent
such Liability is not on the Reference Balance Sheet, including accrued and
unused vacation time under Seller's vacation plan for Business Employees;
(v) any Liability of Seller to any Affiliate of Seller or
any other Related Party;
(vi) any Liability for intercompany payables of Seller;
(vii) any Liability incurred under the Acquired Business
Contracts prior to the date of the Reference Balance Sheet and not reflected on
the Reference Balance Sheet; and
(viii) any other Liability that is not an Assumed Liability.
For purposes of this Agreement, all Liabilities not expressly listed in the
definition of Assumed Liabilities, including the items described in (i) through
(vii) above, are referred to as "EXCLUDED LIABILITIES," and notwithstanding
anything in this Agreement to the contrary, except for the Assumed Liabilities,
MI and Seller agree that Purchaser shall not be obligated to assume or perform,
and is not assuming, and that Seller shall be responsible for performing and
satisfying, or otherwise discharging, at its sole expense, and without
liability, cost, loss or expense to Purchaser, all liabilities and obligations
of Seller, including the Excluded Liabilities, but excluding the Assumed
Liabilities, whether the Excluded Liabilities are known or unknown, fixed or
contingent, certain or uncertain, and whether they have arisen prior to or may
arise at any time after the Closing. No assumption by Purchaser of any of the
Assumed Liabilities shall relieve or be deemed to relieve Seller or MI from any
obligation or Liability under this Agreement with respect to any representations
or warranties made by Seller and MI to Purchaser.
1.3 Consideration.
(a) The "PURCHASE PRICE" shall consist of the sum of the following
amounts:
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(i) Eleven Million Dollars ($11,000,000.00) payable to
Seller in the amounts and at the times described in Section 1.5 and as may be
adjusted in accordance with Section 1.4 (the "CASH PRICE"); and
(ii) The aggregate amount of the Assumed Liabilities.
(b) The Assumed Liabilities shall be assumed by Purchaser at
Closing.
1.4 Adjustments.
(a) No later than sixty (60) days following the Closing Date, MI
shall cause Seller, at MI's expense, to prepare and deliver to TOPAC, the
Reference Balance Sheet. Acquired Assets included on the Reference Balance Sheet
shall include the same categories of assets as included on the Financial
Statements (set forth at Schedule 2.4) and shall not be supplemented by the
inclusion of additional intangible assets or tax-related assets that are not
working capital in nature - by way of example, and not by way of limitation,
deferred tax assets that are recurring in nature shall not be supplemented in
the Reference Balance Sheet.
(b) During the sixty (60) days after delivery of the Reference
Balance Sheet, Purchaser, TOPAC and their Representatives shall have the right
to review and audit the entries on the Reference Balance Sheet. Purchaser, TOPAC
and their Representatives shall have the right to review the workpapers of
Seller used in preparing the Reference Balance Sheet and Purchaser, TOPAC and
their Representatives shall have full access to the Books and Records of Seller
for the purpose of verifying the accuracy and fairness of the Reference Balance
Sheet; provided, however, that nothing herein shall be deemed to supersede or
waive any representation or warranty of MI or Seller made in Article 2 hereof.
Within sixty (60) days after receipt of the Reference Balance Sheet, Purchaser
or TOPAC may dispute any amounts reflected on the Reference Balance Sheet or the
calculation of the Net Book Value and its components, but only on the basis of
its belief that the amounts reflected on the Reference Balance Sheet were not
arrived at in accordance with this Agreement or resulted from a mistake,
omission or error. In the case of such dispute, Purchaser or TOPAC must notify
MI or Seller in writing of each disputed item, specifying the amount thereof in
dispute and setting forth, in reasonable detail, the basis for such dispute.
(c) If, within fifteen (15) days after receipt of notice from
Purchaser or TOPAC of a dispute with respect to the Reference Balance Sheet, MI
or Seller notifies Purchaser or TOPAC of a disagreement as to Purchaser's or
TOPAC's dispute, the items in dispute shall be resolved in accordance with the
terms of this Agreement by the Charlotte, North Carolina offices of a "Big 4"
accounting firm (the "ACCOUNTANTS") mutually acceptable to Seller and TOPAC;
provided, however, that the Accountants shall not assign any partner, member or
employee of the firm who has performed services for, or who is or was a regular
member of the audit team of, Purchaser, TOPAC, MI, or Seller during the five (5)
years immediately prior to the Closing Date. The Accountants shall review the
disputed matters and as promptly as practicable, deliver to Purchaser or TOPAC
and MI or Seller a statement in writing setting forth their conclusion as to the
resolution of such disputed items (which may include other items related to, or
impacted by, the resolution of the disputed items), and such determination shall
be final and binding upon Purchaser and TOPAC as well as MI and Seller without
any further right of appeal. Fifty percent
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(50%) of the fees and expenses of the Accountants for resolving such dispute
shall be paid by Purchaser and TOPAC, and fifty percent (50%) of such fees and
expenses shall be paid by MI and Seller.
(d) The Reference Balance Sheet shall be deemed accepted by
Purchaser and TOPAC to the extent that neither Purchaser nor TOPAC notifies MI
or Seller of a dispute within the 60-day period in accordance with Section
1.4(b). The modifications to any item on the Reference Balance Sheet or the
calculation of the Net Book Value set forth in the notice from Purchaser or
TOPAC delivered pursuant to Section 1.4(b) shall be deemed accepted by MI and
Seller to the extent that MI and Seller do not notify Purchaser or TOPAC of a
disagreement within the 15-day period in accordance with Section 1.4(c).
(e) If the Reference Balance Sheet indicates that the aggregate
Net Book Value is less than Seven Million Two Hundred Thousand Dollars
($7,200,000.00), then there shall be a dollar-for-dollar deduction from the
Holdback. If the Net Book Value as indicated on the Reference Balance Sheet is
more than Seven Million Two Hundred Thousand Dollars ($7,200,000.00), then
within five (5) business days Seller shall be entitled to receive or retain from
the Acquired Assets cash and marketable securities (valued as set forth on the
Reference Balance Sheet) in an amount equal to the amount above Seven Million
Two Hundred Thousand Dollars ($7,200,000.00); if such cash or marketable
securities shall be insufficient to cover such amount above Seven Million Two
Hundred Thousand Dollars ($7,200,000.00), then within five (5) business days
Seller shall be entitled to withhold or cause to be transferred back to Seller
inventory (valued as set forth on the Reference Balance Sheet) from the Acquired
Assets in the amount of such deficiency and TOPAC shall immediately purchase
such inventory for the amount of such deficiency. In the event that any
deduction during the Holdback Period exceeds the amount of the Holdback, then MI
or Seller shall, jointly and severally, pay Purchaser any such excess amount
within five (5) business days of written notification by Purchaser to MI and
Seller.
1.5 Payment of Purchase Price.
(a) The Purchase Price shall be paid to Seller as follows:
(i) Wire of Funds at Closing. At the Closing, Purchaser
shall wire transfer immediately available funds to Seller, pursuant to Seller's
wiring instructions, the amount of Nine Million Nine Hundred Thousand Dollars
($9,900,000.00).
(ii) Holdback. Purchaser shall withhold payment of the
Holdback (as defined below) for a period of one (1) year after the Closing (the
"HOLDBACK PERIOD") as security against any Liabilities (which exceed a basket of
Seventy-Five Thousand Dollars ($75,000.00) in the aggregate) arising out of
Adjustments under, or Breaches of, this Agreement during the Holdback Period.
Purchaser may deduct from the Holdback any amount deemed necessary to satisfy
any such Liability, up to and including the full amount of the Holdback,
provided, however, that prior to making any deductions from the Holdback,
Purchaser shall provide thirty (30) day's prior written notice to MI and Seller
of any proposed deduction to the Holdback. In the event that MI and Seller
Dispute the deduction, the parties must resort to the Dispute resolution
procedures prescribed in Article 6 prior to the deduction being effected. The
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Holdback shall be held by Purchaser during the Holdback Period. At the end of
the Holdback Period, Purchaser shall pay interest on the amount of the Holdback,
for the entire Holdback Period, to Seller at the rate of two percent (2%) simple
interest per annum. If at the end of the Holdback Period a Dispute exists,
Purchaser shall continue to withhold payment of that portion of the Holdback
equal to the principal amount in Dispute until the Dispute is resolved. Interest
shall continue to accrue in favor of Seller on the portion of the Holdback not
distributed to Seller. One (1) year after the Closing Date, Purchaser (or TOPAC)
shall pay to Seller the Holdback amount of One Million One Hundred Thousand
Dollars ($1,100,000.00) (the "HOLDBACK"), less any offsets, Adjustments or
Disputed amounts as provided herein, plus the interest described above, by wire
transfer of immediately available funds. All Disputed amounts shall remain with
Purchaser until the Dispute is resolved at which time Purchaser shall pay to
Seller any portion of such amounts it is not entitled to retain.
(iii) Assumption of Liabilities. At Closing Purchaser shall
assume or pay off all the Assumed Liabilities.
(b) Allocation of Purchase Price. The Purchase Price shall be
allocated as follows:
(i) Ten Million Four Hundred Fifty Thousand Dollars
($10,450,000.00) of the Cash Price (the "ASSET ALLOCATION") plus the amount of
the Assumed Liabilities shall be allocated for the Acquired Assets.
(ii) Five Hundred Fifty Thousand Dollars ($550,000.00)
(the "NON-COMPETE ALLOCATION") shall be allocated for a three (3) year
non-competition agreement described in Article 4, to be entered into by
Purchaser, TOPAC, MI, and Seller.
(iii) For federal and state income tax purposes, TOPAC,
Purchaser, MI, and Seller agree to allocate the purchase price among the
Acquired Assets in amounts equal to the Closing Date book values thereof (for
Acquired Assets having Closing Date book values), in accordance with GAAP, with
the balance being allocated to goodwill and/or intangibles.
(c) Sales Taxes. Purchaser shall bear and pay, and shall reimburse
Seller for, any sales taxes, use taxes, transfer taxes, documentary charges,
recording fees or similar taxes, charges, fees or expenses that may become
payable in connection with the transfers of the Acquired Assets to Purchaser or
in connection with any of the other Transactions. However, Purchaser shall not
be responsible for any of MI's or Seller's income taxes.
1.6 Closing. The Closing shall take place via facsimile transmission of
executed Transaction Documents and shall be deemed effective as of 11:59 p.m.
eastern time on the Closing Date. All proceedings to take place at the Closing
shall take place simultaneously, and no delivery shall be considered to have
been made until all such deliveries have been made.
1.7 Closing Conditions and Deliveries. At the Closing:
(a) Seller shall execute and deliver a Xxxx of Sale and General
Assignment and Assumption Agreement, substantially in the form of EXHIBIT B
hereto;
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(b) Seller shall execute and deliver to Purchaser such other bills
of sale, endorsements, assignments, certificates of title, any and all other
instruments of conveyance and transfer as shall be reasonably requested by
Purchaser in order to effectively convey and transfer to Purchaser the Acquired
Assets or to evidence such conveyance and transfer, and any other documents as
may (in the reasonable judgment of Purchaser or its counsel) be necessary or
appropriate in the judgment of Purchaser's counsel to assign, convey, transfer
and deliver to Purchaser good and valid title to the Acquired Assets free and
clear of any Encumbrances;
(c) MOS shall deliver to Purchaser a good standing certificate
from the secretary of state of North Carolina, its state of incorporation, dated
as of a date that is within five (5) business days of the Closing Date;
(d) MOS shall deliver to Purchaser a copy of its articles of
incorporation and all amendments thereto, and a copy of its bylaws and all
amendments thereto, all certified by the secretary of MOS as correct and
complete as of the Closing Date;
(e) MI and MOS shall each deliver to Purchaser a copy of
resolutions of each of MI's and MOS's boards of directors (and stockholders if
required) approving the Transactions, certified by each of MI's and MOS's
secretaries as correct and complete as of the Closing Date;
(f) Purchaser and Seller shall execute and deliver a lease
agreement with respect to Seller's corporate offices (the "LEASE AGREEMENT");
(g) Purchaser and/or TOPAC shall deliver the amount set forth in
Section 1.5(a)(i) by wire transfer of immediately available funds; and
(h) Purchaser shall execute and deliver the LICENSE AGREEMENT.
