1
Exhibit 10.3
ASSET PURCHASE AGREEMENT
among
ASHCON, INC.
(the Seller and a Pennsylvania corporation
formerly known as Dauphin Graphic Machines, Inc.),
XXXXXXXXXXX X. XXXX
(the majority shareholder of the Seller),
DAUPHIN GRAPHIC MACHINES, INC.,
(a newly-formed Pennsylvania corporation and the Buyer)
and
PAMARCO TECHNOLOGIES INC.
(a Delaware corporation and the sole shareholder of the Buyer)
Section Page
------- ----
1. Definitions............................................................ 1
2. Sale and Purchase...................................................... 5
3. Closing................................................................ 10
4. Representations and Warranties of the Selling Parties.................. 10
5. Representations and Warranties of the Buying Parties................... 17
6. Conditions Precedent to Obligations of the Buying Parties.............. 18
7. Conditions Precedent to Obligations of the Selling Parties. ........... 18
8. Payment of Tax Liabilities............................................. 18
9. Competition and Confidentiality by the Selling Parties................. 19
10. Additional Covenants................................................... 20
11. Indemnification. ...................................................... 21
12. Contents of Agreement, Amendment, Parties in Interest, Assignment, Etc. 23
13. Interpretation......................................................... 24
14. Notices................................................................ 24
15. Governing Law.......................................................... 25
16. Counterparts........................................................... 25
2
Schedules
---------
2.6 Assumed Liabilities
4.3 Required Consents
4.5 Encumbrances
4.6 Real Property
4.7 Fixed Asset Schedule
4.8 Leases
4.11 Liabilities
4.14 Litigation; Governmental Permits
4.15 Contracts
4.16 Insurance
4.20 Benefit Plans
4.22 Payments to Affiliates
3
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is made as of January 23, 1995 by and
among Dauphin Graphic Machines, Inc., a Pennsylvania corporation formed on the
date hereof (the "Buyer"), Pamarco Technologies Inc., a Delaware corporation
("Pamarco," and together with the Buyer, the "Buying Parties"), Ashcon, Inc.,
formerly known as Dauphin Graphic Machines, Inc. and a Pennsylvania corporation
(the "Seller"), and Xxxxxxxxxxx X. Xxxx, a Pennsylvania resident ("Xxxx," and
together with the Seller, the "Selling Parties"). Certain terms are used herein
as defined below in Section 1 or elsewhere in this Agreement.
Background
----------
The Seller and Pamarco are engaged in similar lines of business. Xxxx
and his wife, Xxxxx Xxx Xxxx (together referred to as the "Shareholders") own
all of the outstanding capital stock of the Seller. Pamarco owns all of the
outstanding capital stock of the Buyer and has formed the Buyer on the date
hereof for the purpose of entering into this Agreement. Subject to the terms and
conditions of this Agreement, on the date hereof, the Seller is selling to the
Buyer, and the Buyer is buying from the Seller, the Assets, subject to Buyer's
assumption of the Assumed Liabilities.
Witnesseth
----------
NOW, THEREFORE, in consideration of the respective covenants contained
herein and intending to be legally bound hereby, the parties hereto agree as
follows:
1. Definitions.
------------
For convenience, certain terms used in more than one part of this
Agreement are listed in alphabetical order and defined or referred to below
(such terms as well as any other terms defined elsewhere in this Agreement shall
be equally applicable to both the singular and plural forms of the terms
defined).
"1994 Distributions" is defined in Section 4.4(c).
"Affiliates" means, with respect to a particular party, persons or
entities controlling, controlled by or under common control with that party, as
well as any officers, directors and majority-owned entities of that party and of
its other Affiliates.
"Agreement" means this Agreement and the exhibits and schedules hereto.
"Assets" is defined in Section 2.1(a).
"Assigned Leases" is defined in Section 4.8.
"Assumed Liabilities" is defined in Section 2.6(a).
-1-
4
"Balance Sheet Date" is defined in Section 4.4.
"Benefit Plans" means all employee benefit plans of the Seller within
the meaning of Section 3(3) of ERISA and any related or separate Contracts,
plans, trusts, programs, policies, arrangements, practices, customs and
understandings, in each case whether formal or informal, that provide benefits
of economic value to any present or former employee of Seller, or present or
former beneficiary, dependent or assignee of any such employee or former
employee.
"Building Lease" means the Agreement of Lease, dated April 1, 1990,
among the Seller, as the tenant, and Xxxxxxxxx X. Xxxx and Xxxxxxxx Xxx Xxxx, as
the landlords.
"Building Lease Assignment" means the Assignment and Assumption
Agreement among the lessors under the Building Lease, the Seller and the Buyer,
dated the date hereof.
"Business" means the entire business, operations and facilities of the
Seller.
"Buyer" is defined above in the preamble.
"Buyer Paydown Amount" is defined in Section 2.2(d).
"Certain Seller Liabilities" is defined in Section 2.2(c).
"Charter Documents" means an entity's certificate or articles of
incorporation, articles of organization, general or limited partnership
agreement, certificate of limited partnership, joint venture agreement or
similar document governing the entity.
"Closing" means the closing on the Transactions.
"Closing Date" means the date on which the Closing is held.
"Closing Payments" is defined in Section 2.2(a).
"Contingent Purchase Price" is defined in Section 2.3(a).
"Contract" means any written or oral contract, agreement, lease,
instrument or other commitment that is binding on any person or its property
under applicable law.
"Court Order" means any judgment, decree, injunction, order or ruling
of any federal, state, local or foreign court or governmental or regulatory body
or authority that is binding on any person or its property under applicable law.
"Custom Software" means any computer software that has been developed
or designed for use in the Business.
-2-
5
"Customer Records" is defined in Section 2.1(a)(v).
"Default" means (a) a breach, default or violation, or (b) the
occurrence of an event that with the passage of time or the giving of notice, or
both, would constitute a breach, default or violation.
"Dispute Notice" is defined in Section 2.4(c).
"Earnings Period" is defined in Section 2.3(a).
"Encumbrances" means any lien, mortgage, security interest, pledge,
restriction on transferability, defect of title or other claim, charge or
encumbrance of any nature whatsoever on any property or property interest.
"Environmental Condition" is defined in Section 4.14(b).
"Environmental Law" is defined in Section 4.14(b).
"Environmental Liabilities" means any Liabilities arising from or
related to an Environmental Condition or a Default under an Environmental Law.
"Employment Agreements" means the Employment Agreements between the
Buyer and each of Xxxxx Xxxx, Xxxxxxx Xxxxxxx, Xxxxxx Xxxxxxxxxxxxx and Xxxx
Xxxxxx, all dated the date hereof.
"Employee Subscription Agreement" means the Employee Subscription
Agreement between Pamarco and Xxxx, dated as of the date hereof.
"ERISA" means the Employee Retirement Income Act of 1974, as amended.
"Escrow Agent" means First Fidelity Bank, N.A.
"Escrow Agreement" means the Escrow Agreement among the Seller, the
Buyer and the Escrow Agent, dated the date hereof.
"Escrow Funds" is defined in Section 2.2(b)(i).
"Excluded Assets" is defined in Section 2.1(b).
"Excluded Land" means the two parcels of real estate described on
SCHEDULE 4.6.
"Financial Statements" is defined in Section 4.4.
"GAAP" means generally accepted accounting principles.
-3-
6
"Governmental Permits" is defined in Section 4.14(c).
"Subordination and Pledge Agreement" means the Subordination and Pledge
Agreement among the Seller, Xxxx, the Buyer and First Fidelity Bank, N.A., dated
the date hereof.
