ANNEX A
ASSET PURCHASE AGREEMENT
DATED APRIL 9, 2001,
AMONG
DANKA BUSINESS SYSTEMS, PLC, AS SELLER
AND
PITNEY ▇▇▇▇▇ INC., AS PURCHASER
TABLE OF CONTENTS
ARTICLE I Purchase and Sale of Assets............................................................................. 1
1.1 Agreement to Purchase and Sell....................................................................... 1
1.2 Enumeration of Purchased Assets...................................................................... 1
1.3 Excluded Assets...................................................................................... 3
1.4 Sale of the Purchased Assets to Purchaser............................................................ 4
ARTICLE II Assumption of Liabilities.............................................................................. 5
2.1 Agreement to Assume.................................................................................. 5
2.2 Description of Assumed Liabilities................................................................... 6
2.3 Excluded Liabilities................................................................................. 6
ARTICLE III Purchase Price. Manner of Payment and Closing......................................................... 8
3.1 Purchase Price....................................................................................... 8
3.3 Time and Place of Closing............................................................................ 9
3.4 Manner of Payment of the Purchase Price.............................................................. 9
3.6 Adjustment to Purchase Price......................................................................... 9
ARTICLE IV Representations and Warranties......................................................................... 11
4.1 General Statement.................................................................................... 11
4.2 Purchaser's Representations and Warranties........................................................... 11
4.3 Seller's Representations and Warranties.............................................................. 12
4.4 Limitation on Warranties............................................................................. 30
4.5 Definition of Knowledge.............................................................................. 30
ARTICLE V Conduct Prior to the Closing............................................................................ 31
5.1 General.............................................................................................. 31
5.2 Seller's Obligations................................................................................. 31
5.3 Purchaser's Obligations.............................................................................. 33
5.4 Joint Obligations.................................................................................... 34
ARTICLE VI Conditions to Closing.................................................................................. 35
6.1 Conditions to Seller's Obligations................................................................... 35
6.2 Conditions to Purchaser's Obligations................................................................ 35
6.3 Conditions to Purchaser's and Seller's Obligations with Respect to Each Foreign Closing.............. 36
ARTICLE VII Closing and Foreign Closings.......................................................................... 36
7.1 Form of Documents.................................................................................... 36
7.2 Purchaser's Deliveries at the Closing................................................................ 36
7.3 Seller's Deliveries at the Closing................................................................... 37
7.4 Deliveries at the Foreign Closings................................................................... 39
ARTICLE VIII Post-Closing Agreements.............................................................................. 39
8.1 Post-Closing Agreements.............................................................................. 39
8.2 Inspection of Records................................................................................ 39
8.3 Certain Tax Matters.................................................................................. 39
8.4 Use of Trademarks: References to Seller.............................................................. 40
8.5 Payments of Accounts Receivable...................................................................... 41
8.6 Third Party Claims................................................................................... 41
8.7 Products Liability Insurance......................................................................... 41
8.8 Certain Contract Matters............................................................................. 41
i
8.9 Seller's Confidentiality............................................................................. 41
8.10 Use of Seller's Trademarks.......................................................................... 42
8.11 Non-Competition and Non-Solicitation................................................................ 42
8.12 Further Assurances.................................................................................. 43
8.13 Non-Assignment...................................................................................... 43
8.14 Additional Payment.................................................................................. 43
ARTICLE IX Employees and Employee Benefit Plans................................................................... 44
9.1 Post-Closing Covenants Relating to Seller's U.S. and Canadian Employees.............................. 44
9.2 Post-Closing Covenants Relating to Seller's Non-U.S. and Canadian Employees.......................... 46
9.3 Relation to Ancillary Agreements..................................................................... 46
10.1 General............................................................................................. 46
10.2 Certain Definitions................................................................................. 46
10.3 Indemnification Obligations of Seller............................................................... 47
10.4 Indemnification Obligations of Purchaser............................................................ 47
10.5 Limitation on Indemnification Obligations........................................................... 48
10.6 Cooperation......................................................................................... 49
10.7 Third Party Claims.................................................................................. 49
10.8 Tax Indemnities..................................................................................... 50
10.9 Indemnification Exclusive Remedy.................................................................... 50
ARTICLE XI Effect of Termination/Proceeding....................................................................... 51
11.1 General............................................................................................. 51
11.2 Right to Terminate.................................................................................. 51
11.3 Certain Effects of Termination...................................................................... 51
11.4 Remedies............................................................................................ 52
11.5 Right to Damages.................................................................................... 52
ARTICLE XII Miscellaneous......................................................................................... 52
12.1 Sales and Transfer Taxes............................................................................ 52
------------------------
12.2 Publicity........................................................................................... 52
12.3 Notices............................................................................................. 52
12.4 Expenses............................................................................................ 53
12.5 Entire Agreement.................................................................................... 54
12.6 Value Added Taxes................................................................................... 54
12.7 Non-Waiver.......................................................................................... 56
12.8 Counterparts........................................................................................ 56
12.9 Severability........................................................................................ 56
12.10 Applicable Law..................................................................................... 56
12.11 Binding Effect, Benefit............................................................................ 56
12.12 Assignability...................................................................................... 56
12.13 Amendments......................................................................................... 56
12.14 Headings........................................................................................... 56
12.15 Governmental Reporting............................................................................. 56
12.16 Rule of Construction............................................................................... 56
12.17 Consent to Jurisdiction............................................................................ 57
12.18 No Effect.......................................................................................... 57
12.19 Definitions........................................................................................ 57
ii
EXHIBITS
Exhibit A Asset Purchase Agreement - Canadian Acquisition
Exhibit B Asset Purchase Agreement - Belgian Acquisition
Exhibit C Asset Purchase Agreement - Danish Acquisition
Exhibit D Going Concerns Transfer Agreement - French Acquisition
Exhibit E Asset Purchase Agreement - German Acquisition
Exhibit F Asset Purchase Agreement - Italian Acquisition
Exhibit G Asset Purchase Agreement - Dutch Acquisition
Exhibit H Asset Purchase Agreement - Swedish Acquisition
Exhibit I Asset Purchase Agreement - Norwegian Acquisition
Exhibit J Asset Purchase Agreement - UK and Irish Acquisition
Exhibit K Asset Purchase Agreement - U.S. Acquisition
Exhibit L-1 Services and Supplies Agreement
Exhibit L-2 Transitional Support Services Agreement
Exhibit M Escrow Agreement
Exhibit N Good Faith Deposit Escrow
iii
EXHIBIT 10.33
ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made April 9, 2001, between
DANKA BUSINESS SYSTEMS, PLC, a public limited company incorporated under the
laws of England and Wales ("Seller") and PITNEY ▇▇▇▇▇ INC., a corporation
organized under the laws of Delaware ("Purchaser").
RECITALS
--------
A. The Transferring Subsidiaries (as defined herein) are in the
business of providing on-site and multiple client location facilities management
outsourcing services aimed at providing total document management solutions,
including, mail center operations, mail delivery, literature fulfillment and
supplies management, shipping and receiving, network fax, on-line image
retrieval, central reprographics, color copy, convenience copy / fleet
management, microfilming, color print, print-on-demand, network print, computer
output to microfilm (COM), CD output and electronic scanning and indexing (the
"Business"). Notwithstanding the above, the term "Business" shall not include
incidental provision of such services as part of the Seller's and its
Affiliates' core business, or the sale of software.
B. Seller and the Transferring Subsidiaries desire to sell to
Purchaser directly all of the Transferring Subsidiaries' assets used in or
relating to the Business, and Purchaser desires to purchase said assets, all on
the terms and subject to the conditions contained in this Agreement.
AGREEMENTS
----------
Therefore, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE I
Purchase and Sale of Assets
1.1 Agreement to Purchase and Sell. On the terms and subject to the
------------------------------
conditions contained in this Agreement, Purchaser agrees to purchase from the
Transferring Subsidiaries, and Seller agrees to cause the Transferring
Subsidiaries, and each Transferring Subsidiary agrees, to sell to the Purchaser,
the assets, properties and rights as of the Closing Date (as herein defined),
wherever situated or located, of the Transferring Subsidiaries which are used in
or relate to the conduct of the Business or which are described in Section 1.2
(the "Purchased Assets"), free and clear of Liens (as defined herein) other than
Permitted Liens (as defined herein). Wherever used herein, the phrases "used in"
or "relate to" or the like shall mean "arising out of, related to or used in
connection with the Business as conducted by Seller and the Transferring
Subsidiaries at any time during the one year period immediately preceding the
Closing Date." Without limiting the generality of the foregoing, the Purchased
Assets shall not include any of the assets, properties and rights described in
Section 1.3 (the "Excluded Assets").
1.2 Enumeration of Purchased Assets. The Purchased Assets shall
-------------------------------
include the following assets except to the extent that any of the following
assets are also enumerated in Section 1.3:
(a) [intentionally omitted]
(b) all inventory held for use in the conduct of the
Business (including, raw materials, work in process, finished goods, service
parts and supplies) (collectively, the "Inventory");
(c) all furniture, art work, fixtures, equipment (including
office equipment), machinery, parts, computer hardware, telecommunication
equipment (including any switch), copiers,
1
tools, dies, jigs, patterns, molds, automobiles and trucks and all other
tangible personal property (other than Inventory) (collectively, "Fixed Assets")
used in the conduct of the Business;
(d) all leasehold interests and leasehold improvements created by
all leases, including capitalized leases of personal property used in connection
with the Business under which any of the Transferring Subsidiaries is a lessee
or lessor;
(e) the Transferring Subsidiaries' respective entire leasehold
interest (including all leasehold improvements) as lessee of real property used
in connection with the Business (the "Leased Premises") under the leases which
are listed in the Disclosure Schedule;
(f) all trade accounts receivable, notes receivable, negotiable
instruments and chattel paper received as a result of the conduct of the
Business (excluding accounts receivable from Seller and its Affiliates included
in the Intercompany Accounts (as defined herein));
(g) all deposits and rights with respect to such deposits in
connection with the Business;
(h) all contracts (and benefits arising therefrom) relating to or
arising out of the Business, all rights against suppliers under warranties
covering any of the tangible assets of the Business, to the extent legally
transferable, and all Permits (as herein defined) and Environmental Permits (as
herein defined), to the extent legally transferable;
(i) all sales orders and sales contracts, purchase orders and
purchase contracts, quotations and bids generated by the operation of the
Business;
(j) all license agreements, distribution agreements, sales
representative agreements, service agreements, supply agreements and franchise
agreements relating to the Business; and all computer software leases, licenses
and agreements and technical service agreements relating to the Business, to the
extent contractually transferable;
(k) all intellectual property rights used by any of the
Transferring Subsidiaries in or relating to the Business (including, U.S. and
foreign patents and applications therefor, know-how, unpatented inventions,
trade secrets, secret formulas, business and marketing plans, U.S. and foreign
copyrights, U.S. and foreign trademarks, service marks, trade or business names,
trade dress and slogans (and all registrations of such copyrights, trademarks,
service marks, trade names, trade dress, domain names and slogans, and all
applications for registration thereof), Software (as defined herein), licenses
and rights with respect to the foregoing (collectively, the "Intellectual
Property") used by any of the Transferring Subsidiaries) and all goodwill
associated with such intellectual property rights;
(l) all customer and supplier lists, customer records and
information and all other proprietary information relating to the Business;
(m) all books and records relating to the Business, including,
blueprints, drawings and other technical papers, personnel, payroll, employee
benefit, accounts receivable and payable, Inventory, maintenance, and asset
history records, asset registry, ledgers, and books of original entry, all
insurance records and Occupational Safety and Health Administration and
Environmental Protection Agency files relating to occupational health and safety
and protection of public health and the environment;
(n) all rights in connection with prepaid expenses with respect to
the Purchased Assets;
2
(o) all letters of credit issued to any of the Transferring
Subsidiaries relating to the Business;
(p) all sales and promotional materials, catalogues and advertising
literature relating to the Business;
(q) all telephone numbers or telephone directories relating to the
Business and all non-shared lock boxes relating to the Business to which any of
the Transferring Subsidiaries' account debtors remit payments;
(r) all rights (including rights to make claims but excluding
claims against) related to the Purchased Assets or Assumed Liabilities; and
(s) all rights in and to claims, rights of indemnification and
causes of action against third parties but only to the extent they relate to the
Business, the Purchased Assets or the Assumed Liabilities. The applicable
Transferring Subsidiaries shall continue to enjoy all rights in and to such
claims, rights of indemnification and causes of action, together with Purchaser,
except to the extent set forth in this paragraph (s). With respect to claims,
rights of indemnification and causes of action with respect to a matter or
series or group of matters that are asserted by both a Transferring Subsidiary
and Purchaser ("Joint Claims"), such Transferring Subsidiary and Purchaser agree
to cooperate with each other to determine the relative value of each party's
claim and to share in such limitations as may be applicable to any Joint Claims
on a pro rata basis with the relative value of each party's claim. Nothing shall
prohibit the parties from acting independently where a claim is not a Joint
Claim.
1.3 Excluded Assets. The Excluded Assets shall consist of the following
items:
(a) except as provided in Section 1.2(g), all cash and cash
equivalents on hand and in banks (exclusive of letters of credit issued by
customers of any of the Transferring Subsidiaries), investments and marketable
securities;
(b) the Transferring Subsidiaries' bank accounts (other than the
lock boxes referred to in Section 1.2(q)), checkbooks and canceled checks;
(c) all contracts with, and claims and rights against, Seller or
any of Seller's Affiliates (as herein defined), including those included in the
accounts maintained by any of the Transferring Subsidiaries in accordance with
its customary practices, in which there are recorded or reflected the amounts
owed by any business of Seller or any of its Affiliates to the Business or by
the Business to any business of Seller or any of its Affiliates, attributable to
intercompany transactions (the "Intercompany Accounts") and including any rights
of any of the Transferring Subsidiaries against any other Transferring
Subsidiaries;
(d) rights in and to claims (including, for indemnification) (and
in each case benefits to the extent they arise therefrom) against third parties
that relate to Excluded Liabilities (as herein defined) or relate to, or are
made under or pursuant to, other Excluded Assets;
(e) insurance policies of any of the Transferring Subsidiaries and
rights in connection therewith;
(f) rights arising from prepaid expenses, if any, with respect to
Excluded Liabilities or other Excluded Assets;
(g) rights arising from any refunds whether or not due as of the
Closing Date (including, any retrospective premium adjustments) with respect to
insurance premium payments to the extent they relate to insurance policies which
constitute Excluded Assets and refunds whether or not due
3
as of the Closing Date, from federal, state, foreign and/or local taxing
authorities with respect to Taxes paid by Seller or any of its Affiliates,
including any of the Transferring Subsidiaries;
(h) deposits of Seller or any of its Affiliates, including any of
the Transferring Subsidiaries with any federal, state, local or foreign Tax
authorities, including, Tax deposits, prepayments and estimated payments;
(i) all rights of indemnification, claims and causes of action
which relate to the conduct of the Business prior to the Closing Date, including
those against any person under any purchase or other agreement pursuant to which
Seller or any of its Affiliates acquired any portion of the Business or those
arising by operation of law or equity or otherwise, but excluding claims for
repair or replacement of defective products against the suppliers thereof with
respect to tangible assets of the Business;
(j) Seller's and the Transferring Subsidiaries' rights under this
Agreement and the Ancillary Agreements;
(k) the Transferring Subsidiaries' corporate charters, minute and
stock record books, and corporate seals, Tax Returns and Tax receipts (other
than copies of relevant portions of Tax Returns and Tax receipts relating to
assumed Taxes); provided, however, Purchaser shall have the right to review and
copy the relevant portions of any Tax Returns and workpapers for Taxes of the
Transferring Subsidiaries that are relevant Taxes for which Purchaser is liable
after the Closing if it reasonably requests such access;
(l) the agreements, if any, set forth on Schedule 1.3(l);
---------------
(m) the assets, if any, described on Schedule 1.3(m);
---------------
(n) all assets and properties of any of the Transferring
Subsidiaries not used in the conduct of Business;
(o) other than the initials "DSI", all intellectual property rights
and any associated goodwill of Seller or any Transferring Subsidiary related to
the names or marks "Danka Services International", "Danka Services", "Danka
Imaging Services", "Danka Office Imaging" and any other name or ▇▇▇▇ which
consists of or uses the name "Danka", including, any internet domain name; and
(p) any real property owned by a Transferring Subsidiary (provided,
however, if Purchaser shall so request the Seller shall grant a license or a
lease of such real property to the Purchaser upon commercially reasonable
terms).
1.4 Sale of the Purchased Assets to Purchaser. The Purchased Assets shall
-----------------------------------------
be sold to the Purchaser as follows:
(a) Seller shall cause Danka Canada Inc. ("Danka Canada I") and
Kalmara Inc. ("Danka Canada II") to sell, transfer and assign the assets of
Danka Canada I and Danka Canada II which constitute Purchased Assets to
Purchaser pursuant to an Asset Purchase Agreement, substantially in the form
attached hereto as Exhibit A;
---------
(b) Seller shall cause Danka Services International N.V. ("Danka
Belgium") to sell, transfer and assign the assets of Danka Belgium which
constitute Purchased Assets to Purchaser pursuant to an Asset Purchase
Agreement, substantially in the form attached hereto as Exhibit B;
---------
(c) Seller shall cause Danka Services International A/S ("Danka
Denmark"), to sell, transfer and assign the assets of Danka Denmark which
constitute Purchased Assets to Purchase pursuant to an Asset Purchase Agreement,
substantially in the form attached hereto as Exhibit C;
---------
4
(d) Seller shall cause Danka Services International S.A.
("▇▇▇▇▇ ▇▇▇▇▇▇") to sell, transfer and assign the assets of Danka France which
constitute Purchased Assets to Purchaser pursuant to a Going Concerns Transfer
Agreement, substantially in the form attached hereto as Exhibit D;
---------
(e) Seller shall cause Danka Services GmbH ("Danka
Germany") to sell, transfer and assign the assets of Danka Germany which
constitute Purchased Assets to Purchaser pursuant to an Asset Purchase
Agreement, substantially in the form attached hereto as Exhibit E;
---------
(f) Seller shall cause Danka Services International
S.R.L. ("Danka Italy") to sell, transfer and assign the assets of Danka Italy
which constitute Purchased Assets to Purchaser pursuant to an Asset Purchase
Agreement, substantially in the form attached hereto as Exhibit F;
---------
(g) Seller shall cause Danka Services International ▇.▇.
("▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇") to sell, transfer and assign the assets of Danka
Netherlands which constitute Purchased Assets to Purchaser pursuant to a Stock
Purchase Agreement, substantially in the form attached hereto as Exhibit G;
---------
(h) Seller shall cause Danka Services International
Aktiebolag ("Danka Sweden") to sell, transfer and assign the assets of Danka
Sweden which constitute Purchased Assets to Purchaser pursuant to an Asset
Purchase Agreement, substantially in the form attached hereto as Exhibit H;
---------
(i) Seller shall cause Danka Services International A/S
("Danka Norway"), to sell, transfer and assign the assets of Danka Norway which
constitute Purchased Assets to Purchaser pursuant to an Asset Purchase
Agreement, substantially in the form attached hereto as Exhibit I;
---------
(j) Seller shall cause Danka Services International
Limited ("Danka UK") to sell, transfer and assign the assets of Danka UK located
in the United Kingdom and in Ireland which constitute Purchased Assets to
Purchaser pursuant to an Asset Purchase Agreement (the "U.K. Purchase
Agreement"), substantially in the form attached hereto as Exhibit J; and
---------
(k) Seller shall cause Danka Office Imaging Company
("Danka US") to sell, transfer and assign the assets of Danka US which
constitute Purchased Assets (the "US Purchased Assets") to Purchaser pursuant to
an Asset Purchase Agreement, (the "U.S. Purchase Agreement") substantially in
the form attached hereto as Exhibit K.
---------
The foregoing agreements and any other agreements, documents or instruments
executed in connection therewith are referred to herein collectively as the
"Ancillary Agreements." The portion of the Business conducted by Danka US is
referred to herein as the "U.S. Business." The term "wholly-owned" refers to
direct or indirect ownership. The term "Transferring Subsidiaries" refers to
Danka Canada I, Danka Canada II, Danka Belgium, Danka Denmark, Danka France,
Danka Germany, Danka Italy, Danka Netherlands, Danka Sweden, Danka Norway, Danka
UK and Danka US.
ARTICLE II
Assumption of Liabilities
-------------------------
2.1 Agreement to Assume. At the Closing (as herein defined),
-------------------
Purchaser shall assume and agree to discharge and perform when due, only the
liabilities and obligations of, or asserted against, the Transferring
Subsidiaries as described in Section 2.2 (the "Assumed Liabilities"). All
liabilities and obligations of Seller and the Transferring Subsidiaries other
than the Assumed Liabilities are collectively referred to herein as "Excluded
Liabilities." Purchaser shall not assume, and the Transferring Subsidiaries
shall remain liable for, the Excluded Liabilities.
5
2.2 Description of Assumed Liabilities. The Assumed Liabilities
----------------------------------
shall consist of the following, and only the following, liabilities and
obligations of the Transferring Subsidiaries with respect to the Business:
(a) all accounts payable set forth on the Audited Balance
Sheet relating to the Business, excluding accounts payable to Seller and its
Affiliates under the Intercompany Accounts;
(b) all accrued and unpaid expenses relating to the
Business which are set forth on the Audited Balance Sheet, including, accrued
vendor payables, salaries and wages, and all bonuses, vacation pay, social
security and employee benefits to the extent and solely to the extent expressly
assumed by Purchaser pursuant to Article IX and excluding all Taxes other than
payroll taxes and any accruals related to litigation described in Section
2.3(m);
(c) all liabilities of any of the Transferring
Subsidiaries under the written purchase orders, sales orders, leases, agreements
and commitments relating to the Business, which have not been performed prior to
the Closing Date and which are set forth in the Disclosure Schedule or which are
not required to be set forth in the Disclosure Schedule because of the amount
involved;
(d) all liabilities of any of the Transferring
Subsidiaries arising from events on or after the Closing Date under any Permits
and Environmental Permits which were issued to any of the Transferring
Subsidiaries prior to the Closing Date and are assigned to Purchaser, but only
to the extent such liabilities relate solely to the conduct of the Business
after the Closing Date;
(e) all liabilities for a prorated share (based on a
relative number of days of ownership from the Closing Date) for real estate,
personal property or similar ad valorem Taxes arising out of the operation of
the Business ("Property Taxes") which if paid on a timely basis are due after
the Closing Date (the "Assumed Property Taxes"). The Assumed Property Taxes
shall be treated as an Assumed Liability, irrespective of whether, at the
Closing Date, liability for such Taxes has actually attached, or whether such
Taxes have become actually payable or have been paid by Seller or any
Transferring Subsidiary; and
(f) all liabilities arising out of the obligations
assumed by Purchaser in Article IX hereof or in the Ancillary Agreements.