ARTICLE 2 - REPRESENTATIONS AND WARRANTIES
OF MI AND SELLER
As a material inducement to TOPAC and Purchaser to enter into this
Agreement, with the understanding that TOPAC and Purchaser will be relying
thereon in consummating the Transactions, each of MI and Seller, jointly and
severally, represent and warrant as of the Closing Date, to and for the benefit
of Purchaser Indemnitees as follows below. On or prior to the Closing Date,
Seller shall have delivered to TOPAC and Purchaser a disclosure schedule
(collectively referred to as the "DISCLOSURE SCHEDULES" and individually as a
"SCHEDULE"), which
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Disclosure Schedules include certain information specifically required to be
provided by this Article 2 and disclose certain exceptions to the
representations and warranties contained in this Article 2; provided that any
such exceptions are specifically referenced in the relevant representation and
warranty so modified. It is understood and agreed that nothing in any Schedule
herein shall in any way increase Purchaser's Liability hereunder; and,
Purchaser's only Liabilities hereunder shall be those specific and limited
Assumed Liabilities, and no other.
2.1 Due Organization; No Subsidiaries. MOS is a corporation duly
organized, validly existing and in good standing under the laws of the State of
North Carolina. Seller is qualified, authorized, registered or licensed to do
business as a foreign corporation in any jurisdiction where its business
requires such qualification, except in jurisdictions, if any, where the failure
to be so qualified (a) would not result in a Material Adverse Effect or (b)
would not result in a Breach of any of the other representations, warranties or
covenants set forth in this Agreement. Seller has the requisite corporate power
and authority to own, use or lease its properties and to carry on its business
as it is now being conducted and as it is now proposed to be conducted. Seller
is not in default in any material respect in the performance, observation or
fulfillment of any provision of its articles of incorporation or bylaws. Seller
has delivered to (or made available for inspection by) Purchaser accurate and
complete copies of its articles of incorporation and bylaws, including all
amendments thereto, and they are all in full force and effect.
Neither MI nor Seller controls, directly or indirectly, nor does either MI or
Seller have any direct or indirect equity participation or other interest in,
any corporation, partnership, trust or other business entity that would be a
Non-compete Business Service. Neither MI nor Seller nor, to the Knowledge of
Seller, any of MI's or Seller's employee's immediate family members has any
material interest in any entity which is a vendor or customer of Seller.
Ownership of not more than one percent (1%) of the voting stock of a corporation
whose stock is traded on a national securities exchange or over-the-counter
shall not of itself constitute a violation of this Section 2.
2.2 Authority; Binding Nature of Agreements. Each of MI and Seller has
the absolute and unrestricted right, power and authority to enter into and to
each perform the obligations under each of the Transaction Agreements to which
it is a party (other than the power and authority to assign any Acquired
Business Contracts that require third party consent to be assigned as a result
of the Transactions); and the execution, delivery and performance by each of MI
and Seller of the Transaction Agreements to which it is a party have been duly
authorized by all necessary action on the part of MI and Seller and their
respective stockholders, board of directors, and officers and no other corporate
proceedings on the part of MI or Seller are necessary, as a matter of law or
otherwise, to authorize the Transaction Agreements. Each Transaction Agreement
to which MI or Seller is a party on the date hereof, and each other Transaction
Agreement upon execution at Closing, constitutes the legal, valid and binding
obligation of MI and Seller, enforceable against MI and Seller in accordance
with its terms, except as (a) such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium or similar laws now or hereinafter in
effect relating to creditors' rights generally or to general principles of
equity, and (b) the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
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2.3 Non-Contravention; Consents. Neither the execution and delivery of
any of the Transaction Agreements, nor the consummation or performance of any of
the Transactions, will directly or indirectly (with or without notice or lapse
of time):
(a) Contravene, conflict with or result in a violation of, or give
any Governmental Body or other Person the right to challenge any of the
Transactions or to exercise any remedy or obtain any relief under, any Legal
Requirement or any Order to which MI, Seller, or any of the Acquired Assets, is
subject;
(b) Except as such may be caused by a failure to obtain the
consent of any third party, (i) contravene, conflict with or result in a
violation or breach of, or result in a default under (or give rise to any right
of termination, cancellation or acceleration or guaranteed payments), any
provision of any Acquired Business Contract; (ii) give any Person the right to
(A) declare a default or exercise any remedy under any Acquired Business
Contract, (B) accelerate the maturity or performance of any Acquired Business
Contract, or (C) cancel, terminate or modify any Acquired Business Contract; or
(iii) result in the imposition or creation of any Encumbrance upon or with
respect to any of the Acquired Assets;
(c) Conflict with any provision of the articles of incorporation
or bylaws (or other similar charter documents) of either MI or Seller;
2.4 Financial Statements. MI and Seller have delivered the Financial
Statements (set forth at Schedule 2.4) to TOPAC and Purchaser.
2.5 Absence Of Changes. Except as set forth on Schedule 2.5, since May
1, 2004, concerning the Acquired Business:
(a) No event has occurred that could reasonably be expected to
have a Material Adverse Effect on Seller;
(b) There has not been any material loss, damage or destruction to
any of the Acquired Assets (whether or not covered by insurance);
(c) Seller has not written off as uncollectible, or established
any extraordinary reserve with respect to, any account receivable or other
indebtedness included in the Acquired Assets except in the Ordinary Course of
Business;
(d) No material Acquired Business Contract has been amended or
terminated;
(e) Seller has not caused any of the Acquired Assets to become
subject to any Liability except in the Ordinary Course of Business;
(f) Seller has not changed any of its methods of accounting or
accounting practices in any respect, or changed outside accountants;
(g) Seller has not entered into any transaction or taken any other
action, in each case related to the Acquired Business outside the Ordinary
Course of Business, except as related to the Transactions;
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(h) There has not been any declaration, setting aside or payment
of any dividend or other distribution of cash or other assets of Seller, other
than repayment of intercompany debt in the Ordinary Course of Business and
salaries and bonuses paid in the Ordinary Course of Business and consistent with
past practices, to MI or to any affiliate or Representative of MI, and since the
date of the Reference Balance Sheet Seller has not paid any dividend or
otherwise transferred any assets (in the form of repayment of intercompany debt
or otherwise) to MI;
(i) There has not been any acquisition, whether by merger or
consolidation with, or purchase of a substantial portion of the assets of, or by
any other manner, any business or corporation, partnership, association or other
business organization or division thereof or other acquisition or agreement to
acquire any capital or other assets which are material, either individually or
in the aggregate, to Seller;
(j) There has not been agreement by Seller to enter into any
material lease or extension of any material lease with respect to any real or
personal property except in the Ordinary Course of Business;
(k) There has not been any labor dispute or difficulty concerning
the Business Employees which is reasonably likely to result in any Material
Adverse Effect, and to the Knowledge of Seller, no such dispute or difficulty is
now threatened;
(l) No material asset has been sold, leased or disposed of (except
inventory sold in the Ordinary Course of Business) and no material asset has
been mortgaged, pledged or subjected to any lien, charge, factoring agreement or
other Encumbrance;
(m) No indebtedness has been incurred by Seller, except such as
may have been incurred in the Ordinary Course of Business and consistent with
past practice;
(n) Other than in the Ordinary Course of Business, there has not
been any increase in excess of Five Thousand Dollars ($5,000.00) in the
compensation payable, or which could become payable by either MI or Seller to
any Business Employee or to any directors, officers, distributors, dealers, or
sales representatives;
(o) Seller has not entered into, or agreed to enter into, or
amend, any employment, severance, or termination agreement;
(p) There has not been any loan made or agreed to be made by
Seller, nor has Seller become liable or agreed to become liable as a guarantor
with respect to any loan, nor has Seller guaranteed the repayment of any debt
securities, nor has Seller paid or become liable for the prepayment or other
penalties in connection with the early retirement of any of such Seller's
indebtedness for borrowed money except in the Ordinary Course of Business;
(q) There has not been any waiver by Seller of any right of
material value or any payment, direct or indirect, or cancellation of any
material debt, liability or other obligation or claim except in the Ordinary
Course of Business;
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2.6 Title To Assets.
(a) Seller has good and valid title to, or in the case of leased
property, have a valid leasehold interest in, all of the Acquired Assets
(whether real or personal, tangible or intangible). No Affiliate of either MI or
Seller (other than MI and Seller) or any Related Party has title to, or in the
case of leased property a leasehold interest in, any of the Acquired Assets.
None of such Acquired Assets is subject to any Encumbrances (including
tax-related Encumbrances), except Encumbrances related to and arising out of
Assumed Liabilities. All of the Acquired Assets are in the exclusive possession
and control of Seller (except leased property in the possession of third party
lessee/end users under valid leases) and Seller has the unencumbered right to
use and sell to Purchaser all of the Acquired Assets without interference from
others (other than the power and authority to assign any Acquired Business
Contracts that require third party consent to be assigned as a result of the
Transactions). No actions, proceedings or transactions have been commenced or
undertaken by MI or Seller which give, or would give, rights to any Person,
other than Purchaser, in any of the Acquired Assets or interfere with the
consummation of the Transactions.
(b) At the Closing Date, Seller shall transfer to Purchaser good
and valid title to all Acquired Assets, free and clear of any Encumbrances.
(c) Except as set forth on Schedule 2.6(c), the Acquired Assets,
together with Purchaser's rights under this Agreement and the other Transaction
Agreements, constitute all the assets, properties, rights and goodwill necessary
to carry on the Acquired Business as conducted on the date of this Agreement, it
being understood that the Excluded Assets will be retained by Seller and that
such Excluded Assets have been used in Seller's businesses prior to Closing.
(d) Neither MI nor Seller nor any of their Affiliates has any
agreement, absolute or contingent, written or oral, with any other Person to
effect any acquisition transaction or to sell or otherwise transfer any of the
Acquired Assets or any line of business or material asset relating to the
Acquired Business or MI's or Seller's obligations under the Transaction
Agreements.
2.7 Bank Accounts. Schedule 2.7 accurately sets forth, with respect to
each account related to the Acquired Business and which is an Acquired Asset,
and maintained by or for the benefit of Seller at any bank or other financial
institution: (a) the name and location of the institution at which such account
is maintained; (b) the name in which such account is maintained and the account
number of such account; (c) a description of such account and the purpose for
which such account is used; (d) the rate of interest being earned on the funds
in such account; and (e) the names of all individuals authorized to draw on or
make withdrawals from such account. There are no safe deposit boxes or similar
arrangements related to the Acquired Business and maintained by or for the
benefit of Seller.
2.8 Receivables. Schedule 2.8 provides an accurate and complete
breakdown and aging of all accounts receivable (showing amounts due in thirty
(30) day aging categories), notes receivable, other receivables prepaid expenses
and other current assets of Seller related to the Acquired Business as of the
date of the Reference Balance Sheet. All accounts receivable related to the
Acquired Business that are reflected on the Reference Balance Sheet represented,
valid
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obligations arising from sales actually made or services actually performed by
Seller in the Ordinary Course of Business. Except to the extent of any reserves
set forth on the Reference Balance Sheet, there is no contest, claim, defense,
right, or setoff, other than returns in the Ordinary Course of Business of
Seller, under any Contract with any account debtor of an account receivable
relating to the amount or validity of such account receivable.
2.9 Customers. Schedule 2.9 accurately identifies and provides a
complete breakdown of the fifteen (15) largest (by dollar volume) copier,
facsimile, and duplicator customers of Seller, together with the amount of sales
made to each such customer during the most recent fiscal year. None of such
customers has given notice to Seller of an intention to cancel, cease dealing
with, fail to renew, terminate or materially impair its business relationship
with the Seller, or otherwise reduce the volume of business transacted by such
customer with the Seller below historical levels. Seller has no Knowledge of any
event that would precipitate the impairment, cancellation, or termination of, or
the failure to renew, or entitle such customer to terminate, such business
relationship except for any impairment, cancellation, or termination, or failure
to renew caused by the Transactions.