"Liability" means any direct or indirect liability, indebtedness,
obligation, expense, claim, loss, damage, deficiency, guaranty or endorsement of
or by any person, absolute or contingent, accrued or unaccrued, due or to become
due, liquidated or unliquidated.
"Litigation" means any lawsuit, action, arbitration, administrative or
other proceeding, criminal prosecution or governmental investigation or inquiry.
"Minor Contracts" is defined in Section 4.15.
"Note Reduction" means a prepayment as part of the Contingent Purchase
Price of Xxxx'x obligation under the Note and Pledge Agreement delivered by Xxxx
in accordance with the Employee Subscription Agreement.
"Ordinary course" or "ordinary course of business" means the ordinary
course of business that is consistent with past practices.
"Person" means any natural person, corporation, partnership,
proprietorship, association, trust or other legal entity.
"Pre-Tax Income" is defined in Section 2.3.
"Purchase Price" is defined in Section 2.3(a).
"Regulation" means any statute, law, ordinance, regulation, order or
rule of any federal, state, local, foreign or other governmental agency or body
or of any other type of regulatory body, including those covering environmental,
energy, safety, health, transportation, bribery, recordkeeping, zoning,
antidiscrimination, antitrust, wage and hour, and price and wage control
matters.
"Required Consents" is defined in Section 4.3.
"Seller" is defined above in the preamble.
"Shareholders" is defined above in the Background section.
"Specialty Printing" means Specialty Printing, Inc., a Pennsylvania
corporation.
-4-
7
"Stock Option" means an option to purchase shares of Class A Common
Stock of Pamarco at an exercise price of $10 per share, which option is granted
under a Stock Option Agreement.
"Stock Option Agreement" means a Stock Option Agreement substantially
in the form of Exhibit "A" hereto.
"Subchapter S Income" is defined in Section 8.1.
"Subordinated Note" means the 6% Subordinated Note payable by the Buyer
to the Seller in the aggregate principal amount $1.0 million, dated the date
hereof.
"Transaction Documents" means this Agreement, the Building Lease
Assignment, the Employment Agreements, the Escrow Agreement, the Stock Option
Agreement, the Subordinated Note and the other agreements and documents
contemplated thereby.
"Transactions" means the sale of the Assets and the other transactions
contemplated by the Transaction Documents.
2. Sale and Purchase.
------------------
2.1 ASSIGNMENT OF ASSETS.
(a) At the Closing on the date hereof, the Seller is granting, selling,
conveying, assigning, transferring and delivering to the Buyer, and the Buyer is
purchasing from the Seller, all right, title and interest of the Seller in and
to all of the Assets, free and clear of all Encumbrances. The term "Assets"
means all assets, properties and rights of the Seller on the Closing Date of
every kind and description, real, personal and mixed, tangible and intangible,
wherever situated, excluding the Excluded Assets, but including the following:
(i) All cash and cash equivalents;
(ii) All accounts receivable and other receivables;
(iii) All inventory;
(iv) All furniture, fixtures, automobiles, leasehold
improvements, tooling, machinery and equipment;
(v) All customer records, including principal
contacts, address and telephone number, purchasing history,
payment information and any other information with respect to
the Seller's customers (the "Customer Records");
-5-
8
(vi) All records related to suppliers, employees and
other aspects of the Business;
(vii) All patents, patent applications, logos,
tradenames, including rights to the name "Dauphin Graphic
Machines, Inc.";
(viii) All manufacturing, warehouse and office
supplies;
(ix) All computer software (including documentation
and related object and source codes);
(x) All rights under the Building Lease, and any
easements, deposits or other rights pertaining thereto;
(xi) All rights under any Governmental Permits;
(x) Any capital stock or other interests in any
Person;
(xi) All rights related to any prepaid expenses; and
(xii) All rights under any insurance contracts.
(b) Notwithstanding the foregoing, the Assets do not include any of the
following (the "Excluded Assets"):
(i) shares of capital stock, notes receivable and any
other rights related to Specialty Printing; and
(ii) the Excluded Land.
2.2 PURCHASE PRICE.
(a) The total purchase price for the Assets (the "Purchase Price")
equals the sum of (i) $4,250,000 in cash, subject to reduction in accordance
with paragraph (c) below (the "Closing Payments"), (ii) the principal amount of
the Subordinated Note, (iii) the Buyer Paydown Amount, (iv) the Contingent
Purchase Price and (v) the Assumed Liabilities.
(b) The Buyer shall pay the Purchase Price to the Seller as set forth
below:
(i) At the Closing, the Buyer is paying by a wire
transfer of immediately available funds (A) $3,000,000 to the
Seller and (B) $750,000 to the Escrow Agent in accordance with
the Escrow Agreement (the "Escrow Funds").
-6-
9
(ii) At the Closing, the Seller has directed the
Buyer to pay a $500,000 portion of the Purchase Price to
Pamarco on behalf of Xxxx in order to pay a like portion of
Xxxx'x obligation under his Employee Subscription Agreement.
(iii) At the Closing, the Buyer is delivering to the
Seller the Subordinated Note.
(iv) At the Closing, the Buyer is assuming the
Assumed Liabilities as provided in Section 2.6.
(v) The Buyer shall pay the Seller the Contingent
Purchase Price to the extent that it shall be due under
Section 2.3.
(c) Notwithstanding the foregoing, the Purchase Price shall be reduced
to the extent that the aggregate balance of Certain Seller Liabilities (defined
below) as of the Closing Date is less than $1,344,915 excluding the Buyer
Paydown Amount of $112,500. The Buyer shall deduct any such deficiency from the
cash amount of $3,500,000 payable to the Seller at the Closing. The term
"Certain Seller Liabilities" means the following Liabilities of the Seller: (i)
the Line of Credit, dated March 6, 1989 and amended February 13, 1992, payable
to Community Banks, N. A. (the "Existing Lender") in the maximum amount of
$1,500,000 (the "Credit Line"); and (ii) the Promissory Note, dated February 25,
1994, in the amount of $840,000, payable to the Existing Lender and secured by
23 SSC press units and four SSC folders.
(d) At the Closing, the Buyer shall pay the Existing Lender $112,500 to
reduce the amount due under the Credit Line (the "Buyer Paydown Amount"), and
the Seller shall pay in full the remainder of the Credit Line and all other
obligations of the Seller to the Existing Lender.
2.3 CONTINGENT PURCHASE PRICE.
(a) The Buying Parties shall deliver the Contingent Purchase Price to
the Seller if the aggregate Pre-Tax Income of the Business during the period
beginning on January 1, 1995 and continuing for three years thereafter (referred
to herein as the "Earnings Period") shall be at least $3,400,000. The term
"Contingent Purchase Price" means the cash, Stock Options or Note Reduction
specified below in this paragraph (a). If the Pre-Tax Income of the Business is
at least $3,400,000 during the Earnings Period, the Buying Parties shall deliver
the Contingent Purchase Price specified below for the range of Pre-Tax Income
that shall be achieved for the Earnings Period:
-7-
10
PRE-TAX INCOME CASH NOTE REDUCTION TOTAL
-------------- ---- -------------- -----
$3,400,000 to $3,499,999 $250,000 $250,000 $500,000
$3,500,000 to $3,599,999 $333,000 $250,000 $583,000
$3,600,000 to $3,699,999 $406,000 $250,000 $656,000
$3,700,000 to $3,799,999 $500,000 $250,000 $750,000
$3,800,000 to $3,899,999 $583,000 $250,000 $833,000
$3,900,000 to $3,999,999 $666,000 $250,000 $916,000
$4,000,000 and greater $750,000 $250,000 $1,000,000
PRE-TAX INCOME STOCK OPTIONS
-------------- -------------
$4,000,000 to $4,099,999 6,250
$4,100,000 to $4,199,999 12,500
$4,200,000 to $4,299,999 18,750
$4,300,000 and greater 25,000
(b) The Buyer shall calculate and cause its independent accountants to
report on the Pre- Tax Income of the Business (each an "Income Determination")
within 90 days after each of the following dates: (i) December 31, 1995;
December 31, 1996; and December 31, 1997. Within 20 days after completion of
each Income Determination, the Buyer shall give the Seller notice (the "Income
Notice") of the results of the Income Determination together with access to all
work papers and all other supporting accounting documents.
