EXHIBIT 2.2
IMAGEMAX, INC.
ASSET PURCHASE AGREEMENT
FOR CERTAIN ASSETS OF
IMAGE-TEC, INC.
TABLE OF CONTENTS
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PRELIMINARY STATEMENTS......................................................1
ARTICLE 1 CERTAIN DEFINITIONS.............................................1
ARTICLE 2 SALE AND PURCHASE OF ASSETS; CONSIDERATION;
ASSUMPTION OF LIABILITIES.....................................6
2.1. Agreement to Sell and Purchase Assets...........................6
2.2. Consideration and Payment.......................................6
2.3. Post-Closing Adjustment Process.................................7
2.4. Payment of Purchase Price.......................................8
2.5. Allocation of Purchase Price....................................8
2.6. Assumption of Liabilities.......................................8
2.7. Rework Warranty.................................................9
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE
SHAREHOLDERS..................................................9
3.1. Organization; Qualification; Good Standing......................9
3.2. Authorization for Agreement.....................................9
3.3. Ownership, Subsidiaries and Legal Names.........................9
3.4. Enforceability.................................................10
3.5. Pending Legal Proceedings, Orders or Investigations............10
3.6. Title to the Purchased Assets and Related Matters..............10
3.7. Compliance with Laws...........................................10
3.8. Labor Matters..................................................10
3.9. Employee Benefit Plans.........................................11
3.10. Financial Statements...........................................12
3.11. Absence of Undisclosed Liabilities.............................13
3.12. Real Property..................................................13
3.13. Tangible Personal Property.....................................13
3.14. Contracts......................................................13
3.15. Insurance......................................................15
3.16. Intellectual Property..........................................15
3.17. Environmental Matters..........................................15
3.18. Permits........................................................16
3.19. Regulatory Filings.............................................16
3.20. Taxes and Tax Returns..........................................16
3.21. Accounts.......................................................17
3.22. Transferred Receivables........................................17
3.23. Solvency.......................................................17
3.24. Officers and Directors.........................................17
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3.25. Affiliate Transactions.........................................18
3.26. Brokers or Finders.............................................18
3.27. Customers......................................................18
3.28. Investment Company.............................................18
3.29. Accredited Investor............................................18
3.30. Absence of Changes.............................................18
3.31. Accuracy and Completeness of Information.......................19
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PURCHASER AND PARENT.........20
4.1. Organization...................................................20
4.2. Authorization for Agreement....................................20
4.3. Enforceability.................................................20
4.4. Litigation.....................................................20
4.5. Brokers or Finders.............................................20
ARTICLE 5 CONDITIONS PRECEDENT TO CLOSING................................20
5.1. Conditions Precedent to the Purchaser's Obligations............20
5.2. Conditions Precedent to the Seller's and the
Shareholders' Obligations................................21
ARTICLE 6 CLOSING........................................................22
6.1. The Closing and the Closing Date...............................22
6.2. Right to Possession............................................22
6.3. Third Party Consents...........................................22
6.4. Employment, Compensation and Employee
Benefits From and After Closing............................23
6.5. Current and Deferred Compensation and Other
Compensation Practices.....................................24
6.6. Severance......................................................24
6.7. Unemployment Compensation......................................24
ARTICLE 7 COVENANT NOT TO COMPETE........................................25
7.1. Confidentiality................................................25
7.2. Covenant Not To Compete........................................25
7.3. Specific Enforcement; Extension of Period......................26
7.4. Disclosure.....................................................26
7.5. Interpretation.................................................27
7.6. Acknowledgment.................................................27
ARTICLE 8 SURVIVAL.......................................................27
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ARTICLE 9 INDEMNIFICATION................................................27
9.1. The Seller's and the Shareholders' Indemnification.............27
9.2. The Purchaser's Indemnification................................28
9.3. Payment; Procedure for Indemnification.........................28
9.4. Limitations on Indemnification.................................30
ARTICLE 10 POST-CLOSING COVENANTS.........................................30
10.1. Further Cooperation............................................30
10.2. Maintenance of Books and Records...............................30
10.3. Use of Name....................................................31
10.4. Discharge of Obligations.......................................31
10.5. Receivables....................................................31
10.6. Public Announcements...........................................31
ARTICLE 11 TAXES RELATING TO PURCHASED ASSETS.............................32
ARTICLE 12 TRANSFER RESTRICTIONS..........................................32
ARTICLE 13 SECURITIES LAWS REPRESENTATIONS................................33
13.1. Compliance with Law............................................33
13.2. Economic Risk; Sophistication..................................33
ARTICLE 14 MISCELLANEOUS..................................................34
14.1. Notices........................................................34
14.2. No Third Party Beneficiaries...................................34
14.3. Schedules......................................................34
14.4. Expenses.......................................................35
14.5. Further Assurances.............................................35
14.6. Entire Agreement; Amendment....................................35
14.7. Section and Paragraph Titles...................................35
14.8. Binding Effect.................................................35
14.9. Counterparts...................................................35
14.10. Severability...................................................35
14.11. Governing Law..................................................35
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (as amended or supplemented from time to
time, this "Agreement") is hereby made this 9th day of February, 1998 by and
among Image-Tec, Inc., a Michigan corporation (the "Seller"), ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (the "Shareholders") and ImageMax, Inc., a Pennsylvania
corporation (the "Purchaser").
PRELIMINARY STATEMENTS
The Seller is engaged in the business of providing document management
products and services. The Shareholders own one hundred percent (100%) of the
issued and outstanding shares of the Seller's capital stock. The Seller desires
to sell to the Purchaser and the Purchaser desires to purchase from the Seller
all of the Seller's assets that are used in or related to the operation of the
Seller's document management and related businesses (the "Business"), together
with the goodwill related to the Business in accordance with the provisions set
forth in this Agreement. Except for those specific obligations and liabilities
of the Seller identified in this Agreement, the Purchaser is assuming none of
the Seller's obligations or liabilities.
IN CONSIDERATION of the foregoing and the mutual promises, covenants and
agreements contained in this Agreement, the parties, intending to be legally
bound, hereby agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the meanings
herein specified, unless the context otherwise requires:
1.1. Affiliate shall mean: (i) any Person that directly or indirectly
through one or more intermediaries controls, is controlled by or under common
control with the Person specified; (ii) any director, officer, or Subsidiary of
the Person specified; and (iii) the spouse, parents, children, siblings,
mothers-in-law, fathers-in-law, sons-in-law, daughters-in-law, brothers-in-law,
and sisters-in-law of the Person specified.
1.2. Assumed Liabilities shall mean the Obligations and Liabilities set
forth on Schedule 2.6.
1.3. Balance Sheet Date shall mean December 31, 1997.
1.4. Books and Records shall mean all records, documents, lists and files,
relating to either or both of the Purchased Assets or the Business including,
without limitation, price lists, lists of accounts, customers, suppliers and
personnel, all product, business and marketing plans, historical sales data and
all books, ledgers, files and business records (including, without limitation,
all financial records and books of account) of or relating to either or both of
the Purchased Assets or the Business; in any of the foregoing cases, whether in
electronic form or otherwise.
1.5. Closing Balance Sheet shall mean the Preliminary Closing Balance Sheet
as adjusted in connection with the later review by the Accountants as set forth
in Article 2 hereof.
1.6. Closing Market Price shall mean the average closing price of a share
of ImageMax Common Stock, as reported by the Nasdaq National Market, during the
fifteen-trading day period ending on the business day which immediately precedes
the Closing Date.
1.7. Code shall mean the Internal Revenue Code of 1986 and the rules and
regulations promulgated thereunder, as amended and supplemented from time to
time, or any successors thereto.
1.8. Computer Software shall mean all computer applications software, owned
or licensed by Seller, whether for general business usage (e.g., accounting,
word processing, graphics, spreadsheet analysis, etc.) or specific,
unique-to-the-business usage (e.g., order processing, manufacturing, process
control, design, shipping, etc.) and all computer operating, security or
programming software, owned or licensed by Seller.
1.9. Confidential Information shall mean (i) with respect to any party to
this Agreement or any Affiliate of such party, all financial, technical,
commercial or other information, including but not limited to information,
materials, documents, financial reports, business plans and marketing data that
relate to the business, strategies or operations of the parties hereto,
disclosed or otherwise made available by such party or such Affiliate (the
"Discloser") to another party or affiliate (the "Recipient") in connection with
the transactions contemplated by this Agreement and (ii) each of the terms,
conditions and other provisions contained in this Agreement and in the
agreements or documents to be delivered pursuant to this Agreement.
Notwithstanding the preceding sentence, the definition of Confidential
Information shall not include any information that (i) is in the public domain
at the time of disclosure to the Recipient or becomes part of the public domain
after such disclosure through no fault of the Recipient, (ii) is possessed in
writing by the Recipient at the time of disclosure to such Recipient, or (iii)
is disclosed to a party by any Person other than a party to this Agreement;
provided, that the party to whom such disclosure has been made does not have
actual knowledge that such Person is prohibited from disclosing such information
(either by reason of contractual, or legal or fiduciary duty or obligation). For
the purposes hereof, public domain shall not include disclosure of information,
except as otherwise provided herein, to any other person in connection with the
transactions contemplated hereby.
1.10. Consents shall mean any consents, waivers, approvals, authorizations,
certifications or exemptions required from any Person or under any Contract or
Requirement of Law, as applicable.
1.11. Contracts shall mean, with respect to any Person, any indentures,
indebtedness, contracts, leases, agreements, instruments, licenses, undertakings
and other commitments, whether written or oral, to which such Person is, or such
Person's properties are bound.
1.12. Employee Benefit Plan shall mean any deferred compensation, pension,
profit sharing, stock option, stock purchase, savings, group insurance or
retirement plan, and all vacation pay, severance pay, incentive compensation,
consulting, bonus and other employee benefit or fringe benefit plans or
arrangements maintained by the Seller or any ERISA Affiliate (including, without
limitation, health insurance, life insurance and other benefit plans maintained
for retirees) within the previous six plan years or with respect to which
contributions are or were (within such six year period) made or required to be
made by the Seller or any ERISA Affiliate or with respect to which the Seller
has any liability.
1.13. Encumbrances shall mean, with respect to any asset, any security
interests, liens, encumbrances, pledges, mortgages, conditional or installment
sales Contracts, title retention Contracts, transferability restrictions and
other claims or burdens of any nature whatsoever attached to or adversely
affecting such asset other than liens arising in the ordinary course of business
which are not incurred in connection with the borrowing of money and which, in
the aggregate, are not material.
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1.14. Environmental Laws shall mean all Requirements of Law relating to
pollution or protection of the environment (including, without limitation,
ambient air, surface water, groundwater, land, or surface or subsurface strata)
including, without limitation, Requirements of Law relating to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals, petroleum, or industrial, toxic or hazardous substances or wastes
into the environment and Requirements of Law relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of any of the foregoing including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
ss. 9601 et. seq. ("CERCLA"), the Resource Conservation and Recovery Act, 42
U.S.C. ss. 6901 et. seq., and the rules and regulations promulgated thereunder,
all as amended and supplemented from time to time, and together with any
successors thereto.
1.15. ERISA shall mean the Employment Retirement Income Security Act of
1974 and the rules and regulations promulgated thereunder, as amended and
supplemented from time to time, or any successors thereto.
1.16. ERISA Affiliate shall mean any Person that is included with the
Seller in a controlled group or affiliated service group under Sections 414(b),
(c), (m) or (o) of the Code.
1.17. Escrow Agent shall mean the individual or entity named as the Escrow
Agent in the Escrow Agreement.
1.18. Escrow Agreement shall mean the Escrow Agreement between the Seller,
the Purchaser and the Escrow Agent to hold the Escrow Amount pursuant to the
terms and conditions therein as referred to in Section 2.4, substantially in the
form attached hereto as Exhibit A.
1.19. GAAP shall mean generally accepted accounting principles in the
United States, applied by Seller on a basis consistent with preceding years and
throughout the periods involved.
1.20. Generic Intellectual Property shall mean those items of commercial
off-the-shelf personal micro-computer shrink-wrap licenses.
1.21. Governmental or Regulatory Authority shall mean any court,
tribunal, arbitrator, authority, agency, commission, official or other
instrumentality of the government of the United States or of any foreign
country, any state or any political subdivision of any such government (whether
state, provincial, county, city, municipal or otherwise).
1.22. ImageMax Common Stock shall mean the common stock, no par value per
share, of the Purchaser.
1.23. Intellectual Property shall mean all Computer Software, patents,
patent rights, patent applications, registered trademarks and service marks,
trademark rights, trademark applications, service ▇▇▇▇ rights, service ▇▇▇▇
applications, trade names, registered copyrights, copyright rights and all
intellectual, industrial, software or proprietary rights and trade secrets,
technology and know-how, whether or not owned or under license, relating to
either or both of the Purchased Assets or the Business, in each case together
with any amendments, modifications and supplements thereto and in each case all
goodwill associated with the Business in connection with which any such
intellectual property is used.
1.24. IRS means the Internal Revenue Service or any successor organization
thereto.
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1.25. Knowledge shall mean with respect to any representation, warranty or
statement of any party in this Agreement that is qualified by such party's
"knowledge," the actual knowledge of such party or, in the case of an entity,
the actual knowledge of any officer or director of such entity, and, in the case
of any such officer or director, that knowledge that a reasonably prudent
officer or director should have if such person duly performed his or her duties
as an officer or director of such party or made reasonable and diligent inquiry
and exercised due diligence with respect thereto.
1.26. Legal Proceeding shall mean any action, suit, arbitration, claim or
investigation by or before any Governmental or Regulatory Authority, any
arbitration or alternative dispute resolution panel, or any other legal,
administrative or other similar proceeding.