2.10 Inventory. Schedule 2.10 provides a listing of all inventory of
Seller related to the Acquired Business as of the as of the date of the
Reference Balance Sheet, which such listing is true and correct in all material
respects. All of such inventory (other than any such inventory disposed by
Seller in the Ordinary Course of Business following the date of the Reference
Balance Sheet) and any inventory acquired by Seller in the Ordinary Course of
Business following the date of the Reference Balance Sheet: (a) physically
exists; (b) except to the extent of any reserves set forth on the Reference
Balance Sheet, is of such quality and quantity as to be usable and saleable by
the Seller in the Ordinary Course of Business; (c) has been priced using the
specific identification method; and (d) except to the extent of any reserves set
forth on the Reference Balance Sheet, is free of any material defect, damage, or
deficiency. None of the inventory to be included in the Acquired Assets will be
pledged or subject to any Encumbrance.
2.11 Equipment. Schedule 2.11 provides a listing of all equipment,
vehicles and furniture owned by Seller related to, or deemed necessary by Seller
for the conduct of the Acquired Business as of the date of the Reference Balance
Sheet, which such listing is true and correct in all material respects. Schedule
2.11 also accurately identifies all material tangible assets leased to Seller
and related to or necessary for the conduct of the Acquired Business ("ACQUIRED
BUSINESS LEASED EQUIPMENT") and lists each lease for Acquired Business Leased
Equipment ("EQUIPMENT LEASE"). Each asset identified or required to be
identified in Schedule 2.11 (other than any such equipment disposed by Seller in
the Ordinary Course of Business following the date of the Reference Balance
Sheet) and any equipment acquired by Seller in the Ordinary Course of Business
following the date of the Reference Balance Sheet (a) is in good condition and
repair (ordinary wear and tear excepted); and (b) complies with and is being
operated and otherwise used in material compliance with all applicable Legal
Requirements.
2.12 Real Property. Except as set forth on Schedule 2.12, there is no
real property or any interest in real property which is used in connection with
the Acquired Business, except for the leaseholds for the real property on which
the Acquired Business is operated (the "REAL PROPERTY LEASES") and the portion
of MI's corporate headquarters facility that is occupied by Seller and that
following the Closing will be leased to Purchaser pursuant to the Lease
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Agreement. Seller enjoys peaceful and undisturbed possession of such premises.
Schedule 2.12 sets forth the following information with respect to the premises
covered by the Real Property Leases and the facilities located thereon: address,
square footage and type of space.
2.13 Intellectual Property. In the operation of the Acquired Business, to
the Knowledge of Seller, Seller has not infringed, and is not now infringing,
any patent, trade name, trademark, service xxxx, copyright, trade secret,
technology, know-how or process belonging to any other Person. Neither MI nor
Seller has received any written notice or other indication of any such claim of
infringement. Except for Seller's Intellectual Property and the Excluded
Intellectual Property, there are no Trademarks or Copyrights owned by either MI
or Seller that are used in the operation of the Acquired Business as now
conducted. To the Knowledge of Seller, Seller owns, or holds adequate licenses
or other rights to use, all Intellectual Property used in the operation of the
Acquired Business as now conducted (other than any such Intellectual Property
that constitutes Excluded Intellectual Property) and that use does not and will
not conflict with, infringe on or otherwise violate any rights of others. To the
extent transferable, all of such Intellectual Property (other than any such
Intellectual Property that constitutes Excluded Intellectual Property) is
included in the Acquired Assets being sold to Purchaser hereunder and MI and
Seller shall execute any documents reasonably necessary to effect the transfer
of such Intellectual Property to Purchaser; any non-transferable Intellectual
Property shall be listed in Schedule 2.13. Except as set forth in the Acquired
Business Contracts and pursuant to "off-the-shelf" software products, Seller is
not a party to any license, agreement or arrangement, with respect to any
trademarks, service marks, trade names, or applications for them, or any
copyrights.
2.14 Contracts. Schedule 2.14 identifies each Acquired Business Contract
other than customer contracts, a listing of which was included on the "Customer
Contract List" dated as of the Closing Date previously provided by Seller to
Purchaser. Except as set forth on Schedule 2.14(x)-1, MI and Seller have
delivered or made available to Purchaser accurate and complete copies of all
Acquired Business Contracts, including all amendments thereto. Each Acquired
Business Contract is valid and in full force and effect and is enforceable in
accordance with its terms and, subject to any required Consents, will be
assigned to the Purchaser on the Closing Date without such assignment
constituting any material breach, default, acceleration, modification,
termination or cancellation thereof. Except as a result of failure to obtain
consents with respect to the transfer thereof, Seller has not and, to the
Knowledge of Seller, the other party to such Acquired Business Contract has not,
violated or breached, or declared or committed any default under, any Acquired
Business Contract; and to the Knowledge of Seller, no event has occurred, and no
circumstance or condition exists, that would (with or without notice or lapse of
time) (i) result in a violation or breach of any of the provisions of any
Acquired Business Contract, (ii) give any Person the right to declare a default
or exercise any remedy under any Acquired Business Contract, (iii) give any
Person the right to accelerate the maturity or performance of any Acquired
Business Contract, or (iv) give any Person the right to cancel, terminate or
modify any Acquired Business Contract. Neither MI nor Seller has received any
notice or other communication (in writing or otherwise) regarding any actual,
alleged, possible or potential violation or breach of, or default under, any
Acquired Business Contract nor has Seller waived any material right under any
Acquired Business Contract. Except as a result of failure to obtain consents
with respect to the transfer thereof, the performance of the Acquired Business
Contracts will not result in any violation of or failure to comply with any
Legal Requirement. To the Knowledge of Seller, no Person is renegotiating, or
14
has the right to renegotiate any amount paid or payable to Seller under any
Acquired Business Contract or any other term or provision of any Acquired
Business Contract. Except as set forth on Schedule 2.14(x), the Acquired
Business Contracts, together with Purchaser's rights under this Agreement and
the other Transaction Agreements, collectively constitute all of the Contracts
necessary to enable Purchaser to conduct the Acquired Business in the same
manner in which such business is currently being conducted. The terms of
Seller's private label dealer agreement with GE Capital are substantially
similar to Seller's private label dealer agreement with First Citizens Bank &
Trust except that per the GE Capital agreement, GE Capital, rather than
Seller, controls the determination of fair market value for purposes of
determining the cost to a customer of terminating a lease early.
2.15 Liabilities; Books and Records. Seller has not, at any time, (a)
made a general assignment for the benefit of creditors, (b) filed, or had filed
against it, any bankruptcy petition or similar filing, (c) suffered the
attachment or other judicial seizure of all or a substantial portion of its
assets, (d) admitted in writing its inability to pay its debts as they become
due, or (e) taken or been the subject of any action that may have an adverse
effect on its ability to comply with or perform any of the covenants or
obligations under any of the Transaction Agreements. Seller's Books and Records
are complete and correct in all material respects and represent actual, bona
fide transactions.
2.16 Compliance with Legal Requirements. Seller is, to Seller's
Knowledge, in full compliance with each Legal Requirement that is applicable to
the conduct of Seller's business or the ownership or use of any of the Acquired
Assets, except to the extent any such noncompliance could not reasonably be
expected to (a) have a Material Adverse Effect on the Acquired Assets in the
hands of Purchaser, or (b) result in a Liability other than an Excluded
Liability. To the Knowledge of Seller, no event has occurred, and no condition
or circumstance exists, that could (with or without notice or lapse of time)
constitute or result directly or indirectly in a violation by Seller of, or a
failure on the part of Seller to comply with, any Legal Requirement, except to
the extent any such noncompliance would not (x) have a Material Adverse Effect
on the Acquired Assets in the hands of Purchaser, or (y) result in a material
Liability other than an Excluded Liability. Seller has not received any notice
or other communication (in writing or otherwise) from any Governmental Body or
any other Person regarding (i) any actual, alleged, possible or potential
violation of, or failure to comply with, any Legal Requirement, or (ii) any
actual, alleged, possible or potential obligation on the part of either MI or
Seller to undertake, or to bear all or any portion of the cost of, any cleanup
or any remedial, corrective or response action of any nature, except to the
extent the circumstances underlying any such notice or other communication could
not reasonably be expected to (x) have a Material Adverse Effect on the Acquired
Assets in the hands of Purchaser, or (y) result in a material Liability other
than an Excluded Liability. To the Knowledge of Seller, no Governmental Body has
proposed or is considering any Legal Requirement that, if adopted or otherwise
put into effect, (A) may have a Material Adverse Effect on the Acquired Assets
in the hands of Purchaser, or (B) may have the effect of preventing, delaying,
making illegal or otherwise interfering with any of the Transactions.
2.17 Tax Matters.
(a) Seller has timely filed all Tax Returns related to the
Acquired Business. All Tax Returns were correct and complete in all material
respects and all Taxes owed by Seller in connection therewith have been paid or
properly reserved for in the Financial Statements. Seller is not currently the
beneficiary of any extension of time within which to file any Tax Return. No
outstanding claim has been made either orally or in writing by any Governmental
15
Body in a jurisdiction where Seller does not file Tax Returns that Seller may be
subject to taxation by that jurisdiction.
(b) Seller has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any Business
Employee, creditor, independent contractor, or other third party.
(c) There is no dispute or claim concerning any Tax Liability of
Seller either (i) claimed or raised by any Governmental Body either orally or in
writing or (ii) as to which Seller, or the directors or officers (or employees
or accountants responsible for Tax matters) of Seller has Knowledge based upon
personal contact or correspondence with any agent of such Governmental Body.
Seller has disclosed and provided or otherwise made available to TOPAC all Tax
Returns filed with respect to Seller for taxable periods ended on or after
January 1, 2001, and has disclosed and provided to TOPAC those Tax Returns, if
any, that have been audited, and those Tax Returns, if any, that currently are
the subject of audit.
(d) The Seller has not waived in writing any statute of
limitations in respect of Taxes or agreed to any extension of time with respect
to a Tax assessment or deficiency pertaining to the Seller.
(e) Seller has not made any payments, nor is it obligated to make
any payments, that will not be deductible under Section 280G of the Code. The
Seller has disclosed on its United States federal income Tax Return all
positions taken therein that could give rise to any accuracy-related
understatement penalty pursuant to Section 6662 of the Code.
(f) No Tax Liability related to the Acquired Assets will be
incurred by Seller as a result of any Tax Returns that are required to be filed
or submitted prior to the Closing Date, which would result in a Material Adverse
Effect.
(g) Seller is not, and has not been at any time, a "United States
real property holding corporation" within the meaning of Section 897(c)(2) of
the Code.
(h) Seller is not a party to or bound by any Tax indemnity, Tax
sharing or Tax allocation agreements.
(i) None of the assets of Seller is property that Seller is
required to treat as being owned by any other Person pursuant to the "safe
harbor lease" provisions of former Section 168(f)(8) of the Code.
(j) None of the assets of Seller directly or indirectly secures
any debt the interest on which is tax-exempt under Section 103(a) of the Code.
(k) Seller does not have and has never had a permanent
establishment in any foreign country, as defined in any applicable tax treaty or
convention between the United States and such foreign country.
2.18 Employment Matters. Seller is not a party to, nor is it bound by,
any collective bargaining agreement or other labor agreement and Seller is not
involved in any labor discussion
16
with any unit or group seeking to become the bargaining unit for any of its
Business Employees, nor has any such unit or group notified Seller of an
intention to commence any organizational activities among the Business
Employees. True and complete copies of any agreements disclosed in Schedule 2.18
have been delivered or made available to TOPAC.
(a) Schedule 2.18 contains a complete list of the following
information for each Business Employee as of the date of the Closing Date,
including each Business Employee on leave of absence or layoff status: name, job
title, department, exempt/non-exempt status, full-time/part-time status, hire
date, length of service and salary.