(c) The Seller may dispute any Income Determination in the following
manner. Within 30 days after the Buyer gives the Income Notice, the Seller shall
give the Buyer notice of its disagreement with the Income Determination (the
"Dispute Notice"), and such notice shall specify in detail the nature of the
disagreement. During the 20 days after the day on which the Dispute Notice is
given, the Seller and the Buyer shall attempt to resolve such dispute. If they
fail to reach a written agreement regarding the dispute, the Seller shall refer
the matter to a firm of certified independent accountants (the "Second Firm")
that is different from the firm that initially prepared the Income
Determination, and cause the Second Firm to also determine the Pre-Tax Income of
the Business for the Earnings Period (the "Second Income Determination") within
the 60 days after such 20-day period. The Seller shall give the Buyer prompt
notice of the results of the Second Income Determination. The average of the
Income Determination prepared by the first firm of accountants (the "First
Income Determination") and of the Second Income Determination shall be the final
and binding Income Determination for the purposes of determining whether the
Buyer shall be obligated to pay the Seller any Contingent Purchase Price. The
Buyer shall deliver any Contingent Purchase
-8-
11
Price due to the Seller in four equal installments on June 1 of 1998, and on
March 31 of 1999, 2000 and 2001; any cash portion of the Contingent Purchase
Price shall be paid by a wire transfer of immediately available funds and shall
be subject to the terms of the Subordination and Pledge Agreement. The Seller
shall pay the fees and expenses of the Second Firm with respect to the Second
Income Determination.
(d) "Pre-Tax Income" means income determined in accordance with GAAP
applied on a consistent basis without taking into account any of the following
items: (i) deductions or accruals for any Federal, state or local income taxes;
(ii) net operating loss carryforwards or carrybacks; (iii) any interest expense
related to the Buyer's being obligated for a term loan in an amount over
$1,000,000; (iv) any increase in depreciation expense over the amount reflected
in the Financial Statements for the year ended December 31, 1994 to the extent
that any such increase shall result from using the purchase method of accounting
with respect to the sale of the Assets hereunder; (v) any management, consulting
or similar fees paid to Pamarco, Bradford Ventures, Ltd. or any of their
respective Affiliates, successors or assigns; (vi) any interest expense incurred
by Buyer with respect to any debts or liabilities that result from Buyer's
acquisition of another business by means of a merger, a purchase or otherwise;
(vii) any income or loss resulting from any such acquired business; (viii) any
change in GAAP in comparison to those in effect on January 23, 1995; and (ix)
any items that would be considered extraordinary items under GAAP.
2.4 ESCROW ACCOUNT. At the Closing, the Seller and the Buyer are
entering into the Escrow Agreement with the Escrow Agent under which the Escrow
Agent shall hold the Escrow Funds for possible claims against the Seller under
Section 11.
2.5 ALLOCATION OF THE PURCHASE PRICE. The Purchase Price shall be
allocated among the Assets pursuant to the valuation study to be performed by
the Buyer within 30 days after the Closing. Such allocation shall be in
accordance with applicable requirements of the Code and the Regulations adopted
thereunder. Neither Seller nor Buyer will take a position on any income tax
return, before any governmental agency charged with the collection of any income
tax, or in any judicial proceeding that is in any way inconsistent with such
allocation.
2.6 ASSUMPTION OF LIABILITIES.
(a) As of the Closing, the Buyer shall assume, and pay, discharge or
perform, as appropriate, only the Liabilities of the Seller specifically
identified on SCHEDULE 2.6 hereto (the "Assumed Liabilities").
(b) Notwithstanding paragraph (a) above or any other provision of this
Agreement, the Buyer is not assuming under this Agreement or any other
Transaction Documents as of the Closing or at any time any of the following: (i)
Liabilities arising out of any breach by the Seller of any provision of any
Contract; (ii) any product liability or similar claim for injury to any person
or property, regardless of when made or asserted, that arises out of or is based
upon any express or implied representation, warranty, agreement or guarantee
made by the Seller, or alleged to have been
-9-
12
made by the Seller, or which is imposed or asserted to be imposed by operation
of law, in connection with any service performed or product sold or leased by or
on behalf of the Seller on or prior to the Closing; (iii) subject to the
tax-reimbursement obligations under Section 10, any Federal, state or local
income or other tax payable with respect to the Business, the Assets, or other
properties or operations of the Seller or any member of any affiliated group of
which the Seller is a member for any period prior to the Closing Date, except to
the extent that such taxes are included in the taxes specified in subparagraph
(a)(i) of this Section 2.6; (iv) any Liabilities under or in connection with any
Excluded Assets; (v) any Liabilities arising prior to or as a result of the
Closing to any employees, agents or independent contractors of the Seller,
whether or not employed by the Buyer after the Closing, or under any benefit
plan or arrangement with respect thereto; (vi) any Liabilities of the Seller
arising or incurred in connection with the negotiation, execution and
performance of this Agreement and the Transactions; (vii) any Environmental
Liabilities arising from or related to circumstances existing on or before the
Closing Date.
3. Closing.
--------
The Closing is taking place at the offices of Xxxxx, Danzig, Scherer,
Xxxxxx & Xxxxxxxx, counsel to First Fidelity Bank, N.A., in Morristown, New
Jersey, on January 23, 1995. At the Closing, subject to the terms and conditions
contained herein:
(a) The Seller is delivering to the Buyer a xxxx of sale and
such other instruments and documents of conveyance and transfer as are
necessary and effective, in the judgment of counsel to the Buying
Parties, to transfer and assign to, and vest in, the Buyer all of the
Seller's right, title and interest in and to the Assets, and
simultaneously with such delivery, all such steps are being taken as
may be required to put the Buyer in actual possession and operating
control of the Assets;
(b) The Buyer is delivering the Closing Payments to the Seller
and the Escrow Agent; and
(c) The Selling Parties and the Buying Parties are delivering
or causing to be delivered the documents required to satisfy the
conditions specified in Sections 8 and 9, respectively.
4. Representations and Warranties of the Selling Parties.
------------------------------------------------------
The Selling Parties hereby, jointly and severally, represent and
warrant to the Buying Parties as follows:
4.1 CORPORATE STATUS AND OWNERSHIP. The Seller is a corporation duly
organized, validly existing and in good standing under the laws under which it
was incorporated. The Seller is not required to qualify to do business as a
foreign corporation in any jurisdiction except where the failure to so qualify
would not have a material adverse effect on the Business. The Seller was duly
-10-
13
authorized to conduct business under the name "Dauphin Graphic Machines, Inc."
and has taken all actions that are necessary to change its name to Ashcon, Inc.
