ASSET PURCHASE AGREEMENT
BY AND AMONG
PLASTIC PRINTING PROFESSIONALS, INC.,
CERTAIN SHAREHOLDERS OF PLASTIC PRINTING PROFESSIONALS, INC.
AND
DSS ACQUISITION SUB, INC.
February 7, 2006
Table of Schedules
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A Excluded Assets
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B Assumed Liabilities
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C Allocation of Purchase Price
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D Financial Statements - Proforma Balance Sheet
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E Premises Lease 0000 Xxxxxxx Xxxxxx, Xxxx Xxxx, XX 00000
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F Inventory
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G Contracts Being Assumed
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H Customer Purchase Orders entered into in the ordinary
course of business, consistent with past practices
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I Non-Disclosure Agreements
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J Permits Necessary For Operation
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K Organizational Chart
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L Benefit Plans
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M Suppliers
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N Product and Service Warranties
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O Product Recalls and Product Liability
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P Transferred Employee Accruals
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Q Patent Application
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R Business Secret Disclosures
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S Consents at Closing
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T Tangible Personal Property (Fixed Assets and Deposits
(Prepayments))
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ii
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "Agreement"), dated as of February 7,
2006, by and among Plastic Printing Professionals, Inc., a California
corporation ("Seller"), Xxxxxxx Xxxxxxx, Xxxxxxx Xxxxxxx, and Xxxxxx Xxxxxxx
(collectively, the "Shareholders" and, together with Seller, the "Selling
Parties"), and P3 Acquisition Sub, Inc., a New York corporation ("Buyer").
WHEREAS, Seller is in the business of manufacturing and distributing
plastic printed products, including credit cards, plastic graphics, plastic
templates and overlays and numerous other applications of plastic printing and
fabricating (the "Business");
WHEREAS, the Seller desires to sell to Buyer substantially all of its
assets and Buyer desires to purchase such assets;
WHEREAS, the Shareholders are all the owners of equity interests of 10% or
greater for an equity total of 90% in Seller; and
WHEREAS, it is a material inducement to Buyer's execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby that
each Shareholder shall have made the covenants and agreements set forth in this
Agreement including, without limitation, those contained in Articles 6 and 7
hereof.
NOW, THEREFORE, in consideration of the covenants, agreements,
representations and warranties of the parties herein contained, and upon the
terms and subject to the conditions hereinafter set forth, the parties hereto
hereby agree as follows:
ARTICLE 1. Purchase and Sale of Assets
1.1 Sale and Assignment. Subject to the terms and conditions herein and in
reliance upon the respective representations and warranties of the parties set
forth herein or in any document delivered pursuant hereto, at the Closing and on
the Closing Date, Seller shall sell, convey, assign, transfer and deliver to
Buyer, and Buyer shall purchase, acquire and accept, all of the Seller's right,
title and interest in and to, all of the assets of Seller except for the
Excluded Assets (as defined below), free and clear of all Liens, including,
without limitation, all of its properties, assets and rights of every nature,
kind and description, whether accrued, contingent or otherwise and whether now
existing or hereafter acquired (collectively, the "Purchased Assets"), other
than the Excluded Assets. The Purchased Assets include, without limitation, the
following assets and properties of Seller:
(a) all assets, except the Excluded Assets, reflected on the
Seller's December 31, 2005 Proforma Balance Sheet (attached hereto as Schedule D
and prepared in accordance with Seller's normal accounting practices and
procedures) (the "Proforma Balance Sheet"), which shall be modified to include
the revenue and expenses generated by the Seller's on going operations after
December 31, 2005 to the Closing Date which are of the types of revenue and
expenses that have been ordinarily incurred in the conduct of the Seller's
ordinary business operations prior to the December 31, 2005, including, without
limitation:
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(i.) all cash on hand or in a bank as well as all cash
equivalents;
(ii.) all trade and accounts receivable and other receivables
of whatever nature or origin and other indebtedness owing to Seller including
the benefit of all collateral, security, guaranties and similar undertakings
received or held in connection therewith;
(iii.) all inventory, wherever located, of finished products
and all inventories of raw materials, work-in-process, maintenance and spare
parts, supplies and packaging materials, including inventories consigned to
vendors or subcontractors and goods in transit (collectively, the "Inventory");
(iv.) all prepaid expenses, deferred changes, advance
payments, deposits and rights to refunds from other Persons; and
(v.) all vehicles, machinery, equipment, office furniture,
fixtures, office equipment, office materials, tools, spare parts and supplies
and other tangible personal property, wherever located (collectively, the
"Tangible Personal Property"), including without limitation that set forth on
Schedule T.
(b) all lists of customers (the "Customer List"), namely all
accounts (the "Customers") to whom Seller has ever sold products or ever
provided services, and any interest Seller has in the Customer List, including
Seller's right to engage in the Business with respect to the Customers;
(c) all leasehold and other interests in real property, together
with the buildings, improvements, structures, fixtures, easements and other
appurtenances or rights used or owned by Seller, in each case wherever located,
including, without limitation, those set forth on Schedule E;
(d) all right, title and interest of Seller in and to all contracts,
agreements, purchase orders, licenses (including without limitation software
licenses) and leases to which Seller is a party (collectively the "Contracts"),
whether written or oral, express or implied, including without limitation those
set forth on Schedules G and H;
(e) all right, title and interest of Seller in and to:
(i.) all copyrights, trademarks, service marks, trade names,
logos, EPA Registrations and related data and applications for any of the
foregoing,
(ii.) all know-how, trade secrets, technology, software and
production and other processes or formulae,
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(iii.) all rights under warranties from suppliers of Inventory
and Tangible Personal Property,
(iv.) all telephone numbers, postal addresses, electronic mail
addresses, domain names, web sites and other intangible proprietary property,
and
(v.) all approvals, consents, licenses, permits, waivers or
other authorizations issued, granted, given or otherwise made available under
the authority of any government or political subdivision thereof or any
executive, judicial, legislative, regulatory or administrative agency, authority
or office, including, without limitation, those set forth on Schedule J;
(f) all engineering and production reports, consulting reports,
health and safety data (including data in support of EPA Registration) marketing
data and reports, forecasts, DacEasy billing data, product catalogues, technical
equipment information and specifications, mailing lists, vendor and supplier
lists, customer lists and any other similar information in tangible and/or
electronic form;
(g) all goodwill in and going concern value of the Business,
including the right to use the name "Plastic Printing Professionals" and "P3"
and any variations thereof, and any goodwill related thereto;
(h) Covenants not to compete for no less than one year from each
shareholder / employee holding 10% or more of the Seller's common stock;
(i) all other rights, interests, assets and items of property, real
or personal, tangible or intangible, owned, used by or accruing to the benefit
of Seller or necessary or desirable to enable Buyer to continue the Business
substantially as conducted by Seller immediately before the date hereof; and
(j) the Seller's Working Capital as it exists on the Closing Date.
"Working Capital" for this paragraph is defined as follows: current assets (cash
and cash equivalents plus accounts receivable plus Inventory plus prepaids)
minus current liabilities (accounts payable plus accrued expenses plus short
term working capital loan plus normal and customary WIP expenses).
Prior to Closing, Seller provided Buyer with the Proforma Balance Sheet. Buyer
has objected that the Proforma Balance Sheet may overstate Seller's accounts
receivable as of December 31, 2005 by up to $50,000. Buyer and Seller have
agreed that Buyer will withhold $50,000 (or receive other mutually acceptable
credits totaling $50,000) from the Purchase Price. Buyer and Seller will
mutually agree within ten (10) days after the Closing Date on the accounts
receivable to be reflected in the Proforma Balance Sheet and shall, if
appropriate based upon a comparison of the previously disclosed accounts
receivable in the Proforma Balance Sheet and the accounts receivable to be
mutually agreed upon, decrease each of the accounts receivable in the Proforma
Balance Sheet and the Purchase Price by no more than said $50,000. If Buyer and
Seller are unable to mutually agree on the accounts receivable to be reflected
in the Proforma Balance Sheet within ten (10) days after the Closing Date, the
parties shall use procedures substantially similar to those proscribed in
Section 2.4 to resolve their dispute.
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1.2 Excluded Assets. Seller will retain ownership only of those assets set
forth on Schedule A together with all of Seller's rights under this Agreement
and any other Transaction Documents and the transactions contemplated hereby and
thereby (collectively, the "Excluded Assets").
1.3 Assumed Liabilities. Buyer shall assume only those liabilities listed
on Schedule B, but only to the extent reflected on the Proforma Balance Sheet
which shall be modified to include the revenue and expenses generated by the
Seller's on going operations after December 31, 2005 which are of the types of
revenue and expenses that have been ordinarily incurred in the conduct of the
Seller's ordinary business operations prior to the December 31, 2005
(collectively, the "Assumed Liabilities"). Except as provided in this Agreement
(including, without limitation, the immediately preceding sentence and the
Schedules attached hereto), Buyer shall not assume or become liable or obligated
for or on any contract or agreement of Seller or for any debt, liability or
obligation of Seller, whatsoever, whether known or unknown, direct, contingent
or otherwise, however or whenever arising or asserted, including, without
limitation (collectively, the "Excluded Liabilities"):
(a) any liability or obligation of Seller to its employees,
customers, creditors, suppliers or brokers, or to any governmental authority,
except for Transaction Taxes (as defined below) and Sales Taxes (as defined
below);
(b) in respect of the non purchased or retained assets;
(c) any loss, liability or damage relating to an Environmental
Condition existing on the Closing Date or a violation of Environmental Laws at
or prior to the Closing Date;
(d) any and all liabilities of Seller for Taxes, except to the
extent provided for on the Proforma Balance Sheet and the subsequent generation
of ordinary income and expenses;
(e) any and all liabilities of Seller to any of its directors,
officers, members or affiliates;
(f) any and all liabilities, obligations and commitments arising
from any material breach of the Contracts;
(g) any and all of Seller's obligations and liabilities arising
under this Agreement or incurred by Seller in connection with the negotiation,
execution or performance of this Agreement, including, without limitation, all
legal, accounting, brokers', finders' and other professional fees and expenses
and Taxes on any gain or income from the sale of the Purchased Assets (except
for Transaction Taxes);
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(h) any and all indebtedness (not excluding normal monthly payments
made prior to the Closing Date) of any Selling Party, including without
limitation any and all indebtedness of Seller to Transpacific Bank, and
(i) any and all obligations of Seller relating to credit cards,
phone cards or other materials of credit to or for the benefit of Employees
except for expenditures ordinarily incurred in the conduct of the Seller's
business operations.
Without limiting the generality of the indemnification obligations set forth in
Section 7.1, Seller shall be solely responsible for satisfying all of the
Excluded Liabilities and Buyer shall have no liability whatsoever with respect
thereto. "Sales Taxes" shall mean the obligation to pay sales Taxes relating to
the Business.