(b) To the Knowledge of Seller: (i) no Business Employee intends
to terminate his or her employment; (ii) no Business Employee has received an
offer to join a business that may be competitive with the Acquired Business;
(iii) no Business Employee is a party to or is bound by any confidentiality
agreement, noncompetition agreement or other Contract (with any Person) that may
have an adverse effect on the performance by such Business Employee of any of
his or her duties or responsibilities as an employee of Seller or as an employee
of Purchaser. To the Knowledge of Seller, Seller has not engaged in any unfair
labor practice of any nature with respect to the Acquired Business or the
Business Employees. Since January 1, 2001, except as set forth on Schedule 2.18,
there have been no federal or state claims based on sex, sexual or other
harassment, age, disability, race or other discrimination or common law claims,
including claims of wrongful termination against Seller, by any Business
Employees or by any of the employees performing work for Seller but provided by
an outside employment agency, or by any current or potential representatives of
suppliers or customers or distributors, and there are no facts or circumstances
known to Seller that could reasonably be expected to give rise to such complaint
or claim. To the Knowledge of Seller, Seller has complied in all material
respects with all Legal Requirements related to the employment of Business
Employees and has not received any notice of any claim that it has not complied
in any material respect with any Legal Requirement relating to the employment of
Business Employees, including without limitation, any provisions thereof
relating to wages, hours, collective bargaining, the payment of Social Security
and similar taxes, equal employment opportunity, employment discrimination, the
WARN Act, employee safety, or that it is liable for any arrearages of wages or
any taxes or penalties for failure to comply with any of the foregoing.
2.19 Benefit Plans; ERISA. Purchaser shall not be considered a successor
employer with respect to any Employee Benefit Plan of Seller or MI as a result
of the Transactions or otherwise. Purchaser shall not be liable or otherwise
responsible for any accrued or unaccrued liability (including any underfunding,
penalties, excise taxes or otherwise) or other obligation, either existing
currently or accrued or discovered in the future, with respect to any Employee
Benefit Plan of Seller or MI. Purchaser is not assuming or retaining any
liability or asset related to any ERISA covered benefit plan of Seller or MI.
2.20 Environmental Matters. To the Knowledge of Seller, the Acquired
Business has been and is now operated in material compliance with all
Environmental Laws.
2.21 Insurance. Set forth on Schedule 2.21 is a true and correct list of
all insurance policies that cover the Acquired Business. Such policies are in
full force and effect through the Closing Date and, except as otherwise set
forth on Schedule 2.21, such policies, or other policies
17
covering the same risks, have been in full force and effect, without gaps,
continuously for the past five (5) years. Copies of all such policies have been
made available to TOPAC for its inspection (including all renewals thereof and
endorsements thereto) and all of the pending applications.
2.22 Proceedings; Orders. Except as set forth on Schedule 2.22, there is
no pending Proceeding to the Knowledge of Seller, and, to the Knowledge of
Seller, no Person has threatened to commence any Proceeding: (a) that involves
MOS and that could reasonably be expected to have a Material Adverse Effect on
the Acquired Business, any of the Acquired Assets or the obligations of Seller
under this Agreement and any of the Transaction Agreements (whether or not
Seller is named as a party thereto); or (b) that challenges, or that may have
the effect of preventing, delaying, making illegal or otherwise interfering
with, any of the Transactions. To the Knowledge of Seller, no event has
occurred, and no claim, dispute or other condition or circumstance exists,
excluding disputes with customers in the Ordinary Course of Business, that could
directly or indirectly give rise to or serve as a basis for the commencement of
any such Proceeding. MI and Seller have delivered to Purchaser accurate and
complete copies of all pleadings, correspondence and other written materials
that relate to any Proceedings identified in Schedule 2.22. There is no Order to
which either MI or Seller, or any of the Acquired Assets, is subject; and none
of the Affiliates of either MI or Seller or any other Related Party is subject
to any Order that relates to the Acquired Business or the Acquired Assets. To
the Knowledge of Seller, no Business Employee is subject to any Order that may
prohibit Business Employees from engaging in or continuing any conduct, activity
or practice relating to the Acquired Business. To the Knowledge of Seller, there
is no proposed Order that, if issued or otherwise put into effect, (x) may have
a Material Adverse Effect, or (y) may have the effect of preventing, delaying,
making illegal or otherwise interfering with any of the Transactions.
2.23 Bulk Sales; Fraudulent Transfers. The sale of the Acquired Assets to
Purchaser is not subject to any bulk sales or similar laws. Seller is not now
insolvent, nor will it be rendered insolvent by any of the Transactions.
2.24 Absence of Undisclosed Liabilities. Except to the extent reserved
against or reflected in the balance sheets of Seller included in the Financial
Statements, Seller has no material Liabilities or obligations (contingent or
otherwise) that are required by GAAP to be reflected therein (or footnotes
thereto), and from the date of the Financial Statements, up to and including the
Closing Date, Seller has not incurred any material liabilities or obligations
that are required by GAAP to be reflected in the balance sheets of Seller (and
the footnotes thereto) (except as may be noted therein), except any such
Liabilities or obligations incurred in the Ordinary Course of Business and
consistent with past practice or which constitute Excluded Liabilities.
2.25 Broker's Commissions or Finder's Fees. No Person has acted for
either MI or Seller in connection with the Transactions in any way that would
entitle such Person to, and no Person is entitled to, receive from either MI or
Seller any broker's commissions or finder's fees (or other similar fees or
commissions) in connection with the Transactions for which Purchaser could be
liable.
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2.26 Customer Lists. Each of Seller's current sales employee has signed a
confidentiality agreement with Seller which requires each such employee to keep
Seller's customer lists confidential and D. Xxxx XxXxx, Xxxxxx Xxxxx, Xxxxxx
Xxxxx or Xxxxxx Xxxxxxxx have not disclosed the customer lists to any non-MI, or
non-Seller Person other than TOPAC and Purchaser.
2.27 Certain Payments. To the Knowledge of Seller, neither MI nor Seller,
nor any director, officer, agent or employee of either MI or Seller, nor any
other person associated with or acting for or on behalf of either MI or Seller,
has directly or indirectly (a) made any contribution, gift, bribe, rebate,
payoff, influence payment, kickback or other payment to any person, private or
public, regardless of form, whether in money, property or services in violation
of any federal, state, local, municipal, foreign or other constitution,
ordinance, regulation, statute, treaty or other law adopted, enacted,
implemented or promulgated by or under the authority of any Governmental Body,
or (b) established or maintained any fund or asset that has not been recorded in
the Books and Records of Seller which would result in a Material Adverse Effect.
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES
OF PURCHASER AND TOPAC
Purchaser and TOPAC represent and warrant, jointly and severally, to and
for the benefit of the MI and Seller as follows:
3.1 Organization. Purchaser is a corporation duly formed, validly
existing and in good standing in the State of North Carolina. TOPAC is a
corporation duly organized, validly existing and in good standing in the State
of Delaware. Each of Purchaser and TOPAC has the requisite corporate power to
own, use or lease its properties and to carry on its business as it is now being
conducted. Neither Purchaser nor TOPAC is in default in any material respect in
the performance, observation or fulfillment of any provision of its articles of
incorporation or bylaws, respectively.
3.2 Authority Relative to this Agreement. Each of Purchaser and TOPAC
has all requisite corporate power and authority to execute and deliver this
Agreement and to consummate the Transactions. The execution and delivery of this
Agreement and the consummation of the Transactions on the part of each of
Purchaser and TOPAC have been duly and validly authorized by the Boards of
Directors of Purchaser and TOPAC, and no other corporate proceedings on the part
of Purchaser or TOPAC are necessary, as a matter of law or otherwise, to
authorize this Agreement or to consummate the Transactions. This Agreement has
been duly and validly executed and delivered by Purchaser and TOPAC and,
assuming this Agreement constitutes a valid and binding obligation of each of
Sellers, this Agreement constitutes a valid and binding agreement of Purchaser
and TOPAC, enforceable against them in accordance with its terms, except as (a)
such enforcement may be subject to bankruptcy, insolvency, reorganization,
moratorium or similar laws now or hereafter in effect relating to creditors'
rights generally or to general principles of equity, and (b) the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
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3.3 Broker's Commissions or Finder's Fees. No Person has acted for
Purchaser or TOPAC in connection with the Transactions in any way that would
entitle such Person to, and no Person is entitled to, receive from Purchaser or
TOPAC any broker's commissions or finder's fees (or other similar fees or
commissions) in connection with the Transactions.
3.4 Non-Contravention; Consents. Neither the execution and delivery of
any of the Transaction Agreements, nor the consummation or performance of any of
the Transactions, will directly or indirectly (with or without notice or lapse
of time):
(a) Contravene, conflict with or result in a violation of, or give
any Governmental Body or other Person the right to challenge any of the
Transactions or to exercise any remedy or obtain any relief under, any Legal
Requirement or any Order to which Purchaser or TOPAC is subject;
(b) Conflict with any provision of the articles of incorporation
or bylaws (or other similar charter documents) of either Purchaser or TOPAC; or
(c) Except as such may be caused by a failure to obtain the
consent of any third party, conflict with, result in the breach of or constitute
a default (or give rise to any right of termination, cancellation or
acceleration or guaranteed payments) under any of the terms, conditions or
provisions of any note, lease, mortgage, license, agreement or other instrument
or obligation to which either Purchaser or TOPAC is a party or by which either
Purchaser or TOPAC, or any of their assets or property may be bound, except for
such defaults (or rights of termination, cancellation or acceleration) or which,
in the aggregate, would not result in a material adverse effect.
3.5 Proceedings; Orders. There is no pending Proceeding, and, to the
Knowledge of TOPAC or Purchaser, no Person has threatened to commence any
Proceeding: (a) that involves either TOPAC or Purchaser and that could
reasonably be expected to affect the obligations of Purchaser or TOPAC under
this Agreement and any of the Transaction Agreements (whether or not Purchaser
is named as a party thereto); or (b) that challenges, or that may have the
effect of preventing, delaying, making illegal or otherwise interfering with,
any of the Transactions.
ARTICLE 4 - COVENANTS
4.1 Noncompetition; Nonsolicitation.
(a) Prohibited Activities. During the Non-compete Period, MI and
Seller shall not:
(i) establish, enter into, be employed by, advise,
consult with or become an owner in any part of, or in any way participate in any
company, partnership, corporation or other entity or venture that engages in the
Non-compete Business Services within the Non-compete Territory, other than for
Purchaser;
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(ii) directly or indirectly hire, or solicit for hire any
employee of Seller who becomes an employee of Purchaser on the Closing Date
other than any such employee who is laid-off or otherwise terminated by
Purchaser other than for misconduct;
(iii) directly or indirectly solicit any present or past
customer of Seller or Purchaser or any of their respective subsidiaries for the
purpose of providing Non-compete Business Services; or
(iv) disclose any past or present customer of Seller to
any person or entity for the purpose of providing Non-compete Business Services.
Ownership of not more than one percent (1%) of the voting stock of a corporation
whose stock is traded on a national securities exchange or over-the-counter
shall not of itself constitute a violation of this Section 4.1.
(b) Reasonable Restraint. The parties agree that the covenants
contained in this Section 4.1 impose a reasonable restraint on MI and Seller in
light of the activities and business of Seller and the future plans of
Purchaser.
(c) Severability; Reformation. The covenants in this Section 4.1
are severable, and in the event that any one or more of such covenants are
deemed illegal or unenforceable, the remaining covenants shall remain in full
force and effect, and the unenforceability of any specific covenant shall not
affect the provisions of any other covenant. In the event any court of competent
jurisdiction shall determine the scope, time or territorial restrictions set
forth in this Section 4.1 are unreasonable, then it is the intention of the
parties that such restrictions be enforced to the fullest extent that the court
deems reasonable, and the provision of this Section 4.1 shall thereby be
reformed.
(d) Remedies. MI and Seller acknowledge and agree that, because
the legal remedies of Purchaser may be inadequate in the event of a breach of
any of the covenants set forth in this Section 4.1, Purchaser may, in its
discretion and in addition to obtaining any other remedy or relief available to
it (including, without limitation, damages at law), enforce the provisions of
this Section 4.1 by injunction and other equitable relief.
(e) Independent Covenant. Each of the covenants contained in this
Section 4.1 shall be construed as a covenant independent of any other provision
of this Agreement, and the existence of any claim or cause of action of MI or
Seller against Purchaser or any of its Affiliates, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement of any
such covenant. The Non-compete Period shall be computed by excluding from such
computation any time during which MI or Seller is in violation of any provision
of this Section 4.1 and any time during which there is pending in any court of
competent jurisdiction any action (including any appeal from any judgment)
brought by any Person, whether or not a party to this Agreement, in which
Purchaser or any of its Affiliates seeks to enforce the covenants contained in
this Section 4.1 or in which any Person contests the validity or enforceability
of any such covenant or seeks to avoid the performance or enforcement of any
such covenant, provided that Purchaser or Person seeking to enforce the
covenants in this Section 4.1 is the prevailing party in such action.