Xxxx owns a majority, and the Shareholders own all, of the issued and
outstanding shares of capital stock of the Seller.
4.2 AUTHORIZATION. The Seller has the requisite power and authority to
execute and deliver the Transaction Documents to which it is a party and to
perform the Transactions to be performed by it. Such execution, delivery and
performance have been duly authorized by all necessary corporate action,
including approval by the Shareholders as the sole shareholders of the Seller.
The Transaction Documents have been duly executed and delivered by, and
constitute valid and binding obligations of, each Selling Party that is a party
thereto, enforceable against each such party in accordance with their terms.
4.3 CONSENTS AND APPROVALS. Except for the consents specified on
SCHEDULE 4.3 (the "Required Consents"), neither the execution and delivery by
any Selling Party of the Transaction Documents to which it is a party, nor the
performance of the Transactions by any Selling Party, require any filing,
consent or approval or constitute a Default under (a) any Regulation or Court
Order to which any Selling Party is subject, (b) the Charter Documents or bylaws
of the Seller or (c) any Contract, Government Permit or other document to which
any Selling Party is a party or by which the properties or other assets of any
Selling Party may be subject. All Required Consents have been obtained and are
enforceable against the respective parties that have delivered them.
4.4 FINANCIAL STATEMENTS.
(a) The Seller has delivered to the Buyer correct and complete copies
of the Seller's unaudited monthly financial statements consisting of a balance
sheet of the Seller as of the end of each month from July 1994 through December
31, 1994 and the related statements of income, retained earnings and cash flows
for the periods then ended. The Seller has also delivered to the Buyer correct
and complete copies of financial statements consisting of a balance sheet of the
Seller as of June 30, 1993 and 1994 and as of December 31, 1992 and 1993 and the
related statements of income, retained earnings and cash flows for the periods
then ended, all of which have been reviewed by the firm of Xxxxxx & Xxxxxx, P.C.
In addition, the Seller has delivered to the Buyer a balance sheet of the Seller
as of the Closing Date. All such financial statements specified in this Section
4.4 are referred to herein collectively as the "Financial Statements."
(b) The Financial Statements are consistent with the books and records
of the Seller, and there have not been any material transactions that have not
been or will not be recorded in the accounting records underlying such Financial
Statements. In addition, except with respect to inventory, the Financial
Statements have been prepared in accordance with GAAP consistently applied and
present accurately the financial position and assets and liabilities of Seller
as of the respective dates thereof, and the results of its operations for the
respective periods then ended, subject in the case of interim statements to
customary year-end adjustments. The balance sheet of the Seller as of December
30, 1994 is referred to herein as the "December Balance Sheet," and the date
thereof is referred to as the "Balance Sheet Date."
-11-
14
(c) The total amount of income distributed to the Shareholders for the
year ended December 31, 1994 in their role as the sole shareholders of the
Seller is $633,238.35 (the "1994 Distributions").
4.5 TITLE TO ASSETS AND RELATED MATTERS. The Seller has good and
marketable title to all of the Assets, and upon execution and delivery of the
Transaction Documents, the Buyer is acquiring good and marketable title to all
of the Assets, in both cases free from any Encumbrances except those specified
on SCHEDULE 4.5. The use of the Assets is not subject to any Encumbrances.
4.6 REAL PROPERTY. Except for the Excluded Land, which is described on
SCHEDULE 4.6, and the real estate that is the subject of the Building Lease, the
Seller has not owned or used any real property.
4.7 CERTAIN PERSONAL PROPERTY. SCHEDULE 4.7 is a complete fixed asset
schedule, describing and specifying the location of all items of tangible
personal property that were included in the December Balance Sheet at a carrying
value of at least $10,000. All of such personal property is in good operating
condition, except for reasonable wear and tear and such defects as would not, in
the aggregate, have a material adverse effect on the Business or the Assets.
4.8 ASSIGNED LEASES. SCHEDULE 4.8 lists any property, including any
real property, that is possessed by the Seller under an existing lease,
including all trucks, automobiles, forklifts, machinery, equipment, furniture
and computers. SCHEDULE 4.8 also lists the leases under which such assets and
property are possessed. All of such leases, including the Building Lease, are
referred to herein as the "Assigned Leases." To the knowledge of any Selling
Party, the Seller is not currently in Default under any of the Assigned Leases,
and neither of the Selling Parties is aware of any Default by any of the lessors
thereunder. The Building Lease Assignment is enforceable against the lessors
under the Building Lease.
4.9 ACCOUNTS RECEIVABLE. The accounts receivable of the Seller are bona
fide accounts receivable created in the ordinary course of business and are good
and collectible at the aggregate recorded amounts thereof (a) subject to
reduction for bad debts in accordance with the Seller's operating history and
(b) within periods of time normally prevailing in the Seller's Business.
4.10 INVENTORY. All inventory of the Seller consists of items of
quality and quantity saleable in the ordinary course of business at the Seller's
regular sales prices in the ordinary course of its business. The inventory
records for the Seller that have been delivered to Buyer are accurate with
respect to the data contained therein.
4.11 LIABILITIES. Except as specified on SCHEDULE 4.11, the Seller does
not have any Liabilities, and the Assets are not subject to any Liabilities,
except (a) to the extent specifically disclosed on the December Balance Sheet,
(b) Liabilities incurred since the date thereof that, individually or in the
aggregate, are not material to the Business or the Assets, and (c) Liabilities
-12-
15
under any Contracts specifically disclosed on any Schedule to this Agreement
that were not required under GAAP to have been specifically disclosed or
reserved for on the December Balance Sheet.
4.12 TAXES. The Seller has duly filed all foreign, federal, state,
local and other tax returns that are required to be filed and that were due
prior to the Closing Date, and has paid all material taxes and assessments that
have become due pursuant to such returns or pursuant to any assessment received.
All taxes and other assessments and levies that the Seller is required by law to
withhold or to collect have been duly withheld and collected and have been paid
over to the proper gov ernmental authorities or are properly held by the Seller
for such payment. There are no proceedings or other actions, nor to any Selling
Party's knowledge is there any basis for any proceedings or other actions, for
the assessment and collection of material additional taxes of any kind for any
period for which returns have or should have been filed.
4.13 SUBSIDIARIES. Except for shares of capital stock of and notes
receivable from Specialty Printing, the Seller does not own, directly or
indirectly, any interest or investment (whether equity or debt) in any
corporation, partnership, business, trust, joint venture or other legal entity.
4.14 LEGAL PROCEEDINGS AND COMPLIANCE WITH LAW.
(a) There is no Litigation that is pending or, to any Selling Party's
knowledge, threatened against or related to the Seller, the Business or the
Assets. There has been no Default under any Regulations applicable to the Seller
with respect to the Assets or the Business, including Regulations relating to
pollution or protection of the environment, except for any Defaults that, in the
aggregate, are not material to the Business or the Assets. There has been no
Default with respect to any Court Order applicable to the Seller with respect to
the Business or the Assets.
(b) Without limiting the generality of Section 4.14(a), there has not
been any Environmental Condition (defined below) at or relating to the premises
at which the Business has been conducted, or at or relating to any property
owned, leased or operated by the Seller or any Affiliate of Seller (or any
predecessor thereof) at any time, or at or relating to any property at which
wastes have been deposited or disposed by or at the behest or direction of the
Seller or any Affiliate of the Seller, nor has the Seller or any Affiliate of
the Seller received written notice of any such Environmental Condition.