ARTICLE 2. Consideration
2.1 Purchase Price. The total consideration for the sale, assignment and
transfer of the Purchased Assets, subject to adjustment in accordance with
Section 2.2, shall be (a) One Million Five Hundred Thousand Dollars ($1,500,000)
(the "Purchase Price") and (b) the assumption of the Assumed Liabilities. Buyer
shall pay the Purchase Price to Seller at the Closing as follows: (i) One
Million Two Hundred Fifty Thousand Dollars ($1,250,000) in immediately available
funds and (ii) 18,704 shares of the Common Stock of Document Security Systems,
Inc. (the "DSS Shares"). The value of the DSS Shares shall be equal to Two
Hundred Fifty Thousand Dollars ($250,000) as of the Closing Date (the "Value").
The parties hereby agree and acknowledge that the Value has been calculated as
the average of the closing prices for the Common Stock of Document Security
Systems, Inc. on the ten (10) American Stock Exchange trading days immediately
preceding the Closing Date. Notwithstanding the foregoing, in the event that the
closing price on the American Stock Exchange of the Common Stock of Document
Security Systems, Inc. shall be less than $8 between December 31, 2005 and the
Closing Date, Seller may, prior to the Closing, cancel the transactions
contemplated by this Agreement by providing Buyer written notice of such
decision, which notice shall be received to Buyer prior to the Closing;
provided, however, that nothing in this Section shall provide Seller or any of
the Selling Parties the right to cancel, terminate or otherwise reverse the
consummation of the transactions contemplated by this Agreement after the
Closing. The DSS Shares shall be issued to Seller subject to the terms and
conditions set forth in Section 2.6 and the Buyer's warranties set forth in
Section 5.3.
2.2 Post-Closing Adjustments.
(a) Seller's Closing Date Balance Sheet. Seller's non-binding
estimated Closing Date balance sheet shall consist of and be determined by the
following:
(i.) Seller has provided the Buyer with the Proforma Balance
Sheet;
(ii.) Prior to the Closing, Seller will provide Buyer with the
final form of the following lists:
(A) Accounts Receivables listing;
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(B) Fixed assets listing (a part of Schedule T);
(C) Inventory listing (Schedule F);
(D) Deposits/Prepay amounts (a part of Schedule T); and
(E) Bank balance.
(iii.) At the Closing or not later than three weeks
thereafter, Seller shall provide Buyer with copies of Seller's bank statements
and Seller's cancelled checks to tie the Proforma Balance Sheet to the bank
balance shown on the bank balance final list.
(iv.) Seller shall not provide Buyer a then-current list of
Payables (as defined below) at the Closing. "Payables" shall mean those invoices
or bills directly related to the Business which are presented by Seller to Buyer
no later than 60 days after the Closing Date and meet at least one of the
following criteria:
(A) were on a written List provided by Seller to Buyer
on or before the Closing Date; or
(B) were normal and customary payables occurring as a
result of the ordinary operation of the Seller's
business after the Proforma Balance Sheet and
through to and including the Closing Date.
(b) Buyer's Reviewed Balance Sheet. As soon as practicable and in no
event later than sixty (60) days following the Closing Date, Buyer shall prepare
and deliver to Seller a statement of the Purchased Assets and the Assumed
Liabilities as of the Closing Date (the "Reviewed Balance Sheet"). The Reviewed
Balance Sheet shall be prepared in accordance with GAAP, and shall include:
(i.) a verification of Assumed Liabilities (including accruals
for utility charges, real estate taxes, personal property taxes, payroll,
payroll taxes, XXX (401K) contributions, rental payments, vacation and sick
time),
(ii.) a reconciliation of the Inventory (valued at cost), to
be "rolled back" to the Closing Date,
(iii.) a reconciliation of the accounts receivable
constituting part of the Purchased Assets, to be "rolled back" to the Closing
Date,
(iv.) a physical identification and valuation by appraisal of
fixed assets and verification with fixed asset records, to be "rolled back" to
the Closing Date, and
(v.) such reconciliations, appraisals, and verification shall
be conducted by Buyer and may be observed and/or participated in by Seller or
Seller's representatives at all times and places contemporaneously with the
respective countings and testings, as Seller may desire. Buyer shall give the
Seller reasonable written notice and opportunity to attend such reconciliations,
appraisals, and verification shall be conducted by Buyer. Any remaining portion
of Inventory in transit or on consignment shall be determined by confirmation
methods consistent with prior practice or as may be otherwise mutually agreed by
Seller and Buyer. Except to the extent agreed herein, Seller and Buyer shall
reasonably agree upon the methodologies, procedures, and the appraiser to be
utilized in such countings, testings and appraisals.
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(c) Adjustment Certificate. As soon as practicable and in no event
later than sixty (60) days following the Closing Date, Buyer shall prepare and
deliver (together with the Reviewed Balance Sheet and all documentation that
reflects or verifies it) to Seller a certificate (the "Adjustment Certificate"),
setting forth the Post-Closing Adjustment, if any. The "Post-Closing Adjustment"
shall be the amount that the Reviewed Balance Sheet varies from the Proforma
Balance Sheet (after it has been rolled forward to the Closing Date) (the
"Adjusted Proforma Balance Sheet"). "Material Variance" shall mean a variance in
excess of $40,000 with respect to the amount that the Reviewed Balance Sheet
varies from the Adjusted Proforma Balance Sheet. Any variance included in the
Post Closing Adjustment or in the calculation of a Material Variance must be the
result of a quantifiable difference that arises not primarily as a result of
differences in accounting methodologies: Seller's normal and customary practices
versus Buyer's GAAP based accounting analysis. If there is a Material Variance,
then Buyer shall be compensated by the Seller for the negative difference that
is in excess of the Material Variance and Seller shall be compensated by Buyer
for the positive difference that is in excess of the Material Variance. This
difference that is in excess of the Material Variance that shall be set forth on
the Adjustment Certificate together with all information necessary to support
this determination.
2.3 Resolution of Disagreements. The Reviewed Balance Sheet and the
Adjustment Certificate shall be deemed accepted and conclusive and binding,
unless Seller shall give written notice to Buyer of the items with which it
disagrees ("Disagreement Notice") within fifteen (15) Business Days after the
receipt by Seller of the Adjustment Certificate, the Reviewed Balance Sheet and
all supporting documentation. The Disagreement Notice shall specify each item
disagreed with by Seller and specify in reasonable detail the basis for each
disagreement. Seller and Buyer shall, during the twenty (20) Business Days after
receipt by Buyer of the Disagreement Notice, negotiate in good faith to resolve
any such disagreements with respect to the Adjustment Certificate and the
Reviewed Balance Sheet. If at the end of such twenty (20) Business Days, the
parties have been unable to resolve their disagreements, such disagreements
shall be resolved by a "Big 4" accounting firm selected jointly by Seller and
Buyer which is unaffiliated with Buyer and any Selling Party and whose offices
for reviewing this matter are in San Francisco (the "Unaffiliated Firm"). The
Unaffiliated Firm shall (i) resolve the disagreement as to the Reviewed Balance
Sheet and the Adjustment Certificate as promptly as possible after its
engagement by the parties, (ii) thereby consider and resolve only those items in
the Disagreement Notice(s) which remain unresolved between Buyer and Seller,
(iii) observe the principles set forth in Section 2.2(b), and (iv) shall
otherwise employ such procedures as it, in it sole discretion, deems necessary
or appropriate in the circumstances. The Unaffiliated Firm shall submit to the
parties hereto a report of its review of the items in the Disagreement Notice(s)
as promptly as practicable and shall include in such report its determination of
adjustments required to the Post-Closing Adjustment, which adjustments shall be
no more favorable to Buyer than reflected in the Reviewed Balance Sheet and no
more favorable to Seller than reflected in the Disagreement Notice. The
determinations so made by the Unaffiliated Firm shall be conclusive, binding on,
and non-appealable by, the parties hereto. The fees and disbursements of the
Unaffiliated Firm shall be borne one half by Seller and one half by Buyer.
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2.4 Post-Closing Payments. Upon the earliest to occur, as applicable, of
(a) the date upon which Seller has waived its right to give a Disagreement
Notice after delivery of the Adjustment Certificate, (b) the expiration of the
twenty (20) Business Day period during which Seller has the right to give a
Disagreement Notice, and (c) any resolution of any disagreement relating thereto
becoming effective and binding pursuant to Section 2.3, in each case no later
than five (5) Business Days thereafter, the losing party shall effect the
payments required by this Section 2.4, if applicable. Seller and Buyer agree
that.
(i.) Buyer shall be compensated promptly by Seller for the
negative difference that is in excess of the Material Variance; and
(ii.) Seller shall be compensated promptly by Buyer for the
positive difference that is in excess of the Material Variance.
2.5 Allocation of Purchase Price. The Purchase Price shall be deemed for
all purposes (e.g., those relating to Taxes and tax returns of any kind
whatsoever, including, without limitation, Internal Revenue Service Form 8594)
to be allocated in accordance with the allocation schedule to be mutually
prepared by Buyer and Seller and attached hereto as Schedule C within sixty (60)
days after the Closing Date. Neither Buyer, Seller nor any of their affiliates
shall take any position (whether in audits, Tax Returns or otherwise) that is
inconsistent with such allocation unless required to do so by applicable law.
2.6 Restrictions on Transferability. Seller hereby acknowledges that the
DSS Shares issued to Seller pursuant to this Agreement have not been registered
under the Securities Act of 1933, as amended, and therefore may not be sold or
otherwise transferred unless they are registered under the Securities Act or an
exemption is available therefrom. The DSS Shares shall bear a legend setting
forth the restrictions on transferability.
2.7 Conveyance of Purchased Assets. Seller will request, and Buyer shall
cooperate with Seller to obtain, approvals, consents and waivers necessary to
convey to Buyer any lease, Contract, license, permit, registration, agreement,
purchase order, commitment, property interest or other asset or right included
in the Purchased Assets (including, without limitation, governmental
registrations, permits, licenses and other authorizations), or any claim, right
or benefit arising thereunder or resulting therefrom (a "Retained Interest"). If
any of such approvals, consents or waivers shall not have been obtained as of
the Closing, Seller shall act in good faith, with all reasonable costs related
thereto to be borne by Buyer, to cooperate with Buyer in any reasonable and
lawful arrangement designed to provide the benefits of such Retained Interest to
Buyer. If Buyer is provided the benefits of such Retained Interest as a result
of any such arrangement, the obligations in connection with such Retained
Interest shall be Assumed Liabilities.
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ARTICLE 3. Closing; Deliveries
3.1 Closing.
(a) The closing of the transactions contemplated by this Agreement
(the "Closing") shall take place at the offices of the Seller, at 10:00 a.m.,
local time, on February 7, 2006 or on such other date and place as mutually
agreed upon by Seller and Buyer. The date on which the Closing takes place is
herein called the "Closing Date".
(b) All proceedings to be taken and all documents to be executed and
delivered by the parties at the Closing shall be deemed to have been taken and
executed simultaneously and no proceedings shall be deemed taken nor any
documents executed or delivered until all have been taken, executed and
delivered.