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4.2 Confidential Information.
(a) Nondisclosure by MI and Seller. MI and Seller recognize and
acknowledge that they, in the past had, currently have, and in the future may
possibly have, access to certain confidential information pertaining to the
Acquired Business, such as customer lists, specific information relating to the
special needs of particular customers (including knowledge of what products they
are using and are likely to use in the future), sales and financial records and
related data (including pricing information), information and specifications
relating to products proposed by Seller, knowledge of Seller's sales and
marketing techniques, and information regarding vendors and suppliers of Seller.
MI and Seller agree that from and after the Closing Date they will not use such
confidential information or disclose such confidential information to any Person
for any purpose or reason whatsoever, except to authorized representatives of
Purchaser, unless such information becomes known to the public generally through
no fault of MI or Seller, or unless MI or Seller is required by law to disclose
such information. In the event of a Breach or threatened breach by MI or Seller
of the provisions of this Section 4.2, Purchaser shall be entitled to an
injunction restraining MI and/or Seller from disclosing, in whole or in part,
such confidential information. Nothing herein shall be construed as prohibiting
Purchaser from pursuing any other available remedy for such breach or threatened
breach, including the recovery of Damages.
(b) Permissive Disclosure. If MI or Seller is requested to provide
confidential information pursuant to requirements of applicable law, they shall
notify Purchaser as promptly as reasonably possible and shall allow Purchaser
the opportunity to oppose such request. Notwithstanding anything herein to the
contrary, MI and Seller may disclose to any and all Persons, without limitation
of any kind, the "tax treatment" and "tax structure" (as those terms are defined
in Section 1.6011-4(c) of the Treasury Regulations) of the Transactions and all
materials of any kind (including opinions or other tax analyses) that are
provided to them relating to such tax treatment and tax structure; provided,
however, that such disclosure may not be made (i) until the earlier of (x) the
date of the public announcement of negotiations related to the Transactions, or
(y) the date of the public announcement of the Transaction Agreements and (z)
the date of the execution of the Transaction Agreements, and (ii) to the extent
required to be kept confidential to comply with any applicable federal or state
securities laws. This authorization is not intended to permit disclosure of any
other information including: (i) any portion of any materials to the extent not
related to the tax treatment or tax structure of the Transactions; (ii) the
identities of participants or potential participants in the Transactions; (iii)
the existence or status of any negotiations; (iv) any pricing or financial
information (except to the extent such pricing or financial information is
related to the tax treatment or tax structure of the Transactions); or (v) any
other term or detail not relevant to the tax treatment or the tax structure of
the Transactions.
(c) Remedies. MI and Seller acknowledge and agree that because the
legal remedies of Purchaser may be inadequate in the event of a breach of any of
the covenants set forth in this Section 4.2, Purchaser may, in its discretion
and in addition to obtaining any other remedy or relief available to it
(including, without limitation, Damages at law), enforce the provisions of this
Section 4.2 by injunction and other equitable relief.
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4.3 Governmental Filings. Each of Purchaser, MI and Seller, agree to
make as promptly as practicable all Governmental Filings. Each party shall use
its best efforts, and cause its counsel to use their best efforts, to cooperate
with the other parties in preparing their respective Governmental Filings and in
obtaining all required regulatory approvals, clearances and expirations of
waiting periods.
4.4 Legal Conditions. Each of Purchaser, MI and Seller will take all
reasonable actions necessary to comply promptly with all legal requirements
which may be imposed on such party with respect to the consummation of the
Transactions and will promptly cooperate with and furnish information to such
other party or parties in connection with any such requirements as may be
imposed upon such other party or parties in connection with the consummation of
the Transactions.
4.5 Additional Actions. The parties agree (a) to furnish upon request to
each other such further information, (b) to execute and deliver to each other
such other documents, and (c) to do such other acts and things, all as the other
party may reasonably request for the purpose of carrying out the intent of the
Transactions.
4.6 Tax Matters.
(a) All Tax Returns that relate to any Taxes of Seller for periods
ending on or before the Closing Date shall be prepared and filed by Seller.
(b) Seller agrees to pay Purchaser any refund received by Seller
in respect of any Taxes for which Seller is not liable under Section 5.1(a)(iii)
hereof, to the extent Purchaser has purchased such Tax asset and only as
contained on the Reference Balance Sheet. The parties shall cooperate in order
to take all necessary steps to claim any such refund. Any such refund received
by a party or its Affiliate for the account of the other party shall be turned
over to such other party within thirty (30) days after such refund is received.
(c) Each party will provide, or cause to be provided, to the other
party copies of all correspondence received from any Governmental Body by such
party or any of its Affiliates in connection with the liability of Seller for
Taxes for any period for which such other party is or may be liable under
Section 5.1(a)(iii) or otherwise. The parties will, at their own expense,
provide each other with such cooperation and information as they may reasonably
request of each other in preparing or filing any return, amended return or claim
for refund, in determining a Liability or a right of refund or in conducting any
audit or other proceeding, in respect of Taxes imposed on the parties or their
respective Affiliates. Seller shall be permitted reasonable access to the Books
and Records.
(d) Each of Seller and Purchaser shall be responsible for its pro
rata share of the current year personal property, real property, ad valorem and
similar Taxes with respect to the Acquired Assets, pro rated on a property tax
year basis as of the Closing Date.
(e) Notwithstanding any other provision of this Agreement, the
covenants set forth in this Section 4.6 shall survive until the expiration of
the respective statute of limitations applicable to the period to which the
Taxes relate.
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(f) The allocation of value of the Acquired Business shall be
based upon the book value contained in the agreed-upon final Reference Balance
Sheet.
4.7 Employment Matters. On the Closing Date, Purchaser shall offer
employment to all Business Employees employed by MOS on the Closing Date.
Employees who accept Purchaser's offer of employment are hereinafter
collectively called "TRANSFERRED EMPLOYEES." Purchaser shall permit all
Transferred Employees, when they are eligible, to participate in all employee
benefit plans, programs or policies established or maintained by Purchaser (the
"PURCHASER PLANS"). Purchaser shall recognize and credit all service by the
Transferred Employees with Seller and its predecessors prior to the Closing Date
for purposes of eligibility and vesting under all Purchaser Plans. On
September 10, 2004, MI will pay all Transferred Employees compensation for
service through such date in accordance with its regular payroll practices. Upon
notice, Purchaser agrees to promptly reimburse MI for the portion of such
payments attributable to service following the date of the Reference Balance
Sheet.
4.8 Retention of and Access to Books and Records. Purchaser and TOPAC
will retain for a period consistent with TOPAC's record-retention policies and
practices the Books and Records delivered at Closing. Purchaser and TOPAC also
will provide Seller and its representatives reasonable access thereto, during
normal business hours and on at least three (3) business days' prior written
notice, to enable them to prepare financial statements or Tax Returns or deal
with tax audits.
ARTICLE 5 - INDEMNIFICATION
5.1 Indemnification.
(a) Indemnification by MI and Seller. From and after the Closing
Date MI and Seller shall, jointly and severally, indemnify and hold harmless
each of Purchaser Indemnitees from and against, and shall compensate and
reimburse each of Purchaser Indemnitees for, any and all Damages that are
suffered or incurred by any of Purchaser Indemnitees or to which any of
Purchaser Indemnitees may otherwise become subject at any time (regardless of
whether or not such Damages relate to any third-party claim) and that arise from
or as a result of:
(i) Any Breach of any of the representations or
warranties made by MI or Seller or the inaccuracy of any statement or
information contained in this Agreement or the Disclosure Schedules;
(ii) Any Breach or the failure of performance by MI or
Seller of any of the covenants, obligations, promises, or agreements that either
of them is to perform under this Agreement;
(iii) Any Liability of Seller or of any of its Affiliates
or other Related Parties, other than the Assumed Liabilities; and
(iv) Any Proceeding relating to any Breach, alleged
Breach, or Liability of Seller.
(b) Indemnification by Purchaser and TOPAC. From and after the
Closing Date, Purchaser and TOPAC shall, jointly and severally, indemnify and
hold harmless Seller Indemnitees from and against, and shall compensate and
reimburse each of Seller Indemnitees
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\
for, any and all Damages that are suffered or incurred by any of Seller
Indemnitees or to which any of Seller Indemnitees may otherwise become subject
at any time (regardless of whether or not such Damages relate to any third-party
claim) and that arise from or as a result of, or are connected with:
(i) Any Breach of any of the representations or
warranties made by Purchaser or TOPAC in this Agreement;
(ii) Any Breach or the failure of performance by Purchaser
or TOPAC of any of the covenants, obligations, promises, or agreements that any
of them is to perform under this Agreement;
(iii) Any Assumed Liability.
(c) Limitations on Indemnification. Notwithstanding any provision
of this Agreement to the contrary, (i) MI and Seller shall have no obligation to
indemnify any Purchaser Indemnitee for a Breach of a representation, warranty or
covenant hereunder, any Proceeding relating thereto, or for any Adjustments
unless such Purchaser Indemnitee (together with all other Purchaser Indemnitees)
has suffered Damages in an aggregate amount in excess of Seventy-Five Thousand
Dollars ($75,000.00) (the "BASKET"), in which case MI or Seller shall be
obligated to indemnify Purchaser Indemnitee only for the amounts in excess of
the Basket; and (ii) the Liability of MI and Seller under this Agreement shall
in no event exceed sixty percent (60%) of the Cash Price (the "CAP").
(d) Survival of Representations, Warranties and Covenants and
Indemnification Responsibility. The representations and warranties contained in
Article 2 and Article 3 hereof, and the parties' indemnification obligations
with respect thereto, shall survive the Closing and expire eighteen (18) months
after the Closing Date, unless prior to the stated time of expiration, a claim
specifying a Breach of any of the representations or warranties described above
in reasonable detail is submitted in writing to the Indemnifying Party and
identified as a claim for indemnification pursuant to this Agreement. The
covenants of the parties hereunder, and the parties' indemnification obligations
with respect thereto, shall survive the Closing for eighteen (18) months;
PROVIDED, HOWEVER, that the covenants set forth in Section 4.6, and the
indemnification obligations of MI and Seller with respect thereto, shall survive
until the expiration of the applicable statute of limitations.
5.2 Third Party Claims, Notice and Opportunity to Settle.
(a) Within thirty (30) days after the receipt by the Indemnitee of
any claim or demand (including but not limited to, notice of any action, suit or
proceeding) by any third party against an Indemnitee which gives rise to a right
to indemnification for Damages hereunder (or, in the case of the receipt of any
notice of any examination, claim, adjustment or other proceeding with respect to
Taxes for any period for which Seller is liable under Section 5.1(a)(v),
promptly after the receipt of such notice), the Indemnitee shall give each
Indemnifying Party who may be obligated to provide indemnity hereunder written
notice of such claim or demand; provided, however, that the failure to give such
notice shall not relieve the Indemnifying Party of its
25
obligations hereunder except to the extent that such failure is materially
prejudicial to the Indemnifying Party.
(b) The Indemnifying Party shall have the right (without prejudice
to the right of any Indemnitee to participate at its own expense through counsel
of its own choosing), to defend against such claim or demand (for purposes of
this Section, any Tax proceeding shall be considered a "claim or demand") at its
expense and through counsel of its own choosing (the choice of such counsel to
be subject to the reasonable consent of the affected Indemnitee) and to control
such defense if it gives written notice of its intention to do so within fifteen
(15) days of the receipt of the notice referred to in Section 5.2(a). If the
Indemnifying Party shall decline to assume the defense of such claim or demand,
the affected Indemnitee shall have the right to assume control of such defense
at the expense of the Indemnifying Party. The Indemnitee shall cooperate fully
in the defense of such claim or demand and shall make available to the
Indemnifying Party or its counsel all pertinent information under their control
relating thereto. The Indemnifying Party agrees to cooperate with the Indemnitee
in order to enable their counsel to participate in the defense and to deliver to
the Indemnitee copies of all pleadings and other information within the
Indemnifying Party's knowledge or possession reasonably requested by the
Indemnitee that is relevant to the defense of any such claim or demand. The
Indemnitee and its counsel shall maintain confidentiality with respect to all
such information consistent with the conduct of a defense hereunder.