"Environmental Condition" means any condition or circumstance, whether created
by the Seller, any Affiliate of the Seller or any third party, at or relating to
any such property or premises that is reasonably likely to (i) require abatement
or correction under an Environmental Law (defined below), (ii) give rise to any
civil or criminal liability under an Environmental Law, or (iii) create a public
or private nuisance, including the presence or release of asbestos, PCBs,
hazardous substances, radioactive waste or radon in amounts that would require
any such abatement or correction described in clause (i), give rise to any such
civil or criminal penalty described in clause (ii) or create any such public or
private nuisance specified in clause (iii). "Environmental Law" means all
currently effective Regulations and currently effective Court Orders relating to
pollution or protection of the environment as well as any currently effective
principles
-13-
16
of common law under which a party may be held liable for the release or
discharge of any materials into the environment.
(c) The Seller has obtained and is in full compliance with all
governmental permits, licenses, registrations, certificates of occupancy,
approvals and other authorizations (the "Governmental Permits"), all of which
are listed in SCHEDULE 4.14 along with their respective expiration dates, that
are required for the complete operation of the Business as currently operated.
All of the Governmental Permits are currently valid and in full force, and, to
any Selling Party's knowledge, no revocation, cancellation or withdrawal thereof
has been threatened. The Seller has filed such timely and complete renewal
applications as may be required with respect to its Governmental Permits.
4.15 CONTRACTS.
(a) SCHEDULE 4.15 lists each Contract of the following types to which
the Seller is a party, or by which it is bound, except for any Contract that may
be terminated by the Seller on not more than 30 days' notice without any
Liability and any Contract under which the executory obligation of the Seller
involves an amount of less than $10,000 (such excepted Contracts are referred to
collectively as "Minor Contracts"):
(i) Contracts with any present or former stockholder,
director, officer, employee, partner or consultant of any
Selling Party or Affiliate thereof;
(ii) Contracts for the future purchase of, or payment
for, supplies or products, or for the lease of any Asset from
or the performance of services by a third party, in excess of
$25,000 in any individual case, or any Contracts for the sale
of inventory or products that involve an amount in excess of
$25,000 with respect to any one supplier or other party;
(iii) Contracts to sell or supply products or to
perform services that involve an amount in excess of $25,000
in any individual case;
(iv) Contracts to lease to or to operate for any
other party any Asset that involve an amount in excess of
$25,000 in any individual case;
(v) Any notes, debentures, bonds, conditional sale
agreements, equipment trust agreements, letter of credit
agreements, reimbursement agreements, loan agreements or other
Contracts for the borrowing or lending of money (including
loans to or from officers, directors, partners, stockholders
or Affiliates of any Selling Party or any members of their
immediate families), agreements or arrangements for a line of
credit or for a
-14-
17
guarantee of, or other undertaking in connection with, the
indebtedness of any other person or entity;
(vi) Any Contracts under which any Encumbrances exist
with respect to any Assets; and
(vii) Any other Contracts (other than Minor Contracts
and those described in any of (i) through (vi) above) not made
in the ordinary course of business.
(b) To any Selling Party's knowledge, the Seller is not in Default
under any Contract, which Default could result in a Liability on the part of the
Seller in excess of $20,000 in any individual case, and the aggregate
Liabilities that could result from all such Defaults do not exceed $50,000. The
Seller has not received any communication from, or given any communication to,
any other party indicating that the Seller or such other party, as the case may
be, is in Default under any Contract where such Default could have a material
adverse effect on the Business.
4.16 INSURANCE. SCHEDULE 4.16 lists all policies or binders of
insurance held by or on behalf of the Seller or relating to the Business or any
of its Assets, specifying with respect to each policy the insurer, the amount of
the coverage, the type of insurance, the risks insured, the expiration date, the
policy number and any pending claims thereunder. To any Selling Party's
knowledge, there is no Default with respect to any such policy or binder, nor
has there been any failure to give any notice or present any claim under any
such policy or binder in a timely fashion or in the manner or detail required by
the policy or binder, except for any of the foregoing that would not,
individually or in the aggregate, have a material adverse effect on the
Business. There is no notice of nonrenewal or cancellation with respect to, or
disallowance of any claim under, any such policy or binder that has been
received by the Seller, except for any of the foregoing that would not,
individually or in the aggregate, have a material adverse effect on the Business
or the Assets.
4.17 PATENTS AND OTHER INTELLECTUAL PROPERTY. The Business as
previously and currently operated did not and does not utilize any patent,
trademark, tradename, service xxxx, copyright, Custom Software, trade secret or
know-how. To any Selling Party's knowledge, the Seller does not infringe upon or
unlawfully or wrongfully use any patent, trademark, tradename, service xxxx,
copyright or trade secret owned or claimed by another.
4.18 COMPUTER SOFTWARE. Any Custom Software included in the Assets,
together with all know-how and processes used in connection therewith, functions
as intended, is in machine-readable form, and includes all computer programs,
materials, tapes, know-how, object and source codes and procedures used by the
Seller in the Business.
4.19 EMPLOYEE RELATIONS. The Seller is not (a) a party to, involved in
or, to any Selling Party's knowledge, threatened by, any labor dispute or unfair
labor practice charge, or (b) currently negotiating any collective bargaining
agreement, and the Seller has not experienced any work
-15-
18
stoppage during the last three years. The Seller has delivered to the Buyer a
complete and correct list of the names and salaries, bonus and other cash
compensation of all employees (including officers) of the Seller.
4.20 ERISA. SCHEDULE 4.20 contains a complete list of all Benefit Plans
sponsored or maintained by the Seller or under which the Seller may be
obligated. For purposes of this Section 4.20, the term "Seller" shall include
any corporation that is a member of any controlled group of corporations (as
defined in Section 414(b) of the Internal Revenue Code of 1986, as amended, the
"Code") that includes the Seller, any trade or business (whether or not
incorporated) that is under common control (as defined in Section 414(c) of the
Code) with the Seller, any organization (whether or not incorporated) that is a
member of an affiliated service group (as defined in Section 414(m) of the Code)
that includes the Seller and any other entity required to be aggregated with the
Seller pursuant to the regulations issued under Section 414(o) of the Code.
4.21 CORPORATE RECORDS. The minute books of the Seller contain
complete, correct and current copies of its Charter Documents and bylaws and of
all minutes of meetings, resolutions and other proceedings of its Board of
Directors and shareholders. The stock record book of the Seller is complete,
correct and current.
4.22 ABSENCE OF CERTAIN CHANGES. Since the Balance Sheet Date, the
Seller has conducted the Business in the ordinary course and there has not been
with respect to the Seller:
(a) any material adverse change in the Business, the
Assets or the Seller's Liabilities;
(b) any distribution or payment declared or made in
respect of its capital stock by way of dividends, purchase or
redemption of shares or otherwise;
(c) any increase in the compensation payable or to
become payable to any director, officer, employee or agent,
except for merit and seniority increases for non-officer
employees made in the ordinary course of business, nor any
other change in any employment or consulting arrangement;
(d) any sale, assignment or transfer of Assets, or
any additions to or transactions involving any Assets, other
than those made in the ordinary course of business;
(e) other than in the ordinary course of business,
any waiver or release of any claim or right or cancellation of
any debt held; or
-16-
19
(f) any payments to any Affiliate of the Seller,
except as specified in SCHEDULE 4.22.
4.23 ASSETS. The Assets include all rights and property that are
necessary to the conduct of the Business by the Buyer in the manner in which it
is currently conducted by the Seller.