3.2 Seller's Deliveries. At the Closing, Seller shall deliver or cause to
be delivered to Buyer:
(a) a certificate as to the incumbency of the person(s) executing
this Agreement and the other Transaction Documents on behalf of Seller;
(b) bills of sale and such other instruments of assignment and
conveyance as may be requested by Buyer in order to effectively to transfer to
Buyer good and marketable title to the Purchased Assets (including without
limitation all non-administrative software used in the Business and specifically
excluding the DacEasy and ADP software, personnel, insurance, and financial
software/data/information), all in form requested by Buyer, executed by Seller;
(c) certificates of title, if any, to all of the Purchased Assets;
(d) a duly authorized certificate of amendment to the certificate of
incorporation of Seller, in form acceptable for filing with the appropriate
governmental authorities, changing the name of Seller to a name which does not
contain the words "P3", "Plastic", "Printing" or "Professionals";
(e) UCC-3 termination statements, if necessary, releasing any and
all Liens on the Purchased Assets;
(f) a copy of the Customer List sent to Buyer via e-mail (in no
event shall Seller provide Buyer with a printed copy of the Customer List) and a
copy of the DacEasy billing module; and
(g) all other documents required by the terms of this Agreement to
be delivered by Seller to Buyer at the Closing.
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3.3 Buyer's Deliveries. At the Closing, Buyer will deliver to Seller:
(a) One Million Two Hundred Fifty Thousand Dollars ($1,250,000) by
wire transfer of immediately available funds to such account(s) as Seller shall
specify;
(b) a stock certificate representing the DSS Shares shall be
delivered within ten Business Days after the Closing;
(c) a certificate as to the incumbency of the person(s) executing
the Agreement and the other Transaction Documents on behalf of Buyer; and
(d) all other documents required by the terms of this Agreement to
be delivered by Buyer to Seller at the Closing.
ARTICLE 4. Representations and Warranties of Selling Parties
Each of the Selling Party, jointly and severally, hereby represents and
warrant to Buyer as follows:
4.1 Organization, Standing and Qualification; Authority.
(a) Seller is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of California. Seller has the
requisite power and authority to own and lease its properties, including the
Purchased Assets, and to carry on its business in the places such properties are
now owned and leased and where such business is presently conducted. Seller is
not required to be duly qualified to do business in any state other than the
State of California.
(b) Seller does not have any direct or indirect interest in, and is
not subject to any obligation or commitment to purchase any direct or indirect
interest in, any corporation, partnership, joint venture, limited liability
company, business enterprise or entity.
(c) Seller has all requisite power and authority to execute and
deliver this Agreement and the other agreements and instruments contemplated
hereby (collectively the "Transaction Documents") and to carry out the
transactions contemplated hereby and thereby. This Agreement has been duly
executed and delivered by, and constitutes the legal, valid and binding
obligation of, Seller and this Agreement and the other Transaction Documents,
when executed and delivered by Seller, shall constitute the legal, valid and
binding obligation of Seller, in each case enforceable against it in accordance
with their respective terms. All proceedings required to be taken by Seller
relating to the execution, delivery and performance of this Agreement and the
other Transaction Documents, and the consummation of the transactions
contemplated hereby and thereby, have been duly taken.
(d) The Shareholders are the legal and beneficial owners of 90% of
the membership interests and/or other equity securities of Seller.
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(e) Each Shareholder has all requisite power and authority to
execute and deliver this Agreement and the other Transaction Documents and to
carry out the transactions contemplated hereby and thereby. This Agreement has
been duly executed and delivered by, and constitutes the legal, valid and
binding obligation of, each Shareholder and this Agreement and the other
Transaction Documents, when executed and delivered by a Shareholder, shall
constitute the legal, valid and binding obligation of such Shareholder, in each
case enforceable against such Shareholder in accordance with their respective
terms.
4.2 No Violation. Except as may be caused or made necessary by facts
relating solely to Buyer, the execution, delivery and performance of this
Agreement and the other Transaction Documents by the Selling Party, and the
consummation by the Selling Party of the transactions contemplated hereby and
thereby, will not conflict with, violate, result in or constitute a default
under, breach or violation of, or an event that with notice or lapse of time, or
both, would be a default under, breach or violation of, or permit the
termination of, or cause or permit acceleration under, (a) the certificate
incorporation or by-laws of Seller, (b) any material note, bond, mortgage,
indenture, deed of trust, license, permit, lease, loan agreement, Contract or
other agreement, instrument or arrangement to which a Selling Party is a party
or by which any of their respective assets or properties are bound or (c) any
law, rule or regulation to which a Selling Party is subject or violate any court
or administrative order by which a Selling Party is bound. No material approval
or consent of, and no filing, registration, qualification, designation or
declaration with, or notice to, any federal, state or local governmental
authority or administrative agency or any third party is necessary for the
execution, delivery and performance by the Selling Party of this Agreement and
the other Transaction Documents. The execution, delivery and performance of this
Agreement and the other Transaction Documents by the Selling Parties, and the
consummation by the Selling Party of the transactions contemplated hereby and
thereby, will not result in the creation of any Lien on any of the Purchased
Assets.
4.3 Financial Statements. Attached as Schedule D are true and complete
copies of the unaudited balance sheet of Seller as of December 31, 2005 and the
related statements of income for the preceding fiscal year (2005) (the
"Financial Statements"). The Financial Statements have been prepared in
accordance with the Seller's normal and customary accounting practices,
consistently applied, and fairly present in all material respects the financial
position of and the results of operations of Seller as of the respective dates
thereof and for the fiscal periods covered thereby.
4.4 Absence of Certain Changes or Events. Since December 31, 2005, there
has been no change that, individually or in the aggregate, would have a material
adverse effect on the Business, whether or not covered by insurance, and Seller
has no knowledge of any such change that could reasonably be expected to occur,
nor has there been any damage, destruction or loss that could, individually or
in the aggregate, reasonably be expected to have a material adverse effect on
the Business, whether or not covered by insurance. Except as expressly
contemplated or permitted by this Agreement, since the date of the Balance
Sheet:
(a) there has not been any increase in the rate or terms of salary,
the payment of an abnormal bonus, the payment of a dividend or other
distribution by Seller to any of its employees, directors, Shareholders or other
Person;
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(b) Seller has not entered into any agreement or transaction outside
the ordinary course of business, consistent with past practice;
(c) Seller has not materially changed its financial or accounting
methods, principles or practices, including its payables and receivables
practices, other than as required by GAAP;
(d) Seller has not sold, transferred, leased to others or otherwise
disposed of any of the assets or properties, except in the ordinary course of
business, consistent with past practice;
(e) Seller has not experienced any labor union organizing activity,
had any actual or threatened employee strike, work stoppage, slow down or
lockout, or had any change in its relations with its employees as a group;
(f) Seller has used reasonable efforts to preserve intact its
business organization and goodwill as to customers, suppliers and others having
business relationships with it, to keep available the services of its employees,
and to maintain satisfactory relationships with those Persons having business
relationships with Seller;
(g) Seller has not encumbered any of its assets or canceled any of
its debts or claims or granted any Liens on any of its assets or properties
except, in each case, in the ordinary course of business, consistent with past
practice;
(h) Seller has paid as and when due all amounts due and payable
under any of the Contracts, and otherwise with all of its obligations under the
Contracts, and has not terminated, assigned, amended or otherwise modified any
Contract;
(i) Seller has complied with all laws, rules and regulations
applicable to the conduct of the Business; and
(j) Seller has not entered into any agreement to effect any of the
foregoing or otherwise conducted its business other than in the ordinary course
of business, consistent with past practice.
4.5 Tax Liabilities. Seller has paid all Taxes (as defined below) due and
payable by Seller with respect to the period prior to the Closing Date. Seller
has timely filed, or shall timely file prior to Closing or promptly thereafter,
all required Tax Returns (as defined below). There are no Liens for failure to
pay Taxes upon any of the Purchased Assets. No claim has ever been made by an
authority in a jurisdiction where Seller does not file Tax Returns that it is or
may be subject to taxation by that jurisdiction. To the best of its knowledge,
Seller has withheld and paid all Taxes required to have been withheld and paid
in connection with any amounts paid or owing to any employee, independent
contractor, creditor, stockholder, or other third party, and all IRS Forms W-2
and 1099 required with respect thereto have been properly completed and timely
filed.
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"Taxes" mean any federal, state, local or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental, customs duties, capital stock, franchise,
profits, withholding, social security, unemployment, disability, real property,
personal property, sales, use, transfer, registration, value added, alternative
or add-on minimum, estimated or other tax of any kind whatsoever, whether
computed on a separate or consolidated, unitary or combined basis or in any
other manner, including any interest, penalty, or addition thereto, whether
disputed or not and including any obligation to indemnify or otherwise assume or
succeed to the Tax liability of any other person.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
4.6 Premises Lease.
(a) The Premises Lease for 0000 Xxxxxxx Xxxxxx, Xxxx Xxxx, XX 00000,
attached hereto as Schedule E, is in full force and effect and has not been
modified, amended, or altered, in writing or otherwise (the "Real Property
Lease", and the real estate governed by the Real Property Lease being the "Real
Property").
(b) (i) All obligations of the landlord or lessor under the Real
Property Lease which have accrued have been performed, and (ii) no landlord or
lessee is in default under the Real Property Lease.
(c) All obligations of the tenant or lessor under the Real Property
Lease which have accrued have been performed.
(d) Seller is not in default in any material respect under the Real
Property Lease and no circumstance presently exists which, with notice or the
passage of time, or both, would give rise to a default by Seller.
(e) Seller has full legal power and authority to assign all of its
rights under the Real Property Lease to Buyer in accordance with this Agreement.
(f) Except as set forth on Schedule E, (i) there are no defects in
the physical condition of any improvements constituting a part of the Real
Property, including, without limitation, structural elements, mechanical
systems, roofs or parking and loading areas, and (ii) all of such improvements
are in good operating condition and repair, have been well maintained, are
suitable for their present uses and are structurally sound. There are no
condemnation proceedings, lawsuits or administrative actions relating to any of
the Real Property pending, or, to the knowledge of Seller, threatened, which
might detract from the value of such property, interfere with any present or
intended use of such property or adversely affect the marketability of such
property. Seller has the right to use the Real Property for the operations
currently conducted thereon. Seller has not received any notice of any pending
or threatened real estate Tax deficiency or reassessment or condemnation of all
or any portion of any of the Real Property
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(g) Seller does not lease, sub-lease or own any real property other
than the Real Property, and the Real Property consists of all of the real
property interests, including without limitation fee interests, leasehold
interests and easements, necessary to conduct or primarily used by the Business.
4.7 Other Property.
(a) The Purchased Assets shall be delivered at the Closing with all
documentation necessary for Buyer to obtain all permits, licenses and
registrations required for their operation.
