EXHIBIT 2.19
ASSET PURCHASE AGREEMENT
Agreement entered into on March 11, 2002, by and between ARC
Acquisition Corporation, a California corporation ("Buyer"), and Lason Systems,
Inc., a Delaware corporation ("Seller"). Buyer and Seller are referred to
collectively herein as the "Parties."
This Agreement contemplates a transaction in which Buyer will purchase
for cash certain assets of Seller used in connection with Seller's Consolidated
Reprographics division ("CR").
Now, therefore, in consideration of the promises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
1. Definitions.
"Acquired Assets" means all right, title, and interest in and to the
assets of the Seller set forth in Exhibit A attached hereto Relating to CR,
including all of the following relating thereto (a) Leased Real Property, (b)
tangible personal property (such as machinery, equipment, inventories of raw
materials and supplies, manufactured and purchased parts, work in process and
finished goods, furniture, and vehicles), (c) Intellectual Property, goodwill
associated therewith, licenses and sublicenses granted and obtained with respect
thereto, and rights thereunder, remedies against infringements thereof, and
rights to protection of interests therein under the laws of all jurisdictions,
(d) Assumed Contracts, (e) accounts, notes, and other receivables, (f) claims,
deposits, prepayments, refunds, causes of action, choses in action, rights of
recovery, rights of set off, and rights of recoupment (including any such item
relating to the payment of Taxes), (g) franchises, approvals, permits, licenses,
orders, registrations, certificates, variances, and similar rights obtained from
governments and governmental agencies, to the extent the same are assignable,
(h) books, records, ledgers, files, source documents, correspondence, lists,
plats, architectural plans, drawings, and specifications, creative materials,
advertising and promotional materials, studies, reports, and other printed or
written materials, (i) all computer software (including source code, executable
code, databases and related documentation), to the extent the same are
assignable, (j) the document management system and software used in the CR
business commonly referred to as the "PDS" system, including the source codes
relating thereto, and (k) the good will and going concern value of CR; provided,
however, that the Acquired Assets shall not include cash, and shall not include
claims of Seller, if any, against ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ which arise prior to the
Closing and do not involve an act or omission of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ that results
in damage, loss or expense to Buyer or the Acquired Assets with respect to which
Seller does not provide full indemnity to Buyer under this Agreement, and
provided further, that nothing listed herein which is an executory contract or
unexpired lease within the meaning of Section 365 of the Bankruptcy Code shall
be an Acquired Asset unless expressly assumed by Seller and assigned to Buyer
pursuant to the Executory Contract Assumption and Assignment Order.
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages,
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dues, penalties, fines, costs, amounts paid in settlement, Liabilities,
obligations, Taxes, liens, losses, expenses, and fees, including court costs and
reasonable attorneys' fees and expenses.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the meaning of
Code ss.1504(a).
"Applicable Rate" means the applicable Federal short-term rate under
ss.1274 of the Code announced from time to time.
"Approval Order" shall mean the order or orders of the Court in the
Bankruptcy Proceeding approving this Agreement and authorizing the parties to
proceed, including the Buyer Protection and Bidding Procedures Order and Sale
Order contemplated in Section 5(j).
"Assumed Contracts" means the Executory Contracts and all of the
following types of agreements to the extent that such agreements are
non-executory and comprise a portion of the Acquired Assets: leases, subleases,
agreements, contracts, instruments, customer orders, facility management
agreements, Security Interests, guaranties and other similar arrangements and
rights thereunder.
"Assumed Liabilities" means (a) only those current liabilities of
Seller which have arisen after the Most Recent Fiscal Year End in the Ordinary
Course of the CR Business (but not including any Liability resulting from,
arising out of, relating to, in the nature of, or caused by any breach of
contract, breach of warranty, tort, infringement, violation of law, or
environmental matter, including without limitation those arising under
Environmental, Health, and Safety Requirements), (b) all obligations of Seller
under the agreements and contracts, referred to in the definition of Assumed
Contracts to furnish goods and services, and other non-Cash benefits to
customers after the Closing. For purposes of this definition, current
liabilities shall include accounts payable only to the extent that on the
Closing Date the term for payment offered by each respective vendor in the
ordinary course of business before delinquency and without interest or carrying
charges has not expired. Notwithstanding anything to the contrary contained in
the immediately preceding two sentences, Assumed Liabilities specifically shall
not include the following: accounting fees, expert fees, attorneys fees or other
costs or expenses incurred in connection with the negotiation of this Agreement
or in connection with the general administration of the Seller or of Bankruptcy
Proceeding rather than in connection with the specific operation of the CR
business, obligations under capitalized leases (including obligations under
leases of tangible personal property that nevertheless constitute part of the
Acquired Assets), indebtedness for borrowed money, guaranties of indebtedness,
employment contracts, Taxes, insurance policies, deferred compensation,
obligations, earn-outs, or related party obligations, nor any interest,
penalties or premiums accrued thereon or any other liability whatsoever. Buyer
and Seller shall meet and confer approximately 3 business days prior to the
Closing Date to examine and designate those accounts payable which fall within
this definition, including those which Seller believes in good faith to be
current but which on their face do not appear to be current within the terms of
this definition ("questioned accounts"). Any dispute with respect to such an
account shall be resolved by a neutral certified public accountant jointly
appointed by Buyer and Seller.
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"Bankruptcy Case" means the case under Chapter 11 of the Bankruptcy
Code filed by Seller in the Bankruptcy Court.
"Bankruptcy Code" means 11 U.S.C. 101 et seq., and applicable federal
rules of bankruptcy procedure thereunder.
"Bankruptcy Court" means the United States Bankruptcy Court, District
of Delaware.
"Bankruptcy Proceeding" means the Chapter 11 proceeding before the
United States Bankruptcy Court, District of Delaware, Case No. 01-11488(MFW)
pursuant to which Seller and Seller's Stockholder are debtors and debtors in
possession.
"Basis" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or could form the reason or
cause for any specified consequence.
"Break-up Fee" has the meaning set forth in ss.8(o) below
"Buyer" has the meaning set forth in the preface above.
"Buyer Protection and Bidding Procedures Order" means an order of the
Bankruptcy Court that (a) approves the Break-Up Fee on the terms and conditions
set forth in ss.8(o) and (b) establishes procedures for Seller to obtain and
evaluate a competing proposal that (i) conforms to the description set forth in
ss.5(k)(iii)], (ii) approves several of the covenants set forth in ss.5, to the
extent appropriate, and (iii) authorizes and directs Seller to observe and
perform its obligations under the Buyer Protection and Bidding Procedures Order.
"Cash" means cash and cash equivalents (including marketable securities
and short term investments) calculated and classified in accordance with GAAP
applied on a basis consistent with the preparation of the Financial Statements.
"Closing" has the meaning set forth in ss.2(d) below.
"Closing Date" has the meaning set forth in ss.2(d) below.
"COBRA" means the requirements of Part 6 of Subtitle B of Title I of
ERISA and Code ss.4980B and of any similar state law.
"Code" means the Internal Revenue Code of 1986, as amended.
"Competing Proposal" means a competitive bid or proposal from a third
party (a) to purchase substantially all of the Acquired Assets whether in a
separate transaction or series of transactions or as part of a plan of
reorganization of Seller or (b) for any merger, consolidation, liquidation,
dissolution or similar transaction involving Seller.
"CR" means Seller's operating business division commonly known as
Consolidated Reprographics.
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"Disclosure Schedule" has the meaning set forth in ss.3 below.
"Employee Benefit Plan" means any "employee benefit plan" (as such term
is defined in ERISA ss.3(3)) and any other material employee benefit plan,
program or arrangement of any kind.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
ss.3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
ss.3(l).
"Environmental, Health, and Safety Requirements" shall mean all
federal, state, local and foreign statutes, regulations, ordinances and other
provisions having the force or effect of law, all judicial and administrative
orders and determinations, all contractual obligations and all common law
concerning public health and safety, worker health and safety, and pollution or
protection of the environment, including without limitation all those relating
to the presence, use, production, generation, handling, transportation,
treatment, storage, disposal, distribution, labeling, testing, processing,
discharge, release, threatened release, control, or cleanup of any hazardous
materials, substances or wastes, chemical substances or mixtures, pesticides,
pollutants, contaminants, toxic chemicals, petroleum products or byproducts,
asbestos, polychlorinated biphenyls, noise or radiation, each as amended and as
now or hereafter in effect.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Executory Contracts" means the contracts, unexpired leases and other
agreements of an executory nature within the meaning of Section 365 of the
Bankruptcy Code to which Seller is a party which are a part of the Assumed
Contracts as set forth by party names, date and cure amounts on Exhibit A(ii)
attached hereto. Executory Contracts shall also include any contracts, unexpired
leases and other agreements Relating to CR which are discovered by Buyer after
the date hereof and prior to the Closing Date and with respect to which Buyer
notifies Seller in writing that Buyer wishes to have Seller assume and assign
the same to Buyer in the same manner as other Assumed Contracts.
"Executory Contract Assumption and Assignment Order" an order of the
Bankruptcy Court, which may be the Sale Order and must be in form and substance
reasonably acceptable to Buyer, that (a) approves the provisions of ss.5(k),
(b) authorizes and directs Seller, pursuant to ss.365 of the Bankruptcy Code, to
assume and to assign to Buyer the Assumed Contracts and to make all pre-petition
and post-petition payments related thereto that are not Assumed Liabilities (c)
determines that Buyer has provided adequate assurance of future performance
relative to the Executory Contracts, and (d) conclusively establishes the
amounts necessary to cure all defaults under the Executory Contracts.
"Financial Statement" has the meaning set forth in ss.3(g) below.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time
"Intellectual Property" means all of the following in any jurisdiction
throughout the world: (a) all inventions (whether patentable or unpatentable and
whether or not reduced to
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practice), all improvements thereto, and all patents, patent applications, and
patent disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions, and reexaminations thereof, (b)
all trademarks, service marks, trade dress, logos, slogans, trade names,
corporate names, Internet domain names and rights in telephone numbers, together
with all translations, adaptations, derivations, and combinations thereof and
including all goodwill associated therewith, and all applications,
registrations, and renewals in connection therewith, (c) all copyrightable
works, all copyrights, and all applications, registrations, and renewals in
connection therewith, (d) all mask works and all applications, registrations,
and renewals in connection therewith, (e) all trade secrets and confidential
business information (including ideas, research and development, know-how,
formulas, compositions, manufacturing and production processes and techniques,
technical data, designs, drawings, specifications, customer and supplier lists,
pricing and cost information, and business and marketing plans and proposals)
and, (f)) all advertising and promotional materials, to the extent that the same
do not bear the name of, or references to Seller or Seller's Stockholder, (g)
the document management system and software used in the CR business commonly
referred to as the "PDS" system, including the source codes relating thereto,
and (h) all copies and tangible embodiments thereof (in whatever form or
medium).