2.3 Excluded Liabilities. The Excluded Liabilities shall include
--------------------
all liabilities and obligations of Seller or any Transferring Subsidiary,
whether known or unknown, absolute or contingent, whether or not relating to the
Business, which do not constitute Assumed Liabilities and shall without limiting
the foregoing include the following liabilities and obligations:
(a) except as provided in paragraph (f) of Section 2.2,
any liabilities to Seller or any of Seller's Affiliates (including any liability
reflected in the Intercompany Accounts and any liability of any Transferring
Subsidiary to any other Transferring Subsidiary) as of the Closing Date;
(b) any liabilities for legal, accounting, audit and
investment banking fees, brokerage commissions, and any other expenses incurred
by Seller or the Transferring Subsidiaries in connection with the negotiation
and preparation of this Agreement, Seller's Ancillary Documents, the Ancillary
Agreements or the Subsidiary Ancillary Documents and the sale of the Purchased
Assets to Purchaser;
(c) any liabilities of any of Seller or any of its
Affiliates, including the Transferring Subsidiaries, for Taxes, irrespective of
the manner in which such Taxes are reflected on the financial statements of
Seller or any of the Transferring Subsidiaries, other than the Assumed Property
Taxes and payroll taxes included in Section 2.2(b);
6
(d) any liability for or related to indebtedness of
Seller or any Transferring Subsidiary to banks, financial institutions or other
persons or entities with respect to borrowed money or otherwise (except for
capitalized leases);
(e) any liabilities of Seller or any of the Transferring
Subsidiaries under those leases, contracts, insurance policies, commitments,
sales orders, purchase orders, Permits and Environmental Permits which are not
Assumed Liabilities;
(f) any liabilities of Seller or any of the Transferring
Subsidiaries to pay severance benefits which arise by virtue of the sale of the
Purchased Assets pursuant to the provisions hereof (other than any such
liabilities which arise out of any action by Purchaser on or following the
Closing Date, it being understood and agreed that any such liabilities
constitute Assumed Liabilities);
(g) any liability in respect of any wrongful discharge
claim or claims under any federal or state civil rights or similar law, or the
Worker Adjustment Retraining and Notification Act ("WARN Act") or any similar
local or state law, arising out of the conduct of the Business prior to the
Closing (other than any such liabilities which result from Purchaser's failure
to comply with the provisions of Article IX and other than any such liabilities
which arise as a result of actual terminations or layoffs by Purchaser of
employees of the Business which occur after the Closing Date and result from the
aggregation of any terminations or layoffs of employees of the Business
conducted by any of the Transferring Subsidiaries prior to the Closing Date, it
being understood and agreed that any such liabilities constitute Assumed
Liabilities hereunder so long as, but only so long as, such employees who were
terminated or laid off by any of the Transferring Subsidiaries within the
thirty-day period ending on the day immediately before the Closing Date are
listed in a schedule delivered by Seller to Purchaser at the Closing);
(h) any claims against or liabilities of Seller or any of
the Transferring Subsidiaries for injury to or death of persons or damage to or
destruction of tangible property (including, any workmen's compensation claim)
arising out of the conduct of the Business prior to the Closing Date, regardless
of when said claim or liability is asserted, including, any claim or liability
for consequential or punitive damages in connection with the foregoing;
(i) except as specifically provided in Article IX or in
any of the Ancillary Agreements or insofar as such liabilities transfer to the
Purchaser or any of its Affiliates as a result of the Acquired Rights Directive
(other than any such liabilities arising as the result of any act or omission of
the Seller or any of its Affiliates in respect of the period prior to Closing),
any liabilities arising out of or in connection with any of the Seller's or its
Affiliate's employee welfare and pension benefit (including profit sharing)
plans and any other retirement plan or program whether provided by the Seller or
its Affiliates or otherwise;
(j) liabilities for any so-called "sale bonuses" payable
to the Transferring Subsidiaries' employees by reason of the sale of the
Purchased Assets (without implication that the contrary would otherwise be true,
it is understood and agreed that liabilities under the agreements listed in
Schedule 2.3(f) do not constitute so-called "sale bonuses");
---------------
(k) any liabilities or obligations, whether known or
unknown, fixed or contingent, with respect to, or relating to, any Environmental
Laws (as herein defined) or any environmental, health or safety matter,
including, but not limited to, any liabilities arising out of any acts,
omissions, or conditions that first occurred or existed prior to the Closing
Date;
(l) except as otherwise contemplated hereby, any
liability whether presently in existence or arising hereafter which is
attributable to an asset that is not a Purchased Asset; and
7
(m) any liability of Seller or any of the Transferring
Subsidiaries for litigation (contingent or otherwise) arising out of, in
relation to or caused by the operation of the Business prior to the Closing Date
whether or not commenced prior to such date.
ARTICLE III
Purchase Price; Manner of Payment and Closing
---------------------------------------------
3.1 Purchase Price. Subject to Section 3.2, in consideration of the
--------------
sale, conveyance, assignment, transfer and delivery of the Purchased Assets,
Purchaser shall pay, at the Closing or Foreign Closing (as hereinafter defined),
as the case may be, to the Seller or the applicable Transferring Subsidiaries,
their allocable portion of the Cash Amount (as herein defined), and assume the
applicable portion of the Assumed Liabilities as of the Closing Date (the Cash
Amount and the assumption of the Assumed Liabilities are collectively referred
to herein as the "Purchase Price"). As used herein, the "Cash Amount" shall mean
two hundred ninety million dollars (US $290,000,000), exclusive of any Taxes
imposed under Sections 12.1, 12.6 and any witholding Taxes but inclusive of the
amount to be delivered to the Escrow Agent pursuant to Section 3.2(b). The Cash
Amount will be subject to adjustment as set forth in Section 3.6 and 6.2(c). On
or before the close of business on April 11, 2001, Purchaser shall deliver to
Seller the amount of $45,000,000 (the "Good Faith Deposit"). The Good Faith
Deposit shall be an advance on the Cash Amount and shall be refundable if the
transactions contemplated by this Agreement do not close; provided, however, if
the transactions contemplated by this Agreement do not close because of a
material breach of this Agreement by the Purchaser, then the Good Faith Deposit
shall be paid to the Seller. The Good Faith Deposit shall be held by an
independent party pursuant to an escrow agreement in substantially the form of
Exhibit N to this Agreement.
3.2 Allocation of the Purchase Price; Establishment of Escrow.
---------------------------------------------------------
(a) Purchaser and Seller agree that both (i) the Cash Amount and
(ii) the Purchase Price for the Purchased Assets are allocable among the Seller
and the Transferring Subsidiaries as set forth in Schedule 3.2 hereto, based,
------------
with respect to the Transferring Subsidiaries, on the relative net fair market
values of the assets and businesses sold by each of the Transferring
Subsidiaries under the Ancillary Agreements. Such Schedule is to be prepared in
accordance with Section 1060 of the Code. The parties agree to negotiate in good
faith any appropriate revisions to the foregoing which may be appropriate based
on the Audited Balance Sheet, and Seller agrees to cause the Transferring
Subsidiaries to settle among themselves any resulting inequities in the portion
of the Cash Amount received by each Transferring Subsidiary. Seller and
Purchaser each agree to prepare and file in a timely manner an IRS Form 8594 and
other appropriate information, as required by Section 1060 of the Code and
pertinent regulations and Internal Revenue Service instructions, in accordance
with any agreement between the parties as to the Purchase Price and allocation
of the Purchase Price, with respect to those Purchased Assets and Assumed
Liabilities required to be reflected on such Form. Purchaser and Seller each
agree to submit to the other a draft copy of any Form 8594 that Purchaser or
Danka US proposes to file with respect to the US Purchased Assets at least 45
days before the proposed filing date thereof and to jointly discuss and attempt
to agree, in good faith, with respect to the contents thereof. To the extent the
allocation of the Purchase Price for the U.S. Purchased Assets is adjusted after
the Closing Date, the parties agree to revise and amend any agreed Schedule and
IRS Form 8594 in the same manner and according to the same procedure. Each party
shall provide to the other party the final version of such Form and information
promptly after filing. The parties shall follow a similar procedure with respect
to the allocation of the agreed Purchase Price among the assets purchased from
the non-U.S. Transferring Subsidiaries under each of the other Ancillary
Agreements. The agreed determination and allocation of the Purchase Price and
any agreed determination and/or allocation of the Purchase Price to the
Purchased Assets shall be binding on Seller and Purchaser and their respective
Affiliates.
(b) Notwithstanding the foregoing, on the Closing Date the sum
of US$5,000,000 shall be deposited with an escrow agent selected by Purchaser
and reasonably acceptable to Seller
8
("Escrow Agent") in the purchase price adjustment account (the "Escrow
Account") pursuant to the Escrow Agreement among Purchaser, Seller and the
Escrow Agent in the form attached hereto as Exhibit M. Such amount shall reduce
proportionately the amount to be paid to each Transferring Subsidiary on the
Closing Date. When and to the extent such amounts are paid out of the Escrow
Account to the Seller, and subject to Section 3.6, such pay out shall be for the
appropriate benefit of each Transferring Subsidiary. All such amounts, plus
accrued interest, will be paid out to the Seller or the Purchaser within five
business days after the Actual Closing Date Shareholders' Equity is agreed to or
finally determined. Seller and Purchaser shall each pay one-half of the fees and
expenses of the Escrow Agent.
3.3 Time and Place of Closing. The Closing of the sale of the US
-------------------------
Purchased Assets (the "Closing") shall be consummated at 9:00 a.m. local time at
the offices of Holland & Knight LLP in Tampa, Florida on the second business day
after the conditions set forth in Sections 6.1 and 6.2 shall be satisfied or
waived, subject, however, to the provisions of Section 11.2. The Closing of the
sales provided for in Section 1.4(a) through (k) (each a "Foreign Closing")
shall occur at the offices of Holland & Knight LLP in Tampa, Florida
concurrently with the Closing subject to the conditions set forth in Section
6.3. Each Closing or Foreign Closing shall be deemed to be effective as of 12:01
a.m., prevailing time at the places where the Purchased Assets are located, on
the date on which such Closing (the "Closing Date") shall occur.
3.4 Manner of Payment of the Purchase Price. The respective portion
---------------------------------------
of the Cash Amount to be allocated to the Closing or any Foreign Closing shall
be payable in full on the Closing Date by wire transfers of immediately
available funds. For the purpose of paying the Cash Amount, (i) amounts paid to
Danka US shall be payable in U.S. Dollars; (ii) amounts paid to Seller or Danka
UK shall be payable in U.K. pounds, translated from U.S. Dollars at the
applicable foreign exchange rate as published in the "Key Currency Cross Rates"
section of The Wall Street Journal on the second business day preceding the
Closing Date (the "Applicable Foreign Exchange Rate"); (iii) amounts paid to
Danka Canada shall be payable in Canadian Dollars, translated from U.S. Dollars
at the Applicable Foreign Exchange Rate; and (iv) amounts paid to all other
Transferring Subsidiaries shall be payable in Euros, translated from U.S.
Dollars at the Applicable Foreign Exchange Rate. Said wire transfers shall be
made to such bank accounts of the Seller or the respective Transferring
Subsidiaries selling their respective Purchased Assets as Seller shall specify
by written notice to Purchaser delivered not later than two business days before
the Closing Date.
3.5 Intentionally omitted.
3.6 Adjustment to Purchase Price.
----------------------------
(a) For purposes of this Agreement, the term "Closing Date
Shareholders' Equity" shall mean the shareholders' equity as set forth on the
Audited Balance Sheet, reduced by the Excluded Assets, increased by the Excluded
Liabilities set forth on the Audited Balance Sheet, subject to adjustment as
determined in accordance with this Section 3.6 (the "Adjusted Balance Sheet").
For the purposes of this Agreement, the term "Estimated Closing Date
Shareholders' Equity" shall mean $81,700,000.
(b) As soon as reasonably practicable but not more than 90 days
after the Closing Date, Seller will prepare and deliver to Purchaser the audited
balance sheet (the "Audited Balance Sheet"), statement of income and cash flows
for the Business as of and for the period ending on the Closing Date (and having
commenced January 1, 2001), prepared in accordance with GAAP consistently
applied using the same accounting policies and procedures as used in the
preparation of the December 31, 2000 audited financial statements (the "Audited
Financial Statements") and the Adjusted Balance Sheet of the Business. The sole
intention of this calculation is to reflect the difference, if any, between the
Estimated Closing Date Shareholders' Equity and the Closing Date Shareholders'
Equity.
9
(c) If Purchaser has any objections to the calculation of the
Closing Date Shareholders' Equity, Purchaser will deliver a detailed written
statement describing such objections to Seller within 30 days after receiving
the Adjusted Balance Sheet. Purchaser and Seller will use commercially
reasonable best efforts to resolve any such objections themselves. If the
parties do not obtain a final resolution within 30 days after Seller has
received the statement of objections, however, Purchaser and Seller will select
an accounting firm mutually acceptable to them to resolve any remaining
objections. If Purchaser and Seller are unable to agree on the choice of an
accounting firm, they will select an accounting firm recognized nationally in
the United States by lot (after excluding their respective regular independent
accounting firms). The determination of any accounting firm so selected will be
set forth in writing and will be conclusive and binding upon the parties. Seller
will revise the Closing Date Shareholders' Equity as appropriate to reflect the
resolution of any objections thereto pursuant to this Section 3.6.
(d) In the event the parties submit any unresolved objections to
an accounting firm for resolution as provided in Section 3.6(c) above, Purchaser
and Seller will share responsibility for the fees and expenses of the accounting
firm as follows:
(i) if the accounting firm resolves all of the
remaining objections in favor of Seller's statement of the Closing Date
Shareholders' Equity or any adjustments are, collectively, less than $100,000
(the Closing Date Shareholders' Equity so adjusted is the "High Value"),
Purchaser will be responsible for all of the fees and expenses of the accounting
firm;
(ii) if the accounting firm resolves all of the
remaining objections in favor of Purchaser's statement of objections to the
Closing Date Shareholders' Equity and the adjustments are, collectively, at
least $100,000 (the Closing Date Shareholders' Equity so adjusted is the "Low
Value"), Seller will be responsible for all of the fees and expenses of the
accounting firm; and
(iii) if the accounting firm resolves some of the
remaining objections in favor of Purchaser and other remaining objections in
favor of Seller and the adjustments total at least $100,000, Seller will be
responsible for that fraction of the fees and expenses of the accounting firm
equal to (x) the difference between the High Value and the Actual Closing Date
Shareholders' Equity over (y) the difference between the High Value and the Low
Value, and Purchaser will be responsible for the remainder of the fees and
expenses.
The "Actual Closing Date Shareholders' Equity" is the
Closing Date Shareholders' Equity as adjusted above.
(e) Seller will make the work papers and back-up materials used
in preparing the Audited Financial Statements and the Adjusted Balance Sheet
available to Purchaser, and Purchaser shall make the books, records, and
financial staff of the Business available to Seller and, in each case, their
respective accountants and other representatives at reasonable times and upon
reasonable notice at any time during (i) the preparation by the Seller of, and
review by Purchaser of, the Audited Financial Statements and the Adjusted
Balance Sheet and (ii) the resolution by the parties of any objections thereto.
Notwithstanding the existence of any dispute pursuant to this Section 3.6, the
parties shall make any adjusting payment required under this Section 3.6, to the
extent that such adjusting payment is not disputed, at the time and in the
manner set forth herein.
(f) The Purchase Price will be adjusted as follows:
(i) In the event that the Actual Closing Date
Shareholders' Equity, as determined in accordance with this Section 3.6, is more
than the Estimated Closing Date Shareholders' Equity, Purchaser shall pay such
excess to Seller within three business days after the date on which the Actual
Closing Date Shareholders' Equity is agreed or finally determined.
10
(ii) In the event that the Actual Closing Date
Shareholders' Equity is less than the Estimated Closing Date Shareholders'
Equity, Seller shall pay to Purchaser (or cause to be delivered from the Escrow
Account) the difference between the Estimated Closing Date Shareholders' Equity
and the Actual Closing Date Shareholders' Equity within three business days
after the date on which the Actual Closing Date Shareholders' Equity is agreed
or finally determined.
(g) Any amounts paid pursuant to this Section 3.6 shall
be increased by five percent (5%) per annum from the Closing Date through the
date of payment.
(h) It is acknowledged that all fees and expenses paid by
the Seller or the Purchaser related to the negotiation and consummation of the
transactions contemplated by this Agreement (including, without limitation,
investment banking, legal and accounting fees) shall not be taken into account
in the calculations contemplated by this Section 3.6.
ARTICLE IV
Representations and Warranties
------------------------------
4.1 General Statement. The parties make the representations and
-----------------
warranties to each other which are set forth in this Article IV. Except for the
representations and warranties set forth in Sections 4.3(i), 4.3(t) and 4.3(x),
which shall survive until 90 days after the expiration of the applicable statute
of limitations, and in Sections 4.3(a) and 4.3(c), which shall survive forever,
all such representations and warranties shall survive the Closing (and none
shall merge into any instrument of conveyance) for a period of one year
following the Closing. All representations and warranties of Seller are made
subject to the exceptions which are noted in the schedule delivered by Seller to
Purchaser concurrently with this Agreement and identified by the parties as the
"Disclosure Schedule". Any disclosure set forth on such schedule shall be deemed
disclosed in reference solely to the subsection of this Agreement expressly
referenced thereon.
4.2 Purchaser's Representations and Warranties. Purchaser
------------------------------------------
represents and warrants to Seller that:
(a) Purchaser is a corporation duly organized, existing
and in good standing (or with active status), under the laws of its jurisdiction
of incorporation.
(b) Purchaser has all necessary corporate power and
authority to enter into and perform (x) this Agreement and (y) all documents and
instruments to be executed by it pursuant to this Agreement, including the
Escrow Agreement, the Service and Supplies Agreement substantially in the form
attached hereto as Exhibit L-1 (the "Danka Service Agreement") and the
-----------
Transitional Support Services Agreement substantially in the form attached
hereto as Exhibit L-2 (the "Transitional Services Agreement"; and collectively,
-----------
"Purchaser's Ancillary Documents"). The execution, delivery and performance of
this Agreement and Purchaser's Ancillary Documents by Purchaser and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly approved by the board of directors or a duly appointed committee of
the board of directors of Purchaser and no other corporate proceedings are
necessary on the part of Purchaser to authorize the execution, delivery and
performance of this Agreement and the Purchaser's Ancillary Documents by
Purchaser and the consummation by Purchaser of the transactions contemplated
hereby and thereby. This Agreement has been duly executed and delivered by
Purchaser and constitutes a legal, valid and binding agreement of Purchaser,
enforceable against Purchaser in accordance with its terms and conditions,
subject only to applicable bankruptcy, reorganization, moratorium and similar
laws and general principles of equity. The Purchaser's Ancillary Documents when
duly executed and delivered by the Purchaser will constitute legal, valid and
binding agreements of the Purchaser, enforceable against the Purchaser in
accordance with their terms and conditions, subject only to applicable
bankruptcy, reorganization, moratorium and similar laws and general principles
of equity.
11
(c) Except for the notifications, applications and
filings as are listed on a separate schedule to be delivered by the parties on
or before April 16, 2001 (the "European Filings") or required under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the
"▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act"), no consent, authorization, order or approval of,
notice to, or filing or registration with, any governmental authority is
required for the execution, delivery and performance by Purchaser of this
Agreement and Purchaser's Ancillary Documents, and the consummation by Purchaser
of the transactions contemplated by this Agreement and Purchaser's Ancillary
Documents. No representation is made pursuant to this Section 4.2(c) or 4.2(d)
as to any consent, authorization, notice, order, approval, filing, registration
or any violation, conflict or breach which arises by reason of the regulatory
status of Seller or the Transferring Subsidiaries or by reason of any facts
pertaining to any of them.
(d) Neither the execution and delivery and performance of
this Agreement and Purchaser's Ancillary Documents by Purchaser, nor the
consummation by Purchaser of the transactions contemplated hereby and thereby,
will (with notice or lapse of time or both) violate, conflict with or result in
a breach of any of the terms, conditions or provisions of the Certificate of
Incorporation or By-laws or comparable documents of Purchaser, or of any statute
or administrative regulation, or of any order, writ, injunction, judgment or
decree of any court or governmental authority or of any arbitration award
applicable to Purchaser.
(e) Purchaser is not a party to any unexpired,
undischarged or unsatisfied written or oral contract, agreement, indenture,
mortgage, debenture, note or other instrument under the terms of which
execution, delivery or performance by Purchaser according to the terms of this
Agreement and the Purchaser's Ancillary Documents will be a default or an event
of acceleration, or grounds for termination, and whereby timely performance by
Purchaser according to the terms of this Agreement and the Purchaser's Ancillary
Documents may be prohibited, prevented or delayed.
(f) Neither Purchaser nor any of its Affiliates has dealt
with any person or entity who is entitled to a broker's commission, finder's
fee, investment banker's fee or similar payment from Seller or any of its
Affiliates (including the Transferring Subsidiaries) for arranging the
transaction contemplated hereby or introducing the parties to each other. As
used herein, an "Affiliate" is any person or entity which, at the time of
determination, controls a party to this Agreement, which, at the time of
determination, that party controls, or which, at the time of determination, is
under common control with that party. "Control" means the power, direct or
indirect, to direct or cause the direction of the management and policies of a
person or entity through voting securities, contract or otherwise.
(g) Except as set forth in this Section 4.2, the
Purchaser makes no express or implied warranty of any kind whatsoever.
4.3 Seller's Representations and Warranties. Subject to Section
---------------------------------------
4.1, Seller represents and warrants to Purchaser that:
CORPORATE
---------
(a) Seller is a corporation duly organized, existing and
in good standing (or with active status) under the laws of England and
Wales. Each of the Transferring Subsidiaries is a corporation duly
organized and existing under the laws of its jurisdiction of
organization. The Transferring Subsidiaries have all necessary
corporate power and authority to conduct the Business as the Business
is now being conducted. The Transferring Subsidiaries are the only
subsidiaries of Seller which conduct any portion of the Business.
Neither Seller nor any of its Affiliates other than the Transferring
Subsidiaries directly own any assets used in the Business or conduct
any portion of the Business nor are any of their employees engaged in
the conduct of the Business.
12
(b) Each Transferring Subsidiary has qualified as a foreign
corporation, and is, to the extent applicable, in good standing, under
the laws of all jurisdictions where the nature of the Business or the
nature or location of its assets which are used in the Business
requires such qualification except where the failures to so qualify and
to be in good standing, in the aggregate, are not reasonably likely to
have a Material Adverse Effect (as herein defined). For the purposes of
this Agreement, "Material Adverse Effect" means either (i) a material
adverse effect on the financial or operational condition of the
Business as in existence on the date of the execution of this
Agreement, taken as a whole or (ii) a material adverse effect on the
full and timely performance, including any unreasonable delay therein,
by Seller and the Transferring Subsidiaries of the transactions
contemplated by this Agreement. With respect to clause (i) above, a
Material Adverse Effect shall be an individual or aggregate loss,
expense or cost to the Business in excess of $250,000.
(c) Subject to the passing, without amendment, of an ordinary
resolution of Seller's shareholders approving the transaction that is
the subject of this Agreement, such resolution to be in such form as
Seller's board of directors may reasonably require and as required by
all applicable laws (the "Shareholder Approval"), if required, Seller
has all necessary corporate power and authority to enter into and
perform (x) this Agreement and (y) all documents and instruments to be
executed by Seller pursuant to this Agreement including the Escrow
Agreement, the Danka Services Agreement and the Transitional Services
Agreement (collectively, "Seller's Ancillary Documents"). Subject to
obtaining the Shareholder Approval, upon the execution thereof the
Transferring Subsidiaries will have all necessary corporate power and
authority to enter into and perform the Ancillary Agreements and all
documents and instruments to be executed by any Transferring Subsidiary
pursuant to this Agreement and the Ancillary Agreements including the
Danka Services Agreement and the Transitional Services Agreement
(collectively, the "Subsidiary Ancillary Documents") to which they are
respective parties. The execution, delivery and performance of this
Agreement and Seller's Ancillary Documents by Seller, the execution,
delivery and performance of the Ancillary Agreements and the Subsidiary
Ancillary Documents by the Transferring Subsidiaries, and the
consummation of the transactions contemplated hereby and thereby, have
been duly and validly approved by the board of directors of Seller and
the boards of directors (or similar bodies) and, if required,
shareholders of the Transferring Subsidiaries, and no other corporate
proceedings or approvals are necessary on the part of Seller or any of
the Transferring Subsidiaries to authorize the execution, delivery and,
subject to obtaining the Shareholder Approval, performance of this
Agreement, the Seller's Ancillary Documents, the Ancillary Agreements
and the Subsidiary Ancillary Documents by Seller and the Transferring
Subsidiaries and the consummation by Seller and the Transferring
Subsidiaries of the transactions contemplated hereby and thereby. This
Agreement has been duly executed and delivered by Seller and
constitutes a legal, valid and binding agreement of Seller, enforceable
against Seller in accordance with its terms and conditions, subject
only to applicable bankruptcy, reorganization, moratorium and similar
laws and general principles of equity. The Seller's Ancillary Documents
when executed and delivered by Seller will be legal, valid and binding
agreements of Seller enforceable against Seller in accordance with
their terms and conditions, subject only to applicable bankruptcy,
reorganization, moratorium and similar laws and general principles of
equity. The Ancillary Agreements and the Subsidiary Ancillary
Documents, when executed and delivered by the Transferring
Subsidiaries, will constitute legal, valid and binding agreements of
the Transferring Subsidiaries, enforceable against the respective
Transferring Subsidiaries in accordance with their terms and
conditions, subject only to applicable bankruptcy, reorganization,
moratorium and similar laws and general principles of equity.