1.27. Material Adverse Effect shall mean an effect which is or would likely
be materially adverse to the Business and Properties (including Intellectual
Property), the prospects for the Business, or the condition (financial or
otherwise) or results of operation, of the Seller.
1.28. Obligations and Liabilities and words of similar import include,
without limitation, any direct or indirect indebtedness, guaranty, endorsement,
claim, loss, damage, deficiency, cost, expense, obligation or responsibility,
fixed or unfixed, known or unknown, asserted or unasserted, ▇▇▇▇▇▇ or inchoate,
liquidated or unliquidated, secured or unsecured.
1.29. Order shall mean any judgment, order, writ, decree, injunction or
other determination whatsoever of any Governmental or Regulatory Authority or
any other entity or body whose finding, ruling or holding is legally binding or
is enforceable as a matter of right (in any case, whether preliminary or final).
1.30. PBGC means the Pension Benefit Guaranty Corporation or any successor
organization thereto.
1.31. Permits shall mean all licenses, permits, certificates of authority,
authorizations, approvals, registrations, franchises, rights, orders,
qualifications and similar rights or approvals granted or issued by any
Governmental or Regulatory Authority relating to either or both of the Purchased
Assets or the Business.
1.32. Person shall mean any natural person, corporation, general
partnership, limited partnership, limited liability company, proprietorship,
joint venture, trust, association, union, entity, or other form of business
organization or any Governmental or Regulatory Authority whatsoever.
1.33. Preliminary Closing Balance Sheet shall mean the unaudited balance
sheet delivered by the Seller to the Purchaser two business days prior to the
Closing Date that estimates, to the best knowledge of the Seller, the unaudited
balance sheet of the Seller as of the date immediately prior to the Closing
Date.
1.34. Prepaid Expenses shall mean, as of any date of determination,
payments made by the Seller with respect to the Business, other than payments
made by the Seller to any Affiliate of the Seller or the Shareholders, that
constitute prepaid expenses of the Business in accordance with GAAP consistently
applied as of such date.
1.35. Property shall mean the Real Property, Intellectual Property and
Tangible Personal Property of the Seller.
1.36. Receivables shall mean, as of any date of determination, the Seller's
accounts receivable, notes receivable and other miscellaneous receivables
associated with the Business at such date.
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1.37. Regulatory Approvals shall mean all Consents from all Governmental or
Regulatory Authorities.
1.38. Requirement of Law shall mean, with respect to any Person, such
Person's articles or certificate of incorporation, by-laws or other governing or
constitutive documents, if any, and any provision of law, statute, treaty, rule,
regulation, ordinance or pronouncement having the effect of law, or any Order,
to which, in each case, such Person or any of such Person's properties,
operations, business or assets is bound or subject.
1.39. Restricted Period shall mean, with respect to the Seller and the
Shareholders, the period commencing on the Closing Date and ending on the later
of (i) provided the applicable Shareholder is an employee of the Purchaser on
the Closing Date, the first anniversary of the date on which such Shareholder's
employment with the Purchaser, expires, is not renewed, or is otherwise
terminated, and (ii) the fifth anniversary of the Closing Date, as such period
may be extended pursuant to Section 7.3(b).
1.40. Retained Liabilities shall mean all Obligations and Liabilities of
the Seller and the Shareholders of any nature whatsoever, whether now existing
or hereafter arising or incurred, except for the Assumed Liabilities.
1.41. Securities Act shall mean the Securities Act of 1933, or any
successors thereto, and the rules and regulations promulgated thereunder, as
amended and supplemented from time to time.
1.42. Seller Balance Sheet shall mean the balance sheet of Seller and notes
thereto prepared in accordance with GAAP as of the Balance Sheet Date.
1.43. Subsidiary shall mean, with respect to any Person, any entity in
which such Person owns or controls in excess of 50% of the securities or
ownership interests representing the ordinary voting power of such entity.
1.44. Tangible Fixed Assets shall mean the value of all depreciable assets
of the Seller as of a certain specified date, properly accounted for under GAAP,
net of all accumulated depreciation through such specific date.
1.45. Taxes shall mean (i) all taxes, charges, fees, levies or other
assessments including, without limitation, all net income, gross income, gross
receipts, sales, use, ad valorem, transfer, franchise, profits, payroll,
employment, social security, unemployment, excise, estimated, stamp, occupancy,
occupation, property or other similar taxes, including any interest or penalties
thereon, and additions to tax or additional amounts imposed by any federal,
state, local or foreign governmental authority, domestic or foreign (a "Taxing
Authority") or (ii) all liability for the payment of any taxes, interest,
penalty, addition to tax or like additional amount resulting from the
application of Treasury Regulation ss.1.1502-6 or comparable Requirement of Law.
1.46. Tax Returns shall mean any declaration, return, report, estimate,
information return, schedule, statements or other document filed or required to
be filed, with or when none is required to be filed with a Taxing Authority, the
statement or other document issued by, a Taxing Authority.
1.47. Trade Accounts Receivable shall mean, as of the applicable date, the
Seller's trade accounts receivable associated with the Business.
1.48. Transferred Receivables shall mean those Receivables that are part of
the Purchased Assets.
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1.49. Transfer Taxes shall mean any applicable documentary, sales, use,
filing, transfer and similar Taxes payable as a result of the transactions
contemplated by this Agreement.
ARTICLE 2
SALE AND PURCHASE OF ASSETS; CONSIDERATION;
ASSUMPTION OF LIABILITIES
2.1. Agreement to Sell and Purchase Assets. Subject to the terms and
conditions set forth in this Agreement, and in reliance upon the joint and
several representations and warranties made by the Seller and the Shareholders
to the Purchaser in this Agreement, effective as of the close of business on the
date hereof, the Seller shall sell to the Purchaser and the Purchaser shall
purchase and receive from the Seller, free and clear of all Encumbrances and all
Obligations and Liabilities (other than the Assumed Liabilities (as defined in
Section 2.6)), all of the tangible and intangible assets of the Seller, whether
real, personal or mixed, that are incremental to or relating to or used in
connection with, the Business, wherever located, including, without limitation
(i) the assets included on the Seller Balance Sheet, (ii) the assets listed on
Schedule 2.1(a) attached to this Agreement, and (iii) all assets acquired by the
Seller after the Balance Sheet Date and on or prior to the Closing Date, but
excluding the assets listed on Schedule 2.1(b) (the "Excluded Assets") and any
assets disposed of in the ordinary course of business consistent with past
practice (collectively, the "Purchased Assets").
2.2. Consideration and Payment. As full consideration for the Purchased
Assets being purchased pursuant to this Agreement, the Purchaser shall pay,
deliver or cause to be delivered to the Seller (in addition to the assumption of
the Assumed Liabilities), in the manner set forth in Section 2.4 of this
Agreement, the sum of $250,000 (the "Base Purchase Price") less adjustments, if
any, as further set forth in this Section 2.2 (the "Purchase Price").
(a) Closing Working Capital Adjustment. The Base Purchase Price shall be
reduced at Closing, by $1.00 for each $1.00 that the Seller's Adjusted Working
Capital (as hereinafter defined) as reflected on the Preliminary Closing Balance
Sheet (the "Closing Adjusted Working Capital Amount") is less than $0 (the
"Closing Working Capital Adjustment"). The Seller's Adjusted Working Capital
shall mean the Seller's current portion of Purchased Assets, calculated pursuant
to GAAP, less: (i) the portion of Trade Accounts Receivable that are more than
90 days past the original invoice date, calculated pursuant to GAAP, and (ii)
Adjusted Current Liabilities. The Seller's Adjusted Current Liabilities shall
mean all of the Seller's liabilities which would be classified as current
liabilities in accordance with GAAP, except current amounts of principal,
interest or penalties due and owing: (i) under promissory notes or lines of
credit with aggregate principal amounts exceeding $36,000; (ii) to an employee
(or on the account of an employee) or an Affiliate of the Seller; (iii) to a
lessor under a capital lease (except for any capital lease on account of real
property); (iv) on account of expenses in connection with this Agreement that
are the obligation of the Seller or Shareholders under this Agreement, or (v) on
account of Taxes or earned insurance premiums.
(b) Closing Tangible Fixed Asset Adjustment. The Base Purchase Price
shall be further reduced, at Closing, by $1.00 for each $1.00 that the value of
the Seller's Tangible Fixed Assets, as reflected on the Preliminary Closing
Balance Sheet (the "Closing Tangible Fixed Asset Amount") is less than $115,000
(the "Closing Tangible Fixed Asset Adjustment").
(c) Post-Closing Adjustments. As further set forth in Section 2.3
hereof, the Closing Working Capital Adjustment and the Tangible Fixed Asset
Adjustment (the "Closing Amounts") shall be
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finalized after Closing. Any increase in the Closing Amounts, as determined
pursuant to Section 2.3, plus 8% interest on such amount, shall be paid by
Seller to Purchaser in immediately available funds within five (5) business days
of finalizing the Closing Amounts pursuant to Section 2.3 hereof. If such amount
is not received by the Purchaser within such time period, such amount shall be
paid from the Escrow Amount pursuant to the Escrow Agreement and the Seller
shall be obligated to immediately replenish the Escrow Amount by depositing with
the Escrow Agent upon such payment cash in a like amount.
(d) Shareholders Obligation. The Shareholders hereby agree that they
will be jointly and severally liable for all obligations of the Seller under the
Purchase Price adjustments set forth in this Section 2.2 including, but not
limited to, the obligation to replenish the Escrow Amount.
2.3. Post-Closing Adjustment Process. Promptly following the Closing, and
in order to verify the accuracy of the adjustments made at the Closing, the
Purchaser agrees to cause the internal accounting staff and the independent
certified public accountant of the Purchaser (the "Accountants") to review the
financial statements of the Seller, including the Preliminary Closing Balance
Sheet. In doing so, the Accountants shall also review the Closing Amounts. No
later than sixty (60) days following the Closing Date, the Purchaser shall
notify the Seller and the Shareholders if it objects to the Closing Amounts and
shall provide a report indicating its determination of the Closing Amounts (the
"Purchaser's Closing Report"). The determination of the Closing Amounts by the
Purchaser shall be conclusive and binding upon the parties hereto unless the
Seller shall object within fifteen (15) days following its receipt of the
Purchaser's Closing Report. The Seller's objection, if any, to the Purchaser's
Closing Report (the "Seller's Objection") shall set forth in reasonable detail
the Seller's objection(s) to the Purchaser's Closing Report and the Seller's
calculation of the Closing Amounts. Within ten (10) days after receipt of the
Seller's Objection, the Purchaser will notify the Seller whether it accepts or
disputes the Seller's adjustments, if any, which notification shall set forth in
reasonable detail the adjustments made by the Seller which the Purchaser
continues to dispute (the "Purchaser's Response Notice"). If the Seller does not
object to the Purchaser's Closing Report, or if the Purchaser agrees to accept
the Seller's adjustments to the Purchaser's Closing Report, then the additional
adjustments based on the then final Closing Amounts (the "Final Closing
Amounts"), if any, shall be paid by Seller to the Purchaser as set forth in
Section 2.2(c) above. If the Seller objects to the Purchaser's Closing Report as
set forth above and the Purchaser does not accept the Seller's proposed
adjustments, then an independent accounting firm mutually satisfactory to the
Seller and the Purchaser shall be engaged to determine the amount of the Closing
Amounts and the Final Closing Amounts, such determination to be binding on the
parties. The parties hereto agree to cooperate fully with such independent
accountants at their own cost and expense, including, but not limited to,
providing such independent accountants with access to, and copies of, all books
and records that they shall reasonably request. The Purchaser and the Seller
shall each bear one-half of all of the costs and expenses of such independent
accounting firm, and if the parties hereto are unable to agree upon an
independent accounting firm, the Seller and the Purchaser will request that one
be designated by the President of the Philadelphia office of the American
Arbitration Association. Upon the final determination of the Final Closing
Amounts, any necessary adjustments shall be made to the Preliminary Closing
Balance Sheet.
2.4. Payment of Purchase Price.
(a) Stock Purchase Price. 7,659.5 shares of ImageMax Common Stock shall
be issued at Closing to the Seller.
(b) Cash Purchase Price. Subject to Section 2.4(c), an amount equal to
$175,000 less the reductions, if any, to be made at Closing pursuant to Sections
2.2(a) and 2.2(b), shall be payable at the Closing in cash to the Seller ("Cash
Purchase Price"). The Cash Purchase Price shall be payable by a bank check
payable to the
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order of the Seller in immediately available funds or a wire transfer to an
account to be designated by the Seller in writing prior to the Closing, such
method of payment to be at the sole discretion of the Purchaser.
(c) Delivery into Escrow. Notwithstanding the foregoing, $25,000 of the
Cash Purchase Price shall be delivered at Closing to the Escrow Agent to be held
in an account pursuant to the Escrow Agreement (the "Escrow Account"). The
Escrow Account, pursuant to the terms of the Escrow Agreement, shall be
available to fund (but shall not be the sole source of funding) any obligations
of the Seller and the Shareholders under this Agreement.
