SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): February 4, 1998
Zomax Optical Media, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Minnesota
(State or Other Jurisdiction of Incorporation)
0-28426 41-1833089
(Commission File Number) (I.R.S. Employer Identification Number)
5353 Nathan Lane
Plymouth, Minnesota 55442
(Address of Principal Executive Offices) (Zip Code)
612-553-9300
(Registrant's Telephone Number, Including Area Code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On February 4, 1998, Primary Marketing Group ("PMG") and Next
Generation Services LLC ("NGS") were merged with and into Zomax Services, Inc.
(the "Subsidiary"), a wholly-owned subsidiary of the Registrant pursuant to a
Merger Agreement dated February 3, 1998 (the "Merger"). In the Merger, all
issued and outstanding shares of PMG Common Stock and membership interests in
NGS were converted into the right to receive shares of the Registrant's Common
Stock. In aggregate, 795,860 shares of the Registrant's Common Stock were issued
to Anthony Angelini, Ronald Silzer, Brian Fleury, Andrew Berg and Blake White in
connection with the Merger. Prior to the Merger, PMG's business consisted of
providing manufacturer's representative services in the computer industry and
NGS' business consisted primarily of providing returned merchandise processing
services in the computer industry. PMG and NGS operated their respective
businesses from facilities located in and around San Jose, California and
Boston, Massachusetts. The Subsidiary intends to provide substantially the same
products and services that PMG and NGS provided prior to the Merger.
As a result of the Merger, Subsidiary succeeded to PMG's 78% ownership
stake in the capital stock of Primary Marketing Group Limited ("PMG Limited"), a
company incorporated under the laws of Ireland. Simultaneous to the Merger, the
Subsidiary acquired the remaining 22% of the outstanding capital stock of PMG
Limited in exchange for shares of the Registrant's Common Stock pursuant to the
terms of a Stock Purchase Agreement dated February 3, 1998 (the "Acquisition").
In aggregate, 4,142 shares of the Registrant's Common Stock were issued to
Anthony Angelini, Ronald Silzer, Brian Fleury, Andrew Berg, Blake White and
Patrick Burke in connection with the Acquisition. Prior to the Acquisition, PMG
Limited's business consisted of providing returned merchandise processing and
manufacturer's representative services in the computer industry from facilities
located in Dublin, Ireland. The Subsidiary intends to continue to operate PMG
Limited as a wholly-owned subsidiary providing substantially the same products
and services that PMG Limited provided prior to the Acquisition.
Pursuant to a Registration Rights Agreement dated February 3, 1998, the
Registrant granted certain demand and participatory registration rights to the
individuals who received shares of the Registrant's Common Stock as a result of
the Merger and the Acquisition. The Registrant will account for the Merger and
the Acquisition as a pooling of interests.
Simultaneous to the Merger and the Acquisition, the Registrant acquired
certain assets and assumed certain contractual rights and obligations of Kao
Infosystems Company ("Kao") pursuant to an Asset Purchase Agreement and an
Assignment and Assumption Agreement, both dated February 3, 1998, between the
Registrant and Kao, and a Sublease dated February 3, 1998 and an Agreement for
Manufacturing Turnkey Products, dated as of January 1, 1998, between the
Registrant and Novell, Inc. The Registrant provided promissory notes primarily
for equipment and inventory to Kao payable over six months in the aggregate
amount of $1,124,356 and assumed certain liabilities of Kao in connection with
this transaction. The assets and rights acquired by the Registrant in this
transaction will be employed in the operations of the Subsidiary.
<PAGE>
The Registrant believes that the foregoing transactions are in line
with its strategy of expanding operations through acquisitions and broadening
its base of customers and facilities. The success of this strategy will depend
on management's ability to integrate the products and services, manufacturing
operations and personnel of PMG Limited, PMG and NGS into the Registrant's
current operation. These companies have been operating as separate independent
entities, and there can be no assurance that management will be able to
effectively integrate and manage the combined entities and implement the
Registrant's operating or growth strategies. Further, there can be no assurance
that the Registrant will be able to retain the personnel currently employed by
each entity following the acquisitions or that current sales personnel will be
able to effectively sell the other firm's products. Failure to properly
integrate these businesses on a timely basis or to implement the Registrant's
operating and growth strategy could have a material adverse impact on the
Registrant's profitability and future operating results.
Certain of the statements contained herein are forward looking, based
on current expectations and are made pursuant to the safe harbor provisions of
the Private Securities Reform Act of 1995. As stated in the foregoing paragraph,
there are certain important factors that could cause results to differ
materially from those anticipated by such forward looking statements. Investors
are cautioned that all forward looking statements involve risk and uncertainty.