(d) Except for the European Filings and the notifications,
applications and filings required by the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act and as
described in the Disclosure Schedule (collectively, the "Governmental
Consents"), no consent, authorization, order or approval of, notice to,
or filing or registration with, any governmental authority is required
for the execution, delivery and
13
performance of this Agreement, Seller's Ancillary Documents, the
Ancillary Agreements and the Subsidiary Ancillary Documents and the
consummation by Seller and the Transferring Subsidiaries of the
transactions contemplated by this Agreement, Seller's Ancillary
Documents, the Ancillary Agreements and the Subsidiary Ancillary
Documents. No representation is made pursuant to this Section 4.3(d) or
4.3(e) as to any consent, authorization, notice, order, approval,
filing, registration or any violation, conflict or breach which arises
by reason of the regulatory status of Purchaser or by reason of any
facts pertaining to it.
(e) Neither the execution and delivery and performance of
this Agreement and Seller's Ancillary Documents by Seller, nor the
execution and delivery and performance of this Agreement and the
Ancillary Agreements and the Subsidiary Ancillary Documents by the
Transferring Subsidiaries, nor the consummation by Seller and the
Transferring Subsidiaries of the transactions contemplated hereby and
thereby, will (with notice or lapse of time or both) violate, conflict
with or result in a breach of any of the terms, conditions or
provisions of the Memorandum of Association or Articles of Association
of Seller or the organizational documents of any of the Transferring
Subsidiaries, or of any law, permit, statute or administrative
regulation of, or agreement with, any federal, state, or local
governmental authority, or of any order, writ, injunction, judgment or
decree of any court or any governmental authority or of any arbitration
award.
FINANCIAL
---------
(f) Copies of the audited combined balance sheet, statements
of income, retained earnings and cash flows, and notes to financial
statements (together with any supplementary information thereto) of the
Business, (i) as of March 31, 2000, and (ii) as of and for the nine
months ended December 31, 2000 (the December 31, 2000 financial
statements are referred to as the "Most Recent Fiscal Month End"), are
contained in the Disclosure Schedule. Such financial statements
(together with the notes thereto) are referred to herein collectively
as the "Financial Statements." The Financial Statements have been
prepared from the books and records of the Transferring Subsidiaries
and present fairly the financial position of the Business as of the
date thereof, and the results of operations and cash flows of the
Business for the period covered by said statements, in accordance with
U.S. generally accepted accounting principles ("GAAP"), consistently
applied, except as disclosed therein. The Financial Statements do not
reflect the operations of any entity or business not intended to
constitute a part of the Business.
(g) The Transferring Subsidiaries have full legal and
beneficial title to, and the corporate power to sell, the Purchased
Assets owned by them respectively, free and clear of any liens, claims,
encumbrances, mortgages, pledges, security interests, easements, rights
of way, covenants, restrictions, rights, options, conditional sales or
other title retention agreements of any kind or nature (collectively,
"Liens") except for the following liens (the "Permitted Liens"): (i)
Liens listed in the Disclosure Schedule; (ii) statutory liens for Taxes
(as herein defined) not yet due and payable or for Taxes the taxpayer
is contesting in good faith through appropriate proceedings for which
appropriate reserves have been established on the Financial Statements
(which proceedings are described in the Disclosure Schedule), (iii)
statutory liens of landlords, carriers, warehousemen, mechanics and
materialmen incurred in the ordinary course of business for sums not
yet due and payable and which, in the aggregate, do not detract from
the value or use of the Purchased Assets except such Liens that, in the
aggregate, are not reasonably likely to have a Material Adverse Effect;
(iv) liens incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and
other types of social security; and (v) retention of title clauses in
favor of suppliers (other than Seller and its Affiliates) in the
ordinary course of business. Seller does not hold title to any of the
Purchased Assets.
(h) Neither Seller nor any Transferring Subsidiary has any
liabilities or obligations of any nature, whether known or unknown,
absolute, accrued, contingent or otherwise and
14
whether due or to become due, arising out of or relating to the
Business, except (a) as set forth in the Disclosure Schedule, (b) as
and to the extent disclosed or reserved against in the Financial
Statements and (c) for liabilities and obligations that (i) were
incurred after the date of the Most Recent Fiscal Month End in the
ordinary course of business consistent with prior practice and (ii) in
the aggregate, have not and are not reasonably likely to have a
Material Adverse Effect. None of the Business' employees is now or will
by the passage of time become entitled to receive any vacation time,
vacation pay or severance pay attributable to services rendered prior
to the date of the Closing except (x) as set forth in the Financial
Statements, (y) with respect to vacation time and vacation pay, as has
been or will be incurred in the ordinary course of business consistent
with past practices or (z) as is disclosed in the Disclosure Schedule.
TAXES
-----
(i) For purposes of this Agreement, the term
"Taxes" means all federal, state, local, foreign and other
income, sales, use, ad valorem, withholding, gross receipts,
excise, asset, franchise, payroll, employment, social security
(or its equivalent), severance, license, stamp, occupation,
premium, environmental, goods and services, value added,
transfer or other taxes, customs duties or tariffs, fees,
assessments or charges of any kind arising out of the
Business, together with any interest and any penalties with
respect thereto, and the term "Tax" means any one of the
foregoing Taxes; the term "Code" means the Internal Revenue
Code of 1986, as amended. The term "Tax Returns" means all
reports and returns required to be filed with respect to
Taxes.
(ii) There have been filed on a timely basis all
Tax Returns required to be filed by Seller and the
Transferring Subsidiaries on or prior to the date hereof
pertaining to the Property Taxes.
(iii) There have been filed on a timely basis all
Tax Returns required to be filed by Danka Italy, Danka Belgium
and Danka Germany provided that in Germany this representation
is made solely with respect to wage taxes, trade taxes and VAT
pertaining to Taxes and Danka France provided that in France
this representation is made solely with respect to corporate
income and apprenticeship tax.
(iv) With respect to all amounts in respect of
Property Taxes imposed upon any of the Transferring
Subsidiaries, or for Property Taxes for which any of Seller
and the Transferring Subsidiaries is liable to taxing
authorities, with respect to all taxable periods or portions
of periods ending on or before the Closing Date, all
applicable tax laws have been complied with, and all such
amounts required to be paid by the applicable Transferring
Subsidiaries to taxing authorities on or before the date
hereof have been paid.
(v) With respect to all amounts in respect of
Taxes imposed upon Danka Italy, Danka Belgium and Danka
Germany provided that in Germany this representation is made
solely with respect to wage taxes, trade taxes and VAT and
Danka France provided that in France this representation is
made solely with respect to corporate income and
apprenticeship tax, with respect to all taxable periods or
portions of periods ending on or before the Closing Date, all
applicable tax laws have been complied with, and all such
amounts required to be paid to taxing authorities on or before
the Closing Date have been paid.
(vi) There are at present no pending tax audits,
assessments or other proceedings relating to Property Taxes or
the assets pertaining thereto, and neither Seller nor any of
the Transferring Subsidiaries has received any written notice
of any such proceeding.
15
(vii) There are at present no pending tax audits,
assessments or other proceedings relating to Taxes of Danka
Italy, Danka Belgium or Danka Germany provided that in Germany
this representation is made solely with respect to wage taxes,
trade taxes and VAT or Danka France provided that in France
this representation is made solely with respect to corporate
income and apprenticeship tax, and neither Seller nor any of
the Transferring Subsidiaries has received any written notice
of any such proceeding.
(viii) Seller has provided to Purchaser copies of
all relevant portions of private rulings and closing
agreements which impact Taxes of the Business or any Purchased
Asset or Assumed Liability.
(ix) There has been no claim of nexus or other
taxing authority with respect exclusively to the Business by
any tax jurisdiction in which Seller or a Transferring
Subsidiary does not file returns relating to the Business.
(x) None of the Purchased Assets to be
transferred by Seller or any of the Transferring Subsidiaries
is a "United States real property interest," within the
meaning of Section 897(c) of the Code.
(xi) As of the Closing Date , Seller and each of
the Transferring Subsidiaries shall have made all payments of
VAT (as defined herein) due and payable with respect to the
conduct of the Business, shall have filed all returns and
reports required to have been filed prior to such date and
shall have complied with all applicable provisions relating to
VAT.
CONDUCT OF BUSINESS
-------------------
(j) Since the Most Recent Fiscal Month End, other than
changes resulting from changes in general economic conditions, no event
or events have occurred which in the aggregate have had or are
reasonably likely to have a Material Adverse Effect, and neither Seller
nor any Transferring Subsidiary has, with respect to the Business:
(i) except for current liabilities for trade or
business obligations incurred in connection with the purchase
of goods or services in the ordinary course of business
consistent with past practice, incurred any obligation or
liability, absolute, accrued, contingent or otherwise, whether
due or to become due, which liabilities, in the aggregate,
would reasonably be likely to have a Material Adverse Effect;
(ii) discharged or satisfied any Lien or liability
other than those then required to be discharged or satisfied,
or paid any obligation or liability, absolute, accrued,
contingent or otherwise, whether due or to become due, other
than capitalized leases, current liabilities shown on the
Financial Statements and current liabilities incurred since
the date thereof in the ordinary course of business consistent
with past practice;
(iii) mortgaged, pledged or subjected to Lien, any
property, business or assets, tangible or intangible;
(iv) solely as of the date of the execution of
this Agreement, received any notice of termination of any
contract or more than one contract with the same customer or
its affiliates, or any lease or other agreement or suffered
any damage, destruction or loss (whether or not covered by
insurance) which, in the aggregate, would reasonably be
16
likely to result in a loss or decrease in annual revenues , or
an increase in expenses, exceeding $500,000;
(v) transferred or granted any rights under, or
entered into any settlement regarding the breach or
infringement of, any Intellectual Property (as defined in
Section 4.3(z)), or modified any existing rights with respect
thereto;
(vi) except in the ordinary course of business
consistent with past practice, made any change in the rate of
compensation, commission, bonus or other direct or indirect
remuneration payable, or paid or agreed or orally promised to
pay, conditionally or otherwise, any bonus, incentive,
retention or other compensation, retirement, welfare, fringe
or severance benefit or vacation pay, to or in respect of any
shareholder, director, officer, employee, salesman,
distributor or agent of Seller or any Transferring Subsidiary;
(vii) encountered any labor union organizing
activity, had any actual or threatened employee strikes, work
stoppages, slowdowns or lockouts, or had any change in its
relations with its employees, agents, customers or suppliers
which, in the aggregate, would reasonably be likely to have a
Material Adverse Effect;
(viii) failed to replenish the Business' Inventory
and supplies in a normal and customary manner consistent with
its past practice, or made any purchase commitment in excess
of the normal, ordinary and usual requirements of the Business
or at any price in excess of the then current market price or
upon terms and conditions more onerous than those usual and
customary in the industry, or made any change in its selling,
pricing, advertising or personnel practices inconsistent with
its past practice;
(ix) failed to pay any accounts payable or other
liability when they became due and payable;
(x) made any capital expenditures or capital
additions or improvements in excess of an aggregate of
$250,000 other than in connection with the establishment or
enhancement of customer facilities in the ordinary course of
Business or as disclosed on the Disclosure Schedule;
(xi) instituted, settled or agreed to settle any
litigation, action or proceeding before any court or
governmental body relating to the Business or the Purchased
Assets other than in the ordinary course of business
consistent with past practices but not in any case involving
amounts in excess of $100,000;
(xii) entered into any transaction, contract or
commitment other than in the ordinary course of business
consistent with past practices or paid or agreed to pay any
legal, accounting, brokerage, finder's fee, Taxes or other
expenses in connection with, or incurred any severance pay
obligations by reason of, this Agreement or the transactions
contemplated hereby;
(xiii) sold, leased or transferred any of its assets
or property except for (A) sales of Inventory in the ordinary
course of business consistent with past practices, and (B)
cash applied in payment of the Transferring Subsidiaries'
respective liabilities in the ordinary course of business
consistent with past practices, and except as permitted by
this Agreement;
(xiv) suffered any loss, or any interruption in
use, of any assets or property (whether or not covered by
insurance), on account of fire, flood, riot, strike or other
17
hazard or Act of God which, in the aggregate, would reasonably
be likely to have a Material Adverse Effect;
(xv) cancelled or compromised any debt or claim or
waived any rights other than in the ordinary course of
business consistent with past practices which, in the
aggregate, would reasonably be likely to have a Material
Adverse Effect;
(xvi) conducted its business and operations other
than in the ordinary course of business consistent with past
practice (this clause (xvi) shall not be deemed to be breached
by virtue of the entry by Seller into this Agreement and the
Ancillary Agreements or its or their consummation of the
transactions contemplated hereby and thereby);
(xvii) made any dividend payment in excess of
$250,000, or repaid, forgiven or incurred any Intercompany
Account other than in the ordinary course of business
consistent with past practices or as permitted under any
express term of this Agreement; or
(xviii) taken any action or omitted to take any
action that would result in the occurrence of any of the
foregoing.
(k) The Purchased Assets comprise all assets and services
required for the continued conduct of the Business as now being
conducted. The Purchased Assets, taken as a whole, constitute all the
properties and assets used in or related to the Business during the
past twelve months (except Inventory sold, cash disposed of, accounts
receivable collected, prepaid expenses realized, contracts fully
performed, properties or assets replaced by equivalent or superior
properties or assets, in each case in the ordinary course of business,
employees not hired by Purchaser, and the Excluded Assets). There are
no assets or properties used in the operation of the Business and owned
by any person or entity (including Seller and its Affiliates) that will
not be transferred to Purchaser hereunder or leased or licensed to
Purchaser under the Ancillary Materials, except where the failure to
transfer such assets or properties, in the aggregate, would not be
reasonably likely to have a Material Adverse Effect. The Purchased
Assets are adequate for the purposes for which such assets are
currently used or are held for use, and are in reasonably good repair
and operating condition (subject to normal wear and tear). To the
knowledge of Seller and the Transferring Subsidiaries, there are no
facts or conditions affecting the Purchased Assets which could,
individually or in the aggregate, interfere with the use, occupancy or
operation thereof as currently used, occupied or operated, or their
adequacy for such use, except where the existence or occurrence of such
facts or conditions, in the aggregate, would not be reasonably likely
to have a Material Adverse Effect.
CONTRACTS
---------
(l) As used herein, the term "Material Contracts" refers
to the following undischarged written and, to Sellers' and the
Transferring Subsidiaries' knowledge, oral contracts, agreements,
leases and other instruments to which Seller or any of the Transferring
Subsidiaries is a party with respect to the Business:
(i) agreements for the employment for any period
of time whatsoever, or in regard to the employment, or
restricting the employment, of any employee of any of the
Transferring Subsidiaries who is or was employed in the
conduct of the Business where the agreement provides for
annual compensation to an employee in excess of $100,000 or
provides severance benefits;
18
(ii) consulting agreements where the agreement
provides for annual compensation in excess of $100,000 or
provides severance benefits;
(iii) collective bargaining agreements covering
employees employed in the conduct of the Business or in
respect of which the Purchaser or any of its Affiliates will
be bound by reason of the transactions contemplated by this
Agreement, and agreements with trade unions and work councils;
(iv) plans or contracts or arrangements providing
for incentive compensation, equity (or equity based)
compensation and deferred compensation;
(v) agreements restricting in any manner
(including but not limited to any restrictions with respect to
any geographic territory) the right to compete with any other
person or entity restricting the right to sell to or purchase
from any other person or to employ any person, or restricting
the right of any other party to compete with the Business or
the ability of such person or entity to employ any of the
Transferring Subsidiaries' respective employees employed in
the conduct of the Business;
(vi) agreements between any of the Transferring
Subsidiaries and any of their respective Affiliates, including
with respect to the purchase of goods or the performance of
services;
(vii) agreements of agency, representation,
distribution, or franchise which cannot be canceled by any of
the Transferring Subsidiaries without payment or penalty upon
notice of ninety (90) days or less;
(viii) service agreements affecting any of the
Purchased Assets where the agreement has an annual service
charge in excess of $100,000 and has an unexpired term as of
the Closing Date in excess of one year;
(ix) guaranties, performance, bid or completion
bonds, or surety or indemnification agreements with respect to
the Business;
(x) leases or subleases, either as lessee or
sublessee, lessor or sublessor, of real or personal property
or intangibles to be assigned to Purchaser pursuant to this
Agreement, where the lease or sublease provides for an annual
rent in excess of $100,000 and has an unexpired term as of the
Closing Date in excess of one year;
(xi) agreements between Seller or the relevant
Transferring Subsidiaries and any person granting any right to
use, license or sublicense, or practice any right under the
Intellectual Property (as defined herein) (other than with
respect to "off-the-shelf" Software);
(xii) loan agreements, indentures, letters of
credit, mortgages, security agreements, pledge agreements,
deeds of trust, bonds, notes, guarantees, and other agreements
and instruments relating to the borrowing of money or
obtaining of or extension of credit;
(xiii) joint venture, partnership and similar
contracts involving a sharing of profits or expenses
(including but not limited to joint research and development
and joint marketing contracts);
(xiv) asset purchase agreements and other
acquisition or divestiture agreements, including but not
limited to any agreements relating to the sale, lease or
19
disposal of any Assets (other than this Agreement and the
Ancillary Agreements and sales of inventory in the ordinary
course of business) or involving continuing indemnity or other
obligations;
(xv) sales agency, manufacturer's representative,
marketing or distributorship agreements; and
(xvi) all other agreements not specifically
enumerated above, related to the Business which are to be
assigned to Purchaser under this Agreement (including,
agreements with customers, vendors and suppliers) where the
agreement provides for the receipt or expenditure by Purchaser
after such assignment of the agreement of more than $100,000,
except, with respect to this Section 4.3(l)(xvi), agreements
entered into in the ordinary course of business consistent
with past practices, as to which no breach or default
currently exists.
The Disclosure Schedule contains a list of all Material Contracts as of
the date hereof. All Material Contracts are binding upon Seller or a
Transferring Subsidiary and, to Seller's knowledge, the other parties
thereto. Seller has made available to Purchaser copies of all written
Material Contracts. No default (or event which with notice or lapse of
time or both would be a default) by any of the Transferring
Subsidiaries has occurred thereunder and, to Seller's knowledge, no
default (or event which with notice or lapse of time or both would be a
default) by the other contracting parties has occurred thereunder,
except for such defaults which in the aggregate are not reasonably
likely to have a Material Adverse Effect. Neither Seller nor any of
Seller's Affiliates (other than the Transferring Subsidiaries) are a
party to any Material Contract on behalf of the Business.
(m) The Disclosure Schedule identifies (i) all contracts,
leases (for real and personal property), licenses and other instruments
which prohibit the transfer of the Purchased Assets by the Seller or
any Transferring Subsidiary or the assignment of the Sellers' or the
Transferring Subsidiaries' respective rights thereunder without the
consent of the other party thereto ("Third Party Consents"), and (ii)
each Third Party Consent which involves a customer and an amount of
revenues exceeding $5.0 million per year which, for the convenience of
the parties are identified on Schedule 4.3(m)(ii) ("Material Third
Party Consents"). Except as provided in the Disclosure Schedule,
neither the execution, delivery and performance of this Agreement and
Seller's Ancillary Documents by Seller, nor the execution, delivery and
performance of this Agreement and the Ancillary Agreements and the
Subsidiary Ancillary Documents by the Transferring Subsidiaries, nor
the consummation by Seller and the Transferring Subsidiaries of the
transactions contemplated hereby and thereby, will (with notice or
lapse of time or both) violate, conflict with or result in a breach of
any of the terms, conditions or provisions of or result in (or give any
party any right of) acceleration, termination or cancellation of any of
the terms of any contract, lease, license, agreement, indenture,
mortgage, debenture, note or other instrument related to the Business
or the Purchased Assets, which violations, conflicts, or results would
in the aggregate be reasonably likely to have a Material Adverse
Effect.
(n) The Disclosure Schedule (i) contains a list of all
material licenses, permits, registration and governmental approvals
(the "Permits") (other than Environmental Permits, which are
exclusively provided for in Section 4.3(y)) held by the Seller and the
Transferring Subsidiaries with respect to the Business, (ii) identifies
any Permit which is prohibited from being transferred or may not be
assigned to Purchaser without the consent of any governmental authority
or any third party (the "Permit Consents") and (iii) identifies each
Permit Consent required to be obtained on or before the Closing Date
(the "Material Permits"). The Transferring Subsidiaries possess all
Permits which are required in order for the Transferring Subsidiaries
to conduct the Business as presently conducted, except where the
failure to possess such Permits would not in the aggregate be
reasonably likely to have a Material Adverse Effect.
20
INVENTORY
---------
(o) All Inventories are of good, usable and merchantable quality,
except as set forth on the Disclosure Schedule and except where, in the
aggregate, such quality is not reasonably likely to have a Material Adverse
Effect, do not include obsolete or discontinued items. Except as set forth
on the Disclosure Schedule, (a) all Inventories are of such quality as to
meet the quality control standards of Seller and each Transferring
Subsidiary and any applicable governmental quality control standards, (b)
all Inventories that are finished goods are saleable as current inventories
at the current prices thereof in the ordinary course of business, (c) all
Inventories are recorded on the books of the Business at the lower of cost
or market value determined in accordance with GAAP and (d) no write-down in
inventory has been made or should have been made pursuant to GAAP. The
Disclosure Schedule lists the locations of all Inventories.
CUSTOMERS
---------
(p) Solely as of the date of the execution of this Agreement: the
Disclosure Schedule sets forth (a) the names and addresses of all customers
of Seller or any Transferring Subsidiary that ordered goods and services
from the Business with an aggregate value for each such customer of
$500,000 or more during the twelve-month period ended as of December 31,
2000 and (b) the amount for which each such customer was invoiced during
such period. Neither the Seller nor any Transferring Subsidiary has
knowledge, or has received any written notice, that any such customer of
Seller or any Transferring Subsidiary has terminated or will terminate or
has substantially reduced or will substantially reduce its use of products,
goods or services of the Business. To the knowledge of Seller and the
Transferring Subsidiaries, no customer of the Business described in clause
(a) of the first sentence of this Section has otherwise threatened to take
any action described in the preceding sentence as a result of the
consummation of the transactions contemplated by this Agreement and the
Ancillary Materials.
SUPPLIERS; RAW MATERIALS
------------------------
(q) The Disclosure Schedule sets forth (a) the names and addresses
of all suppliers (including without limitation Seller and any Affiliates
thereof) from which the Business ordered raw materials, supplies,
merchandise and other goods and services with an aggregate purchase price
for each such supplier of $100,000 or more during the twelve-month period
ended December 31, 2000 and (b) the amount for which each such supplier
invoiced the Business during such period. Neither the Seller nor any
Transferring Subsidiary has received any notice or has any reason to
believe that there has been any change in the price of such raw materials,
supplies, merchandise or other goods or services, or that any such supplier
will not sell raw materials, supplies, merchandise and other goods to
Purchaser at any time after the Closing Date on terms and conditions
similar to those used in its current sales to the Business, subject to
general and customary price increases and except where the changes, in the
aggregate, are not reasonably likely to have a Material Adverse Effect. To
the knowledge of Seller, no supplier of the Business described in clause
(a) of the first sentence of this Section has otherwise threatened to take
any action described in the preceding sentence as a result of the
consummation of the transactions contemplated by this Agreement and the
Ancillary Agreements.