(b) Schedule F sets forth a true, complete and correct list of the
Inventory as of December 31, 2005, setting forth the cost and current location
of each item of Inventory as of such date. The Inventory included on the Closing
Date is or will be, in usable or saleable condition in the ordinary course of
business consistent with past practice; is or will be in the physical possession
or control of Seller at its facilities, at public warehouses or in transit from
suppliers of Seller; and complies or will comply with all applicable laws,
rules, regulations and other specifications in order to permit the sale of such
inventory in the ordinary course of business without any addition or other
modification to the physical makeup thereof. The Inventory is not obsolete and
the items included in such Inventory are of at least the standard quality for
such items in the relevant industry, meet industry standards and are not
materially in excess of the normal stocking patterns of Seller. Seller has no
knowledge of any adverse condition affecting the supply of raw materials for the
Business other than conditions applicable to the industry of the Business in
general.
4.8 Registered Patents, Trade Names, Trademarks and Copyrights. Seller
uses the corporate name of Plastic Printing Professionals, Inc. and is commonly
known as "P3". Seller does not use any such trade name, trademark, service xxxx
or copyright. To the best of its knowledge, Seller is not infringing on any
patent, trade name, trademark, service xxxx or copyright of any other Person.
Seller is not a party to any license agreement or arrangement, whether as
licensor, licensee, franchisor, franchisee or otherwise, with respect to any
patent, trademark, service xxxx, trade name or copyright. Schedule Q sets forth
Seller's only Patent Application (pending).
4.9 Title to Assets. Seller has good, valid and marketable title to the
Purchased Assets, free and clear of any Lien. The Purchased Assets constitute
all of the non-administrative assets used by Seller in connection with the
Business and are adequate for the non-administrative conduct of the Business as
presently conducted by Seller.
4.10 Contracts. All of the Contracts are listed on Schedule G and are in
full force and effect. As of the Closing Date, Seller shall have paid in full
all amounts due as of the Closing Date under each Contract and will have
satisfied in full or provided for all of its obligations thereunder in the
ordinary course of business. Neither Seller nor any other party to any Contract
is in breach thereof or in default thereunder in any material respect and no
fact, event or circumstance exists with respect to any Contract that, with the
giving of notice or lapse of time, would constitute such a breach or default,
except for such breaches, defaults and events as to which requisite waivers or
consents have been obtained. Except as specifically identified on Schedule G, no
approval or consent of, or notice to or filing with, any Person is required
under the terms of any Contract in order that such Contract continues in full
force and effect for the benefit of Buyer following the consummation of the
transactions contemplated by this Agreement.
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4.11 Compliance with Laws. Since the date of its incorporation, Seller has
conducted, and is presently conducting, the Business, and Seller has used, and
is presently using, the Purchased Assets, in compliance in all material respects
with all federal, state and local laws, statutes, rules, regulations,
ordinances, orders and other requirements of law ("Laws") applicable to the
Business and the Purchased Assets including, without limitation, matters
relating to anti-competitive practices, discrimination, employment, zoning,
land-use concerns, and health and safety practices and requirements. Seller is
not subject to any judicial, governmental or administrative order, judgment or
decree and is not presently charged with or under any governmental or
administrative investigation, or, to Seller's knowledge, threatened with any
such investigation or proceeding; no facts, circumstances or conditions exist
which could give rise to any such investigation or proceeding. Seller has not
received any notice of any uncorrected violation of any Law asserted by any
Governmental Authority and no facts, circumstances or conditions exist which
could give rise to such a notice.
4.12 Litigation. There is neither pending nor threatened, any suit,
action, arbitration, or legal or administrative proceeding against Seller
including, without limitation, any claims by (a) any past or present employee or
consultant of Seller for compensation or otherwise arising out of his or her
employment or relationship with Seller, (b) any customer or other Person
relating to any products sold or provided by Seller, whether pursuant to any
warranty (express or implied), whether due to injury to persons or property
suffered by any Person as a result of the sale of any such product by Seller or
otherwise, or (c) any supplier of Seller. To the best of the Seller's knowledge,
no facts, events or circumstances exist which could give rise to any such
action, arbitration or proceeding or of any claim of default or non-performance
by Seller asserted by any Person under any Contract. Seller is not in violation
of any order, writ, injunction, decree or settlement agreement of or with any
Governmental Authority.
4.13 Permits. Schedule J lists all governmental (including, without
limitation, federal, state and local governments and political subdivisions
thereof and regulatory or administrative agencies, authorities and offices)
authorizations, licenses, franchises, waivers and permits necessary or desirable
for the operation of the Purchased Assets and the conduct of the Business as
currently operated and conducted (collectively, the "Permits"). Seller has
obtained all Permits and all such Permits are presently in full force and
effect. Seller is conducting the Business in compliance with all Permits and no
action, proceeding or claim is pending, or to the knowledge of Seller,
threatened to revoke, modify, terminate or invalidate any Permit. None of the
Permits will be forfeited, terminated, suspended or modified, and no consent
will be required, by reason of the transactions contemplated by this Agreement,
including the assignment of the Permits to Buyer, so as to permit Buyer to
conduct the Business after the Closing in reliance on the Permits and in the
manner in which Seller currently conducts such business.
4.14 Job Descriptions. Schedule K attached hereto contains an
organizational chart indicating all management and supervisor job designations
and pay ranges for all remaining key operating positions in the Seller's
business. Seller is not a party to any employment agreement or consulting
agreement.
15
4.15 Employment Contracts and Benefits.
(a) Seller is not a party to any contract or agreement with any
labor organization, and Seller has not agreed to recognize any union or other
collective bargaining unit, and no union or other collective bargaining unit has
been certified as representing any of the Employees. Seller has no knowledge of
any organizational effort currently being made or threatened by or on behalf of
any labor union with respect to any of the Employees. No unfair labor practice
charges are pending or threatened against Seller. No strikes or arbitration
proceedings by any of the Employees are pending or threatened. Seller has not
experienced any strikes, work stoppage or other material labor difficulties of
any nature with respect to its employees in the past three years.
(b) Seller has complied in all material respects with all laws
relating to the employment of labor, including, without limitation, those laws
relating to safety, health, wages, hours, collective bargaining, unemployment
insurance, workers' compensation, equal employment opportunity and payment and
withholding of taxes.
(c) Schedule L sets forth a complete and correct list of all
employee benefit plans, as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended (collectively, the "Benefit Plans").
(d) With respect to each Benefit Plan, Seller has furnished Buyer
with a complete and accurate copy of (i) the plan document or other governing
contract, as amended, (ii) the most recently distributed summary plan
description and summary of material modifications, (iii) each trust or other
funding agreement, (iv) the most recently filed IRS Form 5500, (v) the most
recently received IRS determination letter, (vi) the most recently prepared
actuarial report and financial statements and (vii) The Seller has noted the
issues dealing with the "top heavy" nature of the Seller's current arrangement
and the recent modification of plan to include a safe harbor 4% match.
4.16 Brokerage or Finder's Fee. No Person is entitled to any brokerage
commissions or finder's fees in connection with the transactions contemplated by
this Agreement as a result of any action taken by Seller or any of the
Affiliates, officers, directors or employees thereof.
4.17 Environmental Laws.
(a) All of the Permits required under Environmental Laws for the
operation of the Business have been obtained and maintained in effect in good
standing by Seller. No material change in the facts or circumstances reported or
assumed in the applications for such Permits exists. Seller is in compliance,
and at all times has complied, with all Environmental Laws applicable to the
operations associated with the Business, the Real Property and each of the
properties formerly owned, leased or operated by Seller (the "Former Real
Property") and with all of the Permits. Seller is not aware of any violation
with respect to any of the Permits, which violations are outstanding or uncured
as of the date hereof, and no proceeding is pending, or to Seller's knowledge,
threatened, to revoke or limit any of the Permits.
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(b) Seller has not performed or suffered any act which could give
rise to, or has otherwise incurred, liability to any Person, including itself,
under the Comprehensive Environmental Response, Compensation and Liability Act,
42 U.S.C. ss. 9601 et seq. ("CERCLA") or any of the Environmental Laws, nor does
Seller have notice of any such liability or any claim therefor or submitted
notice pursuant to Section 103 of CERCLA to any Governmental Authority nor
provided information in response to a request for information pursuant to
Section 104(e) of CERCLA or any analogous state or local information gathering
authority.
(c) No Hazardous Substances has been Released, placed, dumped,
disposed of, manufactured, stored or otherwise come to be located in, on, at,
beneath or near any of the Real Property or the Former Real Property or any
surface waters or groundwaters thereon or thereunder in excess of the levels
prescribed or permitted under Environmental Laws.
(d) There have been and are no aboveground or underground storage
tanks, polychlorinated biphenyls or asbestos-containing materials located at or
within the Real Property or the Former Real Property.
(e) None of the Real Property or the Former Real Property is
identified or proposed for listing on the National Priorities List under 40
C.F.R. ss. 000 Xxxxxxxx X, the Comprehensive Environmental Response Compensation
and Liability Inventory System ("CERCLIS") or any analogous list of any
Government Authority and Seller is not aware of any conditions on such
properties which, if known to a Governmental Authority, would qualify such
properties for inclusion on any such list.
(f) None of the Real Property or the Former Real Property, or any
current or previous business operations conducted by Seller, is the subject of
any pending or threatened investigation or judicial or administrative
proceeding, notice, decree or settlement respecting any actual, potential or
alleged violation of any Environmental Law, or any Releases of Hazardous
Substances into any surface water, ground water, drinking water supply, soil,
land surface or subsurface strata, or ambient air (the "Environment"). Seller
has not received from any Governmental Authority, insurance company or other
Person, any request for information that Seller is the subject of an
investigation under Environmental Laws, notice of any potential or alleged
violations of any Environmental Laws or of any proposed order under any
Environmental Laws or any order or proposed order requiring any of such parties
to prepare studies, action plans, or clean-up strategies in respect of an
Environmental Condition on any of the Real Property or the Former Real Property.
Seller has not received notice of any inquiry or investigation by any Person
concerning matters regulated by Environmental Laws.
(g) Seller has not reported any violation of any applicable
Environmental Laws to any Governmental Authority. No Releases have occurred on
any of the Real Property or Former Real Property which would require reporting
to any Governmental Authority under any Environmental Laws.
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(h) Seller has not sent, transported, or directly arranged for the
transport of any garbage, solid waste or Hazardous Substances, whether generated
by Seller or another Person, to any site listed on the National Priorities List
or proposed for listing on the National Priorities List or to a site included on
the CERCLIS list or any analogous state list of sites.
(i) There is not now, nor has there ever been, on or in any Real
Property or Former Real Property, any generation, treatment, recycling, storage
or disposal of any hazardous waste, as that term is defined under 40 C.F.R. Part
261 or any state or foreign equivalent, except in accordance with Environmental
Laws.
"Hazardous Substances" means and includes any flammable explosives, radioactive
materials or hazardous, toxic or dangerous wastes, substances or related
materials or any other chemicals, materials or substances, exposure to which is
prohibited, limited or regulated by any federal, state, county, regional or
local authority including, but not limited to, asbestos, PCBs, petroleum
products and by-products (including, but not limited to, crude oil or any
fraction thereof, natural gas, natural gas liquids, liquefied natural gas, or
synthetic gas usable for fuel, or any mixture thereof), substances defined or
listed as "hazardous substances", "hazardous materials", "hazardous wastes",
"toxic substances", "hazardous air pollutants" or "waste" or similarly
identified in, pursuant to, or for purposes of, any Environmental Laws
applicable to the operations of the Business, the Real Property and each of the
properties formerly owned, leased or operated by Seller, and with all associated
permits.