4.24 PREVIOUS SALES; WARRANTIES. All goods sold or distributed by the
Seller were of merchantable quality, and the Seller has not breached any express
or implied warranties in connection with the sale or distribution of such goods
or in connection with the performance of any services, except for breaches that
would not adversely affect the Buyer after the Closing. The Seller has provided
the Buyer with true and correct copies of all warranties (a) made by all Persons
from whom the Seller has obtained any goods that have been resold or distributed
by the Seller, including any goods that constituted parts included in other
goods sold or distributed by the Seller, and (b) made by the Seller with respect
to any goods that have been sold or distributed by the Seller or services
performed by the Seller.
4.25 DISTRIBUTORS, CUSTOMERS OR SUPPLIERS. No Selling Party is aware
that any major distributor, customer or supplier intends to cease doing business
with the Seller or, after the Closing, with the Buyer or to alter materially the
amount of business done with the Seller or the Buyer due to consummation of the
Transactions or any other reason. To any Selling Party's knowledge, the Customer
Records are accurate in all material respects.
4.26 FINDER'S FEES. Except for Xxxxxx Business Services, Inc., no
Person retained by any Selling Party is or will be entitled to any commission or
finder's or similar fee in connection with the Transactions.
4.27 ACCURACY OF INFORMATION. No representation or warranty by any
Selling Party in any Transaction Document, and no information contained therein
or otherwise delivered to the Buyer or in connection with the Transactions,
including the Financial Statements and the due diligence questionnaire completed
and given to the Buying Parties, contains any untrue statement of a material
fact or omits to state any material fact necessary in order to make the
statements contained herein or therein not misleading.
5. Representations and Warranties of the Buying Parties.
The Buying Parties hereby, jointly and severally, represent and warrant
to the Selling Parties as follows:
5.1 CORPORATE. Each Buying Party is a corporation duly organized,
validly existing and in good standing under the laws under which it was
incorporated.
5.2 AUTHORIZATION. Each Buying Party has the requisite power and
authority to execute and deliver the Transaction Documents to which it is a
party and to perform the Transactions to be
-17-
20
performed by it. Such execution, delivery and performance have been duly
authorized by all necessary corporate action. The Transaction Documents have
been duly executed and delivered by, and constitute valid and binding
obligations of, each Buying Party that is a party thereto, enforceable against
each such Buying Party in accordance with their terms.
5.3 CONSENTS AND APPROVALS. Neither the execution and delivery by any
Buying Party of the Transaction Documents to which it is a party, nor the
performance of the Transactions by any Buying Party, require any filing, consent
or approval or constitute a Default under (a) any Regulation or Court Order to
which any Buying Party is subject, (b) the Charter Documents or bylaws of any
Buying Party or (c) any Contract, Government Permit or other document to which
any Buying Party is a party or by which the properties or other assets of any
Buying Party may be subject.
5.4 FINDER'S FEES. No Person retained by any Buying Party is or will be
entitled to any commission or finder's or similar fee in connection with the
Transactions.
5.5 ACCURACY OF INFORMATION. No representation or warranty by any
Buying Party in any Transaction Document, and no information contained therein
or otherwise delivered to the Seller or in connection with the Transactions,
contains any untrue statement of a material fact or omits to state any material
fact necessary in order to make the statements contained herein or therein not
misleading.
6. Conditions Precedent to Obligations of the Buying Parties.
----------------------------------------------------------
All obligations of the Buying Parties to consummate the Transactions at
the Closing are subject to the fulfillment (or waiver) of each of the following
conditions:
6.1 ENCUMBRANCES. The Encumbrances set forth on SCHEDULE 4.5 have been
removed, except for the Encumbrance related to the Equipment Note.
6.2 ANCILLARY DOCUMENTS. All parties to the following agreements have
executed and delivered the following documents: the Building Lease Assignment,
the Escrow Agreement, the Employment Agreements and the Employee Subscription
Agreement.
6.3 LEGAL OPINION. The Buying Parties have received the legal opinion
of Xxxxxx & Xxxxxx, counsel to the Selling Parties.
6.4 RELEASE. The Buying Parties have received a copy of Xxxxxx Business
Services, Inc.'s release of the Selling Parties with respect to the
Transactions.
7. Conditions Precedent to Obligations of the Selling Parties.
-----------------------------------------------------------
All obligations of the Selling Parties to consummate the Transactions
at the Closing are subject to the fulfillment (or waiver) of each of the
following conditions:
-18-
21
7.1 ANCILLARY DOCUMENTS. All parties to the following agreements have
executed and delivered the following agreements: the Building Lease Assignment,
the Escrow Agreement, the Employment Agreements and the Employee Subscription
Agreement.
7.2 LEGAL OPINION. The Selling Parties have received the legal opinion
of Xxxxxx, Xxxxx & Xxxxxxx, counsel to the Buying Parties.
8. Payment of Tax Liabilities.
---------------------------
8.1 SUBCHAPTER S INCOME. For the purposes of this Agreement,
"Subchapter S Income" means the income of the Seller that is required to be
included in the income of the Shareholders under the "pass through" rules for
"S" corporations under Section 1366 of the Code, less the 1994 Distributions.
8.2 1994 TAX LIABILITIES. Notwithstanding any other provision of this
Agreement, the Buyer shall pay to the Shareholders not later than April 1, 1995
an amount equal to their respective liabilities up to $285,000 for federal and
state income taxes (other than any interest or penalties) with respect to the
Subchapter S Income for the fiscal year ended December 31, 1994.
8.3 1995 TAX LIABILITIES. Following the Closing, the Seller will cause
the Seller's accountants to prepare compiled financial statements for the Seller
in accordance with generally accepted accounting principles for the period from
January 1, 1995 through the Closing Date (the "1995 Interim Period"). Such
accountants shall also compute the Subchapter S Income for the Interim Period,
and the Shareholders' respective liabilities for federal and state income taxes
(other than any interest or penalties) with respect to the Seller's operations
during the Interim Period but excluding any tax liabilities with respect to the
sale of the Assets and the other Transactions contemplated by the Transaction
Documents (the "1995 Tax Liabilities"). The Seller shall provide the Buyer with
whatever documents the Buyer may reasonably request in order to verify the
foregoing calculations. The Buyer shall pay to the Shareholders on April 1, 1995
an amount equal to the 1995 Tax Liabilities of the Shareholders.
8.4 TAX REIMBURSEMENT. The Buyer shall pay to the Shareholders any
additional federal or state income taxes for the Buyer's operations during the
1995 Interim Period that must be paid by them pursuant to a determination of the
appropriate governmental taxing authority. The foregoing obligation shall not
extend to any interest and penalties that may be due in connection with any such
additional taxes.
9. Competition and Confidentiality by the Selling Parties.
-------------------------------------------------------
9.1 RESTRICTED PERIOD. None of the Selling Parties shall, at any time
within the Restricted Period (defined below), directly or indirectly, engage in,
or have any interest on behalf of itself or others in any person, firm,
corporation or business (whether as an employee, officer, director, agent,
security holder, creditor, partner, joint venturer, beneficiary under a trust,
investor, consultant or
-19-
22
otherwise) that engages within the Restricted Territory in any of the business
activities in which the Seller has at any time been engaged, including the
refurbishing and remanufacturing of printing presses and the manufacturing and
sale of replacement parts for printing presses. The "Restricted Period" means
(a) with respect to the Seller, the three-year period immediately following the
Closing Date, and (b) with respect to Xxxx, the longer of (i) the three-year
period immediately following the Closing Date or (ii) the period during which
Xxxx shall be employed by the Buyer or an Affiliate of the Buyer plus (A) an
additional two years if Xxxx resigns from such employment or (B) an additional
one year if the Buyer or such an Affiliate terminates such employment. The
"Restricted Territory" means the area comprising the entire United States of
America, Canada and those other areas of the world in which the Seller has
engaged in business at any time within the two years prior to the Closing Date.