(c) The Indemnifying Party shall have the right to elect to settle
(i) any such claim or demand, other than a Tax proceeding, for monetary damages
only and including an unconditional release and resulting in no adverse impact
on the future operations of the Acquired Business, or (ii) any Tax proceeding,
subject to the consent of the affected Indemnitee, provided, however, if the
affected Indemnitee fails to give such consent within twenty (20) days of being
requested to do so, the affected Indemnitee shall, at its expense, assume the
defense of such claim or demand and regardless of the outcome of such matter,
the Indemnifying Party's liability hereunder shall be limited to the amount of
any such proposed settlement.
(d) In the event that the Indemnifying Party assumes the defense
of a claim or demand, the Indemnitee shall have the right to assume control of
the defense of any claim or demand from the Indemnifying Party at any time and
to elect to settle such claim or demand; provided, however, the Indemnifying
Party shall have no indemnification obligations with respect to such claim,
demand or settlement except for the costs and expenses of such Indemnifying
Party incurred prior to the assumption of the defense of the claim or demand by
the Indemnitee.
5.3 Obligation to Offset. Purchaser shall be required, to the extent of
the Holdback Amount, to offset all or any part of its Damages to which it is
entitled under this Agreement by first reducing the amount owed to Seller under
the Holdback; provided, however, that prior to making any deductions from the
Holdback, TOPAC or Purchaser shall provide thirty (30) day's prior written
notice to MI and Seller of any proposed offset and reduction to the Holdback; in
the event that MI and Seller dispute the offset or reduction, the parties must
resort to the Dispute resolution procedures prescribed in Article 6 prior to the
deduction being effected.
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5.4 Non-Third Party Claims. In the event that any Indemnitee should have
a claim against any Indemnifying Party hereunder which does not involve a third
party claim, the Indemnitee shall transmit to the Indemnifying Party a written
notice describing in reasonable detail the nature of the claim, an estimate of
the amount of damages attributable to such claim and the basis of the
Indemnitee's request for indemnification under this Agreement. If the
Indemnifying Party does not notify the Indemnitee within thirty (30) days from
the Indemnifying Party's receipt of the indemnity notice that the Indemnifying
Party disputes such claim, the claim specified by the Indemnitee in the
indemnity notice shall be deemed a liability of the Indemnifying Party
hereunder; provided, however, that Purchaser or TOPAC shall first offset all or
any part of its Damages from the Holdback as provided in Section 5.3.
5.5 Payments. Payments of all amounts owing by an Indemnifying Party
pursuant to this Article 5 relating to a third party claim shall be made within
thirty (30) days of the settlement of such third party claim; provided, however,
that if such third party claim is the subject of a final adjudication payment
shall be made within thirty (30) days after the later of (a) the expiration of
the period for appeal of a final adjudication of such third party claim or (b)
the expiration of the period for appeal of a final adjudication of the
Indemnifying Party's liability to the Indemnitee under this Agreement. Subject
to Section 5.3, payments of all amounts owing by an Indemnifying Party pursuant
to Section 5.4 shall be made within thirty (30) days of the expiration of the
30-day indemnity notice period; provided, however, that if the Damages asserted
are the subject of a Dispute, the portion of the Damages subject to Dispute
shall not be paid until the Dispute has been resolved in accordance with Article
6.
5.6 Exclusive Remedy. After the Closing, this Article 5 will provide the
exclusive legal remedy for the matters covered by this Agreement or in
connection with the Transactions, except for claims based upon common law fraud
or injunctive relief.
ARTICLE 6 - DISPUTE RESOLUTION
Except for matters to be decided in accordance with the provisions of
Section 1.4(c), all Disputes shall be submitted to binding arbitration at the
Charlotte, North Carolina, office of the AAA in accordance with its rules and
procedures regarding commercial disputes, except to the extent such rules or
procedures vary from the following provisions:
6.1 Notice. The party desiring to initiate arbitration can do so by
sending written notice of an intention to arbitrate by registered or certified
mail to the other parties and to AAA. The notice must contain a description of
the Dispute, the amount of money involved and the remedies sought.
6.2 Arbitrator. The parties shall attempt to agree on a retired judge
from the AAA panel to act as the arbitrator hereunder. If the parties are unable
to agree, AAA shall provide a list of three (3) available judges to each party
and each party may strike one. The remaining judge shall serve as the
arbitrator. The parties agree the arbitration must be initiated within one (1)
year after the claimed breach occurred and that the failure to initiate
arbitration within the one-year period constitutes an absolute bar to the
institution of any arbitration or any judicial proceeding on any dispute set
forth in the notice of intent to arbitrate. The arbitrator shall determine all
questions of arbitrability, including, without limitation, the scope of this
agreement
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to arbitrate, the subject matter of the Dispute, whether an agreement to
arbitrate exists and, if so whether it covers the Dispute in question, and any
other form of disagreement or conflict among the parties to the agreement
whether such Dispute existed prior to, or arises after, the Closing Date.
6.3 Pre-Hearing Conference. Once an arbitrator is assigned to hear the
matter, the arbitrator shall schedule a pre-hearing conference to reach
agreement on procedural matters, arrange for the exchange of information, obtain
stipulations, and attempt to narrow the issues.
6.4 Discovery. It is the parties' objective to expedite the arbitration
proceedings by placing the following limitations on discovery: (a) on a date to
be determined at the pre-hearing conference, each party may serve one (1) demand
for production of documents and one (1) set of twenty (20) interrogatories
(without subparts) upon the other parties. The response to the document demand,
the documents to be produced, and the responses to the interrogatories shall be
exchanged thirty (30) days later; (b) each party may depose two (2) witnesses.
Each deposition must be concluded within eight (8) hours and all depositions
must be taken within sixty (60) days of the pre-hearing conference. Any party
deposing an opponent's expert must pay the expert's fee for attending the
deposition. All discovery disputes shall be decided in the sole discretion of
the arbitrator.
6.5 Briefs and Hearing. The parties must file briefs with the arbitrator
at least three (3) days before the arbitration hearing, specifying the facts
each intends to prove and analyzing the applicable law. The parties have the
right to representation by legal counsel throughout the arbitration proceedings.
The presentation of evidence at the arbitration hearing shall be governed by the
North Carolina Rules of Evidence. Within reasonable limitations, both sides at
the hearing may call and examine witnesses for relevant testimony, introduce
relevant exhibits or other documents, cross-examine or impeach witnesses who
shall have testified orally on any matter relevant to the issues, and otherwise
rebut evidence, as long as these rights are exercised in an efficient and
expeditious manner in the sole discretion of the arbitrator. Oral evidence given
at the arbitration hearing shall be given under oath. Any party desiring a
stenographic record may secure a court reporter to attend the arbitration
proceedings. The party requesting the court reporter must notify the other
parties and the arbitrator of the arrangement in advance of the hearing, and
must pay for the cost incurred.
6.6 Decision. The arbitrator's decision shall be based on the evidence
introduced at the hearing, including all logical and reasonable inferences
therefrom. The arbitrator may grant any remedy or relief which is just and
equitable. The award must be made in writing and signed by the arbitrator. It
shall contain a concise statement of the reasons in support of the decision. The
award must be mailed promptly to the parties, but no later than thirty (30) days
from the closing of the hearing. The award can be judicially enforced
(confirmed, corrected or vacated) pursuant to applicable law. The award is final
and binding and there is no direct appeal from the award on the grounds of error
in the application of the law.
6.7 Costs. Each party to the arbitration must pay its own witness fees.
Each party shall pay its pro-rata share of the arbitrator's fees. The arbitrator
may award to the prevailing party attorneys' fees and costs actually and
reasonably incurred.
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ARTICLE 7 - GENERAL PROVISIONS
7.1 Public Announcements. Purchaser, MI and Seller shall consult each
other as to the form, substance and timing of the initial press release or other
initial public statement relating to this Agreement, or any of the Transactions,
and no such initial statement will be made by one without the consent of the
other, which consent will not be unreasonably withheld or delayed; provided that
each may make such disclosures as are necessary to comply with any Legal
Requirement or the request of any Governmental Body after making good faith
efforts under the circumstances to consult in advance with the other.
7.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given upon personal delivery, facsimile transmission
(with written or facsimile confirmation of receipt), or delivery by a reputable
overnight commercial delivery service (delivery, postage or freight charges
prepaid), or on the fourth day following deposit in the United States mail (if
sent by registered or certified mail, return receipt requested, delivery,
postage or freight charges prepaid), addressed to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
If to TOPAC: TOPAC U.S.A., INC.
0 Xxxxxx
Xxxxxx, Xxxxxxxxxx 00000-0000
Attn: General Manager
FAX: (000) 000-0000
If to Purchaser: CONNECTED OFFICE PRODUCTS, INC.
0 Xxxxxx
Xxxxxx, Xxxxxxxxxx 00000-0000
Attn: General Manager
FAX: (000) 000-0000
If to MI or Seller: XxXXX INDUSTRIES, INC.
000 Xxxxx Xxxx Xxxxxx
Xxxxx Xxxxxx, Xxxxx Xxxxxxxx 00000
Attn: Xxxxxx Xxxxx
FAX: (000) 000-0000
With a copy to: Xxxx X. Xxxxx, Esq.
Xxxxxxx Xxxxxxxxx Xxxxxxx & Xxxxxxx, L.L.P.
Hearst Tower, 47th Floor
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
FAX: (000) 000-0000
7.3 Section Headings, Construction. The headings of Sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. All
29
references to "Sections" refer to the corresponding Sections of this Agreement.
All words used in this Agreement will be construed to be of such gender or
number as the circumstances require. Unless otherwise expressly provided, the
word "including" does not limit the preceding words or terms.
7.4 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be an original and all of which together shall
be one and the same instrument.
7.5 Integration. This Agreement and the Exhibits, Schedules, documents,
instruments and other agreements among the parties hereto that are referred to
herein constitute the entire agreement of the parties with respect to the
subject matter set forth herein or therein and supersede all prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter hereof or thereof.
7.6 Governing Law. This Agreement and the rights of the parties
hereunder will be interpreted in accordance with the laws of the State of North
Carolina, without regard to the conflict of law principles thereof and all
rights and remedies will be governed by such laws without regard to principles
of conflict of laws.
7.7 Amendment. This Agreement may not be amended except by an instrument
in writing signed by an authorized officer on behalf of each of the parties
hereto.
7.8 Assignment. No party hereto shall assign or transfer or permit the
assignment or transfer of this Agreement without the prior written consent of
the other parties.
7.9 Severability. If any paragraph, section, sentence, clause or phrase
contained in this Agreement will become illegal, null or void or against public
policy, for any reason, or will be held by any court of competent jurisdiction
to be incapable of being construed or limited in a manner to make it
enforceable, or is otherwise held by such court to be illegal, null or void or
against public policy, the remaining paragraphs, sections, sentences, clauses or
phrases contained in this Agreement will not be affected thereby.
7.10 Attorney's Fees. If any party to this Agreement shall bring any
action, suit, counterclaim or appeal for any relief against any other party,
declaratory or otherwise, to enforce the terms hereof or to declare rights
hereunder (collectively, an "Action"), the prevailing party shall be entitled to
recover as part of any such Action its reasonable attorneys' fees and costs,
including any fees and costs incurred in bringing and prosecuting such Action,
successfully defending such Action and/or enforcing any order, judgment, ruling
or award granted as part of such Action. "Prevailing Party" within the meaning
of this section includes, without limitation, a party who agrees to dismiss an
Action upon the other party's payment of all or a portion of the sums allegedly
due or performance of the covenants allegedly breached, a party who obtains
substantially the relief sought or a party who successfully defends itself
against such Action.
7.11 Expenses. Whether or not the Transactions are consummated, all costs
and expenses incurred in connection with this Agreement and the Transactions
shall be paid by the party incurring such expense.
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7.12 Waiver. The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by any party
in exercising any right, power or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver or such right,
power or privilege, and no single or partial exercise of any such right, power
or privilege will preclude any other or further exercise of such right, power or
privilege or the exercise of any other right, power or privilege.
7.13 No Strict Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rule of strict construction will be applied against any party.