"Environmental Laws" means all federal, state and local environmental, health or
safety laws, ordinances, regulations, rules of common law or policies regulating
Hazardous Substances, including, without limitation, those governing the
generation, use, refinement, handling, treatment, removal, storage, production,
manufacture, transportation or disposal of Hazardous Substances, to the extent
such laws, ordinances, regulations, rules and policies may be in effect from
time to time and be applicable to the operations of the Business, the Real
Property and each of the properties formerly owned, leased or operated by
Seller, and with all associated permits, including, without limitation, the
California Solid Waste Management, Resource Recovery and Recycling Act, as now
or hereafter amended (California Government Code Section 66700 et seq.); the
Comprehensive Environmental Response, Compensation, and Liability Act, as now or
hereafter amended (42 U.S.C. Section 9601, et seq.); the Hazardous Materials
Transportation Act, as now or hereafter amended (49 U.S.C. Section 1801, et
seq.); the Resource Conservation and Recovery Act, as now or hereafter amended
(42 U.S.C. Section 6901, et seq.); Section 25117, Section 25281, Section 25316
or Section 25501 of the California Health & Safety Code, as now or hereafter
amended; the Toxic Substance Control Act of 1976, as now or hereafter amended
(15 U.S.C. Section 2601 et seq.); the Clean Water Act, as now or hereafter
amended (33 U.S.C. Section 1251 et seq.); the Clean Air Act, as now or hereafter
amended (42 U.S.C. Section 7901 et seq.); Section 13050 of the California Water
Code, as now or hereafter amended; any so-called "Superfund" or "Superlien" law;
or any other federal, state or local statute, law, ordinance, code, rule,
regulation, order or decree regulating, relating to or imposing liability or
standards of conduct concerning any hazardous, toxic or dangerous waste,
substance or material.
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4.18 Customers and Suppliers.
(a) On the Closing Date, Seller shall send Buyer an e-mail
containing the list of all of the Customers of Seller for the years ending
December 31, 2004 and December 31, 2005. Except as set forth in such e-mail, the
relationships of Seller with its Customers are good commercial working
relationships and since January 1, 2005, Seller has no knowledge that any of its
material Customers intends to cancel or otherwise to modify its relationship or
to decrease or to limit its purchases of products or services from Seller.
(b) Schedule M sets forth a list of all of the suppliers to Seller
for the years ending December 31, 2004 and December 31, 2005. Except as set
forth on Schedule M, since January 1, 2005, no material supplier of Seller has
cancelled or otherwise terminated, or threatened to cancel or otherwise to
terminate, its relationship with Seller or decreased or limited, or threatened
to decrease or limit, its services, supplies or materials to Seller. Seller has
no knowledge that any of its material suppliers intends to cancel or otherwise
to modify its relationship with Seller or to decrease or to limit its services,
supplies or materials to Seller.
4.19 Disclosure of Confidential Information to Others; Restrictive
Agreements. Schedule R sets forth a true and complete list of all Persons (other
than Buyer, Buyer's agents and representatives and the Employees) to whom Seller
has disclosed or which Seller has reason to know possesses all or any material
portion of the Business Secrets, including the name and address of each such
Person, a description of the information disclosed to each such Person and a
copy of any non-disclosure or other agreement executed by such Person with
respect to the disclosed information. Except as set forth on Schedule R, no
other Person has had possession of or access to, whether with or without
Seller's consent, the Customer List or any other Business Secret. The disclosure
of Business Secrets by Seller to the Employees was solely for the purpose of
allowing such employees to conduct the Business on behalf of Seller; Seller has
given no such employee the right to use the Business Secrets for any other
purpose; and Seller is hereby transferring to Buyer all of its rights against
any employees (past or present) who have in the past or may in the future
violate such limited use rights. For the purposes of the this Agreement,
"Business Secrets" means all information and materials pertaining or relating to
the Business and/or the Purchased Assets, including, without limitation,
customer information, formulas, processes, business methods, policies,
procedures, techniques, sales and marketing strategies, financial statements,
sales and gross profit data, employee and independent contractor rosters and
profiles, pricing and cost data, contract information, know-how and the terms of
this Agreement, excluding information readily available to the public, whether
or not in written form and whether or not Seller has possession thereof.
4.20 Books and Records.
(a) Seller maintains only one set of books and records, which books
and records are maintained in the ordinary course; all such books and records
are in all material respects an accurate reflection of all transactions entered
into by Seller. Neither Seller nor anyone acting on its behalf has made any
payments or otherwise provided any benefits, direct or indirect, to any
customer, supplier, Governmental Authority or otherwise, or to any employee or
agent thereof, for the purpose of acquiring purchase or sales relationships or
otherwise, that (i) are be unknown or undisclosed to the employers of the
Persons who received any such payments, (ii) are unlawful, in any respect, or
(iii) are not fully disclosed as such on the books and records of Seller.
19
(b) There are no currently existing and effective contracts,
agreements or arrangements of any kind, or if oral, a description thereof, to
which Seller is a party or by which Seller is otherwise bound and which restrict
Seller from engaging in any line of business or from competing with any other
Person anywhere in the world.
(c) Schedule I contains all non-disclosure or similar such
agreements to which Seller is a party that bind Seller with respect to
information provided or made available to Seller.
4.21 No Affiliated Business Activities. There are no direct or indirect
Affiliates of Seller and/or Persons in which any Shareholder has an equity or
other pecuniary interest that competes, directly or indirectly, with Seller
and/or provides goods and/or services to Seller. Product Warranties and
Guarantees.
4.22 Product Warranties and Guarantees. Set forth on Schedule N are true,
complete and correct copies of all written product and service warranties and
guarantees, and descriptions of all unwritten product and service warranties and
guarantees, in each case given, made or agreed to by Seller in connection with
the sale of products, services or otherwise. There are no claims against Seller
for more than $5,000 by any current or former customer of Seller or any other
Person to return products to Seller, by reason of alleged overshipments,
defective products or otherwise, and every such claim made, resolved or settled
since January 1, 2005 for more than $5,000. All products have been shipped in
compliance with all applicable Laws and industry standards.
4.23 Product Registrations. There are no product registrations issued in
respect of the Business or otherwise to Seller by the U.S. Environmental
Protection Agency (the "EPA") or by state agencies under state law or regulation
with respect to the Business (the "EPA Registrations").
4.24 Product Liability. Schedule O lists (a) all product recalls, and all
liabilities, obligations and damages of any kind for death, disease or injury to
persons, business or property relating to products of Seller arising with
respect to any period after January 1, 2005 involving amounts in excess of
$5,000 (and all product recalls with regard to the amount involved)
(collectively, "Product Liability Matters") and (b) all product warranty claims
relating to any products of Seller arising with respect to any period after
January 1, 2005 involving amounts in excess of $5,000 ("Product Warranty
Matters"). No fact or circumstance exists that would likely cause a Product
Liability Matter or a Product Warranty Matter to occur prior to or after the
Closing Date.
4.25 Validity of Representations and Warranties. No representation or
warranty of Seller and no statement, report, or certificate furnished or to be
furnished by or on behalf of Seller or any of its respective employees,
representatives or agents in connection herewith, contains or will contain any
untrue statement of a material fact or omits, or will omit, to state a material
fact necessary in order to make the statements contained herein or therein not
misleading.
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ARTICLE 5. Representations and Warranties of Buyer
Buyer represents and warrants to Seller that:
5.1 Organization and Standing. Buyer is a corporation validly existing and
in good standing under the laws of the State of New York. Buyer has all
requisite corporate power and corporate authority to own and lease its assets
and properties and to carry on its businesses as and in the places such assets
and properties are now owned or leased and where such businesses are presently
conducted.
5.2 Authority. Buyer has all requisite corporate power and corporate
authority to enter into this Agreement and the other Transaction Documents and
to carry out the transactions contemplated hereby and thereby. This Agreement
has been duly executed by Buyer and constitutes, and each other Transaction
Documents, when executed and delivered, will constitute, the legal, valid and
binding obligations of Buyer. All corporate proceedings and actions required to
be taken by Buyer relating to the execution, delivery and performance of this
Agreement and the other Transaction Documents and the consummation of the
transactions contemplated hereby and thereby have been duly taken.
5.3 DSS Shares. Buyer represents and warrants that it will deliver to the
Seller the DSS Shares free and clear of all mortgages, liens, liabilities,
security interests, pledges, restrictions, prior assignments, leases, licenses,
charges, claims, defects in title and encumbrances of any kind or type
whatsoever. .
5.4 Litigation. There is no action, suit, proceeding, arbitration or
investigation pending, or to the knowledge of Buyer threatened, against Buyer or
any of its Affiliates, and there is not outstanding any order, writ, injunction,
award or decree of any court or arbitrator or any federal, state, municipal or
other governmental department, commission, board, agency or instrumentality to
which Buyer or any of its Affiliates is subject, in either case that could
reasonably be expected to affect materially adversely the ability of Buyer to
consummate the transactions contemplated by this Agreement and the other
Transaction Documents.
5.5 No Violation; Qualification. Except as may be caused or made necessary
by facts relating solely to Seller: (a) the execution, delivery and performance
of this Agreement and the other Transaction Documents by Buyer and the
consummation by it of the transactions contemplated by this Agreement and the
other Transaction Documents will not (i) conflict with or violate any provision
of the certificate of incorporation or by-laws of Buyer, (ii) with or without
the giving of notice or the passage of time, or both, result in a breach of, or
violate, or be in conflict with, or constitute a material default under, or
permit the termination of, or cause or permit acceleration under, any material
agreement, instrument, debt or obligation to which Buyer is a party or to or by
which it is subject or bound, or (iii) violate any law, rule or regulation or
any order, judgment, decree or award of any court, governmental authority or
arbitrator to or by which Buyer is subject or bound, except as would not
reasonably be expected to have a material adverse effect on the ability of Buyer
to consummate the transactions contemplated by this Agreement and the other
Transaction Documents; and (b) no material consent, approval or authorization
of, or declaration, filing or registration with, or notice to, any Governmental
Authority or any other third party is required to be obtained or made by Buyer
in connection with the execution, delivery and performance of this Agreement and
the other Transaction Documents or the consummation of the transactions
contemplated by this Agreement and the other Transaction Documents, other than
those consents that re the obligation of Seller to obtain.
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ARTICLE 6. Certain Covenants
6.1 Consents. Seller shall use commercially reasonable efforts to obtain
all consents required of third Persons in connection with the transactions
contemplated by this Agreement, including consents in respect of Contracts,
either by assignment or innovation thereof (the "Consents"), and Buyer shall
provide to Seller reasonable cooperation in connection therewith. Schedule S
identifies the Consents obtained by Seller as of the Closing Date and the
Consents not obtained by Seller as of the Closing Date.