"Knowledge" means actual knowledge after an investigation that a
reasonable and prudent person would conduct as to the subject matter of a
particular representation or warranty.
"Knowledge of Seller" means the Knowledge of any of the officers of
Seller or of Seller' Stockholder, or of any of ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇.
"Leased Real Property" means all leasehold or subleasehold estates and
other rights to use or occupy any land, buildings, structures, improvements,
fixtures or other interest in real property held by Seller used in the business
of CR.
"Leases" means all leases, subleases, licenses, concessions and other
agreements (written or oral), including all amendments, extensions, renewals,
guaranties and other agreements with respect thereto, pursuant to which Seller
holds any Leased Real Property, including the right to all security deposits and
other amounts and instruments deposited by or on behalf of Seller.
"Liability" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become due,
including any liability for Taxes.
"Management Incentives" means bonuses, performance incentives or other
compensation enhancements in the aggregate sum of $1,500,000 to be paid in forms
and manners, and in such proportions, as determined by ARC (a) to some or all of
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, and ▇▇▇▇ ▇▇▇▇▇ in accordance with the terms of
Employment Agreements in the forms attached hereto as Exhibits G-1 to G-3 and
(b) to and among a group of not more than 17 senior CR managers to be designated
in writing by ARC prior to the Closing.
"Most Recent Fiscal Month End" has the meaning set forth in ss.3(g)
below.
"Most Recent Fiscal Year End" has the meaning set forth in ss.3(g)
below.
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"Noncompetition and Guaranty Agreement" means the Agreement with
Seller's Stockholder entered into concurrently herewith and attached hereto as
Exhibit B.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" has the meaning set forth in the preface above.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"Prohibited Transaction" has the meaning set forth in ERISA ss.406 and
Code ss.4975.
"Purchase Price" has the meaning set forth in ss.2(c) below.
"Qualified Bid" means a Competing Proposal (a) whose value is greater
than the sum of (i) the Purchase Price and (ii) $2,000,000, (b) that is
accompanied by satisfactory evidence of committed financing or other ability to
perform, and (c) is accompanied by a good faith deposit of $2,000,000. For
avoidance of doubt, this Agreement shall be deemed to be a Qualified Bid for
substantially all of Seller's CR assets.
"Qualified Bidder" means a person (a) who has delivered to Seller a
Competing Proposal that Seller, in good faith and upon the advice of its
independent financial advisors, believes is reasonably likely to lead to a
higher and better offer for the Acquired Assets, and (c) whom Seller in good
faith determines is reasonably likely (based on the availability of financing
and proof of financial wherewithal, experience and other relevant
considerations) to be able to consummate a transaction based on the Competing
Proposal, if selected as the successful bidder for the subject assets. For
avoidance of doubt, Buyer shall be deemed to be a Qualified Bidder.
"Relating to CR" means affecting or relating to the business, assets,
revenues, obligations, operations, employees or good will of CR, including the
Acquired Assets.
"Sale Motion" means the motion or motions, in form and substance
reasonably acceptable to Buyer, filed by Seller, pursuant to the provisions of
ss.ss.363 and 365 of the Bankruptcy Code in the Bankruptcy Case, among other
things, to obtain the Sale Order, approve the transactions contemplated hereby,
authorize the assumption and assignment of the Assumed Contracts to Buyer and
obtain the Buyer Protection and Bidding Procedures Order.
"Sale Order" means an order of the Bankruptcy Court, which may also be
the Executory Contract Assumption and Assignment Order and must be in form and
substance reasonably acceptable to Buyer, that, among other things, grants the
Sale Motion and approves, authorizes and directs Seller to enter into this
Agreement and consummate the transactions contemplated hereby.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest.
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"Seller's Stockholder" means Lason, Inc., a Delaware corporation.
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code ss.59A),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Transferring Employee" has the meaning set forth in ss.5(i) below.
2. Basic Transaction.
(a) Purchase and Sale of Assets. On and subject to the terms and
conditions of this Agreement, Buyer shall purchase from Seller and Seller shall
sell, transfer, assign, convey, and deliver to Buyer, all of the Acquired Assets
at the Closing, free and clear of all claims, interests, liens and Security
Interests other than the Assumed Liabilities, for the consideration specified
below in this ss.2. Buyer shall have the right to direct the transfer of the
Acquired Assets at Closing to a corporation or limited liability company which
is an Affiliate of Buyer so long as such transfer does not affect Buyer's
ability to provide any party to a Executory Contract with Seller adequate
assurances of future performance within the meaning of Section 365 of the
Bankruptcy Code.
(b) Assumption of Liabilities. On and subject to the terms and
conditions of this Agreement, the Buyer shall assume and become responsible for
all of the Assumed Liabilities at the Closing. Buyer will not assume or have any
responsibility, however, with respect to any other obligation or Liability of CR
not specifically included within the definition of Assumed Liabilities including
obligations or liabilities arising in connection with the Executory Contracts
not assumed by Seller.
(c) Purchase Price. Subject to the adjustments hereunder set
forth, Buyer shall pay to Seller at the Closing $32,500,000, minus the
Management Incentives (the "Purchase Price"), payable by wire transfer or other
immediately available funds. Any portion of the Management Incentives not
actually paid to the named or designated individuals shall be paid by Buyer to
Seller, without interest, within thirty (30) days after the date on which such
portion can no longer be validly claimed by any of such individuals.
(d) The Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇, in San Francisco, California, commencing at
9:00 a.m. local time on the third (3rd) business day following the entry of the
Approved Order and upon the satisfaction or waiver of all conditions to the
obligations of the Parties to consummate the transactions contemplated hereby
(other than conditions with respect to actions the respective Parties will take
at the Closing itself)
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or such other date as the Parties may mutually determine (the "Closing Date");
provided, however, that the Closing Date shall be no later than May 31, 2002.
(e) Deliveries at the Closing. At the Closing, (i) Seller will
deliver to the Buyer the various certificates, instruments, and documents
referred to in ss.6(a) below; (ii) Buyer will deliver to Seller the various
certificates, instruments, and documents referred to in ss.6(b) below; (iii)
Seller will execute, acknowledge (if appropriate), and deliver to Buyer a ▇▇▇▇
of sale in the form attached hereto as Exhibit C and such other instruments of
sale, transfer, conveyance, and assignment as Buyer and its counsel reasonably
may request; (iv) Buyer will execute, acknowledge (if appropriate), and deliver
to Seller (A) an assumption in the form attached hereto as Exhibit D and (B)
such other instruments of assumption as Seller and its counsel reasonably may
request; (v) Buyer will deliver to Seller the Purchase Price and (vi) Seller
will pay or provide adequate assurance or other evidence reasonably satisfactory
to Buyer that any amounts required to cure defaults under the Assumed Contracts
in order to allow the Assumed Contracts to be assigned to Buyer at Closing free
of all claims of breach or default will be paid or adequately provided for
pursuant to appropriate orders of the Bankruptcy Court.
(f) Allocation. Buyer and Seller agree to allocate the Purchase
Price among the Acquired Assets for all purposes (including financial accounting
and tax purposes) in accordance with an allocation schedule which will be
completed by Buyer and Seller and attached hereto as Exhibit E on the Closing
Date. Such allocation shall be binding upon the parties for all applicable
federal, state, local and foreign Tax purposes. Buyer and Seller shall report
gain or loss or cost basis, as the case may be, in a manner consistent with such
allocation on all Tax Returns filed by either of them after Closing and not to
voluntarily take any inconsistent position therewith in any administrative or
judicial proceeding relating to such returns. Buyer and Seller shall exchange
mutually acceptable and completed IRS Forms 8594 (including supplemental forms,
if required), which they shall use to report the transaction contemplated
hereunder to the Internal Revenue Service in accordance with such allocation.
Notwithstanding anything to the contrary, no allocation hereunder shall
supersede or otherwise usurp the jurisdiction of the Bankruptcy Court to value
the assets for any purpose under the Bankruptcy Code other than this Agreement.
(g) Net Asset Adjustment.
(i) Buyer's advisors have prepared from the CR books and
records furnished by Seller, and Seller has approved, a Pro Forma Statement of
Closing Net Assets (with 000s omitted) ("Pro Forma Statement) as if the Closing
had taken place on December 29, 2001, as set forth in Exhibit H attached hereto.
Such Pro Forma Statement shows "Pro Forma closing net assets" under the column
marked "Adjusted Book Value" of approximately $7,900,000 after the adjustments
are made to each of the line items as set forth in such Pro Forma Statement,
provided, however, that liabilities shall not include any sums owed to Seller's
employees with respect to vacation, sick pay or paid time off accruals. The
Adjusted Book Value of those categories of Acquired Assets, as of the Closing
Date, for which there are entries set forth in the column of the Pro Forma
Statement marked "Adjusted Book Value" minus the Assumed Liabilities in the same
column ("Closing Net Value"), shall be not less than $7,900,000. Such
determination will follow the accounting principles, policies and estimates used
in determining the Pro Forma Statement, as set forth on Exhibit H hereto.
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(ii) Within 30 business days after the Closing Date, or as
promptly as practicable thereafter, Buyer shall cause to be prepared and
delivered to Seller a draft Closing Net Assets Statement ("Net Assets
Statement") for the CR business as of the Closing Date, using the accounting
principles applied to construct the Pro Forma Statement and covering those
categories for which there are entries set forth in the column of the Pro Forma
Statement marked "Adjusted Book Value." Such Net Assets Statement shall reflect
the results of a physical count of all CR fixed assets and inventory taken at
the direction of Buyer's independent certified public accountants within seven
(7) business days after the Closing Date and a review by such accountants of the
trade accounts receivable as existing on the Closing Date. Buyer shall give
Seller written notice of the time and place of each physical count and Seller
shall have the right to have an observer present at each such place.
(iii) Seller shall have a period of 45 business days after
delivery of the Net Assets Statement to review it and to make any objections in
writing to Buyer. If written objections to the Net Assets Statement are
delivered by Seller to Buyer within such 45 business day period, then Buyer and
Seller shall attempt to resolve the matter or matters in dispute. The Net Assets
Statement shall be revised to reflect any revisions agreed upon by Buyer and
Seller. If no written objections are made by Seller within the time period
provided above, the Net Assets Statement shall be deemed accepted by Seller and
shall be final.
(iv) If disputes with respect to the Net Assets Statement
cannot be resolved by Buyer and Seller within 15 business days after the
delivery of the objections to the Net Assets Statement, then the specific
matters in dispute shall be submitted to an independent certified public
accounting firm as may be approved by Buyer and Seller, which firm shall render
its opinion as to such matters. If Buyer and Seller are unable to agree on the
choice of an accounting firm, they will select a nationally-recognized
accounting firm by lot, after excluding their respective regular outside
accounting firms. The accounting firm so selected will provide to the Parties
its written determination on the specific matters in dispute, which
determination shall be final and binding on the Parties, in which case the Net
Assets Statement, with such changes as determined by such accounting firm, shall
constitute the final Net Assets Statement. Any fees and expenses of the
independent accounting firm appointed pursuant to this Section shall be borne
fifty percent (50%) by Seller and fifty percent (50%) by Buyer.