2.5. Allocation of Purchase Price. The Purchaser shall on or before sixty
(60) days after the Closing Date initially determine and send to the Seller a
schedule containing the allocation of the purchase price, as defined in the
code, among the Purchased Assets as is required by Section 1060 of the Code (the
"Allocation Schedule"). The Allocation Schedule will be deemed to be accepted by
the Seller unless the Seller provides a written notice of disagreement to the
Purchaser within five (5) business days after receipt of the Allocation
Schedule. If the Seller provides such written notice, the Seller and the
Purchaser shall proceed to negotiate in good faith to agree on a mutually
acceptable Allocation Schedule. If no mutually acceptable Allocation Schedule is
created within ten (10) business days of the Seller's receipt of the written
notice of disagreement, then an independent accountant mutually satisfactory to
the Seller and the Purchaser (the "Independent Accountant") shall be engaged to
determine the Allocation Schedule. The fees for such determination shall be
split evenly by the Seller and by the Purchaser. Such determination by the
Independent Accountant, or the original Allocation Schedule if not objected to
by the Seller, or the mutually acceptable Allocation Schedule shall be binding
and conclusive to all parties to the Agreement and all parties shall file all
relevant tax returns consistent with such final determination, unless otherwise
required by applicable law; provided, however, that if the Purchase Price is
adjusted in accord with Section 2.4 of this Agreement, the Allocation Schedule
otherwise determined shall be adjusted in accord with the requirements of
Section 1060 of the Code.
2.6. Assumption of Liabilities. At the Closing, the Purchaser will assume
only the Seller's Obligations and Liabilities expressly listed on Schedule 2.6
attached to this Agreement, if any (collectively, the "Assumed Liabilities").
All other Obligations and Liabilities of the Seller and the Shareholders shall
be Retained Liabilities and not assumed by Purchaser. Nothing contained in this
Agreement shall be construed as an assumption of any specific Assumed Liability
until the applicable required Consents relating to such Assumed Liability shall
have been obtained.
2.7. Rework Warranty. The Seller and the Shareholders hereby, jointly and
severally, agree to assume, for a period ending one hundred eighty (180) days
after the Closing Date, all reasonable costs and expenses incurred by the
Purchaser to perform services or repair or replace products in order to correct
any material deficiencies in services or products performed or sold by the
Seller in the ordinary course of its business prior to Closing ("Rework"). The
Escrow Amount shall be available to fund (but shall not be the sole source of
funding) any obligations of the Seller and the Shareholders hereunder. The
Seller and the Shareholders, jointly and severally, agree to indemnify and hold
the Purchaser harmless from any and all costs incurred in connection with
Rework. Notwithstanding the foregoing, the Purchaser shall not be entitled to
reimbursement and indemnity for Rework hereunder until such time as the
aggregate of all Rework claims which Purchaser may have against the Seller or
the Shareholders shall exceed $10,000, whereupon such claims shall be reimbursed
and indemnified in full.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE SHAREHOLDERS
Except as set forth on the disclosure schedule delivered by the Seller and
the Shareholders to the Purchaser on the date hereof (the "Disclosure
Schedule"), the numbers of which are numbered to correspond to the section
numbers of this Agreement to which they refer, the Seller and the Shareholders
hereby, jointly and severally, represent and warrant to the Purchaser as
follows:
3.1. Organization; Qualification; Good Standing. The Seller (i) is a
corporation duly incorporated, validly existing and in good standing under the
laws of the state of its incorporation or organization, (ii) has the power and
authority to own and operate its properties and assets and to transact the
Business and (iii) is duly qualified and authorized to do business and is in
good standing in all jurisdictions where the failure to be duly qualified,
authorized and in good standing would have a Material Adverse Effect upon the
Seller's Business, prospects, operations, results of operations, assets,
liabilities or condition (financial or otherwise). Listed in the Disclosure
Schedule is a true and complete list of all jurisdictions in which the Seller is
qualified to do business.
3.2. Authorization for Agreement. The Seller's and Shareholders' execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby: (i) are within their powers and authority,
corporate or otherwise, and are duly authorized by all necessary corporate and
shareholder action on the part of the Seller and (ii) do not (A) require any
action by or in respect of, or filing with, any Governmental or Regulatory
Authority, (B) contravene, violate or constitute, whether with or without the
passage of time or the giving of notice or both, a breach or default under, any
Requirement of Law applicable to the Seller, the Shareholders or any of its or
their properties or any Contract to which the Seller, the Shareholders or any of
its or their properties is bound or subject or (C) result in the creation of any
Encumbrance or any obligation and liability on any of the Purchased Assets.
3.3. Ownership, Subsidiaries and Legal Names. No Person other than the
Shareholders owns record, beneficial or equitable ownership of any of the
Seller's securities, whether debt or equity. The Seller does not own, directly
or indirectly, any debt, equity or other ownership or financial interest in any
other Person. No shares or other ownership or other interests, either of record,
beneficially or equitably, in any Person are included in the Purchased Assets.
The Seller has no d/b/a names and has not conducted business under any other
name except its legal name on its Certificate of Incorporation.
3.4. Enforceability. This Agreement has been duly executed and delivered by
the Seller and the Shareholders and constitutes the legal, valid and binding
obligation of the Seller and the Shareholders, enforceable against each of them
in accordance with its terms except as may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
rights of creditors generally.
3.5. Pending Legal Proceedings, Orders or Investigations. There are no
Legal Proceedings or Orders pending, or, to the Seller's or the Shareholders'
knowledge, threatened, against or related to the Seller, the Business, the
Purchased Assets or the Assumed Liabilities or which otherwise could adversely
affect or restrict the ability of the Seller or the Shareholders to consummate
the transactions contemplated hereby or that question the validity of this
Agreement, whether or not fully covered by insurance.
3.6. Title to the Purchased Assets and Related Matters. Except for the
items of tangible personal property possessed or used by the Seller in
connection with the Business ("Tangible Personal Property") leased by the
Seller, the leases and agreements for which are in full force and effect and
constitute valid and binding
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agreements on the parties thereto in accordance with their respective terms, the
Seller owns and has good and valid legal and beneficial title to all of the
Purchased Assets free and clear of all Encumbrances. All of the Purchased Assets
are in the possession or under the control of the Seller and consist of all of
the assets that are incremental or relating to, or used in connection with, the
Business. Except for those items of Tangible Personal Property leased by the
Seller, no Person other than the Seller owns any of the Tangible Personal
Property located on any of the Real Property (other than immaterial items of
personal property that are owned by the Seller's employees).
3.7. Compliance with Laws. The Seller and its independent contractors and
agents are operating in compliance with all Requirements of Law applicable to
them or any of their properties or to which the Seller, its independent
contractors, agents or their properties is bound or subject. In addition, none
of the Seller, its independent contractors, agents or the Shareholders has
received any notice from any Person concerning alleged violations of, or the
occurrence of any events or conditions resulting in alleged noncompliance with,
any such Requirement of Law. None of the Seller, the Shareholders, any of their
respective Affiliates (other than a Person who is an Affiliate solely by virtue
of clause (iii) of the definition thereof), or any of such Affiliates'
respective Affiliates (other than a Person who is an Affiliate solely by virtue
of clause (iii) of the definition thereof) has made any illegal kickback, bribe,
gift or political contribution to or on behalf of any customer, or to any
officer, director, employee of any customer, or to any other Person.
3.8. Labor Matters.
(a) Section 3.8 of the Disclosure Schedule sets forth an accurate list
showing all officers, directors, consultants and employees of the Seller,
listing all Contracts with such officers, directors, consultants and employees
(copies of which are attached to the Disclosure Schedule) and the rate of
compensation (and the portions thereof attributable to salary, bonus and other
compensation, respectively) of each of such persons for 1996 and as of the
Balance Sheet Date. Since the Balance Sheet Date, there have been no increases
in the compensation payable or any special bonuses to any officers, director, or
employee, except ordinary salary increases implemented on a basis consistent
with past practices which have been set forth on the Disclosure Schedule. No
individuals retained by the Seller as an independent contractor or consultant
would be reclassified by the IRS, the U.S. Department of Labor or any other
Governmental or Regulatory Authority as an employee of the Seller for any
purpose whatsoever.
(b) The Seller is not bound by or subject to (and none of its respective
assets or properties is bound by or subject to) any arrangement with any labor
union. No employees of the Seller are represented by any labor union or covered
by any collective bargaining agreement. To the knowledge of the Seller and the
Shareholders, no campaign to establish such representation is in progress and
there is no pending or, to the best of the Seller's and the Shareholders'
knowledge, threatened, labor dispute involving the Seller and any group of its
employees. The Seller has not experienced any labor interruptions over the past
three years. The Seller considers its relationship with its employees to be
good.
3.9. Employee Benefit Plans.
(a) The Disclosure Schedule sets forth a complete and accurate list and
description of each Employee Benefit Plan. With respect to each Employee Benefit
Plan, the Seller and the Shareholders have delivered or caused to be delivered
to the Purchaser true and complete copies of (i) the plan document, trust
agreement and any other document governing such Employee Benefit Plan, (ii) the
summary plan description, (iii) all Form 5500 annual reports and attachments,
and (iv) the most recent IRS determination letter, if any, for such plan.
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(b) Each of the Employee Benefit Plans has been operated and
administered in compliance with their respective terms and all applicable
Requirements of Law including, without limitation, ERISA and the Code. The
Seller has not incurred any "accumulated funding deficiency" within the meaning
of ERISA or incurred any liability to the PBGC in connection with any Employee
Benefit Plan (or other class of benefits that the PBGC has elected to insure).
(c) Each Employee Benefit Plan that is intended to be tax qualified
under the Code is identified as such in the Disclosure Schedule attached to this
Agreement. Each such Employee Benefit Plan has received, or the Seller has
applied for or will in a timely manner apply for, a favorable determination
letter from the IRS stating that such Employee Benefit Plan meets the
requirements of the Code and that any trust or trusts associated therewith are
tax exempt under the Code.
(d) The Seller does not maintain any "defined benefit plan" covering
employees of the Seller within the meaning of Section 3(35) of ERISA subject to
Title IV of ERISA or any "Multiemployer Plan" within the meaning of Section
401(a)(3) of ERISA.
(e) All contributions and payments of insurance premiums required to be
made with respect to the Employee Benefit Plans including, without limitation,
the payment of the applicable premiums on any insurance Contract funding an
Employee Benefit Plan, have been fully paid in such a manner as not to cause any
interest, penalties or other amounts that have not been satisfied or discharged
to be assessed against the Seller with respect thereto.
(f) The Seller has complied with the reporting and disclosure
requirements of ERISA applicable to the Employee Benefit Plans and the
continuation coverage requirements of the Code and ERISA applicable to any of
the Employee Benefit Plans.
(g) There has been no "prohibited transaction" or "reportable event"
within the meaning of the Code or ERISA within the last sixty (60) months, or
breach of fiduciary duty with respect to any of the Employee Benefit Plans that
could subject the Purchaser or the Seller to any Tax, penalty or other liability
under the Code or ERISA.
(h) No Employee Benefit Plan has been terminated since January 1, 1993.
There are no Legal Proceedings or claims with respect to any of the Employee
Benefit Plans (other than routine claims for benefits from eligible participants
or beneficiaries in the normal and ordinary course of business) pending or, to
the knowledge of the Seller or the Shareholders threatened, and to the knowledge
of the Seller or the Shareholders, there are no facts, events, conditions or
circumstances that could give rise to any such Legal Proceeding or claim (other
than routine claims for benefits from eligible participants or beneficiaries in
the normal and ordinary course).
(i) Neither the Seller or any ERISA Affiliate has ever sponsored,
maintained or contributed to, or been obligated to contribute to, any employee
benefit plan subject to Title IV of ERISA or the minimum funding requirements of
Code Section 412.
(j) No Employee Benefit Plan provides post retirement medical benefits,
post retirement death benefits or any post retirement welfare benefits of any
fund whatsoever.
(k) There are no current or former employees of the Seller who are on
leave of absence under either of the Uniformed Services Employment or
Reemployment Rights Act or the Family Medical Leave Act.
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(l) None of the Seller or any of its respective officers, directors or
significant employees (as such term is defined in Regulation S-K of the
Securities Act), or any other Person has made any statement or communication or
provided any materials to any employee or former employee of the Seller that
provides for or could be construed as a contract, agreement or commitment by the
Purchaser or any of its Affiliates to provide for any pension, welfare, or other
employee benefit or fringe benefit plan or arrangement to any such employee or
former employee, whether before or after retirement or separation or otherwise.
(m) The execution and delivery of this Agreement and the consummation of
the transactions contemplated by this Agreement will not result in any increase
in or acceleration of any obligation or liability under any Employee Benefit
Plan or to any employee or former employee of the Seller.
3.10. Financial Statements. The Seller and the Shareholders have delivered,
or caused to be delivered, to the Purchaser a copy of the Seller's balance
sheets as of December 31, 1996 and 1997, and the related statements of income
for the years then ended, together with all proper exhibits, schedules and notes
thereto, and have delivered, two days prior to Closing, the Preliminary Closing
Balance Sheet (collectively, the "Financial Statements"). A true and complete
copy of the Financial Statements is attached to the Disclosure Schedule. The
Financial Statements have been prepared in accordance with GAAP and fairly
represent the financial position of the Seller as of the date of such Financial
Statements and the results of operations and changes in shareholders' equity and
cash flows for the periods covered thereby. The Books and Records accurately and
fairly reflect, in reasonable scope and detail and in accordance with good
business practice, the transactions and assets and liabilities of the Seller and
such other information as is contained therein.
3.11. Absence of Undisclosed Liabilities. Except as and to the extent
reflected on, or fully reserved against in, the Preliminary Closing Balance
Sheet, the Seller has no Obligations or Liabilities, whether direct or indirect,
matured or unmatured, contingent or otherwise as of such date and has incurred
no such liabilities or obligations since the Balance Sheet Date except for
Obligations or Liabilities that were incurred consistently with past business
practice in or as a result of the normal and ordinary course of business since
the Balance Sheet Date.