6.2 Certain Employee Matters.
(a) Effective as of the Closing Date, Buyer may, but shall not be
obligated to offer employment to some of Seller's employees who are actively at
work immediately prior to the Closing Date, subject to Buyer's right to
terminate the employment of any such employees at any time and for any reason in
its sole discretion. It is specifically understood that (i) Buyer shall have no
obligation to hire any of the Seller's employees and (ii) no rights or
entitlements shall vest in favor of any third party (including any of Seller's
employees) by virtue of this Agreement. Any employees so hired are hereinafter
referred to as "Transferred Employees."
(b) Buyer agrees to assume responsibility to the Transferred
Employees for the payment of any accrued wages, salaries, commissions, vacation
pay, sick pay, severance obligations and any other employee benefit or
entitlement of any kind or nature whatsoever accrued or accruing to such
employees pursuant to any employee benefit plan, fund, program, contract (oral
or written), policy or arrangement arising by reason of any applicable Law or
any agreement that Seller may have with any such Transferred Employees, all to
the extent arising in respect of or relating to the period prior to the
Effective Date, but only if, and to the extent, disclosed on Schedule P. Nothing
contained herein shall create any rights in favor of any Transferred Employee
beyond rights to which they were otherwise entitled pursuant to any such
applicable Law or agreement.
(c) Seller shall be responsible to satisfy, and/or to reimburse
Buyer on account of, any claims made by any Transferred Employees against Buyer
for severance pay, unfair or unlawful termination, continued entitlement to
benefits beyond termination and the like in the event of, and regardless of the
circumstances of, Buyer's termination of the employment of any Transferred
Employees following the Closing, to the extent that any such claims relate to,
or otherwise arise on account of, or are calculated in whole or in part by
reference to, the period prior to the Effective Date. Seller shall retain the
right to challenge any such claims made by Transferred Employees, and Buyer
shall continue to be liable for claims arising from the period after the
Effective Date.
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(d) Seller shall terminate all of its employees and, subject to
subsection (c ) above, shall be responsible for all of the consequences thereof.
Seller shall be responsible for compliance with, and prior to the Closing shall
complete any filings required pursuant to, all applicable Laws respecting the
effect of the transaction contemplated by this Agreement and by any agreement or
document contemplated hereby on any of its employees including, without
limitation, the Worker Adjustment and Retraining Notification Act, 29 U.S.C. ss.
2101, et seq. or any state law of similar effect ("WARN"). Seller agrees that it
will not take any action which causes the notice provisions of WARN to be
applicable to the transactions contemplated by this Agreement.
(e) Effective as of Closing, Buyer, to the extent permitted by the
respective insurance carriers and service providers, shall assume and maintain
Seller's insured medical welfare benefit plan, provided that such contract is
properly and legally assigned to Buyer. Notwithstanding anything in this
Agreement to the contrary, Seller and Buyer acknowledge and agree that Buyer
shall not assume Seller's worker's compensation insurance policy.
(f) Seller agrees to cooperate with Buyer to transfer Seller's
unemployment experience to Buyer, or its designee, if permitted by law and
elected by Buyer. To the extent permitted under Law and at Buyer's election,
Seller shall retain liability for unemployment compensation Taxes on behalf of
Employees accrued prior to Closing. Seller shall also retain liability for
unemployment compensation benefits relating to Employees who do not become
Transferred Employees.
(g) Seller shall use commercially reasonable efforts to settle or
resolve all pending formal employee grievances, employee complaints and
outstanding citations with due regard for not generating changes in work
practice or precedents which will have a significant impact on future
operations. Seller shall notify Buyer in advance of any such settlements or
resolutions and the Buyer shall have the right to approve those aspects of such
settlements and resolutions, if any, that would generate a material change in
work practice or precedents, such approval not to be unreasonably withheld.
6.3 Obligation for Employees' Actions. In the event any present or former
employee, agent, representative or independent contractor of Seller has
disclosed directly or indirectly or used for his own benefit or for the benefit
of another Person any Business Secret learned by such individual while employed
or otherwise working for or acting on behalf of Seller, each Selling Party
shall, at Buyer's request and expense, immediately commence and diligently
prosecute an appropriate action or proceeding to enjoin permanently any such
disclosure and/or use, and shall use its best efforts to obtain a court order
restraining any such disclosure and/or use during the pendency of such action or
proceeding. At Buyer's request, Seller shall assign to Buyer any cause of action
or other claim that Seller may have against any present or former employee,
agent, representative or independent contractor for any actions or omissions
prior to or following the Closing and shall reimburse Buyer for the costs
incurred in connection with its pursuit of such action or claim. The Selling
Party shall, at Buyer's cost and expense, cooperate with Buyer, as reasonably
requested by Buyer, in the prosecution of such claim.
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6.4 Non-Competition, Non-Disclosure and Non-Solicitation.
(a) For a period commencing on the Closing Date and ending on the
date that is one (1) year after the Closing Date (the "Restricted Period"), no
Selling Party shall, and each Selling Party shall ensure that none of its
respective Affiliates shall, engage, directly or indirectly, in an activity
competitive with the Business in the United States (the "Restricted Area"). By
way of further definition and explanation of the foregoing, and without limiting
the generality of the foregoing restriction, during such Restricted Period, no
Selling Party and none of their respective Affiliates shall devote any time or
attention to acquiring, managing, operating, joining, controlling, participating
or becoming financially interested in, or being connected with (in any capacity,
whether as a partner, stockholder, investor, consultant, independent contractor,
agent, representative or otherwise), or providing any direct or indirect
financial assistance to, any Person that is engaged, directly or indirectly, in
an activity competitive with the Business within the Restricted Area. Nothing
contained herein, however, shall prohibit the Selling Party or any of their
respective Affiliates from acquiring and owning, for investment purposes only,
up to one percent (1%) of the outstanding equity securities of a Person engaged
in an activity competitive with the Business if such equity securities of any
such Person are available to the general public on a national securities
exchange.
(b) Each Selling Party hereby acknowledges, covenants and agrees
that, from and after the date hereof, it will hold any and all items
constituting Business Secrets communicated or transmitted to, or otherwise
obtained by, it in strictest confidence. No Selling Party shall, regardless of
the reason therefor, directly or indirectly make use of, exploit, disclose or
divulge any Business Secrets to any other Person (except to the extent such
information is required to be submitted to any Governmental Authority or to any
other Person pursuant to subpoena or other court process or as may be permitted
herein), or knowingly make any false statement or otherwise commit any act
(including contacting any customers of the Business) that could in any way be
injurious or detrimental to Buyer, the Business or to Buyer's use of the
Purchased Assets, including, without limitation, Buyer's image, business or
customer relations.
(c) During the Restricted Period, no Selling Party shall, for its
own benefit, or for the benefit of any other Person, or for any reason, accept
any business with respect to the Business from, or interfere in any manner with
the Buyer's business relationship with, any customer of Buyer or the Business.
Without limiting the generality of the foregoing, no Selling Party shall solicit
or induce, or attempt to solicit or induce, any business with respect to the
Business (directly or indirectly through any Person) from any Customer,
regardless of the purpose. Furthermore, nothing contained in this Agreement
shall be construed to infer that any Selling Party is, in any respect
whatsoever, retaining any rights to, or in respect of, the Customer List or the
Business, any customer information of the Business or any other Business Secrets
for direct or indirect use after the expiration of the Restricted Period, it
being understood and agreed that pursuant to this Agreement Buyer is acquiring
all of the Selling Party's rights thereto without limitation as to time or
otherwise.
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(d) During the Restricted Period, no Selling Party shall hire,
solicit or induce, or attempt to hire, solicit or induce (directly or indirectly
through any Person), for employment, or interfere in any manner with Buyer's
relationship with, any employee, agent, consultant or other representative of
Buyer or any of its Affiliates. Except that the Seller may provide reference
letters to unemployed former employees.
(e) The invalidity or unenforceability of this Article 6 in any
respect shall not affect the validity or enforceability of this Article 6 in any
other respect, or of any other provision of this Agreement. In the event that
any provision of this Article 6 shall be held invalid or unenforceable by a
court of competent jurisdiction by reason of the geographic or business scope or
the duration thereof or for any other reason, such invalidity or
unenforceability shall attach only to the particular aspect of such provision
found invalid or unenforceable as applied and shall not affect or render invalid
or unenforceable any other provisions of this Article 6 or the enforcement of
such provision in other circumstances, and, to the fullest extent permitted by
law, this Article 6 shall be construed as if the geographic or business scope or
the duration of such provision or other basis on which such provision has been
challenged had been more narrowly drafted so as not to be invalid or
unenforceable.
(f) Each Selling Party acknowledges and agrees that the agreements
and covenants contained in this Article 6 are of a unique and valuable nature
and may, if breached, result in irreparable damage to Buyer that may not be
readily susceptible to monetary valuation; and, accordingly, in the event of the
breach of any covenant or agreement contained in this Article 6, Buyer shall be
entitled to seek and obtain injunctive or other equitable relief, in addition to
any other remedies provided by law or equity, in furtherance of the enforcement
thereof. In no event shall the amount or value of any consideration paid or
given by Buyer for the covenants and agreements contained in this Article 6, or
otherwise in connection with this Agreement, be used to determine the scope or
extent of damages suffered by Buyer in the event of a breach by a Selling Party
of such covenants and agreements.
(g) Each Selling Party acknowledges that Buyer would not have
completed the transaction contemplated by this Agreement absent the covenants
and agreements set forth in this Article 6.
6.5 Bulk Sales Laws. Buyer hereby waives compliance by Seller with any
bulk sales law, including, but not limited to, Article 6 of the Uniform
Commercial Code, that may be applicable to any of the transactions contemplated
by this Agreement.
6.6 Transaction Taxes. Buyer shall bear and satisfy any and all sales,
transfer, value added, conveyance, stamp, recording or other similar Taxes or
governmental charges or fees imposed by any taxing or other jurisdiction
("Transaction Taxes") with respect to the transfer or assignment of the
Purchased Assets or otherwise on account of this Agreement or any of the
transactions contemplated by this Agreement and any of the other Transaction
Documents.
6.7 Books and Records. The Seller's Books and Records are not an asset
being sold to the Buyer. Buyer agrees that Seller's Books and Records remain
Seller's confidential property. Seller has agreed to provide the Buyer not later
than the two weeks following the Closing Date a hard copy of a top level 2004
and 2005 income and balance sheet; a listing of checks paid from January 1, 2006
forward; a copy of the bank statement from January 1, 2006 forward; and a copy
of the DacEasy billing module and billing data.