SIGNATURES ON FOLLOWING PAGE
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SIGNATURE PAGE
The parties to this Agreement have caused this Agreement to be executed
and delivered as of the date first set forth above.
CONNECTED OFFICE PRODUCTS, INC. TOPAC U.S.A., INC.
By: _________________________________ By: _________________________________
Xxxx Xxxxxx Xxxx Xxxxxx
Its: Chief Executive Officer Its: Senior Vice President
XxXXX INDUSTRIES, INC. XxXXX OFFICE SOLUTIONS, INC.
By: _________________________________ By: _________________________________
Mr. D. Xxxx XxXxx Mr. D. Xxxx XxXxx
Its: President & Chief Executive Its: President & Chief Executive
Officer Officer
INDEX TO SCHEDULES AND EXHIBITS
DISCLOSURE SCHEDULES
Schedule 1.1(x) Excluded Assets & Seller Retained Assets
Schedule 2.4 Financial Statements
Schedule 2.6(a) Encumbrances
Schedule 2.6(c) Title to Assets
Schedule 2.7 Bank Accounts
Schedule 2.8 Accounts Receivable
Schedule 2.9 Customers
Schedule 2.10 Inventory
Schedule 2.11 Equipment
Schedule 2.12 Real Property Leases
Schedule 2.13 Intellectual Property
Schedule 2.14 Acquired Business Contracts
Schedule 2.14(x)-1 Certain Acquired Business Contracts
Schedule 2.14(x)-2 Certain Acquired Business Contracts
Schedule 2.18 Business Employees
Schedule 2.21 Insurance
Schedule 2.22 Proceedings
EXHIBITS
Exhibit A Certain Definitions
Exhibit B Xxxx of Sale and General Assignment and Assumption Agreement
EXHIBIT A
CERTAIN DEFINITIONS
The words "hereof," "herein," "hereto," and "hereunder," and similar
words, when used in this Agreement, shall refer to the Agreement as a whole and
to any particular provision of this Agreement. The terms defined in the singular
shall have a comparable meaning when used in the plural and vice versa.
For purposes of the Agreement (including this Exhibit A):
"AAA" shall mean the American Arbitration Association.
"ACCOUNTANTS" shall have the meaning set forth in Section 1.4(c) of this
Agreement.
"ACQUIRED ASSETS" shall have the meaning set forth in Section 1.1 of this
Agreement.
"ACQUIRED BUSINESS" shall mean Seller's business of selling and servicing
copier, facsimile machines, duplicators, other office equipment, document
solutions, and software, and related spare parts and supplies (as heretofore and
currently conducted by Seller).
"ACQUIRED BUSINESS CONTRACTS" shall mean (a) any Seller Contract related
to or necessary for the conduct of the Acquired Business, (b) the vehicle leases
of MI listed on Schedule 2.14 and (c) the software licenses of MI listed on
Schedule 2.14.
"ACQUIRED BUSINESS LEASED EQUIPMENT" shall mean any equipment owned or
leased by Seller which is included in the Acquired Assets as described in
Section 2.11 of this Agreement.
"ACQUISITION" shall mean the Transactions.
"ACTION" shall have the meaning as set forth in Section 7.10 hereof.
"ADJUSTMENTS" shall mean the amount payable pursuant to Section 1.4
hereof.
"AFFILIATE" shall mean with respect to any Person, any other Person
controlling, controlled by or within common control with such Person.
"AGREEMENT" shall mean the Asset Purchase Agreement to which this Exhibit
A is attached (including the Schedules and Exhibits), as it may be amended from
time to time.
"ASSET ALLOCATION" shall have the meaning set forth in Section 1.5(b)(i)
herein.
"ASSUMED LIABILITIES" shall have the meaning set forth in Section 1.2.
"BASKET" shall have the meaning set forth in Section 5.1(c).
"BOOKS AND RECORDS" shall mean:
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(a) All books, records, original documents, files and papers of MI
and Seller or any Affiliates related to, or necessary for the conduct of, the
Acquired Business, whether in hard copy or electronic format, in the possession
or control of MI or Seller or Affiliates at the Closing including all customer
files; customer account records; production data; equipment repair, maintenance,
and service data; accounting records; inventory records; sales and sales
promotional data; advertising materials; customer lists; cost and pricing
information; supplier lists; business plans; reference catalogs; and any other
similar records;
(b) Copies of (i) all Tax records and Tax Returns related to the
Acquired Business, (ii) the personnel files of any Business Employee that
becomes an employee of Purchaser and (iii) the legal, financial and accounting
records related to the Acquired Business of which Seller or Affiliates are
required to retain originals under any Legal Requirement.
"BREACH" There shall be deemed to be a "Breach" of a representation,
warranty, covenant, obligation or other provision if there is, or has been, (a)
any inaccuracy in or breach (including any inadvertent or innocent breach) of,
or any failure (including any inadvertent failure) to comply with or perform,
such representation, warranty, covenant, obligation or other provision, or (b)
any claim (by any Person) or other circumstance that is inconsistent with such
representation, warranty, covenant, obligation or other provision; and the term
"Breach" shall be deemed to refer to any such inaccuracy, breach, failure, claim
or circumstance.
"BUSINESS EMPLOYEE" shall mean each employee who is employed by Seller and
whose services are related to the Acquired Business (including any employee who
is on a leave of absence or on layoff status) (such individuals, collectively,
"Business Employees").
"CAP" shall have the meaning set forth in Section 5.1(c).
"CASH PRICE" shall have the meaning set forth in Section 1.3(a)(i).
"CERCLA" shall mean the Comprehensive Environmental Response, Compensation
and Liability Act.
"CLOSING" shall mean the consummation of the Transactions on the Closing
Date.
"CLOSING DATE" shall mean September 9, 2004.
"CODE" shall mean the Internal Revenue Code of 1986, as amended and the
regulations promulgated thereunder.
"CONSENT" shall mean any approval, consent, ratification, permission,
waiver, authorization, filing, registration or notification (including any
Governmental Authorization).
"CONTRACT" shall mean any written, oral, implied or other agreement,
contract, understanding, arrangement, instrument, lease, note, guaranty,
indemnity, representation, warranty, deed, assignment, power of attorney,
certificate, purchase order, work order, insurance policy, benefit plan,
commitment, covenant, assurance or undertaking of any nature.
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"COPYRIGHT" shall mean any registered or unregistered copyright in both
published and unpublished works, any mask work rights and any application for
any of the foregoing.
"DAMAGES" shall include any loss, damage, deficiency, Liability, injury,
decline in value, lost opportunity, Liability, claim, action, demand,
settlement, suits, judgment, award, fine, penalty, Tax, levy, cost, fee
(including any legal fee, expert fee, accountant fee or advisory fee), charge,
cost (including any cost of investigation), disbursement, or expense of any
nature. Damages shall not include any amount which any party actually receives
under any insurance policy which provides coverage for the Liability in question
or any consequential, indirect or special damages.
"DISCLOSURE SCHEDULES" shall have the meaning as set forth in Article 2.
"DISPUTE" shall mean any controversy, claim, dispute or counterclaim
arising under or relating to this Agreement or any resulting transaction,
whether it involves a disagreement about its meaning, interpretation,
application, performance, breach, termination, enforceability or validity and
whether based on statute, tort, contract, common law or otherwise.
"EMPLOYEE BENEFIT PLAN" shall have the meaning specified in Section 3(3)
of ERISA.
"ENCUMBRANCE" shall mean any lien, pledge, hypothecation, charge,
mortgage, security interest, encumbrance, equity, trust, equitable interest,
claim, preference, right of possession, lease, tenancy, license, encroachment,
covenant, infringement, interference, Order, proxy, option, right of first
refusal, preemptive right, community property interest, legend, defect,
impediment, exception, reservation, limitation, impairment, imperfection of
title, condition or restriction of any nature (including any restriction on the
transfer of any asset, any restriction on the receipt of any income derived from
any asset, any restriction on the use of any asset and any restriction on the
possession, exercise or transfer of any other attribute of ownership of any
asset). The term SHALL NOT INCLUDE: (a) valid rights of third party lessee/end
users of Acquired Assets which are under lease to such lessee/end users; (b) any
mechanic's, materialmen's or similar statutory lien incurred in the Ordinary
Course of Business for monies not yet due, (c) any lien for Taxes not yet due
and payable and other liens for Taxes that Seller is contesting in the amounts
and through proceedings disclosed in Schedule 2.22, (d) any purchase money lien
or lien securing rental payments under capital lease arrangements to the extent
related to the Acquired Assets, (e) any recorded easement, covenant, zoning or
other restriction or lien on the real property that does not prohibit or impair
the current use or occupancy of the property subject thereto and does not
impair, in any material respect, the value or marketability of title of the
property subject thereto, and (f) any other lien described on Schedule 2.6(a).
"ENTITY" shall mean any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, cooperative, foundation, society,
political party, union, company (including any limited liability company or
joint stock company), firm or other enterprise, association, organization or
entity.
"ENVIRONMENTAL LAWS" shall mean all federal, state and local environmental
protection, occupational, health and safety or similar laws, ordinances,
restrictions, licenses, rules, regulations and permit conditions, including, but
not limited to, the Federal Water Pollution
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Control Act, Resource Conservation & Recovery Act, Clean Air Act, Comprehensive
Environmental Response, Compensation and Liability Act, Emergency Planning and
Community Right to Know, and Occupational Safety and Health Act, each as
amended.
"EQUIPMENT LEASE" shall have the meaning set forth in Section 2.11.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"EXCLUDED ASSETS" shall have the meaning set forth in Section 1.1.
"EXCLUDED INTELLECTUAL PROPERTY" shall have the meaning set forth in
Section 1.1.
"EXCLUDED LIABILITIES" shall have the meaning set forth in Section 1.2.
"FINANCIAL STATEMENTS" shall mean (a) the unaudited balance sheet of
Seller and (b) statements of income, changes in shareholders' equity, and cash
flow of Seller, each as of and for the ten (10) months ended May 1, 2004, as set
forth at Schedule 2.4 prepared in accordance with GAAP, provided such financial
statements are subject to normal year-end adjustments to bring such statements
into compliance with GAAP (such adjustments shall not be material) and lack
footnotes, and presenting fairly the financial position of the Seller as of the
end of such ten (10) month period and the results of operations for such ten
(10) month period
"GAAP" shall mean generally accepted accounting principles consistently
applied over the relevant period.
"GOVERNMENTAL BODY" shall mean any: (a) nation, principality, state,
commonwealth, province, territory, county, municipality, district or other
jurisdiction of any nature; (b) federal, state, local, municipal, foreign or
other government; (c) governmental or quasi-governmental authority of any nature
(including any governmental division, subdivision, department, agency, bureau,
branch, office, commission, council, board, instrumentality, officer, official,
representative, organization, unit, body or Entity and any court or other
tribunal); (d) multi-national organization or body; or (e) individual, Entity or
body exercising, or entitled to exercise, any executive, legislative, judicial,
administrative, regulatory, police, military or taxing authority or power of any
nature.
"GOVERNMENTAL FILINGS" shall mean all filings necessary under any
applicable federal, state, local and foreign laws and to obtain any required
regulatory approvals, clearances or expirations of waiting periods in connection
with the Transactions.
"HAZARDOUS MATERIAL" shall include: (a) any petroleum, waste oil, crude
oil, asbestos, urea formaldehyde or polychlorinated biphenyl; (b) any waste, gas
or other substance or material that is explosive or radioactive; (c) any
"hazardous substance," "pollutant," "contaminant," "hazardous waste," "regulated
substance," "hazardous chemical" or "toxic chemical" as designated, listed or
defined (whether expressly or by reference) in any Environmental Law, statute,
regulation or other Legal Requirement (including CERCLA and any other so-called
"superfund" or "superlien" law and the respective regulations promulgated
thereunder); (d) any other substance or material (regardless of physical form)
or form of energy that is subject to any
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Legal Requirement which regulates or establishes standards of conduct in
connection with, or which otherwise relates to, the protection of human health,
plant life, animal life, natural resources, property or the enjoyment of life or
property from the presence in the environment of any solid, liquid, gas, odor,
noise or form of energy; and (e) any compound, mixture, solution, product or
other substance or material that contains any substance or material referred to
in clause "(a)", "(b)", "(c)" or "(d)" above.