3.12. Real Property. The Purchased Assets do not include any Real Property
(as defined below). Section 3.12 of the Disclosure Schedule includes a list of
all real property owned or leased by the Seller at the date hereof, and all
other real property, if any, used by the Seller in the conduct of its business
(collectively, the "Real Property"). The Real Property is in good condition and
repair (ordinary wear and tear excepted) and there has been no damage,
destruction or loss to any of the Real Property that remains unremedied to date,
and the Real Property is suitable to carry out the Business as conducted
thereon.
3.13. Tangible Personal Property. The Seller either owns or leases all
properties as are presently used in the conduct of the Business and the Seller's
operations. All of the Tangible Personal Property owned, possessed or used by
the Seller in connection with the Business is (a) in good condition and repair,
normal wear and tear excepted, (b) suitable for the uses for which it is
currently employed and (c) in conformity in all material respects with all
applicable Requirements of Law currently in effect. All of the Tangible Personal
Property is located on the Real Property. The Seller has good and marketable
title to all the Tangible Personal Property, free and clear of all Encumbrances.
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3.14. Contracts.
(a) Attached to the Disclosure Schedule is a complete and accurate list
of each Contract described below to which the Seller or any of its properties is
party or is otherwise bound or subject (a "Material Contract"):
(i) each Contract with the Seller's customers (but only if such
customers are among the Seller's twenty-five highest, in terms of dollar value
of purchases, for the twelve-month period ending on the Balance Sheet Date),
dealers, brokers, value added resellers or vendors (but only if such vendors are
among the Seller's twenty-five highest, in terms of dollar value of sales, for
the twelve-month period ending on the Balance Sheet Date);
(ii) any Contract that creates a partnership or a joint venture or
arrangement that involves a sharing of profits (whether through equity
ownership, Contract or otherwise) with any other Person;
(iii) any Contract that purports to or has the effect of limiting
either the Seller's right to engage in, or compete with any Person in, any
business;
(iv) any Contract involving the incurrence by the Seller of
liabilities (other than liabilities to render services to customers in the
ordinary course of business) in any one transaction or series of related
transactions in excess of $10,000, or that extend beyond one year from the date
of this Agreement;
(v) any Contract pursuant to which the Seller has created, incurred,
or assumed any indebtedness other than for trade indebtedness incurred in the
normal and ordinary course of the Business;
(vi) any Contract pursuant to which the Seller has guaranteed any
indebtedness;
(vii) any Contract not made in the normal and ordinary course of the
Seller's Business;
(viii) any Contract granting any preferential rights to purchase or
acquire any interest in any of Seller's assets, property or rights or requiring
consent of any party to the transfer and assignment of any such assets, property
or rights;
(ix) any Contract creating any Encumbrance on any of the Purchased
Assets; and
(x) any Contract which relates to or effects any Real Property or
Tangible Personal Property, including leases.
(b) Each Material Contract to which the Seller or any of its properties
is a party or is otherwise bound or subject (i) is valid and binding on the
Seller and, to the knowledge of the Seller and the Shareholders, is valid and
binding upon parties other than the Seller in accordance with its terms, (ii)
was made in the normal and ordinary course of the Business and (iii) contains no
provision or covenant prohibiting or limiting the ability of the Seller to
operate their respective Businesses.
(c) No party to any Material Contract to which the Seller or any of its
properties is a party or is otherwise bound or subject (i) has provided any
notice to the Seller of its intent to terminate, or withdraw its participation
in, any such Contract, (ii) has, to the knowledge of the Seller and the
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Shareholders, threatened to terminate, or withdraw from participation in, any
such Contract or (iii) is, to the knowledge of the Seller and the Shareholders,
in breach or default under any provision thereof, and, to the knowledge of the
Seller and the Shareholders, no event or condition has occurred, whether with or
without the passage of time or the giving of notice, or both, that would
constitute such a breach or default.
(d) Except as set forth in the Disclosure Schedule, no Consent of any
party to any Material Contract to which the Seller or any of its properties is a
party or is otherwise bound or subject is required in connection with the
transactions contemplated by this Agreement.
(e) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not (i) result in or
give to any Person any right of termination, non-renewal, cancellation,
withdrawal, acceleration or modification in or with respect to any Material
Contract to which the Seller or any of its properties is a party or is otherwise
bound or subject, (ii) result in or give to any Person any additional rights or
entitlement to increased, additional, accelerated or guaranteed payments under
any such Contract or (iii) result in the creation or imposition of any
obligation and liability upon the Seller or any Encumbrances upon any of the
Purchased Assets under the terms of any such Contract.
3.15. Insurance. The Disclosure Schedule includes complete and accurate
list of all insurance policies held by the Seller, copies of which have been
delivered to Purchaser. Each such insurance policy is valid and binding and is
and has been in effect since the date of its issuance. All premiums due under
each insurance policy of Seller have been paid, and the Seller has not received
any notice of any cancellation, non-renewal or termination in respect of any of
its insurance policies. The Seller has not received any notice of an increase in
the premium of greater than 5% over the last three years in respect of any of
its insurance policies. The Seller is not in default under any such policy.
Neither the Seller nor the Person to whom any such insurance policy has been
issued has received notice that any insurer under any policy referred to in the
Disclosure Schedule is denying liability with respect to a claim thereunder or
defending under a reservation of rights clause. The Seller has notified its
insurance carriers of all litigation, claims and facts which could reasonably be
expected to give rise to a claim, all of which are disclosed in the Disclosure
Schedule (including worker's compensation claims). The liability insurance
maintained by the Seller is and has at all times prior to the date of this
Agreement been on an "occurrence" basis.
3.16. Intellectual Property.
(a) Included in the Disclosure Schedule is a complete and accurate list
and full description of each item of Intellectual Property, except for the
Generic Intellectual Property. In addition, the Disclosure Schedule identifies
whether each item of Intellectual Property is owned by the Seller or possessed
and used by the Seller under any Contract. The Intellectual Property constitutes
valid and enforceable rights and does not infringe or conflict with the rights
of any other Person; provided that to the extent the foregoing relates to
Generic Intellectual Property used but not owned by the Seller, such
representation and warranty is given solely to the knowledge of the Seller and
the Shareholders.
(b) There is neither pending, nor to either the Seller's or the
Shareholders' knowledge, threatened, any Legal Proceeding against the Seller
contesting the validity or right of the Seller to use any of the Intellectual
Property, and the Seller has not received any notice of infringement upon or
conflict with any asserted right of others nor, to the Seller's or the
Shareholders' knowledge, is there a basis for such a notice. To either the
Seller's or the Shareholders' knowledge, no Person is infringing the Seller's
rights to the Intellectual Property.
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(c) The Seller does not have any obligation to compensate others for the
use of any Intellectual Property. In addition, the Seller has not granted any
license or other right to use, in any manner, any of the Intellectual Property,
whether or not requiring the payment of royalties.
3.17. Environmental Matters.
(a) The Seller and the operation of the Business is and has been in
compliance with all applicable Environmental Laws.
(b) There have occurred no and there are no events, conditions,
circumstances, activities, practices, incidents, or actions on the part of, or
caused by, the Seller or the Shareholders (or to the knowledge of the Seller or
the Shareholders, caused by a third party) that may give rise to any common law
or statutory liability, or otherwise form the basis of any Legal Proceeding,
Order or action involving or relating to the Business, the Real Property or the
Seller, based upon or related to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling, or the emission, discharge,
release or threatened release into the environment, of any pollutants,
contaminants, chemicals, petroleum, or industrial, toxic or hazardous substance
or wastes.
(c) To the knowledge of the Seller and the Shareholders, there is no
asbestos contained in or forming a part of any building, structure or
improvement comprising a part of any of the Real Property. To the knowledge of
the Seller and the Shareholders, no polychlorinated byphenyls (PCBs) are
present, in use or stored on any of the Real Property. The Seller has conducted
appropriate testing for radon and no radon gas or the presence of radioactive
decay products of radon are present on, or underground at any of the Real
Property at levels beyond the minimum safe levels for such gas or products
prescribed by applicable Environmental Laws.
3.18. Permits. Each of the Seller and its employees, independent
contractors and agents has obtained and holds in full force all Permits that are
necessary for the operation of the Business. Neither the Seller nor any such
employee, independent contractor or agent is in noncompliance with the terms of
any such Permit. The execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby will not (i) result in
or give to any Person any right of termination, non-renewal, cancellation,
acceleration or modification in or with respect to any such Permit, (ii) result
in or give to any Person any additional rights or entitlement to increased,
additional, accelerated or guaranteed payments under any such Permit or (iii)
result in the creation or imposition of any obligation and liability upon the
Seller or any Encumbrance upon any of the Purchased Assets under the terms of
any Permit.
3.19. Regulatory Filings. The Seller has filed all registrations, filings,
reports, or submissions that are required by any Requirement of Law. All such
filings were made in compliance with applicable Requirements of Law when filed
and no deficiencies have been asserted by any Governmental or Regulatory
Authority with respect to such filings and submissions that have not been
finally resolved.
3.20. Taxes and Tax Returns.
(a) The Seller has duly and timely filed all Tax Returns. Each such Tax
Return is true, accurate and complete. The Seller has paid in full all Taxes for
the period covered by such Tax Return. All Taxes not yet due and payable have
been withheld or reserved for or, to the extent that they relate to periods on
or prior to the date of the Closing Balance Sheet, are reflected as a liability
thereon. The Seller duly and properly filed an election to be an S corporation
and such election is currently in effect, under section 1362 of the Code and the
rules and regulations promulgated thereunder. Such election has been in effect
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without interruption, including without limitation any inadvertent termination
which has been reinstated, since Seller's inception. Since inception, all of the
current and former stockholders of the Seller are and have been permitted
stockholders under Section 1362 of the Code and the rules and regulations
promulgated thereunder. Since inception, the Seller's federal S election has
been recognized and given effect and the Seller has made an appropriate and
timely election to be treated as an S corporation for state income taxation
purposes in the State of Michigan.
(b) The Seller has complied with all applicable Requirements of Law
relating to the payment and withholding of Taxes (including, without limitation,
withholding of Taxes pursuant to Section 1441 and 1442 of the Code, or similar
provisions under any foreign Requirements of Law) and have, within the time and
in the manner prescribed by applicable Requirements of Law, withheld from
employee wages and paid over, in a timely manner, to the proper Taxing
Authorities all amounts required to be so withheld and paid over under
applicable Requirements of Law.
(c) No deficiency for any Taxes has been asserted or assessed against
the Seller that has not been resolved and paid in full or fully reserved for and
identified on the Closing Balance Sheet and, to the knowledge of the Seller and
the Shareholders, no deficiency for any Taxes has been proposed that has not
been fully reserved for and identified on the Closing Balance Sheet. The Seller
has not received any outstanding and unresolved notices from the IRS or any
other Taxing Authority of any proposed examination or of any proposed change in
reported information relating to the Seller. No Legal Proceeding or audit or
similar foreign proceedings is pending with regard to any of the Seller's Taxes
or Tax Returns.
(d) No waiver or comparable consent given by the Seller regarding the
application of the statute of limitations with respect to any Taxes or Tax
Returns is outstanding, nor, to the knowledge of the Seller and the
Shareholders, is any request for any such waiver or consent pending.
(e) None of the Purchased Assets is required to be treated as owned by
any other person pursuant to the "safe harbor lease" provisions of former
Section 168(f)(8) of the Code.
(f) No state of facts exists or has existed that would constitute
grounds for the assessment of Tax liability with respect to period that have not
been audited by the IRS or any other Taxing Authority.
3.21. Accounts. The Disclosure Schedule attached to this Agreement
completely and accurately states the names and addresses of each bank, financial
institution, fund, investment or money manager, brokerage house and similar
institution in which the Seller maintains any account (whether checking,
savings, investment, trust or otherwise), lock box or safe deposit box
(collectively, the "Accounts"), and the account numbers and name of the Persons
having authority to effect transactions with respect thereto or other access
thereto.
3.22. Transferred Receivables. All Transferred Receivables currently owing
to the Seller are completely and accurately listed and aged in the Disclosure
Schedule. All such Transferred Receivables were incurred in the normal and
ordinary course of business are stated in accordance with GAAP, are fully
collectable in the normal and ordinary course of business (i.e., without resort
to litigation or assignment to a collection agency), and are not subject to any
dispute, counterclaim, defense, set-off or other claim. The Transferred
Receivables reflect transactions which were true and correct as to all services
rendered or products sold, including image counts for conversion services and
time incurred for document preparation and data entry and indexing. The prices
charged to clients in the creation of the Transferred Receivables are consistent
with that stated on client contracts, whether in writing or agreed to by the
client orally.
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3.23. Solvency. On and as of the date of this Agreement, and after giving
effect to the Closing and any other transactions contemplated by this Agreement,
the Seller is not insolvent as defined in, or otherwise in a condition which
could in any circumstances then or subsequently render any transfer or
conveyance made by it voidable or fraudulent pursuant to, any Requirements of
Law pertaining to bankruptcy, insolvency or creditors' rights generally or any
other applicable Requirements of Law relating to fraudulent conveyances,
fraudulent transfers or preferences. The Seller is receiving reasonably
equivalent value and consideration from the Purchaser for the Purchased Assets
and is not selling the Purchased Assets to the Purchaser with intent to hinder,
delay or defraud any of its creditors.