(v) In the event that the Closing Net Value as set forth in
the Net Assets Statement shall be less than $7,900,000, Seller shall repay to
Buyer, in immediately available funds, within 5 business days after the Net
Assets Statement becomes final, the amount, if any, by which $7,900,000 exceeds
the Closing Net Value, provided, however, that no repayment shall be required
with respect to that portion of any shortfall in the Closing Net Value which is
attributable solely to depreciation of tangible personal property constituting a
portion of the Acquired Assets properly recorded in accordance with GAAP on the
books of Seller with respect to periods after December 31, 2001. Notwithstanding
anything to the contrary contained in the foregoing, in the event that the
Closing Net Value exceeds $7,900,000, Buyer shall pay to Seller, in immediately
available funds, within 5 business days after the Net Assets Statement becomes
final, the amount, if any, by which the Closing Net Value exceeds $7,900,000,
but not more than the sum of $215,000.
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3. Representations and Warranties of Seller. Seller represents
and warrants to Buyer that the statements contained in this ss.3 are correct and
complete as of the date of this Agreement and will be correct and complete as of
the Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this ss.3), except as set
forth in the disclosure schedule accompanying this Agreement (the "Disclosure
Schedule"). The Disclosure Schedule will be arranged in paragraphs corresponding
to the lettered and numbered paragraphs contained in this ss.3.
(a) Organization of Seller. Seller is a corporation duly
organized, validly existing, and in good standing under the laws of the state of
Delaware.
(b) Authorization of Transaction. Subject to the approval of
this Agreement by the Bankruptcy Court, as evidenced by entry of the Sales
Order, and Seller's pre-petition lenders, Seller has full power and authority
(including full corporate power and authority) to execute and deliver this
Agreement and to perform its obligations hereunder. Without limiting the
generality of the foregoing, the board of directors of Seller and Seller's
Stockholder have duly authorized the execution, delivery, and performance of
this Agreement by Seller. This Agreement constitutes the valid and legally
binding obligation of Seller, enforceable in accordance with its terms and
conditions, subject only to the entry of the Approval Order.
(c) Noncontravention. Neither the execution and the delivery
of this Agreement, nor, upon entry of the Approval Order, the consummation of
the transactions contemplated by this Agreement, will (i) violate any
constitution, statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental agency, or
court to which Seller is subject or any provision of the charter or bylaws of
Seller or, (ii) except as set forth in ss.3(c) of the Disclosure Schedule,
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which Seller is a party or by which it is
bound or to which any of its assets is subject (or result in the imposition of
any Security Interest upon any of its assets). Except for the necessity of the
Approval Order and Executory Contract Assignment and Assumption Order, Seller is
not required to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any court or government or governmental
agency in order for the Parties to consummate the transactions contemplated by
this Agreement (including the sales and assumptions referred to in ss.2 above).
(d) Brokers' Fees. Seller has no Liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Buyer could become
liable or obligated. Seller is solely responsible for any and all Liabilities or
obligations to pay any fees or commissions to any broker, finder, investment
banker, agent with respect to the transactions contemplated by this Agreement,
including any obligation to Brown, Gibbons, Lang & Company, L.P.
(e) Title to Assets. Seller has good and marketable title to,
or a valid leasehold interest in, all of the Acquired Assets, free and clear of
any Security Interest or restriction on transfer other than the Security
Interest held by Seller's pre-petition lenders. The
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Acquired Assets constitute all of the assets and properties necessary to the
operation of the business of CR.
(f) Status of CR. Seller has operated CR as a division of Seller.
Such division is not a separate incorporated entity.
(g) Financial Statements.
(i) Attached hereto as Exhibit F are the following financial
statements Relating to CR (the " Financial Statements"): unaudited balance sheet
for the Twelve Months Ending December 31, 1999, and Income Statement for the
Month Ending December 31, 1999 showing monthly results and cumulative results at
December 31, 1999, unaudited Comparative Balance Sheets for the 13 fiscal
monthly periods from December 30, 2000 through December 29, 2001 and Comparative
Income Statement, Current vs. Prior Period - Month & YTD, for the year ended
December 31, 2001, showing results for the months of December 2000 and 2001 and
for the full years of December 30, 2000 and December 29, 2001 (December 29, 2001
being the "Most Recent Fiscal Year End"), and Balance Sheet for the month ending
January 31, 2002 and Income Statement for the Month ending January 31, 2002 (the
"Most Recent Fiscal Month End"). The Financial Statements have been prepared for
internal management purposes, and although not prepared in accordance with GAAP,
to the Knowledge of Seller, (a) present fairly the financial condition of CR as
of such dates and the results of operations of CR for such periods, (b) are
correct and complete, and (c) are consistent with the books and records of CR
(which books and records are correct and complete).
(ii) On March 26, 2001, Seller's Stockholder informed the
United States Securities and Exchange Commission and the United States Attorney
for the Eastern District of Michigan of accounting irregularities and system
deficiencies that affected certain portions of the financial statements of
Seller's Stockholder. To the Knowledge of Seller, no such irregularity or
deficiency affects, or will affect, in any manner the Financial Statements, or
any matter presented or reflected therein.
(h) Events Subsequent to Most Recent Fiscal Year End. Except as
set forth in ss.3(h) of the Disclosure Schedule, since the Most Recent Fiscal
Year End, there has not been any material adverse change in the business,
financial condition, operations, results of operations, or future prospects of
the CR business, Except for the Bankruptcy Proceeding. Without limiting the
generality of the foregoing, since that date:
(i) Seller has not sold, leased, transferred, or assigned any
of its assets, tangible or intangible, Relating to CR other than for a fair
consideration in the Ordinary Course of Business;
(ii) Seller has not entered into any agreement, contract,
lease, or license (or series of related agreements, contracts, leases, and
licenses) Relating to CR other than in the Ordinary Course of Business;
(iii) no party (including Seller) has terminated, modified,
or cancelled any agreement, contract, lease, or license (or series of related
agreements, contracts, leases, and
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licenses) Relating to CR involving more than $75,000 to which Seller is a party
or by which Seller is bound and which is an Acquired Asset;
(iv) Seller has not imposed any Security Interest upon any of
its assets, tangible or intangible Relating to CR which is an Acquired Asset
except for Assumed Liabilities;
(v) Except for restrictions imposed in the Bankruptcy
Proceeding, Seller has not delayed or postponed the payment of accounts payable
and other Liabilities Relating to CR which are Assumed Liabilities outside the
Ordinary Course of Business;
(vi) Seller has not granted any license or sublicense of any
rights under or with respect to any Intellectual Property constituting a part of
the Acquired Assets;
(vii) there has been no change made or authorized in the
charter or bylaws of Seller;
(viii) Seller has not experienced any damage, destruction, or
loss (whether or not covered by insurance) relating to the Acquired Assets;
(ix) Seller has not entered into any employment contract or
collective bargaining agreement, written or oral, or modified the terms of any
existing such contract or agreement, Relating to CR or by which Buyer would be
bound as the purchaser of the Acquired Assets;
(x) Seller has not granted any increase in the base
compensation of, or made any other change in employment terms for, any of its
employees employed in the business of CR outside the Ordinary Course of
Business;
(xi) Except for the Bankruptcy Proceeding or as authorized by
the Bankruptcy Court, there has not been any other occurrence, event, incident,
action, failure to act, or transaction outside the Ordinary Course of Business
or Relating to CR; and
(xii) Seller has not committed itself to any of the
foregoing.
(i) Undisclosed Liabilities. Except as set forth in ss.3(i) of
the Disclosure Schedule, Seller has no Liability (and there is no Basis for any
present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand against any of them giving rise to any Liability),
including any liability to any current or former customer, or any liability to
any governmental entity (including any Liability for any tax), which could be
asserted against the Acquired Assets or Buyer except for the Assumed
Liabilities.
(j) Legal Compliance. To the Knowledge of Seller, Seller has
complied with all applicable laws (including rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges thereunder) of
federal, state, local, and foreign governments (and all agencies thereof), and
no action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand, or notice has been filed or commenced against any of them alleging any
failure so to comply except where the failure to comply would not have a
material adverse effect on the
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business, financial condition, operations, results of operations, or future
prospects of the CR business.
(k) Tax Matters. Except as set forth on ss.3(k) of the Disclosure
Schedule, with respect to matters Relating to CR:
(i) To the Knowledge of Seller, Seller has filed all Tax
Returns Relating to CR that it was required to file relating to CR. All such Tax
Returns were correct and complete in all respects. To the Knowledge of Seller,
all Taxes owed by Seller (whether or not shown on any Tax Return) Relating to CR
have been paid. There is no extension of time within which to file any Tax
Return which would affect the Acquired 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 on the basis of any property or
activity Relating to CR. There are no Security Interests on any of the Acquired
Assets that arose in connection with any failure (or alleged failure) to pay any
Tax.
(ii) Seller has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder, or other third party where the
failure to so withhold or to pay would affect the Acquired Assets or the
business of CR.
(iii) Seller has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency which could affect the business of CR or the Acquired
Assets.
(l) Real Property.
(i) Seller does not own any real property used in connection
with the business of CR and no real property other than leasehold interests is
included in the Acquired Assets.
(ii) ss.3(l)(ii) of the Disclosure Schedule sets forth the
address of each parcel of Leased Real Property used in connection with the CR
business, and a true and complete list of all Leases for each such Leased Real
Property (including the date and name of the parties to such Lease document).
Seller has delivered to Buyer a true and complete copy of each such Lease
document, and in the case of any oral Lease, a written summary of the material
terms of such Lease. Except as set forth in ss.3(l)(ii) of the Disclosure
Schedule, with respect to each of the Leases:
(A) To the Knowledge of Seller, such Lease is legal,
valid, binding, enforceable and in full force and effect;
(B) To the Knowledge of Seller, the transaction
contemplated by this Agreement will not cause such Lease to cease to be legal,
valid, binding, enforceable and in full force and effect on identical terms
following the Closing;
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(C) Seller's possession and quiet enjoyment of the
Leased Real Property under such Lease has not been disturbed and to the
Knowledge of Seller there are no disputes with respect to such Lease;
(D) To the Knowledge of Seller, Seller is not in
material breach or default under such Lease, and no event has occurred or
circumstance exists which, with the delivery of notice, the passage of time or
both, would constitute such a material breach or default by Seller, or permit
the termination, modification or acceleration of rent under such Lease; to the
Knowledge of Seller, no other party to such Lease is in material breach or
default under such Lease and no event has occurred or circumstance exists which,
with the delivery of notice, the passage of time or both, would constitute such
a material breach or default by such other party;
(E) no security deposit or portion thereof deposited
with respect to such Lease has been applied in respect of a breach or default
under such Lease which has not been redeposited in full;
(F) to the Knowledge of Seller, Buyer will not owe any
brokerage commissions or finder's fees with respect to such Lease as a result of
assuming the Lease;
(G) except to the extent that ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and/or
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ are deemed Affiliates of Seller, the other party to such Lease
is not an Affiliate of, and otherwise does not have any economic interest in,
Seller;
(H) Seller has not subleased, licensed or otherwise
granted any Person the right to use or occupy such Leased Real Property or any
portion thereof;
(I) Seller has not collaterally assigned or granted any
other Security Interest in such Lease or any interest therein; and
(J) there are no liens or encumbrances on the estate or
interest created by such Lease.