"HOLDBACK" shall have the meaning as set forth in Section 1.5.(a)(ii).
"HOLDBACK PERIOD" shall have the meaning as set forth in Section
1.5.(a)(ii).
"INDEMNITEES" shall mean Seller Indemnitees and Purchaser Indemnitees.
"INDEMNIFYING PARTY" shall mean a party obligated to indemnify an
Indemnitee under Article 5 hereunder.
"INTELLECTUAL PROPERTY" shall mean and include works of authorship,
databases, data collections, diagrams, formulae, inventions (whether or not
patentable), know-how, logos, Trademarks, methods, network configurations and
architectures, processes, proprietary information, protocols, schematics,
specifications, software (including but not limited to that certain Seller
proprietary software named McFile, AXXIS, software code (in any form, including
source code and executable or object code), subroutines, techniques, user
interfaces, works of authorship, and other forms of technology.
"INTELLECTUAL PROPERTY RIGHTS" shall mean and include all past, present,
and future rights of the following types, which may exist or be created under
the laws of any jurisdiction in the world: (a) rights associated with works of
authorship, including exclusive exploitation rights, Copyrights; (b) Trademark
rights and similar rights; (c) trade secret rights; (d) patents and industrial
property rights; (e) other proprietary rights in Intellectual Property of every
kind and nature; and (f) rights in or relating to registrations, renewals,
extensions, combinations, divisions, and reissues of, and applications for, any
of the rights referred to in clauses "(a)" through "(f)" above.
"KNOWLEDGE" shall mean (a) that a Person is actually aware of a particular
fact or other matter, or (b) that a Person should reasonably be expected to
discover or otherwise become aware of such fact or other matter after a
reasonably comprehensive investigation concerning the fact or matter at issue;
PROVIDED HOWEVER, that Seller shall be deemed to have Knowledge of a matter only
if D. Xxxx XxXxx, Xxxxxx Xxxxx, Xxxxxx Xxxxx or Xxxxxx Xxxxxxxx at any time, had
Knowledge as defined immediately above.
"LEASE AGREEMENT" is defined in Section 1.7 (h).
"LEGAL REQUIREMENT" shall mean any federal, state, local, municipal,
foreign or other law, statute, legislation, constitution, principle of common
law, resolution, ordinance, code, edict, decree, proclamation, treaty,
convention, rule, regulation, ruling, directive, pronouncement, requirement,
specification, determination, decision, opinion or interpretation issued,
enacted, adopted, passed, approved, promulgated, made, implemented or otherwise
put into effect by or under the authority of any Governmental Body.
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"LIABILITY" and "LIABILITIES" shall mean any debt, obligation, duty or
liability of any nature (including any unknown, undisclosed, unmatured,
unaccrued, unasserted, contingent, indirect, conditional, implied, vicarious,
derivative, joint, several or secondary liability), regardless of whether such
debt, obligation, duty or liability would be required to be disclosed on a
balance sheet prepared in accordance with GAAP and regardless of whether such
debt, obligation, duty or liability is immediately due and payable.
"LICENSE AGREEMENT" is defined in Section 1.7 (k).
"MATERIAL ADVERSE EFFECT" an event, violation, inaccuracy, circumstance or
other matter will be deemed to have a "Material Adverse Effect" if such event,
violation, inaccuracy, circumstance or other matter (considered together with
all other matters that would constitute exceptions to the representations and
warranties set forth in the Agreement but for the presence of "Material Adverse
Effect" or other materiality qualifications, or any similar qualifications, in
such representations and warranties) had or could reasonably be expected to have
or give rise to a material adverse effect on (i) the business, financial
condition, capitalization, assets, liabilities, operations, financial
performance, or net income of the Acquired Business or (ii) the ability of MI or
Seller to consummate the Transactions, or to perform any of their obligations
under any of the Transaction Agreements; provided, however, that in determining
whether a Material Adverse Effect has occurred, any effect to the extent
attributable to the following shall not be considered: (a) changes in Legal
Requirements or interpretations thereof by Governmental Bodies, (b) changes in
general economic conditions, (c) any actions taken or omitted to be taken
pursuant to the terms of this Agreement and (d) any effects resulting from the
announcement of this Agreement or the Transactions.
"MI" shall mean XxXxx Industries, Inc., a Delaware corporation.
"MOS" shall mean XxXxx Office Solutions, Inc., a North Carolina
corporation and wholly owned subsidiary of MI.
"NET BOOK VALUE" shall mean the book value of the Acquired Assets, less
the book value of the Assumed Liabilities, as computed in accordance with GAAP
consistent with, and utilizing the same principles, practices and policies as
those used in preparing the Financial Statements; provided that for purposes of
calculating Net Book Value the Assumed Liabilities shall include deferred
service revenues associated with the Acquired Business Contracts.
"NON-COMPETE ALLOCATION" shall have the meaning set forth in Section
1.5(b)(ii) herein.
"NON-COMPETE PERIOD" shall mean three (3) years following the Closing Date
during which MI and Seller are each bound by a Non-competition covenant under
Section 4.1.
"NON-COMPETE BUSINESS SERVICES" shall mean the business of selling and
servicing copiers, facsimile machines, duplicators, other office equipment,
document solutions and software and related spare parts and supplies.
"NON-COMPETE TERRITORY" shall mean the one hundred (100) miles from any
location in which MOS conducted business immediately prior to the Closing Date.
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"ORDER" shall mean any: (a) order, judgment, injunction, edict, decree,
ruling, pronouncement, determination, decision, opinion, verdict, sentence,
subpoena, writ or award issued, made, entered, rendered or otherwise put into
effect by or under the authority of any court, administrative agency or other
Governmental Body or any arbitrator or arbitration panel; or (b) Contract with
any Governmental Body entered into in connection with any Proceeding.
"ORDINARY COURSE OF BUSINESS" shall mean an action taken by or on behalf
of Seller where:
(a) such action is recurring in nature, is consistent with the
past practices of Seller in the conduct of the Acquired Business and is taken in
the ordinary course of the normal day-to-day operations of the Acquired
Business; or
(b) such action is taken in accordance with sound and prudent
business and accounting practices; or
(c) such action that is not the result of a mistake, error,
negligence, or fraud; or
(d) such action is not required to be authorized by the
stockholders of Seller, or
(e) such action is similar in nature and magnitude to actions
customarily taken, without any separate or special authorization, in the
ordinary course of the normal day-to-day operations of the best-in-class
companies in Seller's business.
"PERSON" shall mean any individual, Entity or Governmental Body.
"PREVAILING PARTY" shall have the meaning set forth in Section 7.10.
"PROCEEDING" shall mean any claim, action, suit, litigation, arbitration,
proceeding (including any civil, criminal, administrative, investigative or
appellate proceeding and any informal proceeding), prosecution, contest,
hearing, inquiry, inquest, audit, examination or investigation commenced,
brought, conducted or heard by or before, or otherwise involving, any
Governmental Body or any arbitrator or arbitration panel.
"PURCHASER PLANS" is defined in Section 4.7.
"PURCHASE PRICE" shall have the meaning set forth in Section 1.3(a).
"PURCHASER" shall mean Connected Office Products, Inc., a Pennsylvania
corporation, a wholly owned subsidiary of TOPAC.
"PURCHASER INDEMNITEES" shall mean the following Persons: (a) Purchaser;
(b) Purchaser's current and future Affiliates; (c) the respective
Representatives of the Persons referred to in clauses "(a)" and "(b)" above; and
(d) the respective successors and assigns of the Persons referred to in clauses
"(a)", "(b)" and "(c)" above.
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"REFERENCE BALANCE SHEET" shall mean the balance sheet reflecting the
Acquired Assets and the Assumed Liabilities as of August 28, 2004 prepared in
accordance with GAAP consistent with, and utilizing the same principles,
practices and policies as those used in preparing the Financial Statements.
"REAL PROPERTY LEASES" shall have the meaning set forth in Section 2.12.
"RELATED PARTY" Each of the following shall be deemed to be a "Related
Party": (a) each individual who is, or who has at any time been, an officer,
director or stockholders of Seller; (b) each member of the family of each of the
individuals referred to in clause "(a)" above; and (c) any Entity (other than
Seller) in which any one of the individuals referred to in clauses "(a)" and
"(b)" above holds or held (or in which more than one of such individuals
collectively hold or held), beneficially or otherwise, a controlling interest or
a material voting, proprietary or equity interest.
"REPRESENTATIVES" shall mean officers, directors, employees, agents,
attorneys, accountants, advisors and representatives.
"Retained Trademarks" shall mean all assumed fictitious business names,
trade names, registered and unregistered trademarks (whether or not related to a
published work, and including domain names used as trademarks, whether or not
such domain names are owned or registered by Seller or MI), registered or
unregistered service marks and applications for any of the foregoing, owned by
MI or Seller, that incorporate or make use of the name "XxXxx", or any variation
thereof (including spelling variations), in any manner whatsoever.
"SCHEDULE" shall have the meaning in Article 2.0.
"SELLER" shall mean MOS.
"SELLER CONTRACT" shall mean any material Contract: (a) to which Seller is
a party; (b) by which Seller or any of its assets is, or may become, bound or
under which Seller has, or may become subject to, any obligation; or (c) under
which Seller has or may acquire any right or interest.
"SELLER INDEMNITEES" shall mean the following Persons: (a) Seller; (b)
Seller's current and future Affiliates, including MI; (c) the respective
Representatives of the Persons referred to in clauses "(a)" and "(b)" above; and
(d) the respective successors and assigns of the Persons referred to in clauses
"(a)", "(b)" and "(c)" above.
"TAX" or "TAXES" shall mean any tax, including any income tax, franchise
tax, capital gains tax, estimated tax, minimum tax, estimated tax, capital stock
tax, profit tax, value-added tax, alternative or add-on tax, gross receipts tax,
surtax, excise tax, ad valorem tax, transfer tax, stamp tax, sales tax, use tax,
property tax, environmental (including taxes under Code Section 59A), business
tax, license tax, occupation tax, inventory tax, occupancy tax, withholding tax,
severance tax, payroll tax, social security (or similar) tax, unemployment tax,
employment tax, disability tax, real property tax, personal property tax,
premium tax, windfall tax, luxury tax, or other tax of any kind whatsoever,
levy, assessment, tariff, impost, imposition, toll, duty (including any customs
duty), deficiency or fee, and any related charge or amount (including any
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fine, penalty or interest, whether disputed or not), that is, has been or
may in the future be (a) imposed, assessed or collected by or under the
authority of any Governmental Body, or (b) payable pursuant to any tax-sharing
agreement or similar Contract.
"TAX RETURN" shall mean any return, and amendments thereof, or supplements
thereto, (including any information return), report, statement, declaration,
estimate, schedule, notice, notification, form, election, certificate or other
document or information that is, has been or may in the future be filed with or
submitted to, or required to be filed with or submitted to, any Governmental
Body in connection with the determination, assessment, collection or payment of
any Tax or in connection with the administration, implementation or enforcement
of or compliance with any Legal Requirement relating to any Tax.
"TOPAC" shall mean TOPAC U.S.A., Inc., a Delaware corporation, that is the
parent corporation of Purchaser.
"TRADEMARKS" shall mean all assumed fictitious business names, trade
names, registered and unregistered trademarks (whether or not related to a
published work), registered or unregistered service marks and applications for
any of the foregoing owned by MI or Seller.
"TRANSACTIONS" shall mean (a) the execution and delivery of the respective
Transaction Agreements, and (b) all of the Transactions contemplated by the
respective Transaction Agreements, including: (i) the sale of the Acquired
Assets by MI and Seller to Purchaser in accordance with the Agreement; (ii) the
assumption of the Assumed Liabilities by Purchaser pursuant to the Assumption
Agreement; and (iii) the performance by MI and Seller and Purchaser of their
respective obligations under the Transaction Agreements, and the exercise by MI
and Seller and Purchaser of their respective rights under the Transaction
Agreements.
"TRANSACTION AGREEMENTS" shall mean: (a) this Agreement; (b) the Xxxx of
Sale and General Assignment and Assumption Agreement; (c) the Lease Agreement;
and (d) the License Agreement.
"TRANSFERRED EMPLOYEES" is defined in Section 4.7.
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