3.24. Officers and Directors. None of the Shareholders or any of the
current directors or officers of the Seller has, within the past five (5) years:
(a) (i) filed or had filed against it, him or her a petition under the Federal
bankruptcy laws or any state insolvency or similar law, or (ii) had a receiver,
conservator, fiscal agent or similar officer appointed by a court for the
business, property or assets of such individual or corporation, or any
partnership in which it, he or she was a general partner or any other Person of
which he or she was a director or an executive officer or had a position having
similar powers and authority at or within two (2) years of the date of such
filing; (b) been convicted of, or pled guilty or no contest to, any crime (other
than traffic offenses and other minor offenses); (c) been named as a subject of
any criminal Legal Proceeding (other than for traffic offenses and other minor
offenses); (d) been the subject of any Order or sanction relating to an alleged
violation of, or otherwise found by any Governmental or Regulatory Authority to
have violated: (i) any Requirement of Law relating to securities or commodities,
(ii) any Requirement of Law respecting financial institutions, insurance
companies, or fiduciary duties owed to any Person, (iii) any Requirement of Law
prohibiting fraud (including, without limitation, mail fraud or wire fraud); (e)
been the subject of any Order enjoining or otherwise prohibiting it, him or her
from engaging in any type of business activity; or (f) been the subject of any
Order or sanction by (i) a self-regulatory organization (as defined in Section
3(a)(26) of the Exchange Act), (ii) a contract market designated pursuant to
Section 5 of the Commodity Exchange Act, as amended, or (iii) any substantially
equivalent foreign authority or organization.
3.25. Affiliate Transactions. The Disclosure Schedule lists and fully
describes each Contract, transaction or series of transactions, whether written
or oral (other than for the compensation arrangements described in the
Disclosure Schedule under Section numbers 3.8, 3.9 and 3.24), pursuant to which
the Seller is, or, at any time during the previous five (5) years has been, a
party or otherwise bound with any Affiliate of any or all of the Seller and the
Shareholders (an "Affiliate Transaction"). Each Affiliate Transaction has been
entered into the normal and ordinary course of the Business.
3.26. Brokers or Finders. Neither the Seller nor the Shareholders has
engaged the services of any broker or finder with respect to the transactions
contemplated by this Agreement.
3.27. Customers. The Disclosure Schedule accurately and completely lists
the names of the twenty-five largest customers (in terms of dollar volume of
purchases) of the Seller during the past three fiscal years and the current
fiscal year to date and details the Seller's total revenue attributable to each
such customer for the last three fiscal years and the current fiscal year to
date. There has been no adverse change in the Seller's business relationship
with any such customer that, in the aggregate, would have a Material Adverse
Effect.
3.28. Investment Company. The Seller is not an "investment company" within
the meaning of the Investment Company Act of 1940 and the rules and regulations
promulgated thereunder, as amended from time to time, or any successors thereto.
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3.29. Accredited Investor. Each Shareholder is an "accredited investor" as
such term is defined in Rule 501(a) promulgated under the Securities Act.
3.30. Absence of Changes. Since the Balance Sheet Date, there has not been
with respect to the Seller:
(i) any event or circumstance (either singly or in the aggregate)
which would constitute a Material Adverse Effect;
(ii) any change in its authorized capital, or securities outstanding,
or ownership interests or any grant of any options, warrants, calls,
conversion rights or commitments.
(iii) any declaration or payment of any dividend or distribution in
respect of its capital stock or any direct or indirect redemption, purchase
or other acquisition of any of its capital stock, except any declaration of
dividends payable by the Seller.
(iv) any increase in the compensation, bonus, sales commissions or fee
arrangement payable or to become payable by it to any of its respective
officers, directors, stockholders, employees, consultants or agents, except
for ordinary and customary bonuses and salary increases for employees in
accordance with past practice;
(v) any distribution, sale or transfer, or any agreement to sell or
transfer, any material assets, property or rights of any of its business to
any person, including, without limitation, the Shareholders and their
Affiliates, other than distributions, sales or transfers in the ordinary
course of business to persons other than the Shareholders and their
Affiliates;
(vi) any cancellation, termination or agreement to cancel or terminate
any Contract, including any indebtedness or other obligation owing to it,
other than the negotiation and adjustment of customer invoices in the
course of good faith disputes with customers in a manner consistent with
past practice;
(vii) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of its assets, property
or rights or requiring consent of any party to the transfer and assignment
of any such assets, property or rights;
(viii) any waiver of any of its material rights or claims;
(ix) any transaction by the Seller outside the ordinary course of its
respective businesses; or
(x) any change in the accounting methods or practices followed by the
Seller, except (a) as required by GAAP and disclosed on the Disclosure
Schedule or (b) as reflected on the Preliminary Closing Balance Sheet.
3.31. Accuracy and Completeness of Information. All information furnished,
to be furnished or caused to be furnished to the Purchaser by either the Seller
or the Shareholders with respect to the Purchased Assets, the Assumed
Liabilities, the Business, the Seller or the Shareholders for the purposes of or
in connection
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with this Agreement, or any transaction contemplated by this Agreement is true
and complete in all material respects and does not, and, if furnished after the
date of this Agreement, will not, contain any untrue statement of material fact
or fail to state any material fact necessary to make such information not
misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND PARENT
The Purchaser hereby represents and warrants to the Seller and the
Shareholders as follows:
4.1. Organization. The Purchaser each is a corporation duly incorporated,
validly existing and in good standing under the laws of the state of its
incorporation, (ii) has the power and authority to own and operate its
properties and assets and to transact its business as currently conducted and
(iii) is duly qualified and authorized to do business and is in good standing in
all jurisdictions where the failure to be duly qualified, authorized and in good
standing would have a material adverse effect upon the Purchaser's, as the case
may be businesses, prospects, operations, results of operations, assets,
liabilities or condition (financial or otherwise).
4.2. Authorization for Agreement. The execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated hereby
by the Purchaser (i) are within the Purchaser's corporate powers and duly
authorized by all necessary corporate action on the part of the Purchaser and
(ii) do not (A) require any action by or in respect of, or filing with, any
governmental body, agency or official, except as set forth in this Agreement or
(B) contravene, violate or constitute, whether with or without the passage of
time or the giving of notice or both, a breach or default under, any Requirement
of Law applicable to the Purchaser or any of their properties or any Contract to
which the Purchaser or any of its properties is bound.
4.3. Enforceability. This Agreement has been duly executed and delivered by
the Purchaser and constitutes the legal, valid and binding obligation of the
Purchaser, enforceable against the Purchaser in accordance with its terms except
as may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the rights of creditors generally.
4.4. Litigation. There is no Legal Proceeding or Order pending against or,
to the knowledge of the Purchaser, threatened against or affecting, the
Purchaser or any of its properties or otherwise that could adversely affect or
restrict the ability of the Purchaser to consummate fully the transactions
contemplated by this Agreement or that in any manner draws into question the
validity of this Agreement.
4.5. Brokers or Finders. The Purchaser has not engaged the services of any
broker or finder with respect to the transactions contemplated by this
Agreement.
ARTICLE 5
CONDITIONS PRECEDENT TO CLOSING
5.1. Conditions Precedent to the Purchaser's Obligations. The Purchaser's
obligation to consummate the transactions contemplated by this Agreement is
subject to the satisfaction of, or waiver in writing by the Purchaser of, prior
to or at the Closing, each and every of the following conditions precedent:
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1
(a) Representations and Warranties; Covenants and Conditions. Each of
the representations and warranties of the Seller and the Shareholders contained
in this Agreement shall be true and correct on and as of the Closing Date with
the same force and effect as though such representations and warranties had been
made on and as of the Closing Date. The Seller and the Shareholders shall have
each performed and complied in all material respects with each and every
covenant, agreement and condition required by this Agreement to be performed or
satisfied by the Seller and the Shareholders, as the case may be, at or prior to
the Closing Date.
(b) Consents. All proceedings, if any, and all Consents including,
without limitation, all Regulatory Approvals, necessary or advisable in
connection with the transactions contemplated by this Agreement shall have been
taken or obtained.
(c) Preliminary Closing Balance Sheet The Seller shall have delivered to
the Purchaser the Preliminary Closing Balance Sheet.
(d) No Legal Proceeding Affecting Closing. On the Closing Date, no Order
or law, restraining or prohibiting the transactions contemplated by this
Agreement and no Legal Proceeding shall be pending or threatened in which it is
sought to restrain or prohibit or to obtain damages or other relief in
connection with this Agreement or the consummation of the transactions
contemplated hereby or thereby, and no investigation that might eventuate in any
such suit, action or proceeding shall be pending or threatened.
(e) Employment Agreement. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ shall have entered into an
employment agreement (the "Employment Agreement") with the Purchaser
substantially in the form of Exhibit B attached hereto.
(f) Repayment of Indebtedness. Prior to the Closing Date, the
Shareholders shall have repaid the Seller in full all amounts owing by the
Shareholders or employees of the Seller to the Seller.
(g) FIRPTA Certificate. Each Shareholder shall have delivered to the
Purchaser a certificate to the effect that he is not a foreign person pursuant
to Section 1.1445-2(b) of the Treasury regulations.
(h) Escrow Agreement. The Shareholders and the Seller shall have
executed the Escrow Agreement substantially in the form of Exhibit A attached
hereto.
(i) General Conveyance, Transfer and Assignment. The Seller shall
execute and deliver to the Purchaser the General Assignment Agreement
substantially in the form attached hereto as Exhibit C, and any other agreements
of conveyance reasonably requested by the Purchaser to convey title in the
Purchased Assets.
(j) Delivery of Documents. The Seller and the Shareholders shall have
each delivered to the Purchaser all documents, certificates, instruments and
items required to be delivered by it or him at or prior to the Closing Date
pursuant to this Agreement.
5.2. Conditions Precedent to the Seller's and the Shareholders'
Obligations. The Seller's obligation to consummate the transactions contemplated
by this Agreement is subject to the satisfaction of, or waiver in writing by the
Seller of, prior to or at the Closing, each and every of the following
conditions precedent:
(a) Representations and Warranties; Covenants and Conditions. Each of
the representations and warranties of the Purchaser contained in this Agreement
shall be true and correct in all
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material respects on and as of the date of the Closing Date with the same force
as though such representations and warranties had been made on and as of the
Closing Date. The Purchaser shall have performed and complied in all material
respects with each and every covenant, agreement and condition required by this
Agreement to be performed or satisfied by the Purchaser at or prior to the
Closing Date.
(b) No Legal Proceeding Affecting Closing. On the Closing Date, no Order
or law, restraining or prohibiting the transactions contemplated by this
Agreement and no Legal Proceeding shall be pending or threatened in which it is
sought to restrain or prohibit or to obtain damages or other relief in
connection with this Agreement or the consummation of the transactions
contemplated hereby or thereby, and no investigation that might eventuate in any
such suit, action or proceeding shall be pending or threatened.
(c) Escrow Agreement. The Purchaser shall have executed the Escrow
Agreement substantially in the form of Exhibit A attached hereto.
(d) Employment Agreement. The Purchaser shall have entered into the
Employment Agreement with ▇▇▇▇▇ ▇▇▇▇▇▇▇▇.
(e) Assumption Agreement. The Purchaser shall have executed and
delivered an Assumption Agreement substantially in the form of Exhibit D.
(f) Delivery of Documents. The Purchaser shall have delivered to the
Seller all documents, certificates, instruments and items required to be
delivered by it at or prior to the Closing.
ARTICLE 6
CLOSING
6.1. The Closing and the Closing Date. The Closing of transactions herein
contemplated (the "Closing") shall occur on the date hereof (the "Closing
Date"). Closing shall take place at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, 3000 Two
▇▇▇▇▇ Square, ▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇. On the Closing the
Date, the Parties shall deliver all documents and items contemplated hereunder,
including those specifically set forth in Article 5 hereof.
6.2. Right to Possession. At the Closing and as a condition thereto, the
Purchaser shall have full and unrestricted right to possession of the Purchased
Assets subject to applicable laws and regulations of government authorities
having jurisdiction over the Purchased Assets, and Seller shall do such acts,
execute such instruments, and take such action as may be appropriate or required
to assure to the Purchaser uninterrupted full possession of the same.
6.3. Third Party Consents. Unless otherwise agreed to by the Purchaser, to
the extent that any Contract is not assignable without Consent, this Agreement
shall not constitute an assignment or an attempted assignment thereof, or an
assumption or attempted assumption of Obligations and Liabilities arising
thereunder, if such assignments or attempted assignment would constitute a
breach thereof unless the necessary Consents are obtained. The Seller and the
Shareholders shall use commercially reasonable best efforts to obtain the
Consents required for the assignment of the Purchased Assets. The Purchaser will
cooperate to the extent commercially reasonable with the Seller and the
Shareholders in their efforts to obtain such Consents. If any such Consent shall
not be obtained, then either, at the Purchaser's option, (i) the Contract shall
be an Excluded Asset and the Purchaser shall not assume any Obligations and
Liabilities related thereto or arising thereunder, or (ii) the
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Seller, the Shareholders and the Purchaser shall cooperate in a reasonable
arrangement (a) providing for the Purchaser the benefits intended to be assigned
to the Purchaser hereunder with respect to any such other Contract (including
enforcement at the cost and for the account of the Purchaser of any and all
rights of the Seller against the other party thereto arising out of the breach
or cancellation thereof by such other party or otherwise), (b) to relieve the
Seller of its obligations to the other contracting party under any such
Contract. If and to the extent that such arrangement cannot be made on terms and
conditions acceptable to the Seller, the Shareholders and the Purchaser, the
Purchaser shall have no obligation with respect to any such Contract or any
Obligation Liability with respect thereto, and the Closing Balance Sheet and the
Closing Adjustments shall be adjusted accordingly, with any additional Purchase
Price adjustment as a result thereof being paid to Purchaser pursuant to the
terms of Section 2.2(c) hereof.