(iii) The Leased Real Property identified in ss.3(l)(ii)
comprises all of the real property used in, or otherwise related to, the CR
business.
(iv) To the Knowledge of Seller, but without independent
investigation, all buildings, structures, fixtures, building systems and
equipment, and all components thereof, included in the Leased Real Property (the
"Improvements") are in good condition and repair, ordinary wear and tear
excepted, and sufficient for the operation of the CR business. To the Knowledge
of Seller, but without independent investigation, there are no structural
deficiencies or latent defects affecting any of the Improvements and there are
no facts or conditions affecting any of the Improvements which would,
individually or in the aggregate, interfere in any respect with the use or
occupancy of the Improvements or any portion thereof in the operation of the CR
business as currently conducted thereon.
(v) To the Knowledge of Seller, there is no condemnation,
expropriation or other proceeding in eminent domain, pending or threatened,
affecting any
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Leased Real Property or any portion thereof or interest therein. There is no
injunction, decree, order, writ or judgment outstanding, nor any claims,
litigation, administrative actions or similar proceedings, pending or, to the
Knowledge of Seller, threatened, relating to the lease, use or occupancy of the
Leased Real Property or any portion thereof, or the operation of the CR business
as currently conducted thereon.
(vi) To the Knowledge of Seller, except for noncompliance
which is not material to the operation of the CR business, the Leased Real
Property is in compliance with all applicable building, zoning, subdivision,
health and safety and other land use laws, including The Americans with
Disabilities Act of 1990, as amended, and all insurance requirements affecting
the Real Property (collectively, the "Real Property Laws"), and the current use
and occupancy of the Real Property and operation of the CR business thereon does
not violate any Real Property Laws. Seller has not received any notice of
violation of any Real Property Law and, to the Knowledge of Seller, there is no
Basis for the issuance of any such notice or the taking of any action for such
violation.
(vii) To the Knowledge of Seller, all utility services
required in connection with the operation of the CR business as currently
conducted are operational and sufficient.
(viii) To the Knowledge of Seller, all certificates of
occupancy, permits, licenses, franchises, approvals and authorizations
(collectively, the "Real Property Permits") of all governmental authorities,
boards of fire underwriters, associations or any other entity having
jurisdiction over the Leased Real Property, which are required or appropriate to
use or occupy the Leased Real Property or operate the CR business as currently
conducted thereon have been issued and are in full force and effect. Seller has
not received any notice from any governmental authority or other entity having
jurisdiction over the Leased Real Property threatening a suspension, revocation,
modification or cancellation of any Real Property Permit and, to the Knowledge
of Seller, there is no Basis for the issuance of any such notice or the taking
of any such action. To the Knowledge of Seller, no disclosure, filing or other
action by Seller is required in connection with such transfer, and Buyer shall
not be required to assume any additional liabilities or obligations under the
Real Property Permits as a result of such transfer.
(m) Intellectual Property.
(i) Seller owns or possesses or has the right to use, and at
Closing, to the Knowledge of Seller, Buyer shall own or posses or have right to
use, pursuant to a valid and enforceable, written license, sublicense,
agreement, or permission each and every item of Intellectual Property, necessary
for the operation of the CR business as presently conducted. Except as set forth
in ss.3(m)(i)(a) of the Disclosure Schedule, each such item of Intellectual
Property owned or used by Seller immediately prior to the Closing hereunder will
be owned or available for use by the Buyer on identical terms and conditions
immediately subsequent to the Closing hereunder. Seller has taken all necessary
action to maintain and protect each item of Intellectual Property that it owns
and that it uses in the CR business. Seller's rights to some Intellectual
Property may constitute or be subject to an Executory Contract and thus are
being assigned to Buyer pursuant to the Executory Contract Assumption and
Assignment Order.
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(ii) Seller has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual Property
rights of third parties, and neither Seller nor the directors and officers (and
employees with responsibility for Intellectual Property matters) of Seller has
ever received any charge, complaint, claim, demand, or notice alleging any such
interference, infringement, misappropriation, or violation (including any claim
that Seller must license or refrain from using any Intellectual Property rights
of any third party) used in the CR business. To the Knowledge of Seller, no
third party has interfered with, infringed upon, misappropriated, or otherwise
come into conflict with any Intellectual Property rights of Seller, used or
proposed to be used in the CR businesses.
(iii) ss.3(m)(iii) of the Disclosure Schedule identifies each
patent or registration which has been issued to Seller with respect to any of
its Intellectual Property relating to or used in the CR business, identifies
each pending patent application or application for registration which Seller has
made with respect to such Intellectual Property, and identifies each license,
sublicense, agreement, or other permission which Seller has granted to any third
party with respect to such Intellectual Property (together with any exceptions).
Seller has delivered to the Buyer correct and complete copies of all such
patents, registrations, applications, licenses, sublicenses, agreements, and
permissions (as amended to date). ss.3(m)(iii) of the Disclosure Schedule also
identifies each material unregistered trademark, service ▇▇▇▇, trade name,
corporate name or Internet domain name, computer software item (other than
commercially available off-the-shelf software) and each material unregistered
copyright used by Seller in connection with the CR business. With respect to
each item of Intellectual Property identified in ss.3(m)(iii) of the Disclosure
Schedule:
(A) Seller owns and possesses all right, title, and
interest in and to the item, free and clear of any Security Interest, license,
or other restriction or limitation regarding use or disclosure;
(B) To the Knowledge of Seller, the item is not subject
to any outstanding injunction, judgment, order, decree, ruling, or charge;
(C) To the Knowledge of Seller, no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand is
pending or, to the Knowledge of Seller, is threatened which challenges the
legality, validity, enforceability, use, or ownership of the item, and there are
no grounds for the same;
(D) Seller has not ever agreed to indemnify any Person
for or against any interference, infringement, misappropriation, or other
conflict with respect to the item; and
(E) no loss or expiration of the item is threatened or
pending, or to the Knowledge of Seller reasonably foreseeable, except for
patents and copyright registrations expiring at the end of their statutory terms
(and not as a result of any act or omission by Seller, including without
limitation, a failure by Seller to pay any required maintenance fees).
(iv) ss.3(m)(iv) of the Disclosure Schedule identifies each
item of Intellectual Property that any third party owns and that Seller uses in
connection with the
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business of CR pursuant to license, sublicense, agreement, or permission. Seller
has delivered to Buyer correct and complete copies of all such licenses,
sublicenses, agreements, and permissions (as amended to date). With respect to
each item of Intellectual Property identified in ss.3(m)(iv) of the Disclosure
Schedule.
(A) To the Knowledge of Seller, the license, sublicense,
agreement, or permission covering the item is legal, valid, binding,
enforceable, and in full force and effect;
(B) the license, sublicense, agreement, or permission
will continue to be legal, valid, binding, enforceable, and in full force and
effect on identical terms following the consummation of the transactions
contemplated hereby (including the assignments and assumptions referred to in
ss.2 above);
(C) To the Knowledge of Seller, no party to the license,
sublicense, agreement, or permission is in breach or default, and no event has
occurred which with notice or lapse of time would constitute a breach or default
or permit termination, modification, or acceleration thereunder;
(D) no party to the license, sublicense, agreement, or
permission has repudiated any provision thereof;
(E) with respect to each sublicense, the representations
and warranties set forth in subsections (A) through (D) above are true and
correct with respect to the underlying license;
(F) the underlying item of Intellectual Property is not
subject to any outstanding injunction, judgment, order, decree, ruling, or
charge;
(G) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending or, to the Knowledge of Seller,
is threatened which challenges the legality, validity, or enforceability of the
underlying item of Intellectual Property, and there are no grounds for the same;
and
(H) Seller has not granted any sublicense or similar
right with respect to the license, sublicense, agreement, or permission.
(v) To the Knowledge of Seller: (A) Seller has not in the
past interfered with, infringed upon, misappropriated, or otherwise come into
conflict with, any Intellectual Property rights of third parties as a result of
the continued operation of the CR businesses as presently conducted; (B) there
are no facts that indicate a likelihood of any of the foregoing; and (C) no
notices regarding any of the foregoing (including, without limitation, any
demands or offers to license any Intellectual Property from any third party)
have been received.
(vi) Seller has taken all necessary action to maintain and
protect the registrations for all of the Intellectual Property of Seller as
described in ss.3(m)(i)(a) of the Disclosure Schedule and will continue to
maintain and protect all of the Intellectual Property of Seller prior to Closing
so as not to materially adversely affect the validity or enforceability
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thereof. To the Knowledge of Seller, the owners of any of the Intellectual
Property licensed to Seller have taken all necessary action to maintain and
protect the Intellectual Property covered by such license.
(vii) To the Knowledge of Seller and Relating to CR, Seller
has complied in all material respects with and are presently in compliance in
all material respects with all foreign, federal, state, local, governmental
(including, but not limited to, the Federal Trade Commission and State Attorneys
General), administrative or regulatory laws, regulations, guidelines and rules
applicable to any Intellectual Property and Seller shall take all steps
necessary to ensure such compliance until Closing.
(n) Tangible Personal Property. Seller owns or leases all
machinery, equipment, and other tangible assets necessary for the conduct of the
business of CR as presently conducted. To the Knowledge of Seller, each such
tangible asset is free from defects (patent and latent), is in good operating
condition and repair (subject to normal wear and tear), and is suitable for the
purposes for which it presently is used.
(o) Inventory. The inventory of Seller being sold as part of the
Acquired Assets, consists of raw materials and supplies, manufactured and
purchased parts, work or goods in process, and finished goods, all of which is,
to the Knowledge of Seller, merchantable and fit for the purpose for which it
was procured or manufactured, and none of which, to the Knowledge of Seller, is
slow-moving, obsolete, damaged, or defective, subject only to the reserve for
inventory write-down set forth on the face of the Most Recent Balance Sheet
(rather than in any notes thereto) as adjusted for the passage of time through
the Closing Date in accordance with the past custom and practice of Seller.