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ARTICLE 7. Indemnification
7.1 Obligation to Indemnify.
(a) From and after the Closing, and subject to the terms and
conditions of this Article 7, Buyer hereby assumes and agrees to save, indemnify
and hold harmless Seller and all officers, directors, employees, agents and
members of Seller (collectively "Seller Indemnitees") from and against:
(i.) any loss, liability or damage suffered or incurred by any
Seller Indemnitee by reason of any breach by Buyer of any representation or
warranty of Buyer set forth in this Agreement;
(ii.) any loss, liability or damage suffered or incurred by
any Seller Indemnitee by reason of the nonfulfillment by Buyer of any covenant
or agreement to be performed or complied with by Buyer under or pursuant to this
Agreement;
(iii.) any loss, liability or damage suffered or incurred by
any Seller Indemnitee with respect to or in connection with any one or more of
the Assumed Liabilities;
(iv.) any loss, liability or damage suffered or incurred by
any Seller Indemnitee arising out of or related to the ownership or use of any
of the Purchased Assets by Buyer and/or the operations, business or activities
of Buyer after the Closing; and
(v.) any actions, suits, proceedings, judgments, costs and
expenses, including reasonable attorneys' fees, incident to any of the
foregoing, or incurred in enforcing any of the obligations under this Section
7.1.
(b) From and after the Closing, and subject to the terms and
conditions of this Article 7, each of the Selling Parties, jointly and
severally, hereby assumes and agrees to save, indemnify and hold harmless Buyer
and Buyer's officers, directors, employees, agents and stockholders
(collectively "Buyer Indemnitees") from and against:
(i.) any loss, liability or damage suffered or incurred by any
Buyer Indemnitee by reason of any breach by Seller of any representation or
warranty of Seller set forth in this Agreement;
(ii.) any loss, liability or damage suffered or incurred by
any Buyer Indemnitee by reason of the nonfulfillment by Seller of any covenant
or agreement to be performed or complied with by Seller under or pursuant to
this Agreement;
(iii.) any loss, liability or damage suffered or incurred by
any Buyer Indemnitee with respect to or in connection with any one or more of
the Excluded Liabilities;
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(iv.) any loss, liability or damage suffered or incurred by
any Buyer Indemnitee arising out of or related to the ownership or use of any of
the Purchased Assets and/or the operations, business or activities of Seller
prior to or on the Closing Date; and
(v.) any actions, suits, proceedings, judgments, costs and
expenses, including reasonable attorneys' fees, incident to any of the
foregoing, or incurred in enforcing any of the obligations under this Section
7.1
7.2 Procedure for Satisfaction of Indemnity Claims.
(a) The obligations and liabilities of the parties hereto shall be
subject to the following terms and conditions:
(i.) A party hereto who is responsible for indemnifying any
other party against any matter pursuant to this Agreement is referred to as the
"Indemnifying Party," and the party claiming indemnity is referred to as the
"Indemnified Party." Any claim for indemnification made pursuant to this Article
7 is sometimes referred to as an "Indemnity Claim."
(ii.) The Indemnified Party shall give prompt written notice
to the Indemnifying Party of any Indemnity Claim after learning of the existence
thereof; provided, however, that the failure to provide such prompt notice shall
in no event impair the rights of the Indemnified Party or limit the obligations
of the Indemnifying Party hereunder except to the extent that such failure has
an adverse effect on the ability of the Indemnifying Party adequately to defend
such claim. In the event of a claim brought by a third party (a "Third Party
Claim") which might give rise to an Indemnity Claim by the Indemnified Party,
such notice of the Indemnity Claim shall state the nature and basis of said
Indemnity Claim and the amount thereof, to the extent known. In the event of any
other Indemnity Claim, including one for an alleged breach or misrepresentation
hereunder, such notice shall state the nature and basis thereof, the amount of
the asserted damages, and the method by which such alleged damages were
calculated; provided, however, that the Indemnified Party shall in all events
have the right subsequently to revise the basis for such Indemnity Claim and the
amount of damages asserted as well as the method by which such damages are
calculated.
(b) In the event of a Third Party Claim:
(i.) Provided that the Indemnifying Party (A) first
irrevocably admits in writing to the Indemnified Party that such claim is one in
respect of which the Indemnifying Party is obligated to indemnify the
Indemnified Party hereunder in full, and (B) has adequately evidenced to the
Indemnified Party its ability to satisfy such claim, the Indemnifying Party
shall be entitled to contest and to assume the defense of the claim at the
Indemnifying Party's expense, and further provided that it utilizes reputable
counsel reasonably satisfactory to the Indemnified Party. In the event the
Indemnifying Party gives notice to the Indemnified Party of the Indemnifying
Party's election to assume the contest or defense as aforesaid, then the
Indemnifying Party shall be obligated promptly to defend such claim. The
Indemnified Party shall, at the Indemnifying Party's expense, make available to
the Indemnifying Party and its attorneys, accountants or other duly designated
agents all books and records of the Indemnified Party relating to any such
action, suit or proceeding, and the parties hereto agree to render to each other
such assistance (at the expense of the Indemnifying Party) as they may
reasonably require of each other in order to ensure the proper and adequate
contest or defense of any such action, suit or proceeding. The Indemnified Party
shall be entitled, with counsel selected by the Indemnified Party, to
participate in (but not to control), at its own expense, the defense of any
claim or litigation which the Indemnifying Party has, in accordance with the
provisions of this subparagraph (i), elected to defend, and to be kept fully
informed of the status thereof at all stages, including the right to receive, at
the Indemnifying Party's expense, copies of all pleadings and other material
papers in connection with such claim or litigation. The Indemnifying Party shall
not settle any Third Party Claim without the consent of the Indemnified Party
unless (1) the Indemnifying Party fully indemnifies the Indemnified Party for
all losses in connection with such settlement of such claim, (2) there is no
finding or admission of any violation of Law by the Indemnified Party not
agreeing to the settlement, and (3) the relief granted in connection therewith
requires no action on the part of, and has no economic or other effect on, the
Indemnified Party.
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(ii.) If the defense of a Third Party Claim is not assumed by
the Indemnifying Party as provided in subparagraph (i) above, then the
Indemnified Party may (to the extent that the Indemnified Party determines to do
so in its sole discretion) conduct any such proceeding as it deems appropriate,
and may take whatever action it deems necessary or appropriate, to resolve or
settle such claim or dispute, but shall in no event have any obligation to
defend any such claim or proceeding or to appeal any adverse finding or
determination or to defend the appeal by any other party to a favorable
determination, it being agreed that any actions taken or omitted with respect to
the foregoing shall not avoid, reduce or mitigate the Indemnifying Party's
liability hereunder. The Indemnifying Party shall nevertheless, at its own
expense, make available to the Indemnified Party and its attorneys and
accountants all books and records of the Indemnifying Party relating to such
proceedings or litigation and shall render to the Indemnified Party such
assistance as may be reasonably requested by the Indemnified Party. The
Indemnifying Party shall be entitled, with counsel selected by it, to
participate in (but not to control), at its own expense, the defense of any
claim or litigation which the Indemnifying Party has not elected to defend in
accordance with the provisions of subparagraph (i) above. The Indemnified Party
shall not settle any Third Party Claim without first giving notice of the
proposed settlement to the Indemnifying Party (the "Settlement Notice"). The
Indemnifying Party shall have the right, exercisable within three (3) Business
Days following receipt of the Settlement Notice, to instruct the Indemnified
Party not so to settle such Third Party Claim; provided that, in such event, the
Indemnifying Party shall be required to assume the defense of any such Third
Party Claim subject to and in accordance with the provisions and prerequisites
of subparagraph (i) above (including those set forth in the first sentence
thereof); provided, further, that the Indemnified Party shall be entitled to
settle such Third Party Claim regardless of the instructions of the Indemnifying
Party to the contrary if the Indemnifying Party is unable or fails to satisfy
the requirements set forth in clauses (A) and (B) contained in the first
sentence of subparagraph (i) above.
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7.3 Survival and Other Matters. Notwithstanding anything to the contrary
contained in any of Transaction Documents:
(a) Each representation, warranty, indemnity, covenant and agreement
of each of the parties hereto shall survive the Closing;
(b) Seller shall not have any liability for any misrepresentation or
breach of warranty, agreement or covenant under this Agreement if and to the
extent that the same is disclosed in the appropriate Schedule; and
(c) The effect of any misrepresentation, breach of warranty,
covenant or agreement of, or any indemnifiable claim against, any party under
this Agreement shall be determined based solely on damages net of any amounts
recovered by the Indemnified Party in respect thereof or in connection therewith
under any one or more policies of insurance maintained by any party hereto or
any third party.
7.4 Satisfaction of Indemnity Claims. In the event Buyer asserts an
Indemnity Claim pursuant to Section 7.1 against Seller that entitles Buyer to
indemnification hereunder, Buyer may not obtain satisfaction of any such claim,
by way of set-off against any amounts owing by Buyer to Seller.
7.5 Interest. An Indemnifying Party shall pay the an Indemnified Party
interest at a rate per annum equal to the rate announced from time to time by
Citibank, N.A. at its "prime rate" plus one percent (1%) for any indemnifiable
liability from the date such indemnifiable liability was actually paid, incurred
or suffered by the Indemnified Party until paid in full by the Indemnifying
Party.
ARTICLE 8. Miscellaneous
8.1 Certain Defined Terms. As used in this Agreement, the following terms
shall have the following meanings:
(a) "Adjustment Certificate" has the meaning specified in Section 2.2(c).
(b) "Affiliate" when used with respect to any Person, means any Person
that by means of the majority of shares or otherwise, is controlled by
such Person, is controlling such Person or is under common control with
such Person. A corporation or other entity shall be regarded as in control
of another corporation or entity if it owns or directly or indirectly
controls more than thirty-five percent (35%) of the voting stock or other
ownership interest of the other corporation or entity, or if it possesses,
directly or indirectly, the power to direct or cause the direction of the
management and policies of the corporation or other entity.
(c) "Agreement" has the meaning specified in the preamble of this
Agreement.
(d) "Assumed Liabilities" has the meaning specified in Section 1.3.
29
(d) "Benefit Plans" has the meaning specified in Section 4.15(c).
(e) "Business" has the meaning specified in the recitals of this
Agreement.
(f) "Business Day" means any day that is not a Saturday, a Sunday or other
day on which banks are required or authorized by law to be closed in the
State of New York or the State of California.
(g) "Business Secrets" has the meaning specified in Section 4.19.
(h) "Buyer" has the meaning specified in the preamble of this Agreement.
(i) "Buyer Indemnitees" has the meaning specified in Section 7.1(b).
(j) "CERCLA" has the meaning specified in Section 4.17(b). .
(k) "CERCLIS" has the meaning specified in Section 4.17(e). (l) "Closing"
has the meaning specified in Section 3.1(a).
(m) "Closing Date" has the meaning specified in Section 3.1(a).
(n) "Proforma Balance Sheet" has the meaning specified in Section 1.1(a).
(o) "Contracts" has the meaning specified in 1.1(d).
(p) "Customer List" has the meaning specified in 1.1(b).
(q) "Customers" has the meaning specified in 1.1(b).
(r) "Disagreement Notice" has the meaning specified in Section 2.3.
(s) "Employees" shall mean the employees of Seller.
(t) "Environment" has the meaning specified in Section 4.17(f).