SERVICE AND PRODUCT WARRANTIES
------------------------------
(r) Except as set forth in the Disclosure Schedule and for
warranties under applicable law, (a) there are no warranties express or
implied, written or oral, with respect to the products or services of the
Business and (b) there are no pending or threatened claims with respect to
any such warranty, and neither the Seller nor any Transferring Subsidiary
has any
21
liability with respect to any such warranty, whether known or unknown,
absolute, accrued, contingent or otherwise and whether due or to become
due.
RECEIVABLES
-----------
(s) All of Seller's and each Transferring Subsidiary's receivables
(including accounts receivable, loans receivable and advances) which have
arisen in connection with the Business and which are reflected in the
Financial Statements have, and all such receivables which will have arisen
since the Most Recent Fiscal Month End have, arisen only from bona fide
transactions in the ordinary course of business and are, or will be,
collectible in full at the recorded amounts thereof (net of any recorded
reserve) in the ordinary course of business subject to no defenses,
setoffs, counterclaims or recoupments. Neither Seller nor any Transferring
Subsidiary has any knowledge of any facts or circumstances generally (other
than general economic conditions) which would result in any increase in the
uncollectability of such receivables as a class in excess of the reserves
therefor set forth on the Financial Statements. The Disclosure Schedule
hereto accurately lists as of December 31, 2000 all receivables arising out
of or relating to the Business in excess of $100,000, the amount owing and
the aging of such receivable, the name and last known address of the party
from whom such receivable is owing, and any security in favor of Seller or
any Transferring Subsidiary for the repayment of such receivable which
Seller or any Transferring Subsidiary purports to have. Since December 31,
2000, there has been no change to Seller's or any Transferring Subsidiary's
Credit Policy for the Business. "Credit Policy" means the financial and
related standards utilized in connection with the Business to determine who
to accept as a customer, when to record a reserve with respect to a
receivable, and how and when to pursue collections.
EMPLOYEES
---------
(t) With respect to employees of the Transferring Subsidiaries
employed in the conduct of the Business:
(i) the Disclosure Schedule contains a true and complete
list of all Pension Plans. As used herein, the term "Pension Plans"
refer to all employee pension benefit plans (as defined in Section
3(2) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")) that are sponsored, maintained, or contributed to
or required to be contributed to by the Seller, a Transferring
Subsidiary or by any trade or business, whether or not incorporated
(an "ERISA Affiliate"), that together with the Seller or a
Transferring Subsidiary would be deemed a "single employer" within
the meaning of Section 4001(b) of ERISA, or to which Seller, a
Transferring Subsidiary or an ERISA Affiliate is a party, whether
written or oral, for the benefit of employees or former employees of
the U.S. Business. No Pension Plan is a multiemployer plan (as
defined in Section 3(37) of ERISA);
(ii) the Disclosure Schedule contains a true and complete
list of those employee welfare benefit plans (as defined in Section
3(1) of ERISA) that are sponsored, maintained, or contributed to or
required to be contributed to by the Seller, a Transferring
Subsidiary or an ERISA Affiliate for the benefit of employees or
former employees of the U.S. Business (the "Welfare Plans");
(iii) neither Danka US nor any ERISA Affiliate of Danka US
has incurred any liability to the Pension Benefit Guaranty
Corporation ("PBGC") as a result of the voluntary or involuntary
termination of any Pension Plan subject to Title IV of ERISA; there
is currently no active filing by Danka US or any ERISA Affiliate with
the PBGC (and no proceeding has been commenced by the PBGC) to
terminate any Pension Plan subject to Title IV of ERISA maintained or
funded, in whole or in part, by Danka US or
22
any ERISA Affiliate; and neither Danka US nor any ERISA Affiliate has
made a complete or partial withdrawal from a multiemployer plan
resulting in withdrawal liability, as such term is defined in Section
4201 of ERISA (without regard to subsequent reduction or waiver of
such liability under either Section 4207 or 4208 of ERISA); to
Seller's knowledge, no liability under Title IV or Section 302 of
ERISA has been incurred by Seller, a Transferring Subsidiary or any
ERISA Affiliate that has not been satisfied in full, and no condition
exists that presents a risk to Seller, a Transferring Subsidiary or
any ERISA Affiliate of incurring any such liability, other than
liability for premiums due to the PBGC (which premiums have been paid
when due) except where such liabilities and conditions, in the
aggregate, are not reasonably likely to have a Material Adverse
Effect. Insofar as the representation made in this Section
4.3(t)(iii) applies to sections 4064, 4069 or 4204 of Title IV of
ERISA, it is made with respect to any employee benefit plan, program,
agreement or arrangement subject to Title IV of ERISA to which the
Seller, a Transferring Subsidiary or any ERISA Affiliate made, or was
required to make, contributions during the five (5)-year period
ending on the last day of the most recent plan year ended prior to
the Closing Date;
(iv) the consummation of the transactions contemplated by
this Agreement will not, either alone or in combination with another
event, (i) entitle any current or former employee or officer of
Seller, a Transferring Subsidiary or any ERISA Affiliate to worker's
compensation, severance pay, unemployment compensation or any other
payment or (ii) accelerate the time of payment or vesting, or
increase the amount of compensation due any such employee or officer,
(iii) otherwise cause any payment of compensation to any such
employee or officer to be treated as not deductible as an excess
parachute payment under Section 280G(a) of the Code, or (iv)
constitute a "change in control" triggering the payment of additional
benefits to any employee of Seller, any Transferring Subsidiary or
any ERISA Affiliate;
(v) except as set forth in the Disclosure Schedule, no
Welfare Plan provides medical coverage to former employees of the
Business (other than such coverage required by Section 4980B(f) of
the Code and there has been no material failure of a Welfare Plan
that is a group health plan (as defined in Section 5000(b)(1) of the
Code) to meet the requirements of Section 4980B(f) of the Code with
respect to a qualified beneficiary (as defined in Section 4980B(g) of
the Code) except where such failures, in the aggregate, are not
reasonably likely to have a Material Adverse Effect. With respect to
the U.S. Business, neither the Seller nor any Transferring Subsidiary
has contributed to a nonconforming group health plan (as defined in
Section 5000(c) of the Code) and no ERISA Affiliate of the Seller or
any Transferring Subsidiary has incurred a tax under Section 5000(a)
of the Code which is or could become a liability of the Seller or a
Transferring Subsidiary;
(vi) there are no pending or, to Seller's knowledge,
threatened claims by or on behalf of any Welfare Plan , any Pension
Plan or any Non-U.S. Plans, by any employee or beneficiary covered
under any such plan, or otherwise involving any such plan (other than
routine claims for benefits);
(vii) with respect to any plan, arrangement, contract or
other program for the purpose of providing or otherwise making
available retirement, pension, welfare or fringe benefits to
employees of the Transferring Subsidiaries which is not an Excluded
Liability pursuant to Section 2.3(i) (collectively, "Non-U.S.
Plans"), each Non-U.S. Plan is listed on the Disclosure Schedule and
is in compliance with the provisions of all laws applicable to each
such Non-U.S. Plan, and each Transferring Subsidiary has accrued paid
contributions for or otherwise taken into account on its books and
records all pension or retirement liabilities required to be accrued,
contributed or otherwise taken into
23
account under the laws applicable to each Non-U.S. Plan except where
such non-compliance, in the aggregate, would not be reasonably likely
to have a Material Adverse Effect. The plan assets for the Non-U.S.
Plans are, and on the Closing Date will be, sufficient to satisfy all
vested accrued benefits determined as if such plans terminated on the
Closing Date. The Transferring Subsidiaries have filed, or will have
filed prior to the Closing Date, all reports or other documents with
respect to each Non-U.S. Plan required by the law applicable to each
such Non-U.S. Plan. Neither Seller nor any Transferring Subsidiary
has made any communication that would limit Purchaser's ability to
amend, modify or terminate any Non U.S. Plan to the extent Purchaser
becomes obligated thereby;
(viii) except as set forth in the Disclosure Schedule, no
employee or former employee of the Business is represented by a union
and there is no request for union representation pending, or to
Seller's knowledge, threatened against any Transferring Subsidiary
with respect to the Business;
(ix) There are no pending or, to Seller's knowledge,
threatened, material unfair labor practice charges or employee
grievance charges against any Transferring Subsidiary with respect to
the Business except where such changes, in the aggregate, are not
reasonably likely to have a Material Adverse Effect;
(x) the Disclosure Schedule contains a list of all
employees of the Transferring Subsidiaries employed in the conduct of
the Business ("Employees") as of the Most Recent Fiscal Month End,
and said list correctly reflects their base salaries, bonuses, dates
of employment positions, service date for employee benefit purposes,
annual vacation entitlement, and such other information as Purchaser
may reasonably request. Such list shall be made current as of the
Closing Date. Except as set forth in the Disclosure Schedule, none of
the employees have contracts of employment with Seller or any
Transferring Subsidiary. To the knowledge of Seller and any
Transferring Subsidiary, no employee is subject to any contractual or
legal impediment to employment or continued employment by Purchaser
after the Closing Date. All employees of the US Business are
authorized to work for Seller and any Transferring Subsidiary in
accordance with the Immigration and Reform Control Act and Seller and
each Transferring Subsidiary has complied with the requirements of
Executive Order 11246; and
(xi) except as set forth in the Disclosure Schedule, since
the enactment of the WARN Act, none of the Transferring Subsidiaries
has effectuated a "plant closing" or "mass layoff" (as defined in the
WARN Act or any similar state, local or foreign law or regulation)
affecting any site of employment of the Business or one or more
facilities or operating units within any site of employment or
facility of the Business, without complying with the WARN Act or
similar state, local or foreign law or regulation, and, during the
ninety day period preceding the date hereof, none of the Transferring
Subsidiaries' employees in the Business has suffered an "employment
loss" (as defined in the WARN Act or any similar state, local or
foreign law or regulation).
LITIGATION AND CLAIMS
---------------------
(u) There is no litigation, arbitration or proceeding, in law or
in equity, and there are no proceedings or governmental investigations
before any commission or other administrative authority, pending, or, to
Seller's or any Transferring Subsidiary's knowledge, overtly threatened,
against Seller or its Affiliates or (without limiting the generality of the
foregoing) any of the Transferring Subsidiaries or, any of their respective
employees, officers or directors with respect to or affecting the Business,
and except for those which, if decided adversely to such party or the
applicable Transferring Subsidiary would not, in the aggregate, be
reasonably likely to have a
24
Material Adverse Effect. There is no such litigation, proceeding or
investigation pending, or to Seller's knowledge, threatened, against Seller
or its Affiliates or any of the Transferring Subsidiaries with respect to
the consummation of the transaction contemplated hereby, or the use of the
Purchased Assets (whether used by Purchaser after the Closing or by any of
the Transferring Subsidiaries prior thereto).
(v) Neither Seller nor any Transferring Subsidiary is a party to,
or bound by, any decree, order or arbitration award (or agreement entered
into in any administrative, judicial or arbitration proceeding with any
governmental authority) except for those the enforcement of which or
compliance with which, in the aggregate, have not had and are not
reasonably likely to have a Material Adverse Effect.
(w) Except for laws, rules and regulations relating to the
environment (which are exclusively provided for in Section 4.3(x) hereof),
neither Seller nor any of the Transferring Subsidiaries, is, with respect
to the Business, in violation of, or delinquent in respect of, any decree,
order or arbitration award or law, statute, or regulation or order of or
agreement with, or Permit from, any federal, state or local governmental
authority (or to which the properties, assets, personnel, business
activities of the Business or the Leased Premises are subject or to which
it, itself, with respect to the Business, is subject), including, laws,
statutes and regulations relating to equal employment opportunities, fair
employment practices, and discrimination, except for such violations or
delinquencies which, in the aggregate, are not reasonably likely to have a
Material Adverse Effect.
ENVIRONMENTAL MATTERS
---------------------
(x) (i) The Transferring Subsidiaries, with respect to the
Business, have obtained all permits, licenses and other
authorizations that are required under the Environmental Laws
("Environmental Permits") for (A) the operation of the Business and
(B) the ownership, use and operation of each location owned, operated
or leased by the Transferring Subsidiaries; all such permits,
licenses and authorizations are in effect; no appeal nor any other
action is pending to revoke any such permit, license or
authorization; and the Transferring Subsidiaries are in full
compliance with all terms and conditions of all such permits,
licenses and authorizations, except where the failure to so comply
would not in the aggregate have a Material Adverse Effect. The
Disclosure Schedule contains (A) a complete and accurate list of all
Environmental Permits held by the Transferring Subsidiaries with
respect to the Business, (B) identifies any Environmental Permit
which is prohibited from being transferred or may not be assigned to
Purchaser without the consent of any governmental authority or any
third party ("Environmental Permit Consents"), and (C) identifies
each Environmental Permit Consent required to be obtained on or
before the Closing Date (the "Material Environmental Permits").
(ii) The Transferring Subsidiaries, with respect to the
Business, have been and are in compliance with all applicable
Environmental Laws, except where the failure to so comply would not
in the aggregate have a Material Adverse Effect.
(iii) Seller has heretofore made available to Purchaser true
and complete copies of all environmental studies made by or on behalf
of Seller or Transferring Subsidiaries relating to each location
owned, used or operated by the Transferring Subsidiaries in
connection with the Business, to the extent that such studies are in
the possession of Seller or the Transferring Subsidiaries.
(iv) There is no civil, criminal or administrative action,
suit, demand, claim, hearing, notice of violation, investigation,
proceeding, order, decree, judgment, notice or
25
demand letter existing or pending or, to Seller's knowledge,
threatened, relating to the Transferring Subsidiaries with respect to
the Business or any property currently or formerly owned, operated or
leased by the Transferring Subsidiaries in connection with the
Business, relating in any way to the Environmental Laws.
(v) The Transferring Subsidiaries have not and, to
Seller's knowledge, no other person has, Released, discharged, or
otherwise disposed, of any Hazardous Substances at, on, beneath or
adjacent to any property currently or formerly owned, operated or
leased by the Transferring Subsidiaries in connection with the
Business, except for Releases of Hazardous Substances subject to, and
in compliance with, a permit or authorization pursuant to or
otherwise in conformity with applicable Environmental Law.
(vi) To Seller's knowledge, no employee of the Transferring
Subsidiaries in the course of his or her employment with a
Transferring Subsidiary, in connection with the Business, has been
exposed to any Hazardous Substances during the course of his or her
employment which is reasonably likely to give rise to any claim
against any of the Transferring Subsidiaries.
(vii) The Transferring Subsidiaries, in connection with the
Business, have not received any notice or order from any governmental
agency or private or public entity advising them that they are
responsible for or potentially responsible for Cleanup or paying for
the cost of Cleanup of any Hazardous Substances, and none of the
Transferring Subsidiaries, in connection with the Business, has
entered into any agreements concerning such Cleanup, nor are the
Seller or any of the Transferring Subsidiaries, in connection with
the Business, aware of any facts which might reasonably give rise to
such notice, order, agreement or responsibility.
(viii) None of the Transferring Subsidiaries, in connection
with the Business, have entered into any contract, lease, consent
order or judgment or other agreement that may require them to pay to,
reimburse, guarantee, pledge, defend, indemnify or hold harmless any
person for or against any liabilities or costs arising out of or
related to the generation, manufacture, use, transportation or
disposal of Hazardous Substances, or otherwise arising in connection
with or under Environmental Laws (it being understood and agreed that
none of such agreements, and none of the obligations thereunder,
constitute Purchased Assets or Assumed Liabilities).
(ix) For purposes of this Agreement, the following terms
have the meanings ascribed herein:
(A) "Cleanup" shall mean all actions required to (1)
clean up, remove, treat or remediate Hazardous Substances in
the indoor or outdoor environment, (2) prevent the Release of
Hazardous Substances so that they do not migrate, endanger or
threaten to endanger public health or welfare or the indoor or
outdoor environment, (3) perform pre-remedial studies and
investigations and post-remedial monitoring and care, (4)
respond to any government requests for information or
documents in any way relating to cleanup, removal, treatment
or remediation or potential clean up, removal, treatment or
remediation of Hazardous Substances in the indoor or outdoor
environment or (5) any administrative, judicial, or other
proceedings related to the above.
(B) "Environmental Laws" shall mean all foreign,
federal, state and local laws, statutes, codes, regulations,
rules, ordinances, bylaws, decrees,
26
directives, technical norms, orders, decisions of a tribunal
and common law, relating to pollution or protection of the
environment or human health and safety, including, laws
relating to (1) Releases or threatened Releases of Hazardous
Substances into the indoor or outdoor environment (including,
ambient air, surface water, groundwater, land, surface and
subsurface strata) or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, Release,
transport or handling of Hazardous Substances, (2) record
keeping, notification, disclosure and reporting requirements
respecting Hazardous Substances, and (3) endangered or
threatened species of fish, wildlife and plants and the
management, use, impairment or loss of natural resources.
(C) "Hazardous Substances" shall mean (i) any
petrochemical or petroleum products, radioactive materials,
asbestos in any form that is or could become friable, urea
formaldehyde foam insulation, transformers or other equipment
that contain dielectric fluid containing polychlorinated
biphenyls, and radon gas; (ii) any chemicals, materials or
substances defined as or included in the definition of
"hazardous substances," "hazardous wastes," "hazardous
materials," "restricted hazardous materials," "extremely
hazardous substances," "toxic substances," "contaminants" or
"pollutants" or words of similar meaning and regulatory effect
under any Environmental Law; or (iii) any other chemical,
material, agent or substance, exposure to which is prohibited,
limited, or regulated by any applicable Environmental Law.
(D) "Release" shall mean any release, spill, emission,
discharge, leaking, pumping, injection, deposit, disposal,
discharge, dispersal, leaching or migration into the indoor or
outdoor environment (including, ambient air, surface water,
groundwater, and surface or subsurface strata) or into or out
of any property, including, the movement of Hazardous
Substances through or in the air, soil, surface water,
groundwater or property.
LEASED PREMISES
---------------
(y) None of Seller or the Transferring Subsidiaries owns any real
estate which is used in the conduct of the Business. The Leased Premises
are leased to the Transferring Subsidiaries pursuant to written leases,
true and complete copies of which have been made available to Purchaser.
None of the Transferring Subsidiaries is in default under any term of any
agreement relating to the Leased Premises, nor, to Seller's knowledge, is
any other party thereto in default thereunder, except for such defaults
which in the aggregate are not reasonably likely to have a Material Adverse
Effect.
INTELLECTUAL PROPERTY
---------------------
(z) With respect to the Intellectual Property (as defined herein):
(i) the applicable Transferring Subsidiary is the owner of
or has rights to use all of the Intellectual Property;
(ii) the Disclosure Schedule sets forth a complete and
accurate list of all Intellectual Property including all U.S. and
foreign copyright registrations, copyright applications, patents and
patent applications, trademark and service ▇▇▇▇ registrations
(including Internet domain name registrations), trademark and service
▇▇▇▇ applications and material unregistered trademarks and service
marks included within the Intellectual Property, excluding those
trademarks, service marks and Internet domain names
27
containing the term "Danka," owned by or under obligation of
assignment to any Transferring Subsidiary;
(iii) except with respect to unregistered trademarks and
service marks, each owner listed on the Disclosure Schedule is listed
in the records of the appropriate governmental entity as the sole
owner of record (except as otherwise indicated in the Disclosure
Schedule);
(iv) the Disclosure Schedule lists all Software, as defined
herein, which is owned ("Proprietary Software") or licensed, leased
or otherwise used in the Business (other than "off-the-shelf"
software and the Excluded Assets) and identifies which Software is
owned, licensed, leased or otherwise used, as the case may be;
(v) the Disclosure Schedule sets forth a complete and
accurate list of all agreements (other than agreements with respect
to "off-the- shelf" software) between any Transferring Subsidiary, on
the one hand, and any person, on the other hand, granting any right
to use or practice any rights under any of the Intellectual Property
(collectively, "Intellectual Property Licenses");
(vi) to Seller's and Transferring Subsidiaries' knowledge,
the conduct of the Business and the exercise of rights relating to
the Intellectual Property does not infringe upon or otherwise
violate, intellectual property rights of any person and neither the
Seller nor any Transferring Subsidiary has received any notice of a
claim by a third party that the Intellectual Property infringes or
misappropriates or constitutes an unfair competition or trade
practice under laws of any jurisdiction;
(vii) to Seller's and Transferring Subsidiaries' knowledge,
no person is infringing upon or otherwise violating any of the
Intellectual Property;
(viii) neither Seller nor any Transferring Subsidiary has
received notice of any claims, and, to Seller's and Transferring
Subsidiaries' knowledge, there are no pending claims, of any persons
relating to the scope, ownership or use of any of the Intellectual
Property;
(ix) each copyright registration, patent and registered
trademark and application therefor listed on the Disclosure Schedule
is in proper form, not disclaimed and has been duly maintained,
including the submission of all necessary filings in accordance with
the legal and administrative requirements of the appropriate
jurisdictions except with respect to use requirements as to
trademarks;
(x) no Transferring Subsidiary has licensed or sublicensed
its rights in any of the Intellectual Property or received or granted
any such rights, other than pursuant to Intellectual Property
Licenses;
(xi) all Proprietary Software set forth in the Disclosure
Schedule was either developed (a) by employees of Seller or a
Transferring Subsidiary within the scope of their employment and no
employee of Seller or any Transferring Subsidiary has any claims or
rights in or to the Intellectual Property or to the transfer of the
Intellectual Property to Purchaser, or (b) by independent contractors
who have assigned their right to a Transferring Subsidiary pursuant
to written agreements. Seller and each Transferring Subsidiary has
and enforces a policy requiring each employee and contractor to
execute a proprietary information/confidentiality agreement, and
substantially all current and former employees and all consultants of
Seller and each Transferring Subsidiary have executed such an
agreement; and
28
(xii) except as set forth on the Disclosure Schedule, the
Transferring Subsidiaries have full legal and beneficial right, title
and interest in and to, and have all corporate power to sell or
transfer the Intellectual Property, the Proprietary Software and the
Intellectual Property Licenses to Purchaser.
As used herein "Software" means any and all (i) computer programs,
including any and all software implementation of algorithms, models and
methodologies whether in source code or object code and whether embedded or
otherwise, (ii) databases and computations, including any and all data and
collections of data, (iii) documentation, including user manuals and
training materials, relating to any of the foregoing, and (iv) the content
and information contained in any Web site which content and information
relate exclusively to the Business.
GENERAL
-------
(aa) Neither Seller, nor any of its Affiliates, has dealt with any
person or entity who is entitled to a broker's commission, finder's fee,
investment banker's fee or similar payment from Purchaser or any of its
Affiliates for arranging the transaction contemplated hereby or introducing
the parties to each other.
(bb) Neither Seller nor any Transferring Subsidiary nor any of its
directors, officers, agents, employees or any other persons acting on its
behalf has, in connection with the operation of the Business, (i) used any
corporate or other funds for unlawful contributions, payments, gifts or
entertainment, or made any unlawful expenditures relating to political
activity to government officials or established or maintained any unlawful
or unrecorded funds in violation of Section 104 of the Foreign Corrupt
Practices Act of 1977, as amended, or any other applicable foreign, federal
or state law; or (ii) accepted or received any unlawful contributions,
payments, expenditures or gifts.
(cc) (i) The continuance and final success of Seller and each
Transferring Subsidiary will be enhanced on the sale of the Purchased
Assets and the Business by Seller and the Transferring Subsidiaries. The
sale of the Purchased Assets to Purchaser directly benefits Seller in a net
amount greater than the contingent liability assumed by Seller pursuant to
the terms of this Agreement. Seller understands that Purchaser's
willingness to purchase the Purchased Assets is predicated upon, and that
Purchaser has relied upon, the truth of the foregoing representation by
Seller in agreeing to the terms and conditions of this Agreement.
(ii) Neither the Seller nor any Transferring Subsidiary has
been party to a transaction pursuant to or as a result of which any
of the Purchased Assets is liable to be transferred or re-transferred
to another person or which gives or may give rise to a right of
compensation or other payment in favour of another person. No
transaction at an undervalue (a) relating to any of the shares in any
of the Transferring Subsidiaries, or (b) to which Seller or any
Transferring Subsidiary has been a party, has been effected prior to
the date of this Agreement. "Transaction at an undervalue", in
relation to a company, has the meaning assigned by Section 238(4) of
the Insolvency ▇▇▇ ▇▇▇▇ and, in relation to an individual, has the
meaning assigned by Section 339(3) of the Insolvency ▇▇▇ ▇▇▇▇.