(p) Contracts. ss.3(p) of the Disclosure Schedule lists the
following contracts and other agreements Relating to CR to which Seller is a
party:
(i) any agreement (or group of related agreements) for the
lease of personal property to or from any Person providing for lease payments in
excess of $36,000 per annum;
(ii) any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies, products, or other
personal property, or for the furnishing or receipt of services, the performance
of which will extend over a period of more than one year, result in a material
loss to Seller or to Buyer after the Closing, or involve consideration in excess
of $75,000;
(iii) any agreement concerning a partnership or joint
venture;
(iv) any agreement (or group of related agreements) under
which it has created, incurred, assumed, or guaranteed any indebtedness for
borrowed money, or any capitalized lease obligation, under which it has imposed
a Security Interest on any of the Acquired Assets;
(v) any agreement concerning confidentiality or
noncompetition;
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(vi) any agreement involving Seller and any Affiliates of
Seller;
(vii) any deferred compensation, severance, or other material
plan or arrangement for the benefit of its current or former directors,
officers, and employees;
(viii) any agreement for the employment of any individual on
a full-time, part-time, consulting, or other basis providing annual compensation
in excess of $75,000 or providing severance benefits;
(ix) any agreement under which it has advanced or loaned any
amount to any employee of CR outside the Ordinary Course of Business; and
(x) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $ 75,000.
Seller has delivered or made available to Buyer a correct and complete copy of
each written agreement listed in ss.3(p) of the Disclosure Schedule (as amended
to date) and a written summary setting forth the terms and conditions of each
oral agreement referred to in ss.3(p) of the Disclosure Schedule. To the
Knowledge of Seller, with respect to each such agreement that is assumed by
Seller and assigned to Buyer pursuant to the Executory Contract Assumption and
Assignment Order: (A) the agreement will continue to be legal, valid, binding,
enforceable, and in full force and effect on identical terms following the
consummation of the transactions contemplated hereby (including the assignments
and assumptions referred to in ss.2 above); (B) the other party thereto is not
in material breach or default, and no event has occurred which with notice or
lapse of time would constitute a breach or default, or permit termination,
modification, or acceleration, under the agreement; and (D) no party has
repudiated any provision of the agreement.
(q) Accounts Receivable. All accounts receivable of CR (whether
open book or reflected in any promissory note or other debt instrument) are
reflected properly on their books and records, are valid receivables subject to
no setoffs or counterclaims, are current and collectible, and will be collected
in accordance with their terms at their recorded amounts, subject only to the
reserves for bad debts, sales allowances and other accrued liabilities related
to customer credits set forth on the face of the balance sheet for the Most
Recent Fiscal Month End, as adjusted for the passage of time through the Closing
Date in accordance with the past custom and practice of Seller. For purposes of
this Agreement, an account receivable shall not be deemed uncollectible until
120 days after the date of the invoice giving rise to such account
(r) Powers of Attorney. There are no outstanding powers of
attorney executed on behalf of Seller that would affect the Acquired Assets.
(s) Insurance. ss.3(s) of the Disclosure Schedule sets forth the
following information with respect to each insurance policy (including policies
providing property, casualty, liability, and workers' compensation coverage and
bond and surety arrangements) to which Seller is presently a party, a named
insured, or otherwise the beneficiary of coverage Relating to CR:
(i) the name, address, and telephone number of the agent;
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(ii) the name of the insurer, the name of the policyholder,
and the name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the
coverage was on a claims made, occurrence, or other basis) and amount (including
a description of how deductibles and ceilings are calculated and operate) of
coverage; and
(v) a description of any retroactive premium adjustments or
other loss-sharing arrangements.
Such insurance policies are sufficient for compliance with all requirements of
law and of all agreements relating to the CR business and insure the CR business
against such casualties and contingencies in such amounts, types and forms as
are appropriate for the CR business and as are usual and customary in the
industry of which it is a part.
(t) Litigation. Except in connection with the Bankruptcy
Proceeding, ss.3(t) of the Disclosure Schedule sets forth each instance Relating
to CR in which Seller (i) is subject to any outstanding injunction, judgment,
order, decree, ruling, or charge or (ii) is a party or, to the Knowledge of
Seller, is threatened to be made a party to any action, suit, proceeding,
hearing, or investigation of, in, or before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator. None of the actions, suits, proceedings, hearings, and
investigations set forth in ss.3(t) of the Disclosure Schedule could result in
any material adverse change in the business, financial condition, operations,
results of operations, or future prospects of CR. To the Knowledge of Seller,
there is no reason to believe that any such action, suit, proceeding, hearing,
or investigation may be brought or threatened against the Acquired Assets or
Buyer, as successor to Seller.
(u) Product Liability. To the Knowledge of Seller, Seller has no
Liability (and to the Knowledge of Seller there is no Basis for any present or
future action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand against any of them giving rise to any Liability) arising out
of any injury to individuals or property as a result of the ownership,
possession, or use of any service or product sold, leased, or delivered by CR.
(v) Employees. Except as set forth in ss.3(v) of the Disclosure
Schedule, to the Knowledge of Seller, no executive, key employee, or group of
employees working in the CR business has any plans to terminate employment with
Seller other than to be employed by Buyer if hired by Buyer. Seller is not a
party to or bound by any collective bargaining agreement, nor has Seller
experienced any strikes, grievances, claims of unfair labor practices, or other
collective bargaining disputes relating to CR. To the Knowledge of Seller,
Seller has not committed any unfair labor practice Relating to the CR business.
To the Knowledge of Seller, no organizational effort is presently being made or
threatened by or on behalf of any labor union with respect to employees of CR.
(w) Employee Benefits.
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(i) ss.3(w) of the Disclosure Schedule lists each Employee
Benefit Plan that Seller maintains, to which Seller contributes or has any
obligation to contribute, or with respect to which Seller has any material
Liability or potential Liability Relating to CR.
(A) To the Knowledge of Seller, each such Employee
Benefit Plan (and each related trust, insurance contract, or fund) has been
maintained, funded and administered in accordance with the terms of such
Employee Benefit Plan and, to the Knowledge of Seller. complies in form and in
operation in all material respects with the applicable requirements of ERISA,
the Code, and other applicable laws.
(B) To the Knowledge of Seller, each such Employee
Benefit Plan (and each related trust, insurance contract, or fund) has been
maintained, funded and administered in accordance with the terms of such
Employee Benefit Plan and, to the Knowledge of Seller, complies in form and in
operation in all material respects with the applicable requirements of ERISA,
the Code, and other applicable laws.
(C) At Closing, neither Buyer nor the Acquired Assets
shall be subject to any claims arising out of any such Employee Benefit Plan and
there is no Basis for such a claim.
(D) Seller has delivered to Buyer correct and complete
copies of the plan documents and summary plan descriptions, the most recent
determination letter received from the Internal Revenue Service, the most recent
annual report (IRS Form 5500, with all applicable attachments), and all related
trust agreements, insurance contracts, and other funding arrangements which
implement each such Employee Benefit Plan.
(x) Environmental, Health, and Safety Matters.
(i) To the Knowledge of Seller, Seller has complied and is in
compliance in all material respects with all Environmental, Health, and Safety
Requirements Relating to CR.
(ii) Without limiting the generality of the foregoing, to the
Knowledge of Seller, Seller has obtained and complied with, and is in compliance
with, all permits, licenses, plans and other authorizations that are required
pursuant to Environmental, Health, and Safety Requirements for the occupation of
the CR facilities and the operation of the CR business; a list of all such
permits, licenses and other authorizations is set forth on the attached
"Environmental and Safety Permits Schedule."
(iii) Seller has not received any written or oral notice,
report or other information regarding any actual or alleged material violation
of Environmental, Health, and Safety Requirements, or any material liabilities
or potential material liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise), including any investigatory, remedial or corrective
obligations, relating to Seller or the CR facilities arising under
Environmental, Health, and Safety Requirements.
(iv) To the Knowledge of Seller, none of the following exists
at any of the Leased Real Property: (1) underground storage tanks,
(2) asbestos-containing material in any
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form or condition, (3) materials or equipment containing polychlorinated
biphenyls, or (4) landfills, surface impoundments, or disposal areas.
(v) Except as set forth in ss.3(x)(v) of the Disclosure
Schedule, Seller has not treated, stored, disposed of, arranged for or permitted
the disposal of, transported, handled, or released any substance, including
without limitation any hazardous substance, or owned or operated any property or
facility used in connection with the CR business, including the Leased Real
Property, (and no such property or facility is contaminated by any such
substance) in a manner that has given or would give rise to material
liabilities, including any material liability for response costs, corrective
action costs, personal injury, property damage, natural resources damages or
attorney fees, pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), the Solid Waste
Disposal Act, as amended ("SWDA") or any other Environmental, Health, and Safety
Requirements.
(vi) Neither this Agreement nor the consummation of the
transaction that is the subject of this Agreement will result in any material
obligations for site investigation or cleanup, or notification to or consent of
government agencies or third parties, pursuant to any of the so-called
"transaction-triggered" or "responsible property transfer" Environmental,
Health, and Safety Requirements.
(vii) Seller has not, either expressly or by operation of
law, assumed or undertaken any liability affecting the Acquired Assets,
including without limitation any obligation for corrective or remedial action,
of any other Person relating to Environmental, Health, and Safety Requirements,
which liability would become a liability of Buyer or affect the Acquired Assets
after Closing.
(viii) To the Knowledge of Seller, no facts, events or
conditions relating to the past or present CR facilities, properties or
operations of Seller will prevent, hinder or limit continued compliance with
Environmental, Health, and Safety Requirements, give rise to any investigatory,
remedial or corrective obligations pursuant to Environmental, Health, and Safety
Requirements, or give rise to any other liabilities (whether accrued, absolute,
contingent, unliquidated or otherwise) pursuant to Environmental, Health, and
Safety Requirements, including without limitation any relating to onsite or
offsite releases or threatened releases of hazardous materials, substances or
wastes, personal injury, property damage or natural resources damage.
(y) Certain Business Relationships. Except to the extent that
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and/or ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ are deemed Affiliates of Seller, none of
Seller's Affiliates owns any asset, tangible or intangible, which is used in the
CR business and which is not included in the Acquired Assets.
(z) Disclosure. The representations and warranties contained in
this ss.3 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this ss.3 not misleading.
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4. Representations and Warranties of Buyer. Buyer represents and
warrants to Seller that the statements contained in this ss.4 are correct and
complete as of the date of this Agreement and will be correct and complete as of
the Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this ss.4), except as set
forth in the Disclosure Schedule. The Disclosure Schedule will be arranged in
paragraphs corresponding to the lettered and numbered paragraphs contained in
this ss.4.
(a) Organization of Buyer. Buyer is a corporation duly organized,
validly existing, and in good standing under the laws of the jurisdiction of its
incorporation.
(b) Authorization of Transaction. Buyer has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of Buyer, enforceable in
accordance with its terms and conditions.
(c) Noncontravention. Neither the execution and the delivery of
this Agreement, nor, upon entry of the Approval Order, the consummation of the
transactions contemplated hereby (including the assignments and assumptions
referred to in ss.2 above), will (i) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which Buyer is
subject or any provision of its charter or bylaws or (ii) conflict with, result
in a breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify, or cancel, or
require any notice under any agreement, contract, lease, license, instrument, or
other arrangement to which Buyer is a party or by which it is bound or to which
any of its assets is subject. Except for the necessity of the Approval Order,
Buyer does not need to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency in
order for the Parties to consummate the transactions contemplated by this
Agreement (including the assignments and assumptions referred to in ss.2 above).