(u) "Environmental Condition" means a condition of the soil, subsoil,
surface waters, groundwater, stream sediments, air or other environmental media,
including the presence or Release of a Hazardous Substance, at, under, or
migrating from a property that, by virtue of Environmental Laws, (a) requires
investigatory, corrective or remedial measures of Seller or Buyer, and/or (b)
comprises a basis for claims against, demands of and/or liabilities of Seller or
Buyer by any Person, including, without limitation, adjacent land owners.
"Environmental Condition" shall include those conditions identified or
discovered prior to or after the Closing Date resulting from any activity,
inactivity or operations of Seller prior to the Closing Date.
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(v) "Environmental Laws" has the meaning specified in Section 4.17.
(w) "EPA" has the meaning specified in Section 4.23.
(x) "EPA Registrations" has the meaning specified in Section 4.23.
(y) "Excluded Assets" has the meaning specified in 1.2.
(z) "Excluded Liabilities" has the meaning specified in Section 1.3.
(aa) "Financial Statements" has the meaning specified in Section 4.3.
(ab) "Former Real Property" has the meaning set forth in Section 4.17(a).
(ac) "GAAP" shall mean generally accepted accounting principles.
(ad) "Governmental Authority" means any agency, department, court or any
other administrative, legislative or regulatory authority of any foreign,
Federal, state, provincial, local or municipal governmental body.
(ae) "Hazardous Substance" has the meaning specified in Section 4.17.
(af) "Indemnified Party" has the meaning specified in Section 7.2(a)(i).
(ag) "Indemnifying Party" has the meaning specified in Section 7.2(a)(i).
(ah) "Indemnity Claim" has the meaning specified in Section 7.2(a)(i).
(ai) "Inventory" has the meaning specified in Section 1.1(a)(iii).
(aj) "Laws" has the meaning specified in Section 8.6.
(ak) "Lien" means any security interest, mortgage, deed of trust, charge,
pledge, claim, right of another Person, lien, restriction or similar
encumbrance.
(al) "Material Adverse Effect" means any materially adverse effect on or
change to the results of operations or the financial condition or prospects of
the Business, except for any such changes or effects affecting the U.S. economy
in general.
(am) "Shareholders has the meaning specified in the preamble to this
Agreement.
(an) "Permits" has the meaning specified in Section 4.13.
(an) "Person" means an individual, a corporation, a partnership, an
association, a limited liability company, a trust or other entity or
organization of whatever nature.
(ao) "Post-Closing Adjustment" has the meaning specified in Section
2.2(c).
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(ap) "Proforma Balance Sheet" has the meaning specified in Section 1.1(a).
(aq) "Product Liability Matters" has the meaning specified in Section
4.24.
(ar) "Product Warranty Matters" has the meaning specified in Section 4.24.
(as) "Purchase Price" has the meaning specified in Section 2.1.
(at) "Purchased Assets" has the meaning specified in Section 1.1
(au) "Real Property" has the meaning specified in Section Section 4.6(a)
(av) "Real Property Leases" has the meaning specified in Section 4.6(a).
(aw) "Release" means the release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migrating into
the indoor or outdoor environment of any Hazardous Substance.
(ax) "Restricted Area" has the meaning specified in Section 6.4(a).
(ay) "Restricted Period" has the meaning specified in Section 6.4(a).
(az) "Retained Interest" has the meaning specified in Section 2.7.
(ba) "Seller" has the meaning specified in the preamble of this Agreement.
(bb) "Seller Indemnitees" has the meaning specified in Section 7.1(a).
(bc) "Selling Parties" has the meaning specified in the preamble of this
Agreement.
(bd) "Settlement Notice" has the meaning specified in Section 7.2(b)(ii).
(be) "Tangible Personal Property" has the meaning specified in Section
1.1(a)(v).
(bf) "Taxes" has the meaning specified in Section 4.5.
(bg) "Third Party Claim" has the meaning specified in Section 7.2(a)(ii).
(bh) "Transaction Documents" has the meaning specified in Section 4.1(c).
(bi) "Transferred Employees" has the meaning specified in Section 6.2(a).
(bj) "Unaffiliated Firm" has the meaning specified in Section 2.3.
(bk) "WARN" has the meaning specified in Section 6.2(d).
32
(bl) Working capital definition as stated above.
8.2 Certain Understandings. Notwithstanding anything to the contrary
contained in this Agreement, to the extent a representation or warranty in this
Agreement requires the disclosure of any contract or agreement, the applicable
representation or warranty shall be deemed to exclude any agreement under which
the obligations of the parties thereto have been performed.
8.3 Binding Agreement. All of the terms and provisions of this Agreement
shall be binding upon, inure to the benefit of, and be enforceable by, the
parties hereto and their respective heirs, legal representatives, successors and
assigns.
8.4 Assignment. No party may assign this Agreement or any rights or
obligations hereunder, directly or directly, except with the prior written
consent of the other parties hereto; provided, however, that Buyer shall be
permitted to assign some or all of its rights hereunder to one or more of its
Affiliates. No assignment shall relieve the assigning party of any of its
obligations hereunder. Buyer may not assign its obligation to provide the DSS
Shares as a part of the payment of the purchase price.
8.5 Public Announcements. Except as may be required to comply with the
requirements of any applicable law or as required under the rules and
regulations of any stock exchange upon which the securities of one of the
parties or its Affiliates are listed or traded, no Party shall make any public
announcement in respect of this Agreement or the transactions contemplated by
this Agreement or otherwise communicate with respect thereto with any news media
without prior notification to, and written approval of the other party.
8.6 Law To Govern. This Agreement shall be construed and enforced in
accordance with the internal laws of the State of California, without regard to
principles of conflict of laws. Any litigation involving this Agreement shall be
adjudicated in a court with jurisdiction located in San Mateo County, California
and the parties irrevocably consent to the personal jurisdiction and venue of
such court
8.7 Notices. All notices shall be in writing and shall be deemed to have
been duly given if delivered personally or sent by overnight courier, upon
receipt, or if mailed via registered or certified mail, return receipt
requested, postage prepaid, within five (5) Business Days after deposit in the
mail, to the other party hereto at the following addresses:
if to Seller, to:
Plastic Printing Professionals, Inc.
000 X. Xxxxx Xx., #0X,
Xxx Xxxxx, XX
Attn: Xxxxxxx Xxxxxxx
with a copy to:
Xxxxxxx Xxxx, Esq.
0000 Xxxxxxx Xx. #000
Xxxx, XX 00000
33
if to Buyer, to:
P3 Acquisition Sub, Inc.
c/o Document Security Systems, Inc.
00 Xxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxx, XX 00000
Attn: Xxxxxxx Xxxxx, Chief Executive Officer
with a copy to:
Xxxxxxx X. Xxxxxx, Esq.
00 Xxxx 00xx Xxxxxx
Xxxxx 0000
Xxx Xxxx, XX 00000
or to such other addresses as any such party may designate in writing in
accordance with this Section 8.7.
8.8 Entire Agreement. This Agreement (including all Schedules and Exhibits
hereto) sets forth the entire understanding of the parties hereto in respect of
the subject matter hereof and may not be modified or amended except by a written
agreement specifically referring to this Agreement signed by all of the parties
hereto. This Agreement supersedes all prior agreements and understandings among
the parties with respect to such subject matter. No amendment, modification or
waiver of this Agreement, or any provision hereof, shall be binding unless made
in writing and executed by all of the parties hereto.
8.9 Legends On Stock Certifications.
Each certificate representing shares issued pursuant to this Agreement shall be
endorsed with the following legends:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT
BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT COVERING SUCH SECURITIES, THE SALE IS MADE
IN ACCORDANCE WITH RULE 144 OR ITS SUCCESSOR RULE UNDER THE ACT, OR THE COMPANY
RECEIVES AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT EXEMPTIONS FROM
SUCH REGISTRATION AND FROM THE PROVISIONS OF ANY APPLICABLE STATE "BLUE SKY"
LAWS ARE AVAILABLE."
8.10 Waivers. No failure by any of the parties hereto to insist upon the
strict performance of any covenant, agreement, term or condition of this
Agreement, or to exercise any right or remedy consequent upon a breach thereof,
shall constitute a waiver of any such breach or of such covenant, agreement,
term or condition. No covenant, agreement, term or condition of this Agreement
to be performed or complied with by any party hereto, and no breach thereof,
shall be waived, altered or modified except by a written instrument executed by
the other party or parties. No waiver by any of the parties hereto of any breach
of any covenant or condition hereof on the part of the other party or parties
hereto to be kept and performed shall be considered to be a continuing waiver of
such covenant or provision, or of any subsequent breach thereof, unless
otherwise expressly provided for in such waiver.
34
8.11 Severability. In case any one or more of the provisions or parts of a
provision contained in this Agreement shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or part of a provision of
this Agreement, but this Agreement shall be construed as if such invalid or
illegal or unenforceable provision or part of a provision had been limited or
modified (consistent with its general intent) to the extent necessary so that it
shall be valid, legal and enforceable, or if it shall not be possible so to
limit or modify such invalid or illegal or unenforceable provision or part of a
provision, this Agreement shall be construed as if such invalid or illegal or
unenforceable provision or part of a provision had never been contained herein.
8.12 Income Tax Position. No party hereto shall take a position for income
Tax purposes which is inconsistent with an express provision of this Agreement.
8.13 Third-Party Beneficiaries. Nothing herein, express or implied, is
intended or shall be construed to or shall confer upon or give to any Person,
other than the parties hereto (and the respective Seller Indemnitees and Buyer
Indemnitees to the extent provided in Article 7 hereof), any rights, remedies or
other benefits under or by reason of this Agreement or any documents executed in
connection with this Agreement.
8.14 Time of the Essence. Time is of the essence with respect to each
party's respective obligations under or pursuant to this Agreement.
8.15 Drafting. No party shall be deemed to have drafted this Agreement but
rather this Agreement is a collaborative effort of the undersigned parties and
their attorneys.
8.16 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement.
8.17 Headings. The Section and paragraph headings contained herein are for
the purposes of convenience only and are not intended to define or limit the
contents of such Sections and paragraphs.
8.18 Further Assurances. At any time and from time to time following the
Closing, at the request of any party and without further consideration, any
other party hereto shall provide, execute and/or deliver such documents or
instruments, and take such actions, as the requesting party hereto or its
counsel may reasonably deem necessary or desirable in order to consummate or
otherwise to implement the provisions and purposes of this Agreement or to
comply with applicable laws, including the provision of audited financial
statements, as necessary. The parties hereto agree to cooperate fully in
implementing a smooth and orderly transfer of the Business and the Purchased
Assets from Seller to Buyer.
[Remainder of Page Intentionally Left Blank]
35
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
SELLER:
PLASTIC PRINTING PROFESSIONALS, INC.
By: ___________________________________
Name:
Title:
SHAREHOLDERS:
-------------------------------
Xxxxxxx Xxxxxxx
-------------------------------
Xxxxxxx Xxxxxxx
--------------------------------
Xxxxxx Xxxxxxx
BUYER:
P3 ACQUISITION SUB, INC.
By: ________________________________
Name: Xxxxxxx Xxxxx
Title: Chief Executive Officer
36