(iii) Seller further acknowledges that Purchaser's reliance on
Seller's representations and warranties set forth in this Agreement
is justified.
(dd) After giving effect to the consummation of the transactions
contemplated hereby and the incurrence of any indebtedness in connection
therewith, including, without limitation, contingent indebtedness, the fair
market value of the assets of Seller and each Transferring
29
Subsidiary will exceed the Seller's and each Transferring Subsidiary's
respective aggregate liabilities.
(ee) After due investigation and consideration, the Boards of
Directors of the Seller and each Transferring Subsidiary have determined
that the Purchase Price represents the reasonably equivalent value for the
Purchased Assets taken as a whole and the allocation of the Purchase Price
among the Transferring Subsidiaries as set forth on Schedule 3.2 is the
reasonably equivalent value of the Purchased Assets owned by each of the
respective Transferring Subsidiaries after conducting a noncollusive,
public "auction" of the Business to obtain the highest purchase price for
the Purchased Assets. The Seller's Board of Directors has been advised
during the auction process and in the negotiation and execution of this
Agreement by ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇ Capital.
(ff) When (i) the proxy statement required to be provided under
U.S. law (such proxy statement, in its definitive form, together with any
and all amendments and supplements thereto and all information incorporated
therein by reference therein being referred to as the "Proxy Statement") is
mailed to Seller's shareholders and on the date of the shareholders'
meeting, the Proxy Statement shall contain all information required to be
stated therein by the Securities Exchange Act of 1934, as amended and the
rules and regulations of the U.S. Securities and Exchange Commission
thereunder and shall in all material respects conform to the requirements
of the Securities Exchange Act of 1934, as amended, and such rules and
regulations promulgated thereunder, and the Proxy Statement shall not at
the time it is mailed to Seller's shareholders and on the date of the
shareholders' meeting contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements
made, in light of the circumstances under which they were made, not
misleading and (ii) the circular required to be provided under the Listing
Rules of the UK Listing Authority (such circular, in its definitive form,
together with any and all amendments and supplements thereto being
hereafter referred to as the "Circular") is mailed to Seller's shareholders
and on the date of the shareholders' meeting, the Circular shall contain
all information required to be stated therein by the Listing Rules of the
UK Listing Authority and shall in all material respects conform to the
requirements of such Listing Rules, and the Circular shall not at the time
it is mailed to Seller's shareholders and on the date of the shareholders'
meeting contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make statements made, in light of
the circumstances under which they were made, not misleading.
4.4 Limitation on Warranties. Except as set forth in Section 4.3, Seller
------------------------
makes no express or implied warranty of any kind whatsoever, including, with
respect to (a) any information furnished by Seller or Transferring Subsidiaries
or their financial advisor, or any of Seller's or Transferring Subsidiaries'
other representatives or agents, (b) the physical condition or value of any of
the Purchased Assets or (c) the future profitability or future earnings
performance of the Business. ALL IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE ARE EXPRESSLY EXCLUDED. Purchaser hereby
acknowledges and agrees that, except to the extent specifically set forth in
Section 4.3, Purchaser is acquiring the Purchased Assets on an "as-is, where-is"
basis.
4.5 Definition of Knowledge. For the purposes of this Agreement, the
-----------------------
knowledge of Seller or of Seller and each Transferring Subsidiary or of Seller
and the Transferring Subsidiaries, or the like, shall be deemed, in each case,
to be and be limited to the actual knowledge as of the Closing Date of one or
more of the persons listed in Schedule 4.5, which schedule details each such
person's title or capacity, in each case without giving effect to imputed
knowledge but after reasonable diligence and inquiry by such person in light of
the circumstances under which the representations are being made.
30
ARTICLE V
Conduct Prior to the Closing
5.1 General. Seller and Purchaser shall have the rights and
obligations with respect to the period between the date hereof and the Closing
Date which are set forth in the remainder of this Article V.
5.2 Seller's Obligations. The following are Seller's obligations:
--------------------
(a) Subject to applicable law and privilege and Section
5.3(d) below, Seller shall give, and shall cause the Transferring Subsidiaries
to give, to Purchaser's officers, employees, attorneys, consultants, accountants
and lenders reasonable access during normal business hours to all of the
properties, books, contracts, documents, records and personnel of Seller and the
Transferring Subsidiaries relating to the Business and shall furnish to
Purchaser such information, including all internally prepared financial
statements, as Purchaser may at any time and from time to time reasonably
request.
(b) Seller shall use its commercially reasonable best
efforts (and Purchaser shall cooperate with Seller) to obtain the Governmental
Consents, the Third Party Consents, the Permit Consents and the Environmental
Permit Consents. Notwithstanding the foregoing, Seller shall refrain from taking
such actions with respect to any such consents as may be expressly requested by
Purchaser in writing and the Purchaser shall have no recourse against Seller for
Seller's compliance with such written instructions from Purchaser, including any
right to refuse to close or to obtain a purchase price adjustment or indemnity.
(c) Seller shall cause the Transferring Subsidiaries to
carry on the Business in the usual and ordinary course of business for profit
motivated companies of similar size and character, which shall require operating
such business at least consistent with past practices. Seller and each
Transferring Subsidiary shall use their reasonable best efforts to preserve
intact their business organizations and relationships with third parties and to
keep available the services of their present officers and employees. Without
limiting the generality of the foregoing, unless expressly contemplated by this
Agreement, Seller and each Transferring Subsidiary shall and shall cause each
Transferring Subsidiary, to:
(i) pay accounts payable and other obligations of
the Business when they become due and payable in the ordinary course of
business;
(ii) perform all of its obligations under all
contracts, agreements and instruments relating to or affecting the Business or
the Purchased Assets, and comply with all applicable laws;
(iii) not enter into or assume any agreement,
contract or instrument relating to the Business, or enter into or permit any
amendment, supplement, waiver or other modification in respect thereof, which
Seller and the Transferring Subsidiaries reasonably believe in the absence of
breach and in the aggregate would be reasonably likely to have a Material
Adverse Effect;
(iv) except in the ordinary course of business
consistent with past practice, not grant (or commit to grant) any increase in
the compensation (including incentive or bonus compensation) of any employee
employed in the operation of the Business or institute, adopt or amend (or
commit to institute, adopt or amend) any compensation or, subject to Section 5.2
(c) (iv), benefit plan, policy, program or arrangement or collective bargaining
agreement applicable to any such employee;
(v) not institute, adopt or amend (or commit to
institute, adopt or amend) any severance pay plan, policy, program or
arrangement applicable to any employee employed in the Business;
31
(vi) not change or otherwise amend the Credit
Policy or its application other than in the ordinary course of business
consistent with past practice; and
(vii) not take any action or omit to take any
action which would result in a breach of any of the representations and
warranties set forth in Section 4.3 (j).
(d) Seller shall, and shall cause the Transferring
Subsidiaries to, cooperate with Purchaser and any Affiliate of Purchaser to
engage in such discussions with the customers of the Business, as Purchaser may
reasonably request, relating to the transactions contemplated hereby.
(e) Subject to the provisions of this paragraph (e),
Seller shall, if required, as soon as reasonably practicable after the date
hereof (i) take all steps necessary to duly call, give notice of, convene and
hold a meeting of its shareholders for the purpose of securing the Shareholder
Approval, (ii) distribute to its shareholders the Circular and the Proxy
Statement, (iii) use its commercially reasonable best efforts to address
comments from, and obtain clearance of, the UK Listing Authority, the U.S.
Securities and Exchange Commission and other regulatory authorities, and (iv)
subject to a good faith determination, upon advice of outside counsel, that to
do so would be inconsistent with the fiduciary duties of its Board of Directors,
recommend to its shareholders the approval of this Agreement and the
transactions contemplated hereby. Purchaser will be given reasonable opportunity
to review and comment upon the Circular and the Proxy Statement prior to
submission to Seller's shareholders (and, with respect to the Proxy Statement,
prior to its initial submission to the U.S. Securities and Exchange Commission).
The Circular and the Proxy Statement shall include the recommendation of the
Board of Directors of Seller in favor of approval and adoption of this Agreement
and the transactions contemplated hereby, except to the extent the Board of
Directors of Seller, in accordance with the terms of this Section 5.2(e), shall
have withdrawn or modified its approval or recommendation of this Agreement and
the transactions contemplated hereby. Seller shall use its commercially
reasonable best efforts to cause the Circular and the Proxy Statement to be
mailed to its shareholders as promptly as practicable. If at any time prior to
the Closing Date any event with respect to any party or its officers and
directors or any of its subsidiaries shall occur that is required to be
described in the Circular and the Proxy Statement, the parties will work
together in good faith to ensure that such event shall be so described, and an
appropriate amendment or supplement shall be promptly filed with the appropriate
regulatory authorities and, as required by law, disseminated to the shareholders
of Seller.
(f) Subject to the provisions of Section 5.2(g), nothing
contained in this Agreement shall prohibit Seller or Seller's Board of Directors
from taking any action or disclosing to Seller's shareholders a position, or
making a public disclosure, with respect to a tender or exchange offer by a
third party for the share capital of the Seller as required by applicable law or
regulation including the City Code on Takeovers and Mergers.
(g) Seller agrees that it shall not, nor shall it permit
any of its Transferring Subsidiaries to, nor shall it authorize or permit any
officer, director or employee or any investment banker, attorney, accountant,
agent or other advisor or representative of Seller, or any of its respective
Transferring Subsidiaries to, (i) solicit, initiate or knowingly encourage the
submission of any Acquisition Proposal, (ii) enter into any agreement with
respect to any Acquisition Proposal or (iii) participate in any discussions or
negotiations regarding, or furnish to any person any information with respect
to, or take any other action to facilitate any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal; provided, however, to the extent required by the fiduciary
obligations of the Board of Directors of Seller, as determined in good faith by
a majority of the members thereof (after consultation with outside legal
counsel), Seller may, in response to unsolicited requests therefor, participate
in discussions or negotiations with, or furnish information pursuant to a
confidentiality agreement no less favorable to such party than the
Confidentiality Letter to, any person who indicates a willingness to make a
Superior Proposal. Seller immediately shall cease and cause to be terminated all
existing discussions or negotiations with any persons conducted heretofore with
respect to, or that could reasonably be expected to lead to, any Acquisition
Proposal. Seller shall promptly notify
32
Purchaser upon becoming aware of the existence or pending delivery of any
Acquisition Proposal. For all purposes of this Agreement, (y) "Acquisition
Proposal" means any proposal for a merger, consolidation, share exchange,
business combination or other similar transaction involving Seller, or any of
the Transferring Subsidiaries or any proposal or offer to acquire, directly or
indirectly, an equity interest in, at least 15% of the voting securities of, or
a substantial portion of the assets of, Seller or any of the Transferring
Subsidiaries, other than the transactions contemplated by this Agreement and (z)
"Superior Proposal" means a bona fide written proposal made by a third party to
acquire all of the outstanding equity interests in or substantially all of the
assets of Seller or the Business, pursuant to a tender or exchange offer, a
merger, a share exchange, a sale of such assets or otherwise on terms which a
majority of the members of the Board of Directors of Seller determines in good
faith (taking into account the advice of independent financial advisors) to be
more favorable to Seller and its shareholders than the transactions contemplated
hereby (and any revised proposal made by Purchaser to this Agreement) and for
which financing, to the extent required, is then fully committed.
Notwithstanding the foregoing, in the event that (a) any of
the following shall occur or exist: (i) the Shareholder Approval has not been
obtained and Seller enters into a definitive agreement within fifteen months
after the date of this Agreement in respect of an Acquisition Proposal, (ii)
Seller's Board of Directors fails to recommend or withdraws, modifies or changes
in any manner adverse to Purchaser its approval or recommendation of this
Agreement and the transactions contemplated hereunder, (iii) Seller's Board of
Directors takes any action described in paragraph 5.2 (f) which is in any manner
adverse to Purchaser or (iv) Seller's Board of Directors recommends an
Acquisition Proposal (or Seller's Board of Directors resolves to do any of (i),
(ii), (iii) or (iv)), and (b) no Closing occurs, Seller and the Transferring
Subsidiaries, jointly and severally, shall pay to Purchaser, by wire transfer
within one business day after such payment becomes due under this Section, a
termination fee equal to $6,250,000.
5.3 Purchaser's Obligations. The following are Purchaser's
-----------------------
obligations:
(a) Purchaser agrees that all information supplied to it
and its agents by Seller or its representatives in connection with the
transactions contemplated hereby has been, and will hereafter through the
Closing Date be, supplied pursuant to that certain Confidentiality Letter dated
as of January 12, 2001 entered into between Purchaser and Seller (the
"Confidentiality Letter") and that, notwithstanding any provision of the
Confidentiality Letter to the contrary regarding the termination of such
Confidentiality Letter upon the execution of a definitive purchase agreement,
Purchaser shall, and shall cause its Affiliates and representatives to comply
with all of the terms and conditions of the Confidentiality Letter with respect
to all such information from and after the date hereof until the consummation of
the transactions contemplated hereby.
(b) In the event that any Permit or Environmental Permit
which is to be assigned to Purchaser is not assignable, and Purchaser needs such
Permit or Environmental Permit in order to operate the Business, Purchaser shall
use its commercially reasonable best efforts (and Seller shall cooperate with
Purchaser) to obtain such Permit or Environmental Permit at Seller's expense.
(c) Purchaser shall (i) use its commercially reasonable
best efforts to obtain for the benefit of Seller unconditional releases of the
Transferring Subsidiaries' respective obligations and liabilities, and
substitute and replace itself for any of the Transferring Subsidiaries, under
each surety, performance, fidelity or similar bond and other similar obligation
with respect to the Business in each case listed in Schedule 5.3(c)
--------------
(collectively, the "Bonds") or (ii) if unable to obtain the foregoing with
respect to any Bond, use its commercially reasonable best efforts to obtain a
back-up bond or insurance over each such unreleased and/or unreplaced Bond, by
issuers and in amounts reasonably satisfactory to Seller, in order to assure
Seller that it and the Transferring Subsidiaries will have no obligations or
liabilities under the Bonds. Nothing herein contained shall relieve Purchaser of
its liability hereunder to duly and fully perform all obligations for which the
Bonds were given as security.
33
(d) Notwithstanding the provisions of Section 5.2(a)
above, Purchaser shall not disrupt the operations of the Business prior to the
Closing, and Purchaser shall not contact any customer or employee of the
Business without the approval of Seller (which shall not be unreasonably
withheld) and without the presence of a representative of the Seller at any
meeting if such presence is requested by Seller.
5.4 Joint Obligations. The following shall apply with equal
-----------------
force to Seller and Purchaser:
(a) Without implication that such laws apply to the
transaction contemplated hereby and without limitation of Section 10.2(d)
hereof, each of Seller and Purchaser hereby waive compliance with the provisions
of any laws relating to bulk sales.
(b) Seller, Purchaser and all Transferring Subsidiaries
shall use their commercially reasonable best efforts to obtain all available
statutory or regulatory clearances or exemptions from state and local sales, use
and transfer taxes with respect to the transfer of the assets purchased under
the US Asset Purchase Agreement. To the extent it is determined that clearances
or proof of exemption cannot be obtained from one or more of the relevant taxing
authorities but the parties reasonably believe that sales, use and/or transfer
tax is not due with respect to the transfer of specific assets being sold, the
parties agree to obtain and be bound by the written opinion of
PricewaterhouseCoopers LLP. Purchaser shall pay the cost of obtaining such
opinion and shall be responsible for paying the cost arising out of or resulting
from the failure to withhold or pay any such taxes at the Closing. The
limitations contained in Article X shall not apply to the indemnity provided
hereunder.
(c) Each party shall, promptly after becoming aware
thereof, give the other party written notice of the existence or occurrence of
any condition which would make any representation or warranty herein contained
of such party untrue or which might reasonably be expected to prevent or delay
the consummation of the transactions contemplated hereby.
(d) No party shall intentionally perform any act which,
if performed, or intentionally omit to perform any act which, if omitted to be
performed, would prevent or excuse the performance of this Agreement by any
party hereto or which would result in any representation or warranty herein
contained of said party being untrue as if originally made on and as of the
Closing Date (other than, in the case of Seller, changes in the ordinary course
of business consistent with past practice which do not in the aggregate have a
Material Adverse Effect).
(e) Each party shall use its respective commercially
reasonable best efforts to take, or cause to be taken, all action and to do, or
cause to be done, all things necessary, proper or advisable to consummate the
transaction contemplated hereby as soon as possible.
(f) Prior to the Closing Date, except as the parties may
otherwise agree, the parties shall take all steps necessary to ensure that the
information and content of any website which information and content is to be
transferred to Purchaser as part of the Purchased Assets is stored on a website,
the Internet domain name of which does not include the word "Danka".
(g) The parties shall make each of the European Filings
to the relevant government, regulatory, supranational or state agency,
department or body (a "Relevant Agency") and take any further action necessary
in connection therewith.
(h) The parties shall make all notifications to, and
carry out all consultations with, trade unions, employees, works councils and
other similar bodies required by the law of the jurisdictions in which the
Transferring Subsidiaries operate; provided, however, the parties waive any
failure by the Seller to carry out any such consultation prior to the execution
of this Agreement.
34
(i) The parties will file any Notification and Report
Forms and related material that they may be required to file with the Federal
Trade Commission and the Antitrust Division of the United States Department of
Justice under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act, will use their commercially reasonable
best efforts to obtain a waiver from the applicable waiting period, and will
make any further filings that may be necessary in connection with the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act.
ARTICLE VI
Conditions to Closing
6.1 Conditions to Seller's Obligations. The obligation of Seller
----------------------------------
and the applicable Transferring Subsidiary to sell the US Purchased Assets is
subject to the fulfillment of all of the following conditions on or prior to the
Closing Date, upon the non-fulfillment of any of which this Agreement may, at
Seller's option, be terminated pursuant to and with the effect set forth in
Article XI:
(a) The representations and warranties of Purchaser
contained in this Agreement and the Ancillary Materials shall be true and
correct in all respects (in the case of any representation or warranty
containing any materiality qualification) or in all material respects (in the
case of any representation or warranty without any materiality qualification) on
and as of the Closing Date with the same effect as though made at and as of such
time.
(b) Purchaser shall have duly performed and complied in
all material respects with all agreements and conditions required by this
Agreement and the Ancillary Materials to be performed or complied with by it
prior to or on the Closing Date.
(c) No suit, proceeding or investigation shall have been
commenced by any governmental authority or any other person on any grounds to
restrain, enjoin or hinder the consummation of the transaction contemplated
hereby or that may have any such effect.
(d) The Shareholder Approval shall have been obtained,
provided always that this condition shall cease to apply if Seller shall cease
to be subject to the Listing Rules of the UK Listing Authority.
(e) The Foreign Closings shall have occurred concurrently
with the Closing.
6.2 Conditions to Purchaser's Obligations. The obligation of
-------------------------------------
Purchaser to purchase the US Purchased Assets is subject to the fulfillment of
all of the following conditions on or prior to the Closing Date, upon the non-
fulfillment of any of which this Agreement may, at Purchaser's option, be
terminated pursuant to and with the effect set forth in Article XI:
(a) The representations and warranties of Seller
contained in this Agreement and in the Ancillary Materials shall be true and
correct in all respects (in the case of any representation or warranty
containing any materiality qualification) or in all material respects (in the
case of any representation or warranty without any materiality qualification) on
and as of the Closing Date with the same effect as though made on and as of the
Closing Date (except as set forth in Section 4.3(j) and (p)).
(b) Seller shall have duly performed and complied in all
material respects with all agreements and conditions required by this Agreement
and each of the Ancillary Materials to be performed or complied with by it prior
to or on the Closing Date, including, without limitation, as contemplated by
Section 5.4(h).
(c) All of the required Material Third Party Consents, as
identified by the Disclosure Schedule, shall have been obtained, and all of the
Material Permits and Material Environmental Permits shall have been assigned to
Purchaser, or a replacement Permit or Environmental Permit with respect
35
thereto shall have been issued to Purchaser; provided, however, that except as
contemplated by Section 4.3(m)(ii) of the Disclosure Schedule, if one or more
required Material Third Party Consents is not obtained, the parties shall reduce
the Cash Amount dollar-for-dollar by the amount of revenues generated for the
Business by such customer during the fiscal year ended March 31, 2001; and
(d) No suit, proceeding or investigation shall have been
commenced by any governmental authority or any other person on any grounds to
restrain, enjoin or hinder the consummation of the transaction contemplated
hereby or that may have any such effect.
(e) The Shareholder Approval shall have been obtained,
provided always that this condition shall cease to apply if Seller shall cease
to be subject to the Listing Rules of the UK Listing Authority.
(f) The Foreign Closings shall have occurred concurrently
with the Closing.
6.3 Conditions to both Purchaser's and Seller's Obligations. The
-------------------------------------------------------
obligation of Purchaser and Seller to consummate the transactions contemplated
by this Agreement is subject to the fulfillment of all of the following
conditions on or prior to the Closing Date:
(a) The Closing for the U.S. Business shall occur
concurrently with such Foreign Closing.
(b) With respect to such Foreign Closing and the
applicable European Filings, either: (x) the parties shall have received notice
from the Relevant Agency that, in connection with the matters to which the
European Filing relates, there is no objection, or the matters are authorized,
or a referral will not be made to another government, regulatory, supranational
or state agency, department or body, and such notice is unconditional; or (y)
applicable waiting periods (including any extensions) shall have expired or
terminated without receipt of a negative or conditional response, or the
announcement of an investigation, from the Relevant Agency.
(c) Any other conditions to the extent set forth in the
relevant Ancillary Agreements shall have been satisfied or waived.
(d) The waiting period applicable to the transactions
contemplated hereby under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act and the rules and
regulations thereunder shall have expired or been earlier terminated.
(e) The deliveries required pursuant to Section 7.2, 7.3
and 7.4, as applicable, shall have been made in accordance with Section 7.1
ARTICLE VII
Closing and Foreign Closings
7.1 Form of Documents. At the Closing and Foreign Closings, as
-----------------
appropriate, the parties shall deliver the documents, and shall perform the
acts, which are set forth in this Article VII. All documents which Seller or any
Transferring Subsidiary shall deliver shall be in form and substance reasonably
satisfactory to Purchaser and Purchaser's counsel. All documents which Purchaser
shall deliver shall be in form and substance reasonably satisfactory to Seller
and Seller's counsel.
7.2 Purchaser's Deliveries at the Closing. Subject to the
-------------------------------------
fulfillment or written waiver of the conditions set forth in Section 6.2,
Purchaser shall execute and/or deliver to Seller or the Transferring
Subsidiaries all of the following:
36
(a) the Cash Amount (which includes the Good Faith
Deposit) allocable to the Closing (a portion of which shall be delivered to the
Escrow Agent at the Closing);
(b) certified copies of the Certificate of Incorporation
and By-laws or comparable documents for the Purchaser ;
(c) certificate of good standing of Purchaser, issued not
earlier than ten (10) days prior to the Closing Date by the appropriate
authority in such entity's jurisdiction of organization to the extent legally
obtainable;
(d) incumbency and specimen signature certificates with
respect to the officers of Purchaser executing this Agreement or Purchaser's
Ancillary Documents on behalf of Purchaser;
(e) certified copy of resolutions of the board of
directors of Purchaser authorizing the execution, delivery and performance of
this Agreement and Purchaser's Ancillary Documents;
(f) a closing certificate executed by the President of
Purchaser (or any other officer of Purchaser specifically authorized to do so),
on behalf of Purchaser, pursuant to which Purchaser represents and warrants to
Seller that (i) the conditions set forth in Sections 6.1(a) and 6.1(b) have been
fulfilled; and (ii) all documents to be executed by Purchaser and delivered at
the Closing have been executed by duly authorized officers of Purchaser;
(g) an assumption agreement, duly executed by the
Purchaser, under which it assumes the Assumed Liabilities of the U.S. Business;
(h) counterparts of the Purchaser's Ancillary Documents
and the Ancillary Agreements, executed by Purchaser;
(i) the schedule of officers and key employees described
in Section 8.11; and
(j) such other documents from Purchaser as may reasonably
be required in order to effectuate the transactions contemplated (i) hereby,
(ii) by the Purchaser's Ancillary Documents and (iii) by the Ancillary
Agreements.