(d) Brokers' Fees. Buyer has no Liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which Seller could become liable
or obligated.
(e) Payments. Except for the Management Incentives, neither Buyer
nor any Affiliate of Buyer nor any officer, director, employee or agent thereof
has, directly or indirectly, paid or delivered, offered to pay or deliver, or
agreed to pay or deliver any fee, commission or other sum of money or item of
property, however characterized, to any person that is now or was previously an
affiliate or insider (as those terms are defined in the Bankruptcy Code) of
Seller.
(f) Adequate Assurance. Buyer has available to it all amounts
necessary to allow Buyer to pay the Purchase Price in cash on the Closing Date.
5. Pre-Closing Covenants. The Parties agree as follows with respect
to the period between the execution of this Agreement and the Closing.
(a) General. Each of the Parties will use its reasonable best
efforts to take all action and to do all things necessary, proper, or advisable
in order to consummate and make
-23-
effective the transactions contemplated by this Agreement (including
satisfaction, but not waiver, of the closing conditions set forth in ss.6
below).
(b) Notices and Consents. Seller will give any notices to third
parties, and Seller will use its reasonable best efforts to obtain any third
party consents, that Buyer reasonably may request in connection with the matters
referred to in ss.3(c) above. As to those matters for which a notice or consent
would not be required because the matters have been covered by the Approval
Order or the matters have been expressly covered in the Disclosure Schedules,
Buyer will not request a third party consent. Each of the Parties will give any
notices to, make any filings with, and use its reasonable best efforts to obtain
any authorizations, consents, and approvals of governments and governmental
agencies in connection with the matters referred to in ss.3(c) and ss.4(c)
above.
(c) Operation of Business. Seller will not engage in any practice,
take any action, or enter into any transaction Relating to CR outside the
Ordinary Course of Business.
(d) Preservation of Business. Seller will keep the CR business and
properties substantially intact, including its present operations, physical
facilities, working conditions, and relationships with lessors, licensors,
suppliers, customers, and employees.
(e) Full Access. Seller will permit representatives of Buyer to
have full access at all reasonable times, and in a manner so as not to interfere
with the normal business operations of Seller, to all premises, properties,
personnel, books, records (including Tax records), contracts, and documents of
or pertaining to the CR business.
(f) Notice of Developments. Each Party will give prompt written
notice to the other Party of any material adverse development causing a breach
of any of its own representations and warranties in ss.3 and ss.4 above. No
disclosure by any Party pursuant to this ss.5(f), however, shall be deemed to
amend or supplement the Disclosure Schedule or to prevent or cure any
misrepresentation, breach of warranty, or breach of covenant.
(g) Leases. Seller shall not amend, modify, extend, renew or
terminate any Lease used in connection with the CR business, nor shall Seller
enter into any new lease, sublease, license or other agreement for the use or
occupancy of any real or personal property to be used in connection with the CR
business, without the prior written consent of Buyer.
(h) Employees. Seller shall allow Buyer full access to Seller's
employees working in the CR business for the purpose of pre-employment
interviews. Buyer may, but shall not be obligated to, hire any or all of such
employees, effective at the Closing. The employees so hired by Buyer at Closing
are hereinafter referred to as "Transferring Employees." Seller shall comply
with any applicable requirements of the federal Worker Adjustment and Retraining
Notification Act of 1988 ("WARN Act") and any applicable requirements of similar
State laws, if any, in connection with or arising out of the transactions
contemplated by this Agreement. Seller shall indemnify, defend and hold harmless
Buyer for any obligations of Seller under the WARN Act or any similar State law.
Notwithstanding anything contained to the contrary set forth herein, Buyer
agrees that it will employ not less than 349 of Seller's employees who are
employed in the CR business on the date of this Agreement.
-24-
(i) Sale Motion; Buyer Protection and Bidding Procedures Order.
Promptly following, the execution of this Agreement, but, except with the
written consent of Buyer, which consent shall not be unreasonably withheld, no
earlier than March 12, 2002, and no later than March 18, 2002, Seller shall file
with the Bankruptcy Court the Sale Motion and such other motions as are
necessary to implement the transaction contemplated hereby. Seller shall request
a prompt hearing relative to, and shall use its best efforts to obtain, entry of
the Buyer Protection and Bidding Procedures Order and the Sale Order.
(j) Executory Contracts. Subject to the approval of this Agreement
by the Bankruptcy Court and pursuant to the Executory Contract Assumption and
Assignment Order, the Executory Contracts will be assumed by Seller and assigned
to Buyer on the Closing Date under ss.365 of the Bankruptcy Code ("Assumed
Contracts"). Seller shall, consistent with its current financial condition and
the Bankruptcy Code and pursuant to any order of the Bankruptcy Court, use its
best efforts to promptly comply with and perform any obligations under the
Executory Contracts arising from and after the date hereof and through the
Closing Date. In the Sale Motion, or in such additional or subsequent motions as
may be appropriate, Seller will seek authority to assume and assign the
Executory Contracts to Buyer in accordance with ss.365 of the Bankruptcy Code.
All Executory Contracts shall be assigned to and assumed by Buyer at Closing.
Seller shall be responsible for the payment of all cure payments with respect to
any Executory Contracts.
(k) Approval.
(i) Seller shall use its best efforts to obtain Bankruptcy
Court approval of the Sale Order which, among other things, will contain
findings of fact and conclusions of law (i) finding that this Agreement was
proposed by the Parties in good faith and represents the highest and best offer
for the Acquired Assets and should be approved; (ii) finding that Buyer is a
good faith purchaser under ss. 363(m) of the Bankruptcy Code and that the
provisions of ss.363(n) of the Bankruptcy Code have not been violated; (iii)
authorizing and directing Seller to enter into this Agreement and sell only the
Acquired Assets to Buyer pursuant to this Agreement and ▇▇.▇▇. 363 and 365 of
the Bankruptcy Code, free and clear of all liens, claims, interests, liabilities
and encumbrances (including any and all "interests" in the Acquired Assets
within the meaning of ss. 363(f) of the Bankruptcy Code), other than the Assumed
Liabilities, such that Buyer shall not incur any liability as a successor to the
CR business; (iv) authorizing and directing Seller to execute, deliver, perform
under, consummate and implement, this Agreement, together with all additional
instruments and documents that may be reasonably necessary or desirable to
implement the foregoing; (v) finding that Buyer is not a successor in interest
to Seller or otherwise liable for any liability other than Assumed Liabilities,
(vi) finding that Buyer's acquisition of the Acquired Assets and assumption of
the Assumed Liabilities does not reflect a significant continuity of the
business of the debtor and permanently enjoining each and every holder of a
liability other than an Assumed Liability from commencing, continuing or
otherwise pursuing or enforcing any remedy, claim or cause of action against
Buyer relative to such liability; and (vii) directing the Seller, at the
direction of the Buyer, to immediately consummate the sale of the Acquired
Assets without awaiting the expiration of any applicable time period for
appealing the Sale Order;
-25-
(ii) Seller shall use its best efforts to obtain Bankruptcy
Court approval of the Executory Contract Assumption and Assignment Order.
(iii) Seller shall use its best efforts to obtain Bankruptcy
Court approval of the Buyer Protection and Bidding Procedures Order which, among
other things, (i) approves and makes binding the Seller's entry into this
Agreement, (ii) approves the Break-Up Fee, (iii) provides that Buyer's claim to
the Break-Up Fee shall be entitled to treatment in the Bankruptcy Case in the
event the Seller elects to sell the Acquired Assets to a Qualified Bidder,
constitute a first priority lien against and be paid out of the proceeds of the
sale to such Qualified Bidder, (iv) establishes a date by which initial
Qualified Bids must be submitted, (v) establishes the sale hearing procedures
for an auction at which only Qualified Bidders who have previously submitted a
Qualified Bid may bid, (vi) sets a minimum incremental bid amount at $250,000
each bid in excess of the first Qualified Bid and (vii) requires Seller to
promptly provide a copy of any Qualified Bid to Buyer and to any Qualified
Bidder who has submitted a Qualified Bid;
(iv) Seller shall promptly make any filings, take all
actions, and use its best efforts to obtain any and all other approvals and
orders necessary or appropriate for consummation of the transaction contemplated
hereby, subject to its obligations to comply with any order of the Bankruptcy
Court;
(v) In the event an appeal is taken, or a stay pending appeal
is requested, from the Sale Order, the Executory Contract Assumption and
Assignment Order or the Buyer Protection and Bidding Procedures Order, Seller
shall immediately notify Buyer of such appeal or stay request and shall provide
to Buyer within one (1) business day a copy of the related notice of appeal or
order of stay. Seller shall also provide Buyer with written notice of any motion
or application filed in connection with any appeal from either of such orders;
and
(vi) Buyer shall cooperate in providing such information and
evidence as is necessary to obtain the orders described in this ss.5(k).
(l) Exclusivity. Except as may be required by the Bankruptcy Code
or any other applicable law, Seller will not directly or indirectly solicit or
enter into discussions regarding a Competing Proposal; provided, however, that
notwithstanding the foregoing, after entry of the Buyer Protection and Bidding
Procedures Order, Seller shall be entitled to give such notice of the Buyer
Protection and Bidding Procedures Order as the Bankruptcy Court requires to
respond to and discuss any Competing Proposals from a Qualified Bidder, to
provide information, including due diligence materials, to Qualified Bidders and
to negotiate and discuss any Qualified Bid or as required to allow Seller to
satisfy its fiduciary duties in accordance with the advice of Seller's counsel,
provided, further, however, that Seller shall provide Buyer with copies of all
Competing Proposals and other related communications received from third parties
within one business day after Seller's receipt thereof. Nothing in this section
shall require the divulgence of the identity of any third party making a
Competing Proposal in violation of any confidentiality agreement with such third
party.
(m) Allocation Schedule. On or before the Closing Date, Buyer and
Seller shall jointly complete the allocation schedule to be attached hereto as
Exhibit E, as contemplated in ss.2(f) of this Agreement.
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6. Conditions to Obligation to Close.