Without limiting the provisions of this Section, the Seller and the
Purchaser shall use commercially reasonable efforts to enter into, and shall
cooperate with one another in good faith in entering into, appropriate and
reasonable alternative arrangements pursuant to clause (ii) above, if elected by
the Purchaser, on terms mutually agreeable, with respect to any Contract which
is not, by its terms, assignable (in whole or in part) by the Seller or under
which the Seller may not assign its obligations or delegate its duties.
6.4. Employment, Compensation and Employee Benefits From and After Closing.
The respective undertakings and covenants of the Purchaser from and after the
Closing with respect to the employment by the Purchaser of employees of the
Seller or other employees engaged in the conduct of the Business, except for
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, and the compensation and employee benefits to be provided such
employees employed by the Purchaser shall be as set forth below:
(a) Employment. The Purchaser shall offer employment to such employees
engaged in the Business as it may determine in its sole discretion. The offer of
employment to any such employee may, but not need not be (1) for the same
position as held by the employee in the Business immediately prior to the
Closing and/or (2) at the same rate of compensation as paid by the Seller
immediately prior to the Closing. Any such offers of employment and the actual
employment of any such employee shall be subject to the Purchaser's right, in
its sole discretion, to establish and modify from time to time the terms and
conditions of such employment and to terminate any such employee at any time.
Except as the Purchaser may expressly provide, all such employees shall be
treated as new employees of the Purchaser from their date of employment.
(b) The Purchaser's Compensation Practices and Employee Benefits
Programs. The Purchaser shall establish such compensation practices and employee
benefit programs for its employees as it determines appropriate or desirable.
The Purchaser reserves the right (1) to determine the terms and conditions of
all such practices and programs and (2) to amend, discontinue or terminate, in
whole or in part, any such practice or program. The Purchaser intends to
establish its own such practices and programs and not to continue or otherwise
assume any of the Seller's plans or personnel policies.
(c) Health Care and Disability Plans. All health care plans maintained
by the Seller for those of its employees who are employed by the Purchaser on or
after the Closing will terminate not earlier than the end of the month in which
the Closing occurs or, if later, the end of the month in which the employee is
to be employed by the Purchaser (the "Termination Date"). The Seller shall pay,
or cause to be paid, all claims for health care benefits covered by any of its
insured or self-insured health care plans which relate to health care services
rendered on or before the Termination Date, regardless of when such claims may
be filed and to the extent such plan would honor such claims in accordance with
its terms. The Seller shall pay, or cause to be paid, all disability benefits
for any of the Seller's employees who are not actively employed by the Purchaser
following the Termination Date.
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6.5. Current and Deferred Compensation and Other Compensation Practices.
Salaries, wages, commissions and all other regular current compensation of each
employee of the Seller who is employed by the Purchaser after the Closing Date,
and which is attributable to services performed by such employee prior to the
date of employment by the Purchaser, shall be paid by the Seller directly to
that employee. All other cash compensation, including, but not being limited to,
incentive pay, bonuses, and other payments in the nature of compensation,
accrued as of the date of employment by the Purchaser, shall be paid by the
Seller directly to the employee entitled thereto and the Seller and the
Shareholders shall jointly and severally indemnify the Purchaser for any costs
in connection thereto. With respect to the deferred compensation plans, programs
or arrangements of the Seller, if any, maintained for such employees, the Seller
shall either pay all such obligations or, if they are to be assumed by the
Purchaser, there shall be an adjustment in the purchase price otherwise
determined under this Agreement in favor of the Purchaser. All Obligations and
Liabilities of Seller pursuant to this Section shall be deemed Retained
Liabilities. To the extent that any of the obligations of Seller in this Section
("Compensation Obligations") are not fulfilled, Purchaser shall have the right
to pay such obligation and Purchaser shall be reimbursed from the Escrow Amount
pursuant to the Escrow Agreement and the Seller and the Shareholders shall be
jointly and severally obligated to replenish the Escrow Amount by depositing
with the Escrow Agent upon such payment cash in a like amount.
6.6. Severance. The Seller represents that no employee of the Seller is
entitled to severance pay for a voluntary or an involuntary termination of
employment with the Seller. The Seller has not made any representations or
promises or otherwise created any expectation among employees respecting any
severance benefits or payments from the Purchaser. However, the Seller shall
remain liable to the Seller's former employees for severance benefits, if any,
resulting from their termination of employment with the Seller.
6.7. Unemployment Compensation. The Seller shall establish to the
satisfaction of the Purchaser its obligations and expenses with regard to any
payroll expense, including but not limited to, establishing the Seller's current
unemployment compensation tax liability. The Seller shall cooperate with the
Purchaser with respect to establishing the Purchaser's obligations for
unemployment taxes and similar obligations in a manner satisfactory to the
Purchaser, and shall take such steps as directed by the Purchaser in
anticipation of the Purchaser's potential employment of any of the Seller's
former employees. The Seller shall reimburse the Purchaser for any incremental
unemployment compensation tax liability caused by the failure to hire any of the
Seller's employees pursuant to Section 6.4 of this Agreement ("Incremental
Unemployment Costs"). The Seller and the Shareholders hereby agree, jointly and
severally, to indemnify the Purchaser for any Incremental Unemployment Costs,
such indemnification to be funded (but not the sole source of funding) by the
Escrow Amount held pursuant to the Escrow Agreement.
ARTICLE 7
COVENANT NOT TO COMPETE
7.1. Confidentiality.
(a) Each party to this Agreement shall use Confidential Information only
in connection with the transactions contemplated hereby and shall not disclose
any Confidential Information about any other party to any Person unless the
party desiring to disclose such Confidential Information receives the prior
written consent of the party about whom such Confidential Information pertains,
except (i) to any party's directors, officers, employees, agents, advisors and
representatives who have a need to know such Confidential Information for the
performance of their duties as employees, agents or representatives, (ii) to the
extent absolutely necessary to obtain any Consents including, without
limitation, any Regulatory Approvals, that may be required or
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advisable to consummate the transactions contemplated by this Agreement, (iii)
to enforce such party's rights and remedies under this Agreement, (iv) with
respect to disclosures that are compelled by any Requirement of Law or pursuant
to any Legal Proceeding; provided, that the party compelled to disclose
Confidential Information under this clause (iv) pertaining to any other party
shall notify such other party thereof and use his or its commercially reasonable
efforts to cooperate with such other party to obtain a protective order or other
similar determination with respect to such Confidential Information; (v) made to
any party's legal counsel, independent auditors, investment bankers or financial
advisors under an obligation of confidentiality; or (vi) as otherwise permitted
by Section 10.6 of this Agreement.
(b) In the event that the transactions contemplated by this Agreement
are not consummated in accordance with the terms of this Agreement, each party
shall, upon the request of the other party, return to the other party or destroy
all Confidential Information and any copies thereof previously delivered by such
requesting party, except to the extent that such party deems such Confidential
Information necessary or desirable to enforce his or its rights under this
Agreement.
(c) The obligation of confidentiality contained in this Section 7.1
shall survive the termination of this Agreement, or the Closing, as applicable,
for a period of two years after the date of such termination or the Closing
Date, respectively; provided, that, if the Closing shall occur, then the
Purchaser's obligation of confidentiality shall terminate upon the Closing.
(d) The Seller and Shareholders acknowledge and agree that they may
become aware of potential acquisition targets of the Purchaser (collectively,
the "Purchaser Targets") in the course of discussions with the Purchaser.
Accordingly, the Seller and Shareholders each agree not to directly or
indirectly seek to acquire or merge with, or pursue or respond to, with an
intent to acquire or merge with, any the Purchaser Targets until the later of
300 days after the date of this Agreement or 180 days after termination of this
Agreement.
7.2. Covenant Not To Compete. As a material inducement to the Purchaser's
consummation of the transactions contemplated by this Agreement, each of the
Seller and the Shareholders shall not, during the Restricted Period, do any of
the following, directly or indirectly, without the prior written consent of the
Purchaser in its sole discretion:
(a) compete, directly or indirectly, with the Purchaser or any of its
Affiliates or Subsidiaries, or any of their respective successors or assigns,
whether now existing or hereafter created or acquired, including the Seller's
Business acquired hereby (collectively, the "Related Companies"), or otherwise
engage or participate, directly or indirectly, in the provision of digital
document management products and services (the "Restricted Business") within any
geographic area located within the State of Michigan, its possessions or
territories (the "Restricted Area");
(b) become interested (whether as owner, stockholder, lender, partner,
co-venturer, director, officer, employee, agent, consultant or otherwise),
directly or indirectly, in any Person that engages in the Restricted Business
within the Restricted Area; provided, that the Shareholders may own, as a
passive investor, not more than five percent (5%) of the outstanding securities
of any class of any publicly-traded securities of any publicly held company
listed on a well-recognized national securities exchange or on an interdealer
quotation system of the National Association of Securities Dealers, Inc; or
(c) solicit, call on, divert, take away, influence, induce or attempt to
do any of the foregoing, in each case within the Restricted Area, with respect
to the Purchaser's or any of the Related
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Companies' (A) customers or distributors or prospective customers or
distributors (wherever located) with respect to goods or services that are
competitive with those of the Purchaser or any of the Related Companies, (B)
suppliers or vendors or prospective suppliers or vendors (wherever located) to
supply materials, resources or services to be used in connection with goods or
services that are competitive with those of the Purchaser or any of the Related
Companies, (C) distributors, consultants, agents, or independent contractors to
terminate or modify any contract, arrangement or relationship with the Purchaser
or any of the Related Companies or (D) employees to leave the employ of the
Purchaser or any of the Related Companies.
7.3. Specific Enforcement; Extension of Period.
(a) The Seller and the Shareholders acknowledge that any breach or
threatened breach by it or him of any provision of Sections 7.1 or 7.2 will
cause continuing and irreparable injury to the Purchaser and the Related
Companies for which monetary damages would not be an adequate remedy.
Accordingly, the Purchaser and any of the Related Companies shall be entitled to
injunctive relief from a court of competent jurisdiction, including specific
performance, with respect to any such breach or threatened breach. In connection
therewith, neither the Seller nor the Shareholders shall, in any action or
proceeding to so enforce any provision of this Article 7, assert the claim or
defense that an adequate remedy at law exists or that injunctive relief is not
appropriate under the circumstances. The rights and remedies of the Purchaser
and any of the Related Companies set forth in this Section 7.3 are in addition
to any other rights or remedies to which the Purchaser or any of the Related
Companies may be entitled, whether existing under this Agreement, at law or in
equity, all of which shall be cumulative.
(b) The periods of time set forth in this Article 7 shall not include,
and shall be deemed extended by, any time required for litigation to enforce the
relevant covenant periods. The term "time required for litigation" as used in
this Section 7.3(b) shall mean the period of time from the earlier of the
Seller's or the Shareholders', as applicable, first breach of the provisions of
Sections 7.1 or 7.2 or service of process upon the Seller or the Shareholders,
as applicable, through the expiration of all appeals related to such litigation.
7.4. Disclosure. The Seller and the Shareholders acknowledge that the
Purchaser or any of the Related Companies may provide a copy of this Agreement
or any portion of this Agreement to any Person with, through or on behalf of
which either the Seller or the Shareholders may, directly or indirectly, breach
or threaten to breach any of the provisions of Section 7.2.
7.5. Interpretation. It is the desire and intent of the parties that the
provisions of this Article 7 shall be enforceable to the fullest extent
permissible under applicable law and public policy. Accordingly, if any
provision of this Article 7 shall be determined to be invalid, unenforceable or
illegal for any reason, then the validity and enforceability of all of the
remaining provisions of this Article 7 shall not be affected thereby. If any
particular provision of this Article 7 shall be adjudicated to be invalid or
unenforceable, then such provision shall be deemed amended to delete therefrom
the portion thus adjudicated to be invalid or unenforceable, such amendment to
apply only to the operation of such provision in the particular jurisdiction in
which such adjudication is made; provided that, if any provision contained in
this Article 7 shall be adjudicated to be invalid or unenforceable because such
provision is held to be excessively broad as to duration, geographic scope,
activity or subject, then such provision shall be deemed amended by limiting and
reducing it so as to be valid and enforceable to the maximum extent compatible
with the applicable laws and public policy of such jurisdiction, such amendment
only to apply with respect to the operation of such provision in the applicable
jurisdiction in which the adjudication is made.
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7.6. Acknowledgment. The Seller and the Shareholders acknowledge that it or
they has carefully read and considered the provisions of this Article 7. The
Seller and the Shareholders believe that it and they have received and will
receive sufficient consideration and other benefits to justify the restrictions
in this Article 7. The Seller and the Shareholders also acknowledge and
understand that these restrictions are reasonably necessary to protect the
Purchaser's and the Related Companies' interests, and the Seller and the
Shareholders do not believe that such restrictions will prevent it or him from
conducting businesses that are not competitive with those of the Purchaser or
any of the Related Companies during the term of such restrictions in the
Restricted Area.
ARTICLE 8
SURVIVAL
The representations and warranties of the Seller and the Shareholders on
the one hand, and the Purchaser on the other hand, contained in this Agreement
shall survive until the third anniversary of the Closing Date; provided that
representations and warranties and indemnification obligations with respect to
which a claim is made within such period shall survive until such claim is
finally determined and paid. Notwithstanding the foregoing, the representations
and warranties set forth in each of Section 3.17 and Section 3.20 shall survive
until the expiration of the statute of limitations applicable to the subject
matter addressed thereunder; provided that representations and warranties and
indemnification obligations with respect to which a claim is made within such
period shall survive until such claim is finally determined and paid. The
covenants and agreements of the Seller and the Shareholders on the one hand, and
of the Purchaser on the other hand, contained in this Agreement will survive the
Closing until, by their own respective terms, they have been fully performed.