9.2 CONFIDENTIAL INFORMATION. Prior to the Closing and indefinitely
thereafter, none of the Selling Parties shall divulge, communicate or use in any
way, any confidential information or trade secrets of the Business, including
personnel information, know-how and other technical information, customer lists,
customer information and supplier information (the "Confidential Information").
9.3 AFFILIATES. The terms of this Section 10 shall apply to each
Selling Party and any of its Affiliates to the same extent as if they were
parties hereto, and each Selling Party shall take whatever actions may be
necessary to cause its Affiliates to adhere to the terms of this Section 10.
9.4 INJUNCTIVE RELIEF. In the event of any breach or threatened breach
by any Selling Party or any Affiliate thereof of any provision of this Section
10, the Buyer shall be entitled to injunctive or other equitable relief,
restraining such party from using or disclosing any Confidential Information in
whole or in part, or from engaging in conduct that would constitute a breach of
the obligations of such party under this Section 10. Such relief shall be in
addition to and not in lieu of any other remedies that may be available,
including an action for the recovery of damages. In the event of litigation
involving this Agreement, if a court of competent jurisdiction determines that
the scope of this Section 10 is too broad in any respect, then the scope shall
be deemed to be reduced or narrowed to such scope as is found lawful and
reasonable by such court. Each Selling Party acknowledges, however, that this
Section 10 has been negotiated by the parties and that the geographical and time
limitations, as well as the limitation on activities, are reasonable in light of
the circumstances pertaining to the Business.
10. Additional Covenants.
---------------------
10.1 POST-CLOSING RECEIPTS. The Seller and the Buyer each will hold and
will promptly transfer and deliver to the other, from time to time as and when
received by them, any cash, checks with appropriate endorsements or other
property that they may receive on or after the Closing that properly belongs to
the other party under the terms of this Agreement, and will account to the other
for all such receipts.
-20-
23
10.2 TRANSFER TAXES. The Seller and the Buyer shall each pay at the
Closing one-half of all state and local sales, documentary and other transfer
taxes, if any, due as a result of the purchase, sale or transfer of the Assets
hereunder.
10.3 BULK SALES. The Buyer hereby waives the Seller's compliance with
any bulk sales laws that may apply to the Transactions, including with respect
to taxes, but the Selling Parties hereby jointly and severally indemnify the
Buyer against any Damages that the Buyer may incur that it would not have
incurred if the Seller had complied with any such bulk sales laws.
10.4 LIQUIDATION. To the extent that the Seller shall effect any
partial or total liquidation after the Closing, the Seller shall require as part
of the plan of such liquidation that the direct and indirect recipient of any
assets distributed in such liquidation shall be responsible for any obligations
of the Seller under this Agreement to the extent of any assets so distributed.
Xxxx shall take such actions as are necessary to cause the Seller to impose such
obligation on any recipient of any such distributed assets of the Seller,
including himself if he is a recipients, and shall give the Buyer prompt notice
of any such distribution.
10.5 SATISFACTION OF LIABILITIES. After the Closing, the Selling
Parties shall take whatever actions are necessary to pay, discharge or perform,
as appropriate, all Liabilities of the Seller that are not Assumed Liabilities.
In particular, the Selling Parties shall pay and discharge any Liabilities that
may be due to Xxxxxx Business Services, Inc. with respect to the Transactions.
10.6 CONFIDENTIALITY. If the Transactions are not consummated, each
party shall treat all information obtained in its investigation of another party
or any Affiliate thereof, and not otherwise known to them or already in the
public domain, as confidential and shall return to such other party or Affiliate
all copies made by it or its representatives of confidential information
provided by such other party or Affiliate.
10.7 PAYMENT OF EXPENSES OF SELLING PARTIES. Xxxx shall pay any
obligations of the Selling Parties that may be due with respect to the
Transactions.
10.8 PAYMENT OF EXPENSES OF BUYING PARTIES. The Buying Parties shall
pay all obligations of the Buying Parties that may be due to legal counsel for
the Buying Parties with respect to the Transactions.
10.9 INSURANCE. The Buying Parties shall maintain after the Closing
Date products liability insurance for an amount of coverage that is equal to the
highest aggregate amount of coverage maintained by the Seller at any time during
the one year prior to the Closing Date. The Buying Parties shall maintain such
insurance until the later of (a) the latest date when all statutes of
limitations expire for products liability claims with respect to any products or
services sold or provided by the Seller prior to the Closing Date, or (b) the
date when all pending products liability claims that may be covered, at least in
part, by such insurance have been finally resolved.
-21-
24
11. Indemnification.
----------------
11.1 BY SELLING PARTIES. From and after the Closing Date, to the extent
provided in this Section 11, the Selling Parties shall, jointly and severally,
indemnify and hold harmless the Buying Parties from and against any liabilities,
claims, demands, judgments, losses, costs, damages or expenses whatsoever
(including attorneys', consultants' and other professional fees and
disbursements of every kind, nature and description incurred by them in
connection therewith) (collectively, "Damages") that any Buying Party may
sustain, suffer or incur and that result from, arise out of or relate to (a) any
breach of any representation, warranty, covenant or agreement of any Selling
Party contained in any Transaction Document; (b) any injuries to persons,
property or business by reason of defectiveness, improper design or manufacture
or malfunction, or otherwise, of any product sold or services provided by any
Selling Party, whether known or unknown, currently asserted or arising
hereafter, if such claims are based upon or arise out of products sold or
services performed on or prior to the Closing Date; (c) any Environmental
Conditions existing on or prior to the Closing; or (d) any Liabilities of the
Seller, whether arising before, on or after the Closing, that are not assumed by
Buyer hereunder ("Unassumed Liabilities"). For the purposes of this Agreement,
Pamarco shall be deemed to have suffered any Damages that are suffered by the
Buyer so that Pamarco shall be entitled to claim recovery to the same extent
that the Buyer would be entitled to claim recovery, but the Buyer's right to
claim recovery shall be reduced by the amount for which Pamarco claims recovery
in order to avoid duplication.
11.2 BY BUYING PARTIES. From and after the Closing Date, to the extent
provided in this Section 11, the Buying Parties shall, jointly and severally,
indemnify and hold harmless the Selling Parties from and against any Damages
that any Selling Party may sustain, suffer or incur and that result from, arise
out of or relate to (a) any breach of any representation, warranty, covenant or
agreement of any Buying Party contained in this Agreement; (b) any injuries to
persons, property or business by reason of defectiveness, improper design or
manufacture or malfunction, or otherwise, of any product sold or services
provided by any Buying Party, whether known or unknown, currently asserted or
arising hereafter, if such claims are based upon or arise out of products sold
or services performed after the Closing Date but only to the extent that the
Buying Parties would not be entitled to seek indemnification under Section 11.1
with respect to any such claims; (c) any Environmental Conditions existing after
the Closing that were not existing on or prior to the Closing Date; or (d) the
Assumed Liabilities. For the purposes of this Agreement, Xxxx shall be deemed to
have suffered any Damages that are suffered by the Seller so that Xxxx shall be
entitled to claim recovery to the same extent that the Seller would be entitled
to claim recovery, but the Seller's right to claim recovery shall be reduced by
the amount for which Xxxx claims recovery in order to avoid duplication.