(a) Conditions to Obligation of Buyer. The obligation of Buyer to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in ss.3
above shall be true and correct in all material respects at and as of the
Closing Date;
(ii) Seller shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(iii) Seller shall have procured all of the third party
consents specified in ss.5(b) above;
(iv) Seller shall have delivered to Buyer a certificate to
the effect that each of the conditions specified above in ss.6(a)(i)-(iii) is
satisfied in all respects;
(v) no action, suit, or proceeding shall be pending before
any court or quasi-judicial or administrative agency of any federal, state,
local, or foreign jurisdiction wherein an unfavorable injunction, judgment,
order, decree, ruling, or charge would or could (A) prevent consummation of any
of the transactions contemplated by this Agreement, (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation or (C) affect adversely the right of Buyer to own the Acquired
Assets or to operate the CR business;
(vi) Seller shall have obtained the Approval Order in form
and substance reasonably satisfactory to Buyer and no stay has been granted
pending any appeal of the Approval Order. Without limiting the foregoing, the
Approval Order shall specifically provide that:
(A) the Parties have acted in good faith in the
negotiation and consummation of this Agreement;
(B) the Seller is authorized and directed to execute,
deliver, perform under, consummate and implement, this Agreement, together with
all additional instruments and documents that may be reasonably necessary or
desirable to implement the foregoing;
(C) the Acquired Assets shall be sold and transferred to
Buyer and when so sold and transferred shall be free and clear of all claims,
interests, liens or Security Interests such that Buyer shall not incur any
liability as a successor in interest to Seller or a successor to the CR
business, and, that with respect to Leases or contracts which are assumed by
Seller and transferred to Buyer, Buyer shall be obligated under the terms and
conditions of such Leases or contracts only by reason of the occupancy by Buyer
of Real Property or the use by Buyer of personal property or services after the
Closing;
(D) each and every holder of any claim or liability
other than the Assumed Liabilities is permanently enjoined from commencing,
continuing or otherwise
-27-
pursuing or enforcing any remedy, claim or cause of action against Buyer
relative to such claim or liability;
(E) Buyer and Seller, jointly, shall reasonably estimate
the tax claims that could be asserted in connection with the transfer of the
Acquired Assets to Buyer under any applicable state or local law imposing a
stamp, transfer, sales or use tax, or similar tax (the "Section 1146(c) Taxes)
and Seller and Buyer shall each contribute 50% of the amount of such estimated
Section 1146(c) Taxes to a neutral commercial escrow pending entry of an order
confirming a plan of reorganization in the Bankruptcy Proceedings, at which time
the transfer of the Acquired Assets shall not be subject to taxation under any
state or local law imposing any such tax in accordance with Sections 1146(b) and
105(a) of the Bankruptcy Code and the escrowed funds shall be released back to
the Buyer and Seller. Interest earned on such escrowed funds in excess of the
fees of such escrow holder shall be divided equally between Buyer and Seller. In
the event of a subsequent assertion of liability for any such Section 1146(c)
Taxes, against Buyer or Seller, the Party receiving notice of such assertion
shall promptly notify the other of such assertion. Buyer and Seller shall
cooperate with each other to defend against such assertion and any amount
thereof determined to be due, together with all costs of defense (including
reasonable attorneys and accountants fees and costs) shall be borne equally by
Buyer and Seller.
(vii) Seller and each of ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ shall have entered into releases of each of their employment
agreements with Seller and shall have entered into Employment Agreements with
Buyer in form and substance as set forth in Exhibits G-1 through G-3 attached
hereto and the same shall be effective at the Closing.
(viii) Seller shall have terminated its employment of all
Transferring Employees and shall have paid to such Transferring Employees all
sums owed with respect to salaries, commissions, vacation, sick pay or paid time
off accruals, deferred compensation and all other amounts owing to such
Transferring Employees.
(ix) Seller shall have assumed and assigned to Buyer as of
the Closing Date, pursuant to Section 365 of the Bankruptcy Code, all of Assumed
Contracts. On or prior to the Closing Date, Seller shall have cured all defaults
under the Assumed Contracts to the extent required under Section 365(b) of the
Bankruptcy Code and this Agreement.
(x) Seller shall have delivered an instrument of quitclaim
to, and transfer in form and substance satisfactory to Buyer delivering and
surrendering to Buyer possession of all tangible personal property included in
the Acquired Assets, with respect to which Buyer has not agreed to assume a
lease or other contract governing such tangible personal property, together with
Seller's written consent allowing the lessor, vendor or other party such lease
or contract, and Buyer to enter into new leases or other contracts.
(xi) Seller's Stockholder shall have executed the
Noncompetition Agreement and Guaranty in the form of Exhibit K.
Buyer may waive any condition specified in this ss.6(a) if it executes a writing
so stating at or prior to the Closing.
-28-
(b) Conditions to Obligation of Seller. The obligation of Seller
to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in ss.4
above shall be true and correct in all material respects at and as of the
Closing Date;
(ii) Buyer shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(iii) Buyer shall have delivered to Seller a certificate to
the effect that each of the conditions specified above in ss.6(b)(i)-(iii) is
satisfied in all respects;
(iv) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would (A) prevent
consummation of any of the transactions contemplated by this Agreement or (B)
cause any of the transactions contemplated by this Agreement to be rescinded
following consummation (and no such injunction, judgment, order, decree, ruling,
or charge shall be in effect);
(v) all actions to be taken by Buyer in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to
Seller.
Seller may waive any condition specified in this ss.6(b) if it executes a
writing so stating at or prior to the Closing.
7. Termination.
(a) Termination of Agreement. Buyer and/or Seller may terminate
this Agreement as provided below:
(i) Buyer and Seller may terminate this Agreement by mutual
written consent at any time prior to the Closing;
(ii) Buyer may terminate this Agreement by giving written
notice to Seller at any time prior to the Closing (A) in the event that Seller
has breached any material representation, warranty, or covenant contained in
this Agreement in any material respect, Buyer has notified Seller of the breach,
and the breach has continued without cure for a period of 10 days after the
notice of breach or (B) if the Closing shall not have occurred on or before May
31, 2002, by reason of the failure of any condition precedent under ss.6(a)
hereof (unless the failure results primarily from Buyer itself breaching any
representation, warranty, or covenant contained in this Agreement); and
(iii) Seller may terminate this Agreement by giving written
notice to Buyer at any time prior to the Closing (A) in the event Buyer has
breached any material
-29-
representation, warranty, or covenant contained in this Agreement in any
material respect, Seller has notified Buyer of the breach, and the breach has
continued without cure for a period of 10 days after the notice of breach or (B)
if the Closing shall not have occurred on or before May 31, 2002, by reason of
the failure of any condition precedent under ss.6(b) hereof (unless the failure
results primarily from Seller itself breaching any representation, warranty, or
covenant contained in this Agreement).
(b) Effect of Termination. If any Party terminates this Agreement
pursuant to ss.7(a) above, all rights and obligations of the Parties hereunder
shall terminate without any Liability of any Party to any other Party, except
for any Liability of any Party then in breach, and except for the liability of
Seller to pay the Break-Up Fee, if accrued pursuant to the provisions of ss.8(o)
below.
8. Miscellaneous.
(a) Press Releases and Public Announcements. No Party shall issue
any press release or make any public announcement relating to the subject matter
of this Agreement prior to the Closing without the prior written approval of the
other Party; provided, however, that Seller may make any public disclosure it
believes in good faith is required by applicable law or any listing or trading
agreement concerning its publicly-traded securities (in which case Seller will
use its reasonable best efforts to advise Buyer prior to making the disclosure).
(b) No Third-Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
(c) Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement between the Parties and
supersedes any prior understandings, agreements, or representations by or
between the Parties, written or oral, to the extent they relate in any way to
the subject matter hereof.
(d) Succession and Assignment. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of the other Party; provided, however, that Buyer may (i) assign any or
all of its rights and interests hereunder to one or more of its Affiliates and
(ii) designate one or more of its Affiliates to perform its obligations
hereunder (in any or all of which cases the Buyer nonetheless shall remain
responsible for the performance of all of its obligations hereunder).
(e) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(f) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
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(g) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to Seller: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
President and Chief Executive Officer
Lason, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
With a copy to: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
If to Buyer: ▇▇. ▇▇▇▇ ▇▇▇▇
ARC Acquisition Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
With a copy to: ▇▇▇▇ ▇. ▇▇▇▇, Esq.
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, Marcus, ▇▇▇▇▇▇ & ▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, ordinary mail, or electronic mail), but no such notice, request,
demand, claim, or other communication shall be deemed to have been duly given
unless and until it actually is received by the intended recipient. Any Party
may change the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Party notice in
the manner herein set forth.
(h) Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of California
without giving effect to any choice or conflict of law provision or rule
(whether of the State of California or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
California.
(i) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by Buyer
and Seller. Seller may consent to any such amendment at any time prior to the
Closing with the prior authorization of its board of directors. No waiver by any
Party of any default, misrepresentation, or breach of warranty or covenant
hereunder, whether intentional or not, shall be deemed to extend to any prior or
subsequent default, misrepresentation, or breach of warranty or covenant
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hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.
(j) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(k) Expenses. Each of Buyer and Seller will bear its own costs and
expenses (including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby. Without limiting the
generality of the foregoing, all Taxes, and all conveyance fees, and other fees
and charges (including any penalties and interest) incurred in connection with
the consummation of the transactions contemplated by this Agreement), shall be
paid by Seller when due, and Seller will, at its own expense, file all necessary
Tax Returns and other documentation with respect to all such Taxes, fees and
charges, if required by applicable law.
(l) Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state or local
statute or law shall be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise. The word
"including" shall mean including without limitation. Nothing in the Disclosure
Schedule shall be deemed adequate to disclose an exception to a representation
or warranty made herein unless the Disclosure Schedule identifies the exception
with reasonable particularity and describes the relevant facts in reasonable
detail. Without limiting the generality of the foregoing, the mere listing (or
inclusion of a copy) of a document or other item shall not be deemed adequate to
disclose an exception to a representation or warranty made herein (unless the
representation or warranty has to do with the existence of the document or other
item itself). The Parties intend that each representation, warranty, and
covenant contained herein shall have independent significance. If any Party has
breached any representation, warranty, or covenant contained herein in any
respect, the fact that there exists another representation, warranty, or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) which the Party has not breached shall not detract from or
mitigate the fact that the Party is in breach of the first representation,
warranty, or covenant.
(m) Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
(n) Break-Up Fee. In recognition of the great cost and expense
undertaken by Buyer to prepare this Agreement and to investigate the assets and
business relating to CR without assurance that Buyer will be permitted to
purchase the Acquired Assets and in recognition that this Agreement is of
immediate benefit to Seller in facilitating Seller's efforts to obtain the
highest and best price notwithstanding the risks to Buyer, Seller agrees that in
the event that Seller sells or otherwise transfers all or a substantial part of
the assets constituting or used in the CR business to a party other than Buyer
(or an Affiliate of Buyer) pursuant to the
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applicable provisions of the United States Bankruptcy Code, other than by reason
of a breach of this Agreement by Buyer, Seller shall forthwith thereafter pay to
Buyer, in immediately available funds, the sum of $1,250,000, and shall further
reimburse Buyer for all reasonable costs and expenses not exceeding $500,000,
incurred in connection with the negotiation of this transaction and
investigations relating to CR, including, without limitation fees and expenses
of lenders, accountants, attorneys and other advisors. Payment of the Break Up
Fee shall be super priority administrative expense over all other administrative
claims under Sections 503 and 507(a)(1) of the Bankruptcy Code.