Notwithstanding anything herein, any breach of representation or warranty
contained in this Agreement made by any party or any written information
furnished by any party that was made by such party fraudulently or with intent
to defraud or mislead or with gross negligence shall indefinitely survive the
Closing.
ARTICLE 9
INDEMNIFICATION
9.1. The Seller's and the Shareholders' Indemnification. From and after the
Closing Date, the Seller and the Shareholders shall, jointly and severally,
indemnify and hold harmless the Purchaser and any of its Affiliates, and each
Person who controls (within the meaning of the Securities Act) the Purchaser or
any such Affiliate, and each of their respective directors, officers, employees,
agents, successors and assigns and legal representatives, from and against all
liabilities, obligations, claims, demands, damages, penalties, settlements,
causes of action, costs and expenses (including, without limitation, all
reasonable attorneys', experts' and accountants' fees, expenses and
disbursements and court costs in connection therewith)(collectively,
"Indemnifiable Losses") that may be imposed upon, incurred by or asserted
against any of them resulting from, related to, or arising out of (i) any
misrepresentation, breach of any warranty or non-fulfillment of any covenant to
be performed by the Seller or the Shareholders under this Agreement or any
document, instrument, certificate or other item required to be furnished to the
Purchaser pursuant hereto or thereto or in connection with the transactions
contemplated by this Agreement; (ii) any Retained Liabilities; (iii) any
non-compliance with applicable Requirements of Law relating to bulk sales, bulk
transfers and the like or to fraudulent conveyances, fraudulent transfers,
preferential transfers and the like by the Seller; (iv) whether or not known by
the Purchaser, any liability for payment of Taxes that accrued or relate to the
period of time prior to the Closing Date (regardless of disclosure herein,
including the Disclosure Schedule); (v) any Legal Proceeding or Order, arising
out of any of the foregoing even though such Legal Proceeding or Order may not
be filed, become final, or come to light until after the Closing Date; (vi) an
Indemnified Party's (as defined below) investigation and evaluation of
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any claim or right asserted against such Indemnified Party pursuant to this
Article; or (vii) an Indemnified Party's enforcement of this Agreement and/or
the provisions of this Article 9.
9.2. The Purchaser's Indemnification. From and after the Closing Date, the
Purchaser shall indemnify and hold harmless the Seller and the Shareholders and
each of their respective legal representatives, successors and assigns from and
against all Indemnifiable Losses imposed upon, incurred by or asserted against,
the Seller or the Shareholders resulting from, related to, or arising out of:
(i) any misrepresentation, breach of any warranty or non-fulfillment of any
covenant to be performed by the Purchaser under this Agreement or any document,
instrument, certificate or other item furnished or to be furnished to the Seller
or the Shareholders pursuant hereto or thereto or in connection with the
transactions contemplated by this Agreement; (ii) any Assumed Liabilities; and
(iii) any Legal Proceeding or Order, arising out of any of the foregoing even
though such Legal Proceeding or Order may not be filed, become final, or come to
light until after the Closing Date.
9.3. Payment; Procedure for Indemnification.
(a) In the event that the Person seeking indemnification under this
Article 9 (the "Indemnified Party") shall suffer an Indemnifiable Loss, he, she
or it shall promptly, after obtaining Knowledge of the incurrence of any such
Indemnifiable Loss, give written notice to the party from whom indemnification
under this Article 9 is sought (the "Indemnifying Party") of the Indemnifiable
Loss (the "Indemnity Notice"). The failure of any Indemnified Party to give the
Indemnifying Party the Indemnity Notice shall not release the Indemnifying Party
of liability under this Article 9; provided, however that the Indemnifying Party
shall not be liable for Indemnifiable Losses incurred by the Indemnified Party
that would not have been incurred but for the delay in the delivery of, or the
failure to deliver, the Indemnity Notice. Within thirty (30) days after the
receipt by the Indemnifying Party of the Indemnity Notice, the Indemnifying
Party shall either (i) pay to the Indemnified Party an amount equal to the
Indemnifiable Loss or (ii) object to such claim, in which case the Indemnifying
Party shall give written notice to the Indemnified Party of such objection
together with the reasons therefor, it being understood that the failure of the
Indemnifying Party to so object shall preclude the Indemnifying Party from
asserting any claim, defense or counterclaim relating to the Indemnifying
Party's failure to pay any Indemnifiable Loss. The Indemnifying Party's
objection shall not, in and of itself, relieve the Indemnifying Party from its
obligations under this Article 10. In the event that the parties are unable to
resolve the subject of the Indemnity Notice, the issue shall be submitted for
determination to a neutral third party designated by the President of the
Philadelphia office of the American Arbitration Association.
(b) In the event the facts giving rise to the claim for indemnification
under this Article 10 shall involve any action, or threatened claim or demand by
any third Person against the Indemnified Party, the Indemnified Party, promptly
after obtaining Knowledge of the filing of a lawsuit or the existence of a claim
or demand giving rise to the claim for indemnification, shall send written
notice of such claim to the Indemnifying Party (the "Claim Notice"). The failure
of the Indemnified Party to give the Indemnifying Party the Claim Notice shall
not release the Indemnifying Party of liability under this Article 9; provided,
however, that the Indemnifying Party shall not be liable for Indemnifiable
Losses incurred by the Indemnified Party that would not have been incurred but
for the delay in the delivery of, or the failure to deliver, the Claim Notice.
Subject to the provision contained in the third sentence immediately following
this sentence, and except for claims resulting from, relating to or arising out
of the provisions of Section 3.20 and those involving then current customers of
Purchaser, the Indemnifying Party shall be entitled to defend such claim in the
name of the Indemnified Party at its own expense and through counsel of its own
choosing; provided, that if the applicable claim or demand is against, or if the
defendants in any such Legal Proceeding shall include, both the Indemnified
Party and the Indemnifying Party and the Indemnified Party reasonably concludes
that there are defenses available to it that are different or additional to
those available to the Indemnifying Party or if the interests of the Indemnified
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Party may be reasonably deemed to conflict with those of the Indemnifying Party,
then the Indemnified Party shall have the right to select separate counsel and
to assume the Indemnified Party's defense of such claim, demand or Legal
Proceeding, with the reasonable fees, expenses and disbursements of such counsel
to be reimbursed by the Indemnifying Party as incurred. The Indemnifying Party
shall give the Indemnified Party notice in writing within ten (10) days after
receiving the Claim Notice from the Indemnified Party in the event of litigation
or otherwise of its intent to do so. In the case of any claim resulting from,
relating to or arising out of the provisions of Section 3.20 and those involving
then current customers of Purchaser, the Purchaser shall have right to control
the defense thereof at the Indemnifying Party's expense. Whenever the
Indemnifying Party is entitled to defend any claim hereunder, the Indemnified
Party may elect, by notice in writing to the Indemnifying Party, to continue to
participate through its own counsel, at its expense, but the Indemnifying Party
shall have the right to control the defense of the claim or the litigation;
provided, that the Indemnifying Party retains counsel reasonably satisfactory to
the Indemnified Party and pursuant to an arrangement satisfactory to the
Indemnified Party; otherwise, the Indemnified Party shall have the right to
control the defense of the claim or the litigation. Notwithstanding any other
provision contained in this Agreement, the party controlling the defense of the
claim or the litigation shall not settle any such claim or litigation without
the written consent of the other party; provided, that if the Indemnified Party
is controlling the defense of the claim or the litigation and shall have, in
good faith, negotiated a settlement thereof, which proposed settlement contains
terms that are reasonable under the circumstances, then the Indemnifying Party
shall not withhold or delay the giving of such consent (and in the event the
Indemnifying Party and Indemnified Party are unable to agree as to whether the
proposed settlement terms are reasonable, the Indemnifying Party and Indemnified
Party will request that the disagreement be resolved by a neutral third party
designated by the President of the Philadelphia office of the American
Arbitration Association). In the event that the Indemnifying Party is
controlling the defense of the claim or the litigation and shall have negotiated
a settlement thereof, which proposed settlement is substantively final and
unconditional as to the parties thereto (other than the consent of the
Indemnified Party required under this Section 9.3(b)) and contains an
unconditional release of the Indemnified Party and does not include the taking
of any actions by, or the imposition of any restrictions on the part of, the
Indemnified Party and the Indemnified Party shall refuse to consent to such
settlement, the liability of the Indemnifying Party under this Section 9, upon
the ultimate disposition of such litigation or claim, shall be limited to the
amount of the proposed settlement; provided, however, that in the event the
proposed settlement shall require that the Indemnified Party make an admission
of liability, a confession of judgment, or shall contain any other non-financial
obligation which, in the reasonable judgment of the Indemnified Party, renders
such settlement unacceptable, then the Indemnified Party's failure to consent
shall not give rise to the limitation of Indemnifying Party's liability as
provided for in this Section 9.3(b), and the Indemnifying Party shall continue
to be liable to the full extent of such litigation or claim and provided
further, that notwithstanding any provision to the contrary, no Indemnifiable
Losses with respect to Taxes shall be settled without the prior written consent
of the Purchaser.
9.4. Limitations on Indemnification. The Purchaser and the other Persons or
entities indemnified pursuant to Section 9.1 shall not assert any claim for
indemnification under clause (i) of Section 9.1 against the Seller or the
Shareholders until such time as the aggregate of all claims which such persons
may have against the Seller or the Shareholders shall exceed $10,000 (the
"Indemnification Threshold"), whereupon such claims shall be indemnified in
full. Neither the Seller nor the Shareholders shall assert any claim for
indemnification under clause (i) of Section 9.2 against the Purchaser until such
time as the aggregate of all claims which the Seller or the Shareholders may
have against the Purchaser shall exceed the Indemnification Threshold, whereupon
such claims shall be indemnified in full. The limitation on the assertion of
claims for indemnification contained in this paragraph shall apply only to
claims based upon inaccuracies in, or breaches of, representations and
warranties contained in this Agreement or any document, instrument, certificate
or other item required to be furnished pursuant to this Agreement or in
connection with the transaction contemplated by this Agreement.
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No person shall be entitled to indemnification under this Article 9 if and
to the extent that such person's claim for indemnification is directly or
indirectly related to a breach by such person of any representation, warranty,
covenant or other agreement set forth in this Agreement.
No claim under this Article 9 shall be made unless an Indemnity Notice, or
a Claim Notice (as applicable) has been given prior to the applicable survival
period.
ARTICLE 10
POST-CLOSING COVENANTS
10.1. Further Cooperation. From and after the Closing Date, the Seller
shall, and the Shareholders shall and shall cause the Seller to, (i) assist and
cooperate with the Purchaser in effecting the orderly transfer of the Purchased
Assets to the Purchaser, and (ii) execute and deliver such documents and take
such other actions as the Purchaser reasonably requests to fully consummate the
transactions contemplated by this Agreement. In addition, the Seller and the
Shareholders shall (i) provide or cause to be provided such written information
with respect to themselves, (ii) execute and deliver or cause to be executed and
delivered such other documents, certificates or instruments, and (iii) take or
cause to be taken such actions, as the Purchaser or any auditor reasonably deems
necessary or desirable to complete any audit of the Purchaser's consolidated
financial statements, the Seller's financial statements or in connection with
any Requirements of Law applicable to the Purchaser, including federal or state
securities laws.
10.2. Maintenance of Books and Records.
(a) For a period of three (3) years after the Closing Date, the
Purchaser shall maintain all Books and Records maintained by the Seller on or
prior to the Closing Date which are transferred to the Purchaser and shall
permit the Seller or the Shareholders or their respective representatives and
agents access, at the Seller's or the Shareholders' sole cost and expense, to
all such Books and Records, upon reasonable notice by the Seller or the
Shareholders, as applicable, and on terms not disruptive to the business,
operation or employees of the Purchaser. The Seller and the Shareholders will
hold all information provided to them pursuant to this Article 10 (and any
information derived therefrom) in confidence to the same extent as required by
Section 7.1 of this Agreement with respect to Confidential Information.
(b) For a period of three (3) years after the Closing Date, the Seller
shall, and the Shareholders shall, cause the Seller to, maintain all Books and
Records possessed or to be possessed by the Seller or the Shareholders that
relate to the Business prior to the Closing Date. The Seller shall, and the
Shareholders shall, cause the Seller to, permit the Purchaser, or its
representatives and agents access, at the Purchaser's sole cost and expense, to
all of such Books and Records upon reasonable prior written notice for any
reasonable business purpose.
10.3. Use of Name. From and after the Closing Date, the Seller shall, and
the Shareholders shall cause the Seller to: (i) sign such consents and take such
other actions as the Purchaser shall reasonably request to permit the Purchaser
to use the name Image-Tec and all variants thereof (the "Name"); (ii) cease to
use the Name; and (iii) take all necessary action to change its corporate and
trade names by a date which is twenty days from the Closing Date to such name or
names that are substantially different from and not confusingly similar to the
Name.
10.4. Discharge of Obligations. From and after the Closing Date, the Seller
shall, and the Shareholders shall cause the Seller to, pay and discharge
diligently, in accordance with past practice but not less
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than on a timely basis, all of the Retained Liabilities, including, without
limitation, those relating to employees, trade creditors and customers.
10.5. Receivables. If, at any time after the Closing Date, the Seller or
the Shareholders shall receive any payments on account of any of the Receivables
or other rights to payment constituting a part of the Purchased Assets, then the
Seller or the Shareholders, as applicable, shall hold such funds in trust for,
and shall promptly remit (and the Shareholders shall cause the Seller to remit
promptly) such funds to the Purchaser immediately upon receipt thereof. The
Seller hereby, effective from and after the Closing Date, authorizes and grants
to the Purchaser (acting through any one or more of the Purchaser's authorized
representatives or agents) a power of attorney to endorse the Seller's name on
any check or any other remittances received by the Purchaser on account of the
Receivables. The foregoing power of attorney is coupled with an interest and is
irrevocable.