7.3 Seller's Deliveries at the Closing. Subject to the fulfillment
----------------------------------
or written waiver of the conditions set forth in Section 6.1, Seller shall cause
the applicable Transferring Subsidiary to deliver to Purchaser all Purchased
Assets owned by the Transferring Subsidiary, and Seller shall execute (where
applicable in recordable form) and/or deliver or cause to be executed and/or
delivered to Purchaser all of the following:
(a) certified copies of the organizational documents of
Seller and each of the Transferring Subsidiaries;
(b) a certificate of good standing of Danka US, issued
not earlier than ten (10) days prior to the Closing Date by the Secretary of
State of Delaware, and, to the extent the same shall be legally obtainable,
certificates of good standing with respect to the Seller and the other
Transferring Subsidiaries;
(c) an incumbency and specimen signature certificate with
respect to the officers of Seller executing this Agreement and Seller's
Ancillary Documents on behalf of Seller, and incumbency and specimen signature
certificates with respect to the officers of the Transferring Subsidiaries
executing this Agreement, the Ancillary Agreements or any Subsidiary Ancillary
Document on behalf of the Transferring Subsidiaries;
37
(d) a certified copy of resolutions of Seller's board of
directors authorizing the execution, delivery and performance of this Agreement
and Seller's Ancillary Documents, and certified copies of resolutions of the
boards of directors (or similar bodies) and shareholders (if necessary) of the
Transferring Subsidiaries, authorizing the execution, delivery and performance
of this Agreement, the Ancillary Agreements or any Subsidiary Ancillary Document
to which they are parties;
(e) a certified copy of the resolution of Seller
evidencing the Shareholder Approval;
(f) a closing certificate duly executed by the Chairman
of Seller (or any other senior officer of Seller specifically authorized to do
so), on behalf of Seller, pursuant to which Seller represents and warrants to
Purchaser that: (i) the conditions set forth in Sections 6.2(a) and 6.2(b) have
been fulfilled; and (ii) all documents to be executed and delivered by Seller at
the Closing have been executed by duly authorized officers of Seller;
(g) counterparts of the Ancillary Agreements and the
Subsidiary Ancillary Documents, executed by the Transferring Subsidiaries,
together with all documents to be executed and delivered by the Transferring
Subsidiaries pursuant to the provisions of the Ancillary Agreements;
(h) bills of sale, stock powers, assignments of
contracts, leases, and Intellectual Property and such other instruments of
transfer, all in such form as Purchaser reasonably requests;
(i) copies of the Material Third Party Consents, the
Material Permits and the Material Environmental Permits;
(j) the schedule of terminated employees described in
Section 2.3(g) and an update of the disclosure required by Section 4.2(t)(x);
(k) the schedules of officers and key employees described
in Section 8.11;
(l) certificates of title or origin (or like documents)
with respect to all vehicles included in the Purchased Assets and other
equipment for which a certificate of title or origin is required in order for
title thereto to be transferred to Purchaser; and
(m) evidence of the release of all Liens on the Purchased
Assets other than Permitted Liens;
(n) an opinion of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇ Capital;
(o) stock certificates (including directors' shares)
where applicable;
(p) the asset valuation prepared by Ernst & Young LLP;
(q) a certificate of Seller and each Transferring
Subsidiary identifying each written notice of termination or pending termination
of, or substantial reduction or pending substantial reduction of, services or
sales under any contract or agreement received by Seller or any Transferring
Subsidiary after the date hereof;
(r) evidence of the transfers of assets and rights
described in Schedule 4.3(k) of the Disclosure Schedule; and
(s) such other documents as may reasonably be required
from Seller and the Transferring Subsidiaries in order to effectuate the
transactions contemplated (i) hereby, (ii) by the Seller's Ancillary Documents,
(iii) by the Ancillary Agreements and (iv) by the Subsidiary Ancillary
Documents.
38
7.4 Deliveries at the Foreign Closings. At each of the Foreign
----------------------------------
Closings, the parties shall deliver to each other such documents and instruments
similar to those to be delivered at the Closing as the parties may reasonably
agree to accomplish the transactions contemplated hereby and by the applicable
Ancillary Agreement.
ARTICLE VIII
Post-Closing Agreements
-----------------------
8.1 Post-Closing Agreements. From and after the Closing, the
-----------------------
parties shall have the respective rights and obligations which are
set forth in the remainder of this Article VIII.
8.2 Inspection of Records.
---------------------
(a) Seller and the Transferring Subsidiaries shall each
make their respective books and records (and shall use their commercially
reasonable best efforts to make available work papers in the possession of their
respective accountants, and other than books and records delivered to Purchaser
hereunder) available for inspection by the Purchaser, or by its duly authorized
representatives, for reasonable business purposes at all reasonable times during
normal business hours, for a seven (7) year period after the Closing Date, or
for such longer period of time as may be required to comply with Section 8.3 or
Article X, with respect to all transactions of the Business occurring prior to
and those relating to the Closing, the historical financial condition, results
of operations and cash flows of the Business, or the Assumed Liabilities. Such
records shall be made available at Seller's or the applicable Transferring
Subsidiary's executive office. As used in this Section 8.2, the right of
inspection includes the right to make extracts or copies.
(b) Purchaser shall make available to Seller and the
Transferring Subsidiaries the books and records delivered by Seller and the
Transferring Subsidiaries to Purchaser in connection with the Closing, subject
to the same terms and conditions as those set forth in Section 8.2(a) with
respect to books and records of Seller and the Transferring Subsidiaries.
(c) The representatives of a party inspecting the records
of the other party shall be reasonably satisfactory to the other party. In
addition, in connection with lawsuits or other proceedings, Seller or Purchaser,
as the case may be, shall use its commercially reasonable best efforts to make
available, at the requesting party's expense, personnel (for reasonable periods
of time) of Seller or Purchaser, as the case may be, for purposes of
investigation, depositions and testimony. In addition, Purchaser shall give
reasonable assistance to Seller and the Transferring Subsidiaries, through
Purchaser's employees and without cost to Seller or the Transferring
Subsidiaries, in order for Seller and the Transferring Subsidiaries to record
entries relating to the closing of Seller's and the Transferring Subsidiaries'
books relating to the Business, to prepare and file Tax Returns related to the
Business and to reconcile Intercompany Accounts.
8.3 Certain Tax Matters. The parties understand and agree that
-------------------
this Agreement shall be interpreted, and that the parties shall administer their
dealings in relation to this Agreement, so as to effect the following principles
relating to Taxes:
(a) Purchaser shall be responsible for (i) all Taxes
arising out of the ownership and operation of the Business beginning on the day
after the Closing Date, (i) the Assumed Property Taxes, (iii) sales, use and
other transfer Taxes included in invoices issued to Seller and the Transferring
Subsidiaries that are Assumed Liabilities, (iv) employment Taxes reflected in
accrued employee expenses that are Assumed Liabilities, (v) any other Tax
identified as an Assumed Liability in Section 2.2 of this Agreement and (vi)
Sections 12.1 and 12.6.
39
(b) Except as set forth in Section 8.3(a), Seller and the
Transferring Subsidiaries shall be responsible for all Taxes arising out of the
ownership and operation of the Business up to and including the Closing Date and
shall be responsible for all Taxes of the Seller and its Affiliates that do not
arise out of the ownership and operation of the business (except for Taxes
imposed under Sections 12.1 and 12.6). Without limiting the generality of the
foregoing, Seller and the Transferring Subsidiaries shall be responsible for
sales, use and other transfer Taxes included in Accounts Receivable that are
Purchased Assets. Seller's and the Transferring Subsidiaries' responsibility for
Taxes, as set forth above, shall prevail irrespective of the manner in which any
payment of Taxes or obligation to pay Taxes (or the right to any credit, deposit
or refund of Taxes) is reflected in the financial statements of Seller and the
Transferring Subsidiaries.
(c) The party responsible for any Tax pursuant to Section
8.3(a) and (b) shall be entitled to all credits for and deposits and refunds of
such Tax.
(d) Any Tax refunds that are received by Purchaser, and
any amounts credited against Tax to which Purchaser becomes entitled, that
relate to Taxes as to which Purchaser was not responsible shall be for the
account of Seller, and Purchaser shall pay over to Seller any such refund or the
amount of any such credit (including interest) within fifteen (15) days after
receipt or entitlement thereto. Purchaser agrees to notify Seller promptly of
both the discovery of a right to claim any such refund, overpayment or
prepayment and the receipt of any such refund or utilization of any such
overpayment or prepayment. Purchaser agrees (at Seller's cost) to claim any such
refund or to utilize any such overpayment or prepayment as soon as possible and
to furnish Seller (at Seller's cost) all information, records and assistance
necessary to verify the amount of such refund, overpayment or prepayment.
(e) Purchaser, each Transferring Subsidiary and Seller
shall cooperate fully, as and to the extent reasonably requested by the other
party, in connection with the filing of Tax Returns pursuant to this Section 8.3
and any audit, litigation or other proceeding with respect to Taxes. Such
cooperation shall include the retention and (upon the other party's request) the
provision of records and information which are reasonably relevant to any such
audit, litigation or other proceeding and making employees available on a
mutually convenient basis to provide additional information and explanation of
any material provided hereunder. The parties agree to give the other party
reasonable written notice prior to transferring, destroying or discarding any
such books and records and, if the other party so requests, the Purchaser or
Seller, as the case may be, shall allow the other party to take possession of
such books and records. The parties further agree, upon request, to use their
best efforts to obtain any certificate or other document from any governmental
authority or any other person as may be necessary to mitigate, reduce or
eliminate any Tax that could be imposed (including, but not limited to, with
respect to the transactions contemplated hereby). Purchaser and Seller further
agree, upon request, to provide the other party with all information that either
party may be required to report pursuant to the laws of any country.
(f) Seller shall indemnify and hold harmless Purchaser
from, against and in respect of any Taxes which are Excluded Liabilities and any
Taxes for which the Seller or the Transferring Subsidiary are responsible
pursuant to the terms of this Agreement. The limitations contained in Article X
of this Agreement, including but not limited to any limitations as to the time
period and amount of the indemnity, shall not apply to the indemnity provided
hereunder.
(g) Purchaser shall indemnify and hold harmless Seller
and the Transferring Subsidiaries from, against and in respect of any Taxes for
which Purchaser is responsible pursuant to the terms of this Agreement. The
limitations contained in Article X of this Agreement, including but not limited
to any limitations as to the time period and amount of the indemnity, shall not
apply to the indemnity provided hereunder.
8.4 Use of Trademarks: References to Seller. On the Closing Date,
---------------------------------------
Seller and its Affiliates (including the Transferring Subsidiaries) shall cease
to use and shall not license or permit any third party
40
to use any name, trade dress, service ▇▇▇▇, slogan, logo or trademark and the
like which is confusingly similar to any of the names, trade dress, slogans,
logos, trademarks or service marks which constitute Purchased Assets hereunder.
Nothing set forth in this Agreement shall prevent Seller or any of the
Transferring Subsidiaries from using or licensing to use the name and ▇▇▇▇
"Danka" and any name or ▇▇▇▇ incorporating the name "Danka", including, any
internet domain name using or incorporating the name "Danka". Purchaser may
refer to the Business as formerly being Seller's for a period of one year
following the Closing.
8.5 Payments of Accounts Receivable and Other Items. In the event
-----------------------------------------------
Seller or any of its Affiliates (including the Transferring Subsidiaries) shall
receive any instrument of payment of any of the accounts receivable of the
Business, Seller or such Affiliate shall promptly, and in any event within five
business days, deliver it to Purchaser, endorsed where necessary, without
recourse, in favor of Purchaser and, pending such delivery, shall hold it in
trust for Purchaser. In the event Purchaser or any of its Affiliates shall
receive any instrument of payment of any Excluded Asset or other item related to
the operation of the Business prior to the Closing Date (including, but not
limited to, any tax refund), Purchaser or such Affiliate shall promptly, and in
any event within five business days, deliver it to Seller, endorsed where
necessary, without recourse, in favor of Seller and, pending such delivery,
shall hold it in trust for Seller.
8.6 Third Party Claims. The parties shall cooperate with each
------------------
other with respect to the defense of any Third Party Claims (as herein defined)
subsequent to the Closing Date which are not subject to the indemnification
provisions contained in Article X, provided that the party requesting
cooperation shall reimburse the other party for the other party's reasonable
out-of-pocket costs and expenses of furnishing such cooperation.
8.7 Insurance.
---------
(a) Seller will provide Purchaser, not less than thirty
(30) days prior to Closing, a schedule of insurance relating to the Purchased
Assets and the Business. The schedule of insurance will list the policies,
limits of liability, deductibles (or self insured retention), premiums, name and
address of insurers and brokers and expiration dates of each policy for the
current year and the past four (4) years. Seller is responsible for all events
or circumstances that exist or occur prior to the Closing or Foreign Closing, as
the case may be, and that relate to the Purchased Assets or the Business.
(b) Purchaser will provide Seller, not less than thirty
(30) days prior to Closing, a schedule of insurance relating to the business,
assets or operations of the Purchaser the Purchased Assets and the Business. The
schedule of insurance will list the policies, limits of liability, deductibles
(or self insured retention), premiums, name and address of insurers and brokers
and expiration dates of each policy for the current year. Purchaser is
responsible for all events or circumstances that first exist or occur after the
Closing or Foreign Closing, as the case may be, and that relate to the Purchased
Assets or the Business.
8.8 Certain Contract Matters Seller and each Transferring
------------------------
Subsidiary shall use its commercially reasonable best efforts to provide to, or
to facilitate providing to, Purchaser the remaining benefits, rights and claims
(but not the obligations) to which the Seller or any Transferring Subsidiary is
entitled under that certain Asset Purchase Agreement between ▇▇▇▇▇▇▇ Kodak
Company and Seller dated September 6, 1996, as the same has been modified,
amended or otherwise supplemented, to the extent, and solely for the extent,
such benefits relate to the portion of the Business being transferred hereunder.
8.9 Seller's Confidentiality. Seller and each Transferring
------------------------
Subsidiary shall treat as confidential and shall safeguard any and all
information, knowledge and data included in the Purchased Assets by using the
same degree of care, but no less than a reasonable standard of care, to prevent
the unauthorized use, dissemination or disclosure of such information, knowledge
and data as Seller and each Transferring Subsidiary used with respect thereto
prior to the execution of this Agreement.
41
8.10 Use of Seller's Trademarks. Purchaser may continue to use, until
--------------------------
exhausted, but in no event more than six months following the Closing Date, the
supplies of stationery, invoices, order forms, packaging material and the like
which are on hand as of the Closing Date which bear any of Seller's or its
Affiliates' trademarks or service marks which are not included in the Purchased
Assets or the Intellectual Property, as long as Purchaser shall affix thereto a
sticker or stamp indicating Purchaser's ownership of the Business. Seller and
each Transferring Subsidiary shall facilitate an electronic high speed link from
their website(s) to the website(s) of Purchaser for a period of six months
following the Closing.
8.11 Non-Competition and Non-Solicitation. In furtherance of the sale
------------------------------------
of the Purchased Assets and the Business to Purchaser hereunder by virtue of the
transactions contemplated hereby, Seller covenants and agrees that, none of
Seller nor any of its Affiliates including the Transferring Subsidiaries will
(nor will Seller or any of its Affiliates join with any third party in any joint
venture or alliance to or which) for a period ending on the second anniversary
of the Closing Date:
(a) induce or attempt to persuade any customer of the Business
as of the Closing Date or prospective customer of the Business to which the
Seller or any Transferring Subsidiary has made a proposal to provide services or
from which Seller or any Transferring Subsidiary has received a proposal
relating to services during the period commencing ninety days prior to the
Closing Date to terminate or fail to renew or continue or enter such business
relationship with the Business;
(b) engage in a business included within the definition of
"Business" anywhere in the world, whether such engagement shall be as owner,
partner, agent, consultant or shareholder (except as the holder of not more than
five percent (5%) of the outstanding shares of an entity whose equity securities
are listed on any national, regional or foreign securities exchange or reported
by the National Association of Securities Dealers Automated Quotation System or
any successor thereto); or
(c) solicit the employment of or hire or engage in any
discussion with any current or former officer or key employee of Seller or any
Transferring Subsidiary with respect to the Business or any person who is an
officer or key employee of Purchaser whose primary employment duties are with
respect to Purchaser's operation of the Business, in each case while such person
is in the employ of Purchaser or its Affiliates.
Except as provided in Article IX, Purchaser covenants and agrees that, without
implication that the contrary would otherwise be true, until the first
anniversary of the Closing Date neither Purchaser nor any of its Affiliates
shall solicit the employment of or hire or engage in any discussion with any
person who is an officer or key employee of Seller or any Transferring
Subsidiary of Seller, while such person is in the employ of Seller or any
subsidiary; provided, however, in the event that Seller or any of its Affiliates
enters bankruptcy, voluntarily or otherwise, or otherwise becomes insolvent, the
provisions of this sentence shall be terminated and be of no effect. Seller and
Purchaser shall jointly agree upon schedules of the officers and key employees
covered by the immediately preceding sentence and clause (c) of this Section
8.11, such schedules to be delivered at the Closing. Such schedules may include
job titles or classifications rather than names. Where names are indicated such
clause shall also cover replacements of such individuals during the twelve month
period immediately following the Closing as the parties shall advise each other
from time to time. The term "solicitation" as used in such sentence and such
clause shall not include solicitations which are not targeted at particular
individuals, such as "help wanted" advertising. This Section shall survive the
Closing. Seller and Purchaser acknowledge that the provisions of this Section
8.11, including the periods of restriction, the geographical areas of
restriction and the restraints imposed are fair and reasonably required for the
protection of the other party hereto. In the event that any of the provisions of
this Section 8.11 relating to the geographic areas of restriction or the periods
of restriction shall be deemed to exceed the maximum area or period of time
which a court of competent jurisdiction would deem enforceable, the geographic
areas and times shall, for the purposes of this Agreement, be deemed to be the
maximum areas or time periods which a court of competent jurisdiction would deem
valid and enforceable in any state in which such court of competent jurisdiction
42
shall be convened. Each party hereto acknowledges that any breach of its
obligations under this Section 8.11 may result in irreparable injury to the
other party hereto, for which such other party may not have an adequate remedy
at law. In the event of any such breach, the non-breaching party may, in its
sole discretion and in addition to any other remedies available to it, bring an
action or actions against the breaching party for injunctive relief, specific
performance or both, and seek to have entered a temporary restraining order,
preliminary or permanent injunction, or order compelling specific performance.
The prevailing party in any action seeking to enforce the provisions of this
Section 8.11 shall obtain reimbursement of its actual costs and attorneys' fees
in connection with such action. If Seller merges with or is acquired by any
consolidated group that has revenues for its last fiscal year in excess of
$500,000,000 and is engaged at the time of such acquisition, in a business
competitive with the Business, then this Section 8.11 shall immediately
terminate. Nothing herein shall be deemed to prevent Seller and its Affiliates
from, directly or indirectly, selling or seeking to sell office equipment at any
customer locations or otherwise or continuing to conduct their respective
businesses, other than the Business, as such businesses are being conducted as
of the Closing Date. As used herein, "key employee" shall mean with respect to
the Seller and the Transferring Subsidiaries, any person with a job
classification set forth on Schedule 8.11(a) and with respect to Purchaser, any
person with a job classification set forth on Schedule 8.11(b). For the purposes
of this Section 8.11, Pitney ▇▇▇▇▇ Office Systems (or any successor entity)
shall no longer be deemed to be an Affiliate of the Purchaser after it ceases to
be owned by the Purchaser.
8.12 Further Assurances. The parties shall execute such further
------------------
documents, and perform such further acts, as may be necessary or reasonably
requested by Purchaser to transfer and convey the Purchased Assets to Purchaser,
on the terms herein contained, and to otherwise comply with the terms of this
Agreement and consummate the transaction contemplated hereby.
8.13 Non-Assignment. Without limiting any other provision hereof, with
--------------
respect to matters set forth in the Disclosure Schedule in response to Sections
4.3 (d), (m), (n) and (x), to the extent such consents to assignment or transfer
are not obtained, or in the case of Permits and Environmental Permits
replacements therefor are not obtained, prior to Closing and Purchaser so
requests Seller and each Transferring Subsidiary shall each continue to use
their commercially reasonable best efforts to assist Purchaser and the relevant
Transferring Subsidiary to obtain such consents as promptly as practically after
Closing, provided that Purchaser shall reimburse Seller and each Transferring
Subsidiary for their reasonable out-of-pocket costs incurred with the prior
written consent of Purchaser
8.14 Additional Payment. Within thirty days following the first
------------------
anniversary Closing Date, Purchaser shall pay to the Seller the following
amounts, if any:
(a) if the Cash Amount was reduced at Closing pursuant to
Section 6.2(c) as a result of the Seller's inability to obtain a Material Third
Party Consent, an amount equal to the amount of revenues generated by such
customer for the Purchaser in operating the Business during the one-year period
following the Closing Date, but in no event to exceed the amount of such
reduction; and
(b) if (i) the Cash Amount was reduced at Closing pursuant to
Section 6.2(c) as a result of the Seller's inability to obtain a Material Third
Party Consent, and (ii) the relevant customer solicits bids for its business and
(iii) the Purchaser is the successful bidder for such customer's work in the
Business within the one year period following the Closing Date, an amount equal
to the lesser of: (i) the amount by which the Cash Amount was reduced at Closing
by reason of the failure to obtain such customer's consent or (ii) the amount of
revenues generated by such customer for the Purchaser in operating the Business
during the one-year period following the Closing Date.
43
ARTICLE IX
Employees and Employee Benefit Plans
------------------------------------
9.1 Post-Closing Covenants Relating to Seller's U.S. and Canadian
-------------------------------------------------------------
Employees. The following provisions relate solely to Employees actively employed
---------
in the conduct of the Business (each an "Affected Employee") by Danka US, Danka
Canada I or Danka Canada II:
(a) Employment of Seller's U.S. and Canadian Employees.
--------------------------------------------------
On the Closing Date, Purchaser shall offer to employ or to continue to employ as
of the Closing Date each Affected Employee in comparable positions, at
compensation and upon terms and conditions which are in the aggregate no less
favorable to the Affected Employee than the position, compensation or terms and
conditions in effect on the date hereof; provided, however, that each such offer
-------- -------
of employment or continued employment is subject to the Affected Employee
satisfying Purchaser's Hiring Criteria. Purchaser shall not take any action
which would result in Seller or any Transferring Subsidiary having any liability
under the WARN Act or any similar federal, state or local law. As used herein,
"Hiring Criteria" shall mean satisfaction of Purchaser's generally applicable
employment policies and procedures, including, as applicable to the particular
job, completion of a standard employment application, satisfactory completion of
a background check and demonstration of proper authorization to work under the
Immigration Reform and Control Act of 1986 ("IRCA") or any comparable applicable
Canadian law. Purchaser represents and warrants that the Hiring Criteria comply
with all applicable laws. Except for voluntary resignations and deaths,
Purchaser shall continue to employ each Transferred Employee until at least the
first anniversary of the Closing Date, but may at any time terminate any
Transferred Employee for cause or as a result of failure to satisfy Purchaser's
Hiring Criteria. In the event Purchaser terminates the employment of any
Transferred Employee prior to the first anniversary of the Closing Date for any
reason other than cause or failure to satisfy the applicable Hiring Criteria,
Purchaser shall pay to such terminated Transferred Employee a lump-sum severance
amount equal to the severance amount to which such Transferred Employee would be
entitled under Purchaser's severance policy in effect as of the Closing Date.
(b) Welfare Benefits.