9. Remedies for Breaches of This Agreement.
(a) Survival of Representations and Warranties.
All of the representations and warranties of the Parties contained in
ss.3(a)-(j) and ss.3(l)-(z) above, and in ss.4 shall survive the Closing
hereunder and continue in full force and effect for a period of eighteen (18)
months thereafter. All of the representations and warranties of the Seller
contained in ss.3(k) relating to Taxes shall survive the Closing and continue in
full force and effect until 30 days following the expiration of the statute of
limitations (including extensions) applicable to the particular Tax about which
the representations and warranties are made.
(b) Indemnification of Buyer.
(i) In the event that Seller breaches (or in the event any
third party alleges facts that, if true, would mean that Seller has breached)
any of Seller's representations, warranties, and covenants contained herein,
and, if there is an applicable survival period pursuant to ss.9(a) above,
provided that Buyer makes a written claim for indemnification against Seller
pursuant to ss.9(h) below within such survival period, then Seller shall
indemnify, defend and hold harmless Buyer from and against the entirety of any
Adverse Consequences Buyer may suffer through and after the date of Buyer's
written claim for indemnification (including any Adverse Consequences Buyer may
suffer after the end of any applicable survival period) resulting from, arising
out of, relating to, in the nature of, or caused by the breach (or the alleged
breach). For the avoidance of doubt, a claim for a breach of the representations
and warranties of Seller under ss.3(q) hereof relating to accounts receivable of
CR may only be made for the amount, if any, by which the aggregate uncollectible
receivables exceeds the amount of the reserve for bad debts referred to in such
ss.3(q).
(ii) Seller agrees to indemnify, defend and hold harmless
Buyer from and against the entirety of any Adverse Consequences the Buyer may
suffer resulting from, arising out of, relating to, in the nature of, or caused
by any Liability for any Taxes Relating to CR with respect to any Tax year or
portion thereof ending on or before the Closing Date (or for any Tax year
beginning before and ending after the Closing Date to the extent allocable to
the portion of such period beginning before and ending on the Closing Date).
(iii) Notwithstanding anything contained in this Agreement to
the contrary, Seller's maximum aggregate liability under this ss.9(b) shall not
exceed $7,500,000.
(c) Limitation on Indemnities. No indemnification payable by an
indemnifying party hereunder shall be required from such indemnifying party
until the aggregate
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amount of losses incurred by the indemnified party exceed $75,000 and in the
event that indemnified party's damages exceed $75,000 in the aggregate from one
or more claims, the indemnifying party's indemnity obligations will be for
indemnification of amounts of the indemnified party's damages in excess of the
initial $75,000.
(d) Indemnification of Seller. In the event that Buyer breaches
(or in the event any third party alleges facts that, if true, would mean that
Buyer has breached) any of its representations, warranties, and covenants
contained herein, and provided that Seller makes a written claim for
indemnification against Buyer pursuant to ss.9(h) below within the applicable
survival period set forth in ss.9(a), then the Buyer agrees to indemnify, defend
and hold harmless Seller from and against the entirety of any Adverse
Consequences that Seller may suffer through and after the date of Seller's
written claim for indemnification (including any Adverse Consequences Seller may
suffer after the end of any applicable survival period) resulting from, arising
out of, relating to, in the nature of, or caused by the breach (or the alleged
breach).
(e) Matters Involving Third Parties.
(i) If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a "Third Party Claim") which
may give rise to a claim for indemnification against any other Party (the
"Indemnifying Party") under this ss.9, then the Indemnified Party shall promptly
notify the Indemnifying Party thereof in writing; provided, however, that no
delay on the part of the Indemnified Party in notifying the Indemnifying Party
shall relieve the Indemnifying Party from any obligation hereunder unless (and
then solely to the extent) the Indemnifying Party thereby is prejudiced.
(ii) The Indemnifying Party will have the right to assume the
defense of the Third Party Claim with counsel of its choice reasonably
satisfactory to the Indemnified Party at any time within 15 days after the
Indemnified Party has given notice of the Third Party Claim; provided, however,
that the Indemnifying Party must conduct the defense of the Third Party Claim
actively and diligently thereafter in order to preserve its rights in this
regard; and provided further that the Indemnified Party may retain separate
co-counsel at its sole cost and expense and participate in the defense of the
Third Party Claim.
(iii) So long as the Indemnifying Party has assumed and is
conducting the defense of the Third Party Claim in accordance with ss.9(d)(ii)
above, (A) the Indemnifying Party will not consent to the entry of any judgment
or enter into any settlement with respect to the Third Party Claim without the
prior written consent of the Indemnified Party (not to be withheld unreasonably)
unless the judgment or proposed settlement involves only the payment of money
damages by the Indemnifying Party and does not impose any injunctions or other
equitable relief upon the Indemnified Party and (B) the Indemnified Party will
not consent to the entry of any judgment or enter into any settlement with
respect to the Third Party Claim without the prior written consent of the
Indemnifying Party (not to be withheld unreasonably).
(iv) In the event that the Indemnifying Party does not assume
and conduct the defense of the Third Party Claim in accordance with ss.9(d)(ii)
above, however, (A) the Indemnified Party may defend against, and consent to the
entry of any judgment or enter into any settlement with respect to, the Third
Party Claim in any manner it reasonably may deem
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appropriate (and the Indemnified Party need not consult with, or obtain any
consent from, any Indemnifying Party in connection therewith) and (B) the
Indemnifying Parties will remain responsible for any Adverse Consequences the
Indemnified Party may suffer resulting from, arising out of, relating to, in the
nature of, or caused by the Third Party Claim to the fullest extent provided in
this ss.9.
(f) Determination of Adverse Consequences. The Parties shall take
into account the time cost of money (using the Applicable Rate as the discount
rate) in determining Adverse Consequences for purposes of this ss.9. All
indemnification payments under this ss.9 shall be deemed adjustments to the
Purchase Price.
(g) Other Indemnification Provisions. Subject to the limitations
contained in ss.9(a), (b)(iii) and (c), the foregoing indemnification
provisions are in addition to, and not in derogation of, any statutory,
equitable, or common law remedy (including without limitation any such remedy
arising under Environmental, Health, and Safety Requirements) that Buyer may
have with respect to Seller. The foregoing indemnification provisions are in
addition to any specific remedies granted to Buyer pursuant to ss.10 below and
such remedies are subject only to the limitations contained in ss.10.
(h) No Consequential Damages. Notwithstanding anything contained
in this Agreement to the contrary, neither Party shall be liable to the other,
any other person, for indirect, special, incidental, consequential, exemplary or
punitive damages or lost profits or business arising out or related to this
Agreement, or to the performance or breach of any of the warranties,
representations or covenants contained in this Agreement.
10. Covenant not to Compete; Confidentiality.
(a) Noncompetition.
(i) Seller will not, at any time within the five (5) year
period following the Closing (the "Restricted Period"), directly engage in, or
have any interest in, any firm, corporation or business (whether as an agent,
partner, security holder, creditor, owner, employee, consultant, consulting firm
or otherwise) that engages in, or otherwise assist in, any Prohibited Activity,
as that term is defined below, in the Territory, as that term is defined below,
provided, however, that ownership of less than 1% of the outstanding stock of
any publicly-traded corporation shall not be deemed to be an engagement in any
of its businesses solely by reason of such ownership. For the purpose of this
ss.10, "Prohibited Activity" shall mean:
(A) Any activity after the Closing that is the same as,
similar to, or competitive with any CR business activity including, without
limit any business which provides reprographic services to the engineering,
architecture and construction industries (including marketing or sales efforts)
provided, however, that Seller shall not be prohibited from engaging in the
business of small format image capture (such as scanning) not involving hard
copy output and services related to the provision of off-shore data capture and
entry work;
(B) Consulting with, being employed by or acting as an
agent for any prior or existing customer or competitor of the CR business with
respect to those activities specified in clause (A) above; and
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(C) Inducing or attempting to persuade any person who is
then, or at any time during the previous six (6) months has been, a CR employee,
sales representative, consultant, customer or supplier to terminate or curtail
his, her or its present or prospective relationship with Buyer as successor to
the CR business.
(ii) Territory. For purposes of this ss.10, the "Territory"
shall constitute the portions of each city, county, municipality or similar
geographic subdivision in each of the states of the United States lying within a
35 mile radius of each place where the CR business is conducted on the date of
this Agreement or on the Closing Date.
(iii) Reasonableness. Seller agrees that the covenants
contained in clauses of ss.10(a) above, including the terms of the covenants and
the geographical areas encompassed within the Territory, are necessary and
reasonable in order to protect Buyer in the conduct of the CR business and the
utilization of its assets, tangible and intangible, including goodwill, and to
preserve and protect the Acquired Assets, including goodwill, and the customers
and trade secrets Relating to CR of which Seller has and will have knowledge.
(iv) Severability. The Parties intend that the covenants
contained in ss.10(a) above shall be construed as a series of separate,
identical covenants, one for each city, county, municipality, or similar
geographic subdivision covered by the Territory. The scope, geographic limit,
and duration of each such separate covenant shall be enforced to the fullest
extent permitted by law. The invalidity of any one such covenant, or any
provision of this Agreement, shall not affect the validity of the remaining such
covenants or this Agreement as a whole, all of which shall remain in full force
and effect.
(b) Non-Disclosure. Seller shall not, at any time, reveal to any
person or entity any of the trade secrets or confidential information concerning
the CR business, nor shall Seller, at any time reveal to any person or entity
any such trade secrets or information of any third party which Seller is under
an obligation to keep confidential (including, but not limited to, trade secrets
or confidential information respecting inventions, products, designs, methods,
know-how, techniques, systems, processes, software programs, works of
authorship, customer lists, projects, plans and proposals), and Seller shall not
use or attempt to use any such information in any manner which may injure or
cause loss or may be calculated to injure or cause loss, whether directly or
indirectly, to Buyer, Buyer's Affiliates or any said third party.
(c) Injunctive Relief. Seller acknowledges that any failure by
Seller to comply with the requirements of ss.10(a) or (b) will result in
irreparable injury to Buyer and Buyer may have no adequate means to protect its
rights under ss.10(a) or (b) other than by securing a court order prohibiting
Seller from violating the provisions thereof. Seller agrees that Buyer may
enforce this Agreement by obtaining a preliminary and permanent injunction or
other restraining order and any other appropriate equitable relief in any court
of competent jurisdiction.
(d) Seller acknowledges that the recovery of damages will not be
an adequate means to redress a breach of ss.10(a) or (b), but nothing herein
shall prohibit Buyer from pursuing any remedies in addition to injunctive
relief; including recovery of damages.
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
the date first above written.
ARC ACQUISITION CORPORATION
By: /s/ Kumarakulasingam Surivakumar
-------------------------------------
Kumarakulasingam ▇▇▇▇▇▇▇▇▇▇▇,
Chief Operating Officer
LASON SYSTEMS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
President and Chief Executive Officer
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