10.6. Public Announcements. Neither the Seller nor the Shareholders shall
issue any public report, statement, press release or similar item or make any
other public disclosure with respect to the substance of this Agreement prior to
the consultation with and approval of the Purchaser. In addition, before the
Purchaser issues a public statement that refers to the Seller or the
Shareholders, the Purchaser will endeavor to consult with the Seller to the
extent time permits. Nothing contained herein shall restrict the ability of the
Seller from contacting a third party in order to obtain a Consent to the
transactions contemplated hereby.
ARTICLE 11
TAXES RELATING TO PURCHASED ASSETS
The Seller shall, and the Shareholders shall cause the Seller to pay, and
the Seller and the Shareholders shall jointly and severally indemnify and hold
harmless the Purchaser from and against all Transfer Taxes. All Taxes on the
ownership or use of the Purchased Assets and Real Property (specifically
excluding Taxes measured by the net income of any party) that accrue on or prior
to the Closing Date shall be paid by the Seller, and all such Taxes that accrue
after the Closing Date shall be paid by the Purchaser; provided, that all such
Taxes shall be prorated to the Closing Date. Should the Purchaser pay any such
Taxes, Seller shall, immediately upon request, pay to the Purchaser that portion
of such Taxes that accrued prior to the Closing Date.
ARTICLE 12
TRANSFER RESTRICTIONS
Except for transfers to immediate family members who agree to be bound by
the restrictions set forth in this Article 12 (or trusts for the benefit of the
Seller, the Shareholders or family members, the trustees of which so agree), for
a period of one year from the Closing, neither the Seller nor the Shareholders
shall (i) sell, assign, exchange, transfer, encumber, pledge, distribute,
appoint, or otherwise dispose of (a) any shares of ImageMax Common Stock
received by the Seller pursuant to this Agreement, or (b) any interest
(including, without limitation, an option to buy or sell) in any such shares of
ImageMax Common Stock, in whole or in part, and no such attempted transfer shall
be treated as effective for any purpose; or (ii) engage in any transaction,
whether or not with respect to any shares of ImageMax Common Stock or any
interest therein, the intent or effect of which is to reduce the risk of owning
the shares of ImageMax Common Stock acquired pursuant to this Agreement
(including, by way of example and not limitation, engaging in put, call,
short-sale, straddle or similar market transactions). Notwithstanding the
foregoing, the Seller may transfer such the shares of ImageMax Common Stock to
the Shareholders, subject to the Shareholders holding such shares subject to the
restrictions set forth in this Agreement. The certificates evidencing the
ImageMax Common Stock delivered to the Seller pursuant to Section 2
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of this Agreement will bear a legend substantially in the form set forth below
and containing such other information as the Purchaser may deem necessary or
appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED,
EXCHANGED, TRANSFERRED, ENCUMBERED, PLEDGED, DISTRIBUTED, APPOINTED OR
OTHERWISE DISPOSED OF, AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT
TO ANY ATTEMPTED SALE, ASSIGNMENT, EXCHANGE, TRANSFER, ENCUMBRANCE, PLEDGE,
DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION PRIOR TO FIRST ANNIVERSARY
OF CLOSING DATE. UPON THE WRITTEN REQUEST OF THE HOLDER OF THIS
CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY
STOP ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE DATE SPECIFIED ABOVE.
ARTICLE 13
SECURITIES LAWS REPRESENTATIONS
The Seller and the Shareholders acknowledge that the shares of ImageMax
Common Stock to be delivered to the Seller pursuant to this Agreement have not
been and will not be registered under the Securities Act or any other state
securities laws, and therefore may not be resold without compliance with the
Securities Act. The ImageMax Common Stock to be acquired by the Seller pursuant
to this Agreement is being acquired solely for its own respective account, for
investment purposes only, and with no present intention of distributing, selling
or otherwise disposing of it in connection with a distribution.
13.1. Compliance with Law. The Seller and the Shareholders covenant,
warrant and represent that none of the shares of ImageMax Common Stock issued to
Seller will be offered, sold, assigned, pledged, hypothecated, transferred or
otherwise disposed of except after full compliance with all of the applicable
provisions of the Securities Act, the rules and regulations of the Securities
and Exchange Commission and applicable state securities laws. All the ImageMax
Common Stock shall bear the following legend in addition to any other legends
required under this Agreement:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT") OR ANY STATE
SECURITIES OR BLUE SKY LAWS. SUCH SHARES HAVE BEEN ACQUIRED FOR INVESTMENT
AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SHARES UNDER THE 1933 ACT AND
ANY STATE SECURITIES OR BLUE SKY LAWS, UNLESS, IN THE OPINION (WHICH SHALL
BE IN FORM AND SUBSTANCE SATISFACTORY TO THE CORPORATION) OF COUNSEL
SATISFACTORY TO THE CORPORATION, SUCH REGISTRATION IS NOT REQUIRED.
13.2. Economic Risk; Sophistication. The Seller and the Shareholders are
able to bear the economic risk of an investment in the ImageMax Common Stock
acquired pursuant to this Agreement and can afford to sustain a total loss of
such investment and have such knowledge and experience in financial and business
matters that they are capable of evaluating the merits and risks of the proposed
investment in the ImageMax Common Stock. The Seller and the Shareholders or
their respective purchaser representatives have had an adequate opportunity to
ask questions and receive answers from the officers of the Purchaser concerning
any and all matters relating to the transactions described herein including,
without limitation, the background and experience of the current and proposed
officers and directors of the Purchaser, the plans for the operations of the
business of the Purchaser, the business, operations and financial condition of
the Founding Companies, and any plans for additional acquisitions and the like.
The Seller and the Shareholders acknowledge receipt and review of the Company's
Prospectus, dated December 3, 1997, for informational purposes. The Seller and
the Shareholders acknowledge that
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such draft is subject to completion and subject to change, and the Seller and
the Shareholders acknowledge that it or their respective purchaser
representatives have had an adequate opportunity to ask questions and receive
answers from the officers of the Purchaser pertaining thereto.
ARTICLE 14
MISCELLANEOUS
14.1. Notices. All notices required to be given to any of the parties to
this Agreement shall be in writing and shall be deemed to have been sufficiently
given, subject to the further provisions of this Section 14.1, for all purposes
when presented personally to such party or sent by certified or registered mail,
return receipt requested, with proper postage prepaid, or any national overnight
delivery service, with proper charges prepaid, or by facsimile transmission with
receipt confirmed by such party, to such party at its address set forth below:
(a) If to the Seller or the Shareholders:
c/o ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to the Purchaser:
ImageMax, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP
3000 Two ▇▇▇▇▇ Square
▇▇▇▇ & ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇
Fax No.: ▇▇▇-▇▇▇-▇▇▇▇
Such notice shall be deemed to be received when delivered if delivered
personally, the next business day after the date sent if sent by a national
overnight delivery service, or three (3) business days after the date mailed if
mailed by certified or registered mail. Any notice of any change in such address
shall also be given in the manner set forth above. Whenever the giving of notice
is required, the giving of such notice may be waived in writing by the party
entitled to receive such notice.
14.2. No Third Party Beneficiaries. Except as is otherwise expressly
provided in this Agreement, this Agreement is not intended to, and does not,
create any rights in or confer any benefits upon anyone other than the parties
hereto.
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14.3. Schedules. All schedules attached to this Agreement are incorporated
by reference into this Agreement for all purposes.
14.4. Expenses. The parties to this Agreement shall pay their own expenses
incident to the preparation, negotiation and execution of this Agreement
including, without limitation, all fees and costs and expenses of their
respective accountants and legal counsel.
14.5. Further Assurances. The Seller or the Shareholders on the one hand,
and the Purchaser on the other hand, shall, at their own respective expense,
from time to time upon the request of the other party, execute and deliver, or
cause to be executed and delivered, at such times as may reasonably be requested
by such other party, such other documents, certificates and instruments and take
such actions as such other party deem reasonably necessary to consummate more
fully the transactions contemplated by this Agreement.
14.6. Entire Agreement; Amendment. This Agreement and any other documents,
instruments or other writings delivered or to be delivered pursuant to this
Agreement constitute the entire agreement among the parties with respect to the
subject matter of this Agreement and supersede all prior agreements,
understandings, and negotiations, whether written or oral, with respect to the
subject matter of this Agreement. None of the terms and provisions contained in
this Agreement can be changed without a writing signed by all parties hereto.
14.7. Section and Paragraph Titles. The section and paragraph titles used
in this Agreement are for convenience only and are not intended to define or
limit the contents or substance of any such section or paragraph.
14.8. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of each of the parties to this Agreement and their respective heirs,
personal representatives, and successors and permitted assigns. Neither the
Seller, the Shareholders nor the Purchaser shall have the right to assign this
Agreement without the prior written consent of the others, except that the
Purchaser may assign its rights and obligations under this Agreement prior to
the Closing to any wholly-owned Subsidiary of the Purchaser or entity owning all
of the capital stock of the Purchaser, provided that such assignment shall not
relieve the Purchaser of any of its obligations hereunder.
14.9. Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute one and the same
instrument.
14.10. Severability. Any provision of this Agreement (other than those
contained in Article 7 of this Agreement, in which case, Section 7.5 of this
Agreement shall govern with respect to the invalidity, unenforceability, or
illegality of any such provision) that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions of this Agreement or such provision, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
14.11. Governing Law. This Agreement shall be governed and construed as to
its validity, interpretation and effect by the laws of the Commonwealth of
Pennsylvania notwithstanding the choice of law rules of Pennsylvania or any
other jurisdiction.
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IN WITNESS WHEREOF, the Seller, Shareholders and the Purchaser have caused
this Agreement to be duly executed as of the date first written above.
IMAGE-TEC, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: President
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
IMAGEMAX, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chief Executive Officer
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Schedule 2.1(a)
Purchased Assets
1. Real Property Leases. Seller's interest, as lessee, in the real property that
is the subject matter of any outstanding real property lease to which the Seller
is a party.
2. Personal Property Leases. Seller's interest, as lessee or otherwise, in all
personal property that is the subject matter of any leases to which the Seller
is a party.
3. Equipment, Machinery and Other Tangible Personal Property. All machinery,
equipment, leasehold improvements, trucks, automobiles, supplies, office
furniture, computing and telecommunications equipment and other items of
personal property that are owned by Seller and used in connection with the
Business including, without limitation, all Contracts with the Seller's
customers or clients.
4. Contracts. All of the interest in all Contracts relating to the acquisition
or ownership by Seller of any of the Purchased Assets or the operation of the
Business including, without limitation, those listed in the Disclosure Schedule;
provided, however, that the Contracts relating to employees set forth on
Schedule 2.1(b)shall be Excluded Assets.
5. Books and Records. All of Seller's Books and Records relating to the
Purchased Assets.
6. Permits. All of Seller's interest in all Permits relating to the Business
including, without limitation, those listed in the Disclosure Schedule, to the
extent assignable or transferrable.
7. Intellectual Property. All of Seller's right, title and interest in and to
the Intellectual Property including, without limitation, that listed in the
Disclosure Schedule.
8. Business and Goodwill. All of Seller's right, title and interest in and to
the Business as a going concern and all of the goodwill incident to the
Business.
9. Inventory. All inventory incremental or relating to, or used in connection
with the Business including, without limitation, all supplies, work-in-process
and finished goods of the Business on the Closing Date.
10. Receivables. All of Seller's Receivables associated with the Business
existing at the Closing Date, excluding the Trade Accounts Receivables that are
more than 90 days past the original invoice date.
11. Cash. $500 in cash to satisfy accrued payroll expenses.
12. Prepaid Expenses. All Prepaid Expenses at the Closing Date including,
without limitation, those listed and fully described in Annex A to this Schedule
2.1(a) other than those Prepaid Expenses that comprise a part of the Excluded
Assets and that are designated as such on Annex A to Schedule 2.1(b).
13. Computer Software. All Computer Software.
14. Other Intangible Assets. All other assets (including causes of action,
rights of action, contract rights and warranty and product liability claims
against third parties) relating to the Purchased Assets, the Assumed Liabilities
and the Business.
Schedule 2.1(b)
Excluded Assets
1. Insurance Policies. Any insurance policies maintained by Seller with respect
to the Business.
2. Cash Consideration. The aggregate cash consideration paid by the Purchaser to
Seller pursuant to this Agreement.
3. Corporate Records. Seller's corporate minute book and stock books, records
and tax records.
4. Certain Claims. Any of Seller's claims and rights against third parties
(including, without limitation, insurance carriers), to the extent they relate
to Retained Liabilities.
5. Benefit Plan Assets. Assets constituting any pension or other funds for the
benefit of Seller's employees including, without limitation, any Employee
Benefit Plan.
6. Tax Refunds. All of Seller's claims for refunds of Taxes and other
governmental charges to the extent such refunds relate to periods ending on or
prior to the Closing Date.
7. Prepaid Expenses. All Prepaid Expenses at the Closing listed and fully
described in Annex A to this Schedule 2.1(b).
8. Aged Trade Account Receivables. All of Seller's Trade Account Receivables
that are more than 90 days past the original invoice date.
Schedule 2.6
Assumed Liabilities
1. The Adjusted Current Liabilities of Seller, only to the extent and in the
amounts reflected on the Closing Balance Sheet.
2. All Obligations and Liabilities related to the Purchased Assets arising on or
after the Closing Date.