----------------
(i) Seller and its applicable Transferring
Subsidiaries shall be solely liable for all claims and liabilities incurred by
any Employee of the Business prior to the Closing Date under the Welfare Plans
and the Canadian employee welfare benefit plans. Purchaser shall be solely
liable for all claims and liabilities incurred by any Transferred Employee under
Purchaser's employee welfare benefit plans on or following the Closing Date.
From and after the Closing Date, Purchaser shall, at no expense to Seller or
Danka US, provide the benefits, if any, required pursuant to Section 4980B of
the Code or Part 6 of Subtitle B of Title I of ERISA or the comparable Canadian
law, if any, as the case may be, for any Transferred Employee who is or becomes
entitled to such continuation with respect to the Business from Seller, Danka
US, Danka Canada I, Danka Canada II, or Purchaser at any time.
(ii) Except as otherwise provided in Section
9.1(e), from and after the Closing and continuing until the Applicable Benefit
Changeover Date, Purchaser shall provide Transferred Employees with welfare and
fringe benefits substantially equivalent, in the aggregate, to those in effect
with respect to the Transferred Employees on the day before the Closing and all
applicable waiting periods and pre-existing conditions under such benefits shall
be waived with respect to Transferred Employees and their eligible dependents
who were participants in a comparable welfare plan of Seller or a Transferring
Subsidiary on the date before the Closing Date, to the extent permitted under
the terms of the applicable welfare plan and/or required by applicable law. On
and after the Applicable Benefit Changeover Date, Purchaser shall for a period
of one year provide all Transferred Employees and their eligible dependents and
beneficiaries with the same or substantially equivalent welfare and fringe
benefits then being provided to similarly situated employees of Purchaser, if
any but in no event, shall
44
such benefits in the aggregate be less generous than the least generous welfare
and fringe benefits, if any, provided to U.S. or Canadian employees of
Purchaser, and its affiliates.
(iii) Purchaser shall continue the incentive bonus
plans or arrangements in effect on the day before the Closing for the remainder
of the plan year in which the Closing occurs and shall cause benefits to be
provided to each Transferred Employee who is or was a participant in such plan
on the day before the Closing in an amount which is no less than the amount
which is actually earned under the terms of the applicable incentive bonus plan
or arrangement as in effect on the day before the Closing for such plan year.
All payments under this paragraph (c) shall be made as required by the terms of
the applicable plan as in effect on the Closing Date.
(iv) For purposes of this Agreement, "Applicable
Benefit Changeover Date" shall mean, with respect to each pension, welfare or
fringe benefit plan applicable to Transferred Employees, the day elected by the
Purchaser, which may be any day on or after the first anniversary of the Closing
Date, but in no event later than January 1, 2004.
(c) Service Crediting. Effective as of the Closing Date,
-----------------
Purchaser will count the service of all Transferred Employees with Seller, its
Transferring Subsidiaries, and their Affiliates and all service credited by
Seller, its Transferring Subsidiaries or its Affiliates (including service of
Transferred Employees with ▇▇▇▇▇▇▇ Kodak Company and its Affiliates to which
such persons have received credit with Seller, its Transferring Subsidiaries and
their Affiliates for purposes of such policies and plans) under Purchaser's
vacation policy and welfare benefit plans applicable to such Transferred
Employees. In addition, such service shall be counted by Purchaser in
determining each Transferred Employee's eligibility to participate in, and each
such Transferred Employee's vested percentage in, each of Purchaser's employee
benefit plans (as defined in Section 3(3) of ERISA) applicable to such
Transferred Employee, but not for benefit accrual purposes.
(d) Pension Plans.
-------------
(i) From and after the Closing and continuing
until the Applicable Benefit Changeover Date:
(1) Purchaser shall provide Transferred
Employees participating in the Danka Corporation 401(k) Profit Sharing Plan
("Seller's 401(k) Plan") with an individual account pension plan with a cash or
deferred arrangement meeting Section 401(k) of the Code ("Purchaser's 401(k)
Plan") substantially equivalent to Seller's 401(k) Plan in effect with respect
to the Transferred Employees on the day before the Closing. Such Purchaser's
401(k) Plan shall include such provisions as may be necessary or appropriate to
receive "rollover" or "direct rollover" contributions of cash (including the
cash proceeds of any in-kind distributions) from Transferred Employees entitled
to receive a distribution from Seller's 401(k) Plan on account of the
consummation of the transactions contemplated by this Agreement.
(2) Purchaser shall provide Transferred
Employees other than those employed by Danka US or participating in Seller's
401(k) Plan, with pension benefits substantially equivalent, in the aggregate,
to those in effect with respect to such Transferred Employees on the day before
the Closing.
(ii) On and after the Applicable Benefit
Changeover Date, Purchaser shall for a period of one year provide Transferred
Employees with the same or substantially equivalent employee pension benefit
plans, if any, as are then provided to similarly situated employees of
Purchaser, but in no event shall such benefits in the aggregate be less generous
than the least generous employee pension benefit plans, if any, provided to U.S.
and Canadian employees of Purchaser, and its affiliates.
45
(e) Vacation. Effective as of the Closing Date, Purchaser
--------
shall grant vacation days or hours determined under the applicable Transferring
Subsidiary's vacation program applicable to each Transferred Employee. The
vacation days or hours granted by Purchaser hereunder for the vacation
computation period which includes the Closing Date (after taking into account
vacation days taken prior to the Closing Date with respect to the same vacation
computation period) shall be provided under a program no more restrictive than
the vacation policy of Purchaser.
9.2 Post-Closing Covenants Relating to Seller's Non-U.S. and
--------------------------------------------------------
Non-Canadian Employees. The following provision relates solely to Affected
----------------------
Employees other than those employed by Danka US, Danka Canada I and Danka Canada
II. In the case of the Affected Employees of each of the Transferring
Subsidiaries other than Danka US, Danka Canada I and Danka Canada II, on the
Closing Date, Purchaser shall assume (by operation of law or otherwise) the
contracts of employment of all such Affected Employees with effect from the
Closing Date in accordance with and to the extent required by the Acquired
Rights Directive (as defined below) insofar as it has been adopted by local law.
As used herein, "Acquired Rights Directive" means Council Directive 77/187/EEC
on the approximation of the laws of the Member States relating to the
safeguarding of employees' rights in the event of transfers of undertakings,
businesses or parts of businesses and/or any legislation or regulation
implementing that directive in any member state. The Seller and the Purchaser
acknowledge and agree that under the Acquired Rights Directive, the contracts of
employment between the Seller or the applicable Transferring Subsidiary and the
Affected Employees will have effect after Closing as if originally made between
the Purchaser and the Affected Employees. The Purchaser shall comply with its
respective obligations pursuant to the Acquired Rights Directive and shall
indemnify the Seller and each Transferring Subsidiary against any claims and
costs (including legal costs) for breach thereof, insofar as such breach arises
out of the Purchaser's failure to comply with its respective obligations
thereunder.
9.3 Relation to Ancillary Agreements. Notwithstanding any other
--------------------------------
provision of Sections 9.1 or 9.2 , the rights and benefits of the employees of
each of the Transferring Subsidiaries shall be dealt with in accordance with the
detailed provisions of the relevant Ancillary Agreement if and to the extent
there is any conflict between the provisions of Sections 9.1 or 9.2 and any such
Ancillary Agreement
9.4 Liabilities Accrued Prior to Closing. Except as provided in
------------------------------------
Section 9.1(b), as required by the Acquired Rights Directive in so far as it has
been adopted by local law or as reflected on the Audited Balance Sheet, all
liabilities and expenses owed to Transferred Employees, which are incurred prior
to the Closing Date or relate to any period prior to the Closing Date, will be
paid to such Transferred Employee by the applicable Transferring Subsidiary
prior to the Closing Date or as soon as practicable thereafter; provided,
however, that any vested accrued benefits under any Pension Plan of Seller or
any Transferring Subsidiary shall be paid in accordance with the terms and
conditions of the applicable Pension Plan, but nothing in this Section 9.4 shall
require payment of benefits prior to the time required by the applicable Pension
Plan. Each Affected Employee who has actually commenced employment with the
Purchaser is hereinafter referred to individually as a "Transferred Employee"
and collectively as "Transferred Employees."
ARTICLE X
Indemnification.
---------------
10.1 General. From and after the Closing, the parties shall indemnify
-------
each other as provided in this Article X. However in no event shall a party be
entitled to a recovery under this Article X to the extent that such party has
previously recovered under Section 3.6 relating to the same claim.
10.2 Certain Definitions. As used in this Agreement, the following
-------------------
terms shall have the indicated meanings:
46
(a) "Damages" shall mean all assessments, levies, losses,
fines, penalties, damages, settlements, judgments, costs and expenses,
including, reasonable attorneys', accountants', investigators', and experts'
fees and expenses incurred in investigating or defending a claim, whether or not
resulting from, relating to or arising out of a Third Party Claim;
(b) "Indemnified Party" shall mean, with respect to a
particular matter, a party hereto who is entitled to indemnification from
another party hereto pursuant to this Article X;
(c) "Indemnifying Party" shall mean, with respect to a
particular matter, a party hereto who is required to provide indemnification
under this Article X to another party hereto;
(d) "Third Party Claim" shall mean any action, suit,
proceeding, investigation or like matter which is commenced, asserted or
threatened by a party other than the parties hereto, their successors and
assigns, against any Indemnified Party or to which any Indemnified Party is
subject.
10.3 Indemnification Obligations of Seller. Subject to the
-------------------------------------
provisions of Sections 10.5 and 10.9, Seller shall indemnify, defend, save and
keep harmless Purchaser and its directors, officers, shareholders, and
representatives and their successors and assigns ("Purchaser Indemnitees")
against and from all Damages sustained or incurred by any of them resulting
from, relating to, or arising out of or by virtue of:
(a) any inaccuracy in or breach of any representation and
warranty made by Seller or any Transferring Subsidiary in this Agreement or the
Ancillary Agreements or in any document delivered to Purchaser in connection
with this Agreement or the Ancillary Agreement (all such inaccuracies and
breaches shall be determined without giving effect to any "knowledge" or
"materiality" qualifiers (including any "Material Adverse Effect"
qualifications));
(b) any breach by Seller or any Transferring Subsidiary
of, or failure by Seller or any Transferring Subsidiary to comply with, any of
its covenants or obligations under this Agreement, the Ancillary Agreement or
any document delivered to Purchaser in connection with this Agreement or the
Ancillary Agreements (including, its obligations under this Article X);
(c) any liability or obligation of Seller or any
Transferring Subsidiary (other than the Assumed Liabilities) including, any and
all Excluded Liabilities and any liability or obligation relating to the
Excluded Assets;
(d) any failure to comply with respect to any applicable
bulk sales law;
(e) any and all obligations with respect to the Employees
not expressly assumed by Purchaser pursuant to Article IX of this Agreement or
any Ancillary Agreement; and
(f) any liabilities relating to the violation of any
Environmental Law or the investigation, removal, remediation, containment,
cleanup or abatement of the presence, release or threatened release of any
Hazardous Substance, whether on-site or off-site, to the extent, and only to the
extent, (A) related to any activity, action or failure to take action by any
person prior to the Closing, (B) related to any condition existing on or prior
to the Closing Date, or (C) related to any activity, action or failure to take
action required to be taken under any lease with respect to Seller after the
Closing.
The parties hereto agree that all recoveries by Purchaser Indemnitees pursuant
to this Section 10.3 shall be treated as an adjustment to the Purchase Price
under Article III, and that, in each case, such adjustment shall be allocated to
the assets purchased under the Ancillary Agreement to which the recovery
relates.
10.4 Indemnification Obligations of Purchaser. Subject to Sections
----------------------------------------
10.5 and 10.8, Purchaser shall indemnify, defend, save and keep harmless Seller,
the Transferring Subsidiaries and their respective
47
directors, officers, shareholders and representatives and their successors and
assigns (collectively, "Seller Indemnitees" and together with Purchaser
Indemnitees, the "Indemnitees") against and from all Damages sustained or
incurred by any of them resulting from or arising out of or by virtue of:
(a) any inaccuracy in or breach of any representation and
warranty made by Purchaser in this Agreement or the Ancillary Agreements or in
any document delivered to Seller in connection with this Agreement or the
Ancillary Agreements;
(b) any breach by Purchaser of, or failure by Purchaser
to comply with, any of its covenants or obligations under this Agreement
(including, its obligations under this Article X) or any of the Ancillary
Agreements or any document delivered to Seller or any Transferring Subsidiary;
(c) the Assumed Liabilities;
(d) subject to Section 2.3(g), any plant closing or mass
layoff by the Purchaser following the Closing which violates the WARN Act or any
similar state, local or foreign law at any facility related to the Business; or
(e) acts or omissions of Purchaser after the Closing
Date, including, Purchaser's operation of the Business after Purchaser's
acquisition thereof or relevant portion thereof, except as set forth in Section
2.3(g).
10.5 Limitation on Indemnification Obligations. Obligations of
-----------------------------------------
Purchaser or Seller pursuant to the provisions of Sections 10.3 and 10.4 are
subject to the following limitations:
(a) the Purchaser Indemnitees shall not be entitled to
recover under Section 10.3 until the total amount which Purchaser Indemnitees
would recover under Section 10.3 and the Seller Indemnitees shall not be
entitled to recover under Section 10.4 until the total amount which Seller
Indemnitees would recover under Section 10.4, but for this Section 10.5(a) and
without regard to the limitation in Section 10.5(b), exceeds $10,000,000, and
then the Indemnitees shall be entitled to recover only for the excess over
$10,000,000.
(b) the Purchaser Indemnitees shall not be entitled to
recover under Section 10.3 and the Seller Indemnitees shall not be entitled to
recover under Section 10.4 for any matter or any series or group of related
matters, unless such Indemnitees' Damages with respect thereto exceeds $250,000,
in which event such Damages shall, subject to the other provisions of this
Section 10.5, be recoverable in full without regard to the limitation contained
in this Section 10.5(b);
(c) the Purchaser Indemnitees shall not be entitled to
recover under Section 10.3 and the Seller Indemnitees shall not be entitled to
recover under Section 10.4 unless a claim has been asserted by written notice,
specifying the details to the extent then known of the alleged misrepresentation
or breach, delivered on or prior to the first anniversary of the Closing Date;
provided that claims for breach of Sections 4.3(i), 4.3(t) and 4.3(x) may be
made at any time prior to 90 days after the expiration of any statute of
limitations relevant to the subject matter covered by such representations and
warranties and claims relating to the Excluded Liabilities, the Excluded Assets,
the Assumed Liabilities or the representations or warranties set forth in
Sections 4.3(a) and 4.3(c) may be brought at any time; provided, further, that,
if a claim or notice has been given with respect to such indemnification prior
to such date, the right to indemnification in connection with such claim shall
continue indefinitely until such claim and right to indemnification is finally
resolved;
(d) the Indemnitees shall not be entitled to recover
under Sections 10.3 and 10.4:
(i) with respect to consequential damages and
punitive damages, except where such amounts are due to a third party in
connection with a Third Party Claim;
48
(ii) to the extent the aggregate claims
recoverable under Section 10.3 of the Purchaser Indemnitees and under Section
10.4 of the Seller Indemnitees exceed $45,000,000;
(iii) except with respect to any environmental
matter or condition, to the extent the matter in question, taken together with
all similar matters, (i) existed on December 31, 2000 and (ii) does not exceed
the accruals or reserves with respect to such matters which (y) are reflected on
the Audited Balance Sheet and (z) constitute Assumed Liabilities;
(iv) without limiting the generality of anything
contained in Article IX hereof but subject to Section 2.3(g), with respect to
any claim by or liability to any employee employed by any Transferring
Subsidiary with respect to the Business arising as the result of the termination
of such employee's employment with Purchaser or any action by Purchaser
subsequent to the Closing Date (and Purchaser agrees to indemnify Seller for all
such matters);
(e) the amount of any recovery by the Indemnitees
pursuant to Sections 10.3 and 10.4 shall be net of any foreign, federal, state
and/or local income tax benefits inuring to the Indemnitees as a result of the
state of facts which entitled the Indemnitees to recover; provided, however,
that any such income tax benefit shall be netted against such recovery only upon
the actual economic realization of such benefit to the Indemnitees. For purposes
of this Section 10.5(f), a tax benefit shall be economically realized at the
time and to the extent that either (i) the tax cost to the Indemnitee is reduced
by reason of such state of facts, or (ii) the Indemnitee receives a tax refund
by reason of such state of facts.
10.6 Cooperation. Subject to the provisions of Section 10.7, the
-----------
Indemnifying Party shall have the right, at its own expense, to participate in
the defense of any Third Party Claim, and if said right is exercised, the
parties shall cooperate in the investigation and defense of said Third Party
Claim.
10.7 Third Party Claims. Promptly following the receipt of notice
------------------
of a Third Party Claim, the party receiving the notice of the Third Party Claim
shall (i) notify the other party of its existence setting forth in writing and
with reasonable specificity the facts and circumstances of which such party has
received notice, and (ii) if the party giving such notice is an Indemnified
Party, specifying in writing the basis hereunder upon which the Indemnified
Party's claim for indemnification is asserted. The Indemnified Party may, upon
reasonable notice, tender the defense of a Third Party Claim to the Indemnifying
Party. If within thirty (30) days after the date on which written notice of a
Third Party Claim has been given pursuant to this Section 10.7, the Indemnifying
Party shall acknowledge its indemnification obligations as provided in this
Article X in writing to the Indemnified Party and accept the defense thereof
(provided, that, if the Indemnifying Party does not accept the defense of such
Third Party Claim, it shall so notify the Indemnified Party in sufficient time
such that it is not prejudiced thereby), then, except as hereinafter provided,
the Indemnified Party shall not, and the Indemnifying Party shall, have the
right to contest, defend, litigate or settle such Third Party Claim. The
Indemnified Party shall have the right to be represented by counsel at its own
expense in any such contest, defense, litigation or settlement conducted by the
Indemnifying Party provided that the Indemnified Party shall be entitled to
reimbursement therefor if the Indemnifying Party shall lose its right to
contest, defend, litigate and settle the Third Party Claim as herein provided.
The Indemnifying Party shall lose its right to contest, defend, litigate and
settle the Third Party Claim if it shall fail to diligently contest the Third
Party Claim. So long as the Indemnifying Party has not lost its right and/or
obligation to contest, defend, litigate and settle as herein provided, the
Indemnifying Party shall have the exclusive right to contest, defend and
litigate the Third Party Claim and shall have the exclusive right, in its
discretion exercised in good faith, and upon the advice of counsel, to settle
any such matter, either before or after the initiation of litigation, at such
time and upon such terms as it deems fair and reasonable, provided that at least
ten (10) days prior to any such settlement, written notice of its intention to
settle shall be given to the Indemnified Party; provided, further, that, (i)
Seller shall not agree to any settlement that affects the Business, the manner
in which it is conducted following the Closing, requires the Purchaser to take
or allow any action or otherwise affects the Purchaser, without Purchaser's
consent and (ii) the Indemnifying Party will not have the exclusive right to
conduct the defense if under applicable standards of professional conduct a
conflict on any
49
significant issue between the Indemnifying Party and any Indemnified Party
exists in respect of such claim, in which event the Indemnifying Party shall
reimburse the Indemnified Party for the reasonable fees and expenses of counsel
to be retained in connection with the Indemnified Party's defense in order to
resolve such conflict, promptly upon presentation by the Indemnified Party of
invoices or other documentation evidencing such amounts to be reimbursed. All
expenses (including without limitation attorneys' fees) incurred by the
Indemnifying Party in connection with the foregoing shall be paid by the
Indemnifying Party. No failure by an Indemnifying Party to acknowledge in
writing its indemnification obligations under this Article X shall relieve it of
such obligations to the extent they exist. If an Indemnified Party is entitled
to indemnification against a Third Party Claim, and the Indemnifying Party fails
to accept a tender of, or assume the defense of a Third Party Claim pursuant to
the second sentence of this Section 10.7, or if, in accordance with the
foregoing, the Indemnifying Party shall lose its right to contest, defend,
litigate and settle such a Third Party Claim, the Indemnified Party shall have
the right, without prejudice to its right of indemnification hereunder, in its
discretion exercised in good faith and upon the advice of counsel, to contest,
defend and litigate such Third Party Claim, and may settle such Third Party
Claim, either before or after the initiation of litigation, at such time and
upon such terms as the Indemnified Party deems fair and reasonable, provided
that at least ten (10) days prior to any such settlement, written notice of its
intention to settle is given to the Indemnifying Party. If, pursuant to this
Section 10.7, the Indemnified Party so contests, defends, litigates or settles a
Third Party Claim for which it is entitled to indemnification hereunder, as
hereinabove provided, the Indemnified Party shall be reimbursed by the
Indemnifying Party for the reasonable attorneys' fees and other expenses of
defending, contesting, litigating and/or settling the Third Party Claim which
are incurred from time to time, forthwith following the presentation to the
Indemnifying Party of itemized bills for said attorneys' fees and other
expenses.
10.8 Tax Indemnities. In the case of any indemnity relating to
---------------
Taxes, the person against which the taxing jurisdiction asserts liability
(whether as taxpayer, transferee or otherwise) shall be responsible for handling
and controlling all administrative proceedings and litigation relating to such
Taxes. If the taxing authority asserts liability against both parties, the
Indemnitee shall be responsible for handling and controlling administrative
proceedings and litigation relating to such Taxes. At its own expense, the
Indemnitor shall have the right to participate in any proceedings so controlled
by the Indemnitee and to review all correspondence with the taxing authority
relating to such proceedings. The Indemnitee shall not settle any such matter
without the prior consent of the Indemnitor, but the Indemnitor shall not
unreasonably withhold such consent.
10.9 Indemnification Exclusive Remedy.
--------------------------------
(a) Except for claims or causes of action based on
fraud, as provided in this Section 10.9 and as provided in Sections 8.3,
indemnification pursuant to the provisions of this Article X shall following the
Closing be the exclusive remedy of the parties for any misrepresentation or
breach of any warranty or covenant contained herein or in any closing document
executed and delivered pursuant to the provisions hereof. Without limiting the
generality of the preceding sentence, following the Closing, no legal action
sounding in tort or strict liability may be maintained by any party hereto (or a
Purchaser Indemnitee or Seller Indemnitee not a party hereto) against any other
party hereto with respect to any matter that is the subject of this Article X
(excluding with respect to the failure to discharge any Excluded Liability).
(b) The limitations contained in Section 10.5 and 10.9(a)
shall not apply to: (i) claims by Purchaser pursuant to Sections 10.3 (c) or
(ii) claims by the Seller pursuant to Section 10.4(c).
(c) Seller hereby acknowledges and agrees that Purchaser
is relying in particular on the covenants set forth in Sections 8.9 and 8.11 in
executing and delivering this Agreement and each Ancillary Agreement and
consummating the transactions hereunder and thereunder. Seller acknowledges that
any breach of Sections 8.9 or 8.11 would give rise to irreparable harm for which
monetary damages would not be an adequate remedy. Seller accordingly agrees that
in addition to other remedies, Purchaser
50
shall be entitled to enforce the terms of Sections 8.9 and 8.11 by decree of
specific performance without the necessity of proving the inadequacy of monetary
damages as a remedy and to obtain injunctive relief against any breach or
threatened breach of Sections 8.9 or 8.11
ARTICLE XI
Effect of Termination/Proceeding
--------------------------------
11.1 General. The parties shall have the rights and remedies with
-------
respect to the termination and/or enforcement of this Agreement which are set
forth in this Article XI.