11.3 PROCEDURE FOR CLAIMS. A party seeking indemnification under this
Section 11 (an "Indemnified Party") shall give notice of the claim for Damages
and a brief explanation of the basis thereof, to each party responsible alleged
to be responsible for indemnification hereunder (an "Indemnitor"), prior to any
applicable Survival Date specified below. In the case of a claim against the
Selling Parties that may be covered at least in part by the Escrow Funds, a
Buying Party shall
-22-
25
pursue such claim in accordance with the Escrow Agreement. In the case of a
claim against the Selling Parties that cannot be fully satisfied by the amount
of Escrow Funds then maintained by the Escrow Agent, and in the case of any
claim against the Buying Parties, the Indemnified Party may pursue whatever
legal remedies may be available for recovery of the Damages claimed from any
Indemnitor.
11.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Except as provided
below, any claim for breach of any representations or warranties or for breach
of any covenants or agreements of a party in this Agreement shall be made by
giving notice under Section 11.3 and in accordance with the Escrow Agreement on
or before the expiration of 18 months after the Closing Date (the "Survival
Date") or the claim shall be invalid. Any of the following types of claims shall
be made before the respective dates specified below or the claims shall be
invalid (such date for each type of claim being the "Survival Date" for that
particular type of claim): (a) prior to the expiration of the applicable statute
of limitations--any claim for Damages related to (i) any Unassumed Liabilities,
(ii) a breach of any covenant or agreement to be performed at least in part
after the Closing Date, (iii) a breach of any representations or warranties of a
party to this Agreement that were untrue when made and were made with an intent
to mislead or defraud, or (iv) a products liability matter specified in clause
(b) of the first sentence of Section 11.1 or in clause (b) of the first sentence
of Section 11.2; and (b) prior to the third anniversary of the Closing Date--any
claim for Damages with respect to an Environmental Condition, whether based on a
breach of any representation or warranty or on the indemnification for
Environmental Conditions in clause (c) of the first sentence of Section 11.1 or
in clause (c) of the first sentence of Section 11.2. If more than one of such
Survival Dates applies to a particular claim, the latest of such Survival Dates
shall be the controlling Survival Date for such claim.
11.5 THIRD PARTY CLAIMS. An Indemnified Party shall give any Indemnitor
prompt notice of the institution by a third party of any actions, suits or other
administrative or judicial proceedings at any time prior to the applicable
Survival Date if the Indemnified Party would be entitled to claim
indemnification under this Section 11 in connection with any such action, suit
or other proceeding. After such notice, any Indemnitor may, or if so requested
by the Indemnified Party, any Indemnitor shall, participate in any such action,
suit or other proceeding or assume the defense thereof, with counsel
satisfactory to the Indemnified Party; provided, however, that the Indemnified
Party shall have the right to participate at its own expense in the defense of
any such action, suit or other proceeding; and provided, further, that the
Indemnitor shall not consent to the entry of any judgment or enter into any
settlement, except with the written consent of the Indemnified Party, that (a)
fails to include as an unconditional term thereof the giving by the claimant or
plaintiff to the Indemnified Party of a release from all liability in respect of
any such action, suit or other proceeding or (b) grants the claimant or
plaintiff any injunctive relief against the Indemnified Party. Any failure to
give prompt notice under this Section 11.5 shall not bar an Indemnified Party's
right to claim indemnification under this Section 11, except to the extent that
an Indemnified Party shall have been harmed by such failure.
-23-
26
11.6 OTHER REMEDIES. The indemnification rights under this Section 11
are independent of and in addition to such rights and remedies as the parties
may have at law or in equity or otherwise for any misrepresentation, breach of
warranty or failure to fulfill any agreement or covenant hereunder on the part
of any party hereto, including the right to seek specific performance,
rescission or restitution, none of which rights or remedies shall be affected or
diminished hereby.
12. Contents of Agreement, Amendment, Parties in Interest, Assignment, Etc.
-----------------------------------------------------------------------
This Agreement sets forth the entire understanding of the parties
hereto with respect to the subject matter hereof. This Agreement may be amended,
modified or supplemented only by a written instrument duly executed by each of
the parties hereto. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective heirs, legal representatives,
successors and permitted assigns of the parties hereto. No party hereto shall
assign this Agreement or any right, benefit or obligation hereunder, except that
Pamarco may assign its rights and obligations hereunder to any Affiliate of
Pamarco, but in the case of any such assignment, Pamarco shall continue to be
liable for fulfillment of its obligations hereunder. In addition, the Buying
Parties may grant security interests in their rights hereunder to First Fidelity
Bank, N.A. Any term or provision of this Agreement may be waived at any time by
the party entitled to the benefit thereof by a written instrument duly executed
by such party. After the Closing, each party hereto shall execute and deliver
any and all papers and documents that may be deemed reasonably necessary by
counsel to the other parties to complete the Transactions.
13. INTERPRETATION.
---------------
Unless the context of this Agreement clearly requires otherwise, (a)
references to the plural include the singular, the singular the plural, the part
the whole, (b) "or" has the inclusive meaning frequently identified with the
phrase "and/or" and (c) "including" has the inclusive meaning frequently
identified with the phrase "but not limited to." The section and other headings
contained in this Agreement are for reference purposes only and shall not
control or affect the construction of this Agreement or the interpretation
thereof in any respect. Section, subsection, schedule and exhibit references are
to this Agreement unless otherwise specified. Each accounting term used herein
that is not specifically defined herein shall have the meaning given to it under
generally accepted accounting principles.
14. NOTICES.
--------
All notices that are required or permitted hereunder shall be in
writing and shall be sufficient if personally delivered or sent by mail,
facsimile message or Federal Express or other delivery service. Any notices
shall be deemed given upon the earlier of the date when received at, or the
third day after the date when sent by registered or certified mail or the day
after the date when sent by Federal Express to, the address or fax number set
forth below, unless such address or fax number is changed by notice to the other
party hereto:
-24-
27
If to a Buying Party:
Pamarco Technologies Inc.
c/o Bradford Ventures Limited
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
FAX: 000-000-0000
with a copy to:
Xxxxxx, Xxxxx & Xxxxxxx
Attention: Xxxxxx X. Xxxxxxxxx
0000 Xxx Xxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
FAX: 000-000-0000
If to a Selling Party:
Xx. Xxxxxxxxxxx X. Xxxx
0000 Xxxxx 000
Xxxxxxxxxxx, Xxxxxxxxxxxx 00000
with a copy to:
Xxxxxx X. Xxxxxx, Esquire
Xxxxxx & Xxxxxx
East Main Street
R.R.1, Box 566
Elizabethville, Pennsylvania 17023-9765
15. Governing Law.
--------------
This Agreement shall be construed and interpreted in accordance with
the laws of the Commonwealth of Pennsylvania, without regard to its provisions
concerning conflict of laws.
16. Counterparts.
-------------
This Agreement may be executed in two or more counterparts, each of
which shall be binding as of the date first written above. Each such copy shall
be deemed an original, and it shall not be
-25-
28
necessary in making proof of this Agreement to produce or account for more than
one such counterpart.
IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto as of the day and year first written above.
ASHCON, INC.
By:
------------------------------
Title:
---------------------------------
XXXXXXXXXXX X. XXXX
PAMARCO TECHNOLOGIES, INC.
By:
------------------------------
Title:
DAUPHIN GRAPHIC MACHINES, INC.
By:
------------------------------
Title:
-26-