11.2 Right to Terminate. This Agreement and the transactions
------------------
contemplated hereby may be terminated at any time prior to the Closing:
(a) by the mutual written consent of Purchaser and
Seller;
(b) by either of such parties if the Closing shall not
have occurred at or before 11:59 p.m. (Eastern time) on June 30, 2001 (the
"Termination Date"); provided, however, that either the Seller or the Purchaser
-------- -------
shall have the unilateral right to extend the Termination Date for three
successive one-month periods if the conditions to Closing set forth in Sections
6.1(d), 6.2(c), 6.2(e), 6.3(b) and 6.3(d) have not been satisfied and further;
-------
provided, that, the right to terminate this Agreement under this Section 11.2(b)
-------- ----
shall not be available to any party whose failure to fulfill any of its
obligations under this Agreement has been the cause of or resulted in the
failure of the Closing to occur on or prior to the aforesaid date;
(c) by the party entitled to the benefit thereof, if any
condition set forth in Section 6.1 or Section 6.2 shall become impossible to
fulfill;
(d) by either Seller or Purchaser if the Shareholder
Approval shall not have been obtained by reason of the failure to obtain the
required number of votes to approve the transactions contemplated hereby upon
the taking of such vote at a duly held meeting of stockholders of the Seller or
at any adjournment thereof;
(e) by Purchaser if there is a material adverse change in
the condition, financial or otherwise, or operations of the Business, taken as a
whole; or
(f) by either Seller or Purchaser if the other party or,
in the case of the Purchaser, any Transferring Subsidiary, shall enter,
voluntarily or otherwise, bankruptcy.
In the event the Purchaser desires to terminate this Agreement pursuant to
Section 11.2(c) by reason of a failure to satisfy the condition to Closing set
forth in Section 6.2(a), the Purchaser shall have no such right to terminate
until the aggregate liability arising out of all breaches of representations and
warranties causing such failure to satisfy the condition exceeds $1,250,000, and
in any event, the Seller shall have thirty days from Purchaser's written notice
of intent to terminate to: (i) cure the relevant breach; (ii) retain or assume
the liability arising out of the breach; or (iii) pay the Purchaser an amount to
make the Purchaser whole for such breach.
The party desiring to terminate this Agreement shall give prompt written notice
of such termination to the other party in accordance with Section 12.3.
11.3 Certain Effects of Termination. In the event of the
------------------------------
termination of this Agreement by either Seller or Purchaser as provided in
Section 11.2, (i) each party, if so requested by the other party, will return
promptly (or otherwise deal with as permitted under the Confidentiality Letter)
every
51
document furnished to it by the other party (or any subsidiary, division,
associate or Affiliate of such other party) in connection with the transaction
contemplated hereby, whether so obtained before or after the execution of this
Agreement, and any copies thereof (except for copies of documents publicly
available) which may have been made, and will use its commercially reasonable
best efforts to cause its representatives and any representatives of financial
institutions and investors and others to whom such documents were furnished
promptly to return such documents and any copies thereof any of them may have
made, and (ii) the Confidentiality Letter shall remain in effect notwithstanding
any provision to the contrary contained therein with respect to the execution of
a definitive purchase agreement. This Section 11.3 shall survive any termination
of this Agreement.
11.4 Remedies. Notwithstanding any termination right granted in
--------
Section 11.2, in the event of the nonfulfillment of any condition to a party's
closing obligations, in the alternative, such party may elect to do one of the
following:
(a) proceed to close despite the nonfulfillment of any
closing condition, it being understood that consummation of the Closing shall be
deemed a waiver of each breach of any representation, warranty or covenant and
of such party's rights and remedies with respect thereto to the extent that such
party shall have actual knowledge of such breach, shall execute a written
consent thereto and shall nonetheless proceed to the Closing;
(b) decline to close, terminate this Agreement as
provided in Section 11.2, and thereafter seek damages to the extent permitted in
Section 11.5 or Section 5.2; or
(c) seek specific performance of the obligations of the
other party. Each party hereby agrees that in the event of any breach by such
party of this Agreement, the remedies available to the other party at law would
be inadequate and that such party's obligations under this Agreement may be
specifically enforced.
11.5 Right to Damages. If this Agreement is terminated pursuant to
----------------
Section 11.2, neither party hereto shall have any claim against the other except
as provided in Section 5.2 or if the circumstances giving rise to such
termination were caused by the other party's intentional breach of the
representations, warranties or covenants set forth herein, in which event
termination pursuant to Section 11.2 shall not be deemed or construed as
limiting or denying any legal or equitable right or remedy of said party.
ARTICLE XII
Miscellaneous
-------------
12.1 Sales and Transfer Taxes. Purchaser shall pay all excise,
------------------------
stamp and transfer and conveyance taxes and customary duties arising in
connection with and as a consequence of the sale and transfer of the Purchased
Assets and the Business to Purchaser pursuant to this Agreement.
12.2 Publicity. Except as otherwise required by law or applicable
---------
stock exchange rules, press releases concerning this transaction shall be made
only with the prior written consent of the other party, not to be unreasonably
withheld or delayed (and, in any event, Seller and Purchaser shall use their
commercially reasonable best efforts to consult and agree with each other with
respect to the content of any such required press release). In addition, with
respect to any other written publicity related to the transactions contemplated
by this Agreement or otherwise related to any party and its direct and indirect
subsidiaries (including, the Transferring Subsidiaries) and/or their respective
businesses (including, the Business), each party agrees not to (and agrees to
cause its Affiliates not to) disparage the other in any publicity.
12.3 Notices. All notices required or permitted to be given
-------
hereunder shall be in writing and may be delivered by hand, by facsimile or by
an overnight courier nationally recognized in the United
52
States (a "nationally recognized overnight courier"). Notices delivered by hand,
by facsimile or by a nationally recognized overnight courier shall be deemed
given on the date of receipt; provided, however, that a notice delivered by
facsimile shall only be effective if such notice is also delivered by hand or
deposited with a nationally recognized overnight courier on or before two (2)
business days after its delivery by facsimile. All notices shall be addressed as
follows:
If to Seller Addressed to:
Danka Business Systems, PLC,
Masters House
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
Attention: Secretary
Telecopier: 011-44-171-603-8448
with copies to:
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer and General Counsel
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
and
Holland & Knight LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
If to Purchaser Addressed to:
Pitney ▇▇▇▇▇ Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: General Counsel
Telecopier: ____________
with a copy to:
▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
------------
and/or to such other respective addresses and/or addressees as may be designated
by notice given in accordance with the provisions of this Section 12.3.
12.4 Expenses. Except as set forth in Articles X or XI, each of Seller and
--------
Purchaser shall bear all fees and expenses incurred by such party (and by each
such party's respective subsidiaries) in connection with, relating to or arising
out of the execution, delivery and performance of this Agreement and the
consummation of the transaction contemplated hereby, including, financial
advisors', attorneys',
53
accountants' and other professional fees and expenses, provided, however, that
Purchaser and Seller shall each pay one-half of the fees required in connection
with any filing required under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act and any European
Filing. For the purposes of this Section 12.4, fees and expenses incurred by any
Transferring Subsidiary shall be deemed to have been incurred by Seller.
12.5 Entire Agreement. This Agreement, the Purchaser's Ancillary
----------------
Documents, Seller's Ancillary Documents, the Subsidiary Ancillary Documents and
the Ancillary Agreements (the Purchaser's Ancillary Documents, Seller's
Ancillary Documents, the Subsidiary Ancillary Documents and the Ancillary
Agreements together being referred to herein as the "Ancillary Materials")
constitute the entire agreement between the parties and shall be binding upon
and inure to the benefit of the parties hereto and their respective legal
representatives, successors and permitted assigns. This Agreement and the
Ancillary Materials constitute a single agreement among the parties and
contemplate a single, integrated transaction. The Disclosure Schedule being
delivered simultaneously herewith shall be deemed to constitute exceptions to
the representations and warranties set forth in Section 4.3 to the extent
specified in Section 4. Each other exhibit and schedule shall be considered
incorporated into this Agreement and the Ancillary Materials. The inclusion of
any item in the Disclosure Schedule is not evidence of the materiality of such
item for the purposes of this Agreement and the Ancillary Materials. The parties
make no representations or warranties to each other, except as contained in this
Agreement and the Ancillary Materials, and any and all prior representations and
warranties made by any party or its representatives, whether verbally or in
writing, are deemed to have been merged into this Agreement and the Ancillary
Materials, it being intended that no such prior representations or warranties
shall survive the execution and delivery of this Agreement and the Ancillary
Materials. Purchaser acknowledges that it has conducted an independent
investigation of the financial condition, assets, liabilities, properties and
projected operations of the Business in making its determination as to the
propriety of the transactions contemplated by this Agreement and the Ancillary
Materials, and in entering into this Agreement and the Ancillary Materials it
has relied solely on the results of said investigation and on the
representations and warranties of Seller expressly contained in this Agreement,
the Ancillary Agreements, Subsidiary Ancillary Documents and Seller's Ancillary
Documents delivered pursuant to the provisions of this Agreement. In connection
with its investigation of the Business, Purchaser received from or on behalf of
Seller certain estimates, forecasts, plans and financial projections. Purchaser
acknowledges that there are uncertainties inherent in attempting to make such
estimates, forecasts, plans and projections, that Purchaser is familiar with
such uncertainties, that Purchaser is taking full responsibility for making its
own evaluation of the adequacy and accuracy of all estimates, forecasts, plans
and projections so furnished to it (including the reasonableness of the
assumptions underlying such estimates, forecasts, plans and projections), and
that Purchaser shall have no claim against Seller or any Transferring Subsidiary
with respect thereto. Accordingly, neither Seller nor any Transferring
Subsidiary makes any representation or warranty with respect to such estimates,
forecasts, plans and projections (including any such underlying assumptions).
12.6 Value Added Taxes.
-----------------
(a) All sums stated in this Agreement as being payable by
Purchaser to the Transferring Subsidiaries or vice versa shall be deemed to be
exclusive of any VAT, which may be chargeable on the supply or supplies for
which such sums (or any part thereof) are the whole or part of the consideration
for VAT purposes.
(b) The Transferring Subsidiaries and Purchaser shall use
their commercially reasonable best efforts (which shall include, providing each
other with such information or assistance as the other shall reasonably request)
to ensure that the transfer of the Business and the Purchased Assets under this
Agreement is treated under Article 5(8) of the Sixth Directive (where
applicable) or any other applicable legislation made pursuant to, or derived
from, such Article (such as Article 5 of the VAT (Special Provisions) Order 1995
in the United Kingdom) or such other legislation as is applicable in a country
which is not a member state of the European Union as not being a supply of goods
(or a supply of services) for VAT purposes.
54
(c) Seller and Purchaser shall agree whether or not to
make an application to any relevant Tax authority for a confirmatory declaration
that VAT is not chargeable on the transfer of the Business and/or the Purchased
Assets under the relevant Ancillary Agreement. If the parties agree to make such
an application, Seller shall procure the submission (as soon as possible
following the aforementioned agreement) by the relevant Transferring Subsidiary
to its relevant Tax authority of such an application. If, notwithstanding the
commercially reasonable best efforts of the relevant Transferring Subsidiary, an
amount of VAT is determined in writing by a Tax authority to be payable in
respect thereof (or in respect of a transfer of the Business or Purchased Assets
for which an application is not made), then Seller shall notify Purchaser of
that determination forthwith. For the avoidance of doubt, this subsection (c)
shall not affect the application of Subsection (e) below.
(d) Notwithstanding anything to the contrary contained in
the Ancillary Agreements, if Purchaser disagrees with any determination of any
Tax authority that VAT is chargeable, it may, within 5 business days of being so
notified, give notice to Seller that it requires Seller to obtain a review by
the relevant Tax authority of that determination and the relevant Transferring
Subsidiary shall forthwith request the Tax authority, to undertake that review;
provided however that concurrent with notification of such disagreement to the
relevant Transferring Subsidiary, Purchaser shall furnish such Transferring
Subsidiary with an opinion of independent legal counsel of national repute in
the relevant member state of the European Union or Norway (as applicable) in
support of Purchaser's contention that VAT is not so chargeable. Notwithstanding
receipt of such opinion of independent legal counsel, Seller may nonetheless
invoice Purchaser for VAT, and Purchaser shall promptly pay such amount (for
subsequent reimbursement if recovered by the relevant Transferring Subsidiary).
Upon the relevant Transferring Subsidiary being advised by the relevant Tax
authority of the decision arising out of that review, Seller shall forthwith
notify Purchaser thereof. If Purchaser disagrees with that decision, it may give
notice to Seller to make an appeal against the decision of the relevant Tax
authority (an "Appeal") in a manner as Purchaser shall reasonably request or
Purchaser may itself make an Appeal as it shall consider appropriate with such
assistance from Seller as Purchaser shall reasonably request. If as a result of
the Appeal an amount of VAT is still deemed chargeable and has not yet been paid
by the Purchaser, then Purchaser shall forthwith pay over to the relevant
Transferring Subsidiary the amount of VAT chargeable in accordance with
paragraph (e) below, together with any interest, penalties and fines payable in
relation thereto upon receipt of a valid VAT invoice.
(e) Where, pursuant to the terms of this Agreement, one
party (the "Supplying Party") makes a supply to the other (the "Paying Party")
for VAT purposes, and (notwithstanding subsection (b) above) VAT is or becomes
properly chargeable on such supply, the Paying Party shall within two (2) days
prior to the date on which the Supplying Party is obliged to account for such
sum to the relevant Tax authority, pay to the Supplying Party (in addition to
any other consideration for such supply) a sum equal to the amount of such VAT
(and the Supplying Party will at the time of such payment provide the Paying
Party with a valid tax invoice in respect of such supply from the Supplying
Party.)
(f) In this Section 12.6:
(i) "VAT" means value added tax as provided for
in Article 2, EC Council Directive 67/227 (First Council Directive of 11 April
1967 on the harmonization of legislation of Member States concerning turnover
taxes) or any legislation made pursuant thereto or derived therefrom including,
in the UK, the Value Added Tax of 1984 and legislation supplemental thereto and
any other tax (wherever and whenever imposed and whether imposed in substitution
thereof or in addition thereto) of a similar fiscal nature; and
(ii) the "Sixth Directive" means EC Council
Directive 77/388 (Sixth Council Directive of 17 May 1977 on the harmonization of
the laws of the Member States relating to turnover taxes - common system of
value added tax: uniform basis of assessment).
55
12.7 Non-Waiver. The failure in any one or more instances of a party
----------
to insist upon performance of any of the terms, covenants or conditions of this
Agreement, to exercise any right or privilege in this Agreement conferred, or
the waiver by said party of any breach of any of the terms, covenants or
conditions of this Agreement, shall not be construed as a subsequent waiver of
any such terms, covenants, conditions, rights or privileges, but this Agreement
shall continue and remain in full force and effect as if no such forbearance or
waiver had occurred. No waiver shall be effective unless it is in writing and
signed by an authorized representative of the waiving party.
12.8 Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which shall be deemed to be an original, and all such
counterparts shall constitute but one instrument.
12.9 Severability. The invalidity of any provision of this Agreement
------------
or portion of a provision shall not affect the validity of any other provision
of this Agreement or the remaining portion of the applicable provision.
12.10 Applicable Law. This Agreement shall be governed and controlled
--------------
as to validity, enforcement, interpretation, construction, effect and in all
other respects by the internal laws of the State of Delaware applicable to
contracts made in that State.
12.11 Binding Effect; Benefit. This Agreement shall inure to the
--------------
benefit of and be binding upon the parties hereto, and their successors and
permitted assigns. Nothing in this Agreement, express or implied, shall confer
on any person other than the parties hereto, and their respective successors and
permitted assigns any rights, remedies, obligations or liabilities under or by
reason of this Agreement, including, third party beneficiary rights.
12.12 Assignability. This Agreement shall not be assignable by any
-------------
party without the prior written consent of the other parties; provided, however,
that Purchaser may assign any or all of its respective rights and interests
under this Agreement to one or more of its Affiliates and designate one or more
of its Affiliates to perform its obligations under this Agreement (in any or all
of which cases the original party nonetheless shall remain responsible for the
performance of all of its obligations under this Agreement).
12.13 Amendments. This Agreement shall not be modified or amended
----------
except pursuant to an instrument in writing executed and delivered on behalf of
each of the parties hereto.
12.14 Headings. The headings contained in this Agreement are for
--------
convenience of reference only and shall not affect the meaning or interpretation
of this Agreement.
12.15 Governmental Reporting. Anything to the contrary in this
----------------------
Agreement notwithstanding, nothing in this Agreement shall be construed to mean
that a party hereto or other person must make or file, or cooperate in the
making or filing of, any return or report to any governmental authority in any
manner that such person or such party reasonably believes or reasonably is
advised is not in accordance with law.
12.16 Rule of Construction. The parties acknowledge and agree that each
--------------------
has negotiated and reviewed the terms of this Agreement, been assisted by such
legal and tax counsel as they desired, and has contributed to its revisions. The
parties further agree that the rule of construction that any ambiguities are
resolved against the drafting party will be subordinated to the principle that
the terms and provisions of this Agreement will be construed fairly as to all
parties and not in favor of or against any party. The headings contained in this
Agreement are for convenience of reference only and shall not affect the meaning
or interpretation of this Agreement. The word "including," means "including,
without limitation." Unless the context clearly requires otherwise, "law" shall
refer to any applicable U.S. or non-U.S. federal, state or local law.
56
12.17 Consent to Jurisdiction. Seller and Purchaser each agrees to the
-----------------------
exclusive jurisdiction of any state or federal court within Delaware, with
respect to any claim or cause of action arising under or relating to this
Agreement, and waives personal service of any and all process upon it, and
consents that all services of process be made by registered or certified mail,
return receipt requested, directed to it at its address as set forth in Section
12.4, and service so made shall be deemed to be completed when received. Seller
and Purchaser each waives any objection based on forum non conveniens and waives
any objection to venue of any action instituted hereunder. Nothing in this
paragraph shall affect the right of Seller or Purchaser to serve legal process
in any other manner permitted by law.
12.18 No Effect. Notwithstanding any provision of this Agreement or the
---------
Ancillary Agreements, all existing contracts between Seller or any of its
Affiliates on the one hand and Purchaser or any of its Affiliates on the other
hand will remain in full force and effect.
12.19 Definitions. The following terms are defined in the following
-----------
sections of this Agreement:
Defined Term Where Found
------------ -----------
Actual Closing Date Shareholders' Equity 3.6(d)(iii)
Acquired Rights Directive 9.1
Acquisition Proposal 5.2(g)
Adjusted Balance Sheet 3.6(a)
Affected Employee 9.1
Affiliate 4.2(f)
Agreement Preamble
Ancillary Agreements 1.4
Ancillary Materials 12.5
Appeal 12.6(d)
Approved U.K. Counsel 12.17
Applicable Benefit Changeover Date 9.1(c)(iv)
Assumed Liabilities 2.1
Assumed Property Taxes 2.2(e)
Audited Balance Sheet 3.6(b)
Audited Financial Statements 3.6(b)
Bonds 5.3(c)
Business Recitals
Cash Amount 3.1
Circular 4.3(ff)
Cleanup 4.3(x)(ix)(A)
Closing 3.3
Closing Date 3.3
Closing Date Shareholders' Equity 3.6(a)
Code 4.3(i)(i)
Confidentiality Letter 5.3(a)
Contaminants 4.3(x)(ix)(C)
Control 4.2(f)
Credit Policy 4.3
Damages 10.2(a)
Danka 4.3(s)(ii)
Danka Canada I 1.4(a)
Danka Canada II 1.4(n)
Danka France 1.4(d)
Danka Belgium 1.4(b)
Danka Denmark 1.4(c)
Danka Germany 1.4(e)
57
Defined Term Where Found
------------ -----------
Danka Netherlands 1.4(g)
Danka Italy 1.4(f)
Danka Norway 1.4(l)
Danka Services Agreement 4.2(b)
Danka Sweden 1.4(h)
Danka Switzerland 1.4(l)
Danka UK 1.40)
Danka US 1.4(m)
Debt 12.6(e)(i)
employment loss 4.3(t)(xi)
Employees 4.3(t)(x)
Environmental Laws 4.3(x)(ix)(B)
Environmental Permits 4.3(x)(i)
Environmental Permit Consents 4.3(x)(i)
ERISA 4.3(t)(i)
ERISA Affiliate 4.3(t)(i)
Escrow Agent 3.2(b)
Escrow Agreement 3.2(b)
Estimated Closing Date Shareholders' Equity 3.6(a)
European Filings 4.2(c)
Excluded Assets 1.1
Excluded Liabilities 2.1
Extremely hazardous substances 4.3(x)(ix)(C)
Financial Statements 4.3(f)
Fixed Assets 1.2(c)
Foreign Closing 3.3
GAAP 4.3(f)
Governmental Consent 4.3(d)
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act 4.2(c)
Hazardous materials 4.3(x)(ix)(C)
Hazardous substances 4.3(x)(ix)(C)
Hazardous wastes 4.3(x)(ix)(C)
High Value 3.6(d)(i)
Hiring Criteria 9.1
Including 12.16
Indemnified Party 10.2(b)
Indemnifying Party 10.2(c)
Indemnitees 10.4
Intellectual Property 1.2(k)
Intellectual Property Licenses 4.3(z)(v)
Intercompany Accounts 1.3(c)
Inventory 1.2(b)
Joint Claims 1.2(s)
Key Employee 8.11
Kodak Agreement 1.2(u)
Leased Premises 1.2(e)
Letter of Credit 6.2(g)
Liens 4.3(g)
Low Value 3.6(d)(ii)
mass layoff 4.3(t)(xi)
Material Adverse Effect 4.3(b)
Material Third Party Consents 4.3(m)
58
Defined Term Where Found
------------ -----------
Material Contracts 4.3(l)
Material Environmental Permits 4.3(x)(i)
Material Permits 4.3(n)
Most Recent Fiscal Month End 4.3(f)
nationally recognized overnight courier 12.3
Non-U.S. Plans 4.3(t)(vii)
Paying Party 12.6(e)(ii)
PBGC 4.3 (t)(iii)
Pension Plans 4.3(t)(i)
Permits 4.3(n)
Permit Consents 4.3(n)
Permitted Liens 4.3 (g)
plant closing 4.3(t)(xi)
Pollutants 4.3(x)(ix)(C)
Property Taxes 2.2(e)
Proprietary Software 4.3(s)(iv)
Proxy Statement 4.3(ff)
Purchase Price 3.1
Purchased Assets 1.1
Purchaser Preamble
Purchaser Indemnitees 10.3
Purchaser's Ancillary Documents 4.2(b)
Purchaser's 401 (k) Plan 9.4(b)
relate to 1.1
Release 4.3(x)(ix)(D)
Relevant Agency 5.4(g)
Restricted hazardous materials 4.3(x)(ix)(C)
Security 4.3(s)
Seller Preamble
Seller Indemnitees 10.4
Seller's Ancillary Documents 4.3(c)
Seller's Knowledge 4.5
Shareholder Approval 4.3(c)
Single employer 4.3(m)(i)
Sixth Directive 12.6(f)(ii)
Software 4.3(z)
Subsidiary Ancillary Documents 4.3(c)
Superior Proposal 5.2(g)
Supplying Party 12.6(e)(ii)
Tax 4.3(i)(i)
Tax Returns 4.3(i)(i)
Termination Date 11.2
Third Party Claim 10.2(d)
Third Party Consents 4.3(m)
Toxic substances 4.3(x)(ix)(C)
Transferred Employee 9.4
Transferring Subsidiaries Preamble
Transitional Services Agreement 1.4
U.K. Purchase Agreement 1.4(j)
U.S. Business 1.4
U.S. Purchased Assets 1.4(m)
Unassigned Assets 8.8
59
Defined Term Where Found
------------ -----------
United States real property interest 4.3(i)(x)
used in 1.1
VAT 12.6(f)(i)
WARN Act 2.3(g)
Welfare Plans 4.3(t)(ii)
wholly-owned 1.4
60
IN WITNESS WHEREOF, the parties have executed this Agreement on
the date first above written.
SELLER:
DANKA BUSINESS SYSTEMS, PLC
/s/ ▇. ▇▇▇▇ ▇▇▇▇▇▇ III
--------------------------------------
▇. ▇▇▇▇ ▇▇▇▇▇▇ III
Chief Executive Officer
PURCHASER:
PITNEY ▇▇▇▇▇ INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------------
Its: Executive Vice President,
----------------------------------
Group President, Pitney ▇▇▇▇▇
----------------------------------
Business Services
----------------------------------
61