Item 7. Financial Statements and Exhibits.
(a) Financial statements of the businesses acquired:
It would be impracticable for the Registrant to provide the
financial statements of PMG Limited, PMG and NGS for the
periods specified in Rule 3-05(b) of Regulation S-X at the
time of filing of this Form 8-K. The Registrant will file the
required financial statements as soon as practicable, but not
later than sixty days after the date on which this Form 8-K
must be filed.
(b) Pro forma financial information:
It would be impracticable for the Registrant to provide the
pro forma financial information required by Article 11 of
Regulation S-X at the time of filing of this Form 8-K. The
Registrant will file the required pro forma financial
information as soon as practicable, but not later than sixty
days after the date on which this Form 8-K must be filed.
(c) Exhibits:
2.1 Stock Purchase Agreement dated February 3, 1998 by and among
Zomax Optical Media, Inc., Zomax Services, Inc., Primary
Marketing Group Limited and the shareholders of Primary
Marketing Group Limited. Upon the request of the Commission,
the Registrant agrees to furnish a copy of the exhibits and
schedules to the Stock Purchase Agreement, subject to requests
for confidential treatment of certain information contained in
such exhibits and schedules.
<PAGE>
2.2 Merger Agreement dated February 3, 1998 by and among Zomax
Optical Media, Inc., Zomax Services, Inc., Next Generation
Services, LLC, Primary Marketing Group and the holders of all
membership interests of Next Generation Services, LLC and
shares of Primary Marketing Group Limited. Upon the request of
the Commission, the Registrant agrees to furnish a copy of the
exhibits and schedules to the Merger Agreement, subject to
requests for confidential treatment of certain information
contained in such exhibits and schedules.
2.3 Asset Purchase Agreement dated February 3, 1998 by and among
Zomax Optical Media, Inc. and Kao Infosystems Company. Upon
the request of the Commission, the Registrant agrees to
furnish a copy of the exhibits and schedules to the Asset
Purchase Agreement, subject to requests for confidential
treatment of certain information contained in such exhibits
and schedules.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: February 16, 1998
ZOMAX OPTICAL MEDIA, INC.
By /s/ James T. Anderson
James T. Anderson, President and
Chief Executive Officer
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBIT INDEX TO FORM 8-K
Date of Report: Commission File No.:
February 4, 1998 0-28426
ZOMAX OPTICAL MEDIA, INC.
EXHIBIT NO. ITEM
2.1 Stock Purchase Agreement dated February 4, 1998 by and among
Zomax Optical Media, Inc., Zomax Services, Inc., Primary
Marketing Group Limited and the shareholders of Primary
Marketing Group Limited. Upon the request of the Commission,
the Company agrees to furnish a copy of the exhibits and
schedules to the Stock Purchase Agreement, subject to requests
for confidential treatment of certain information contained in
such exhibits and schedules.
2.2 Merger Agreement dated February 4, 1998 by and among Zomax
Optical Media, Inc., Zomax Services, Inc., Next Generation
Services, LLC, Primary Marketing Group and the holders of all
membership interests of Next Generation Services, LLC and
shares of Primary Marketing Group Limited. Upon the request of
the Commission, the Company agrees to furnish a copy of the
exhibits and schedules to the Merger Agreement, subject to
requests for confidential treatment of certain information
contained in such exhibits and schedules.
2.3 Asset Purchase Agreement dated February 3, 1998 by and among
Zomax Optical Media, Inc. and Kao Infosystems Company. Upon
the request of the Commission, the Registrant agrees to
furnish a copy of the exhibits and schedules to the Asset
Purchase Agreement, subject to requests for confidential
treatment of certain information contained in such exhibits
and schedules.
STOCK PURCHASE AGREEMENT
DATE: February 3, 1998
PARTIES: Zomax Optical Media, Inc.
5353 Nathan Lane
Minneapolis, MN 55442 ("Zomax")
Zomax Services, Inc.
5353 Nathan Lane
Minneapolis, MN 55442 ("Subsidiary")
Primary Marketing Group Limited
5D Woodlawn Industrial Estate
Cloghran, Dublin
Ireland ("PMG Limited")
Anthony Angelini
1413 Arbor Ave.
Los Altos, CA 94022 ("Angelini")
Brian Fleury
1750 Alameda Diablo Rd.
P.O. Box 397
Diablo, CA 94528 ("Fleury")
Ronald Silzer
527 Hale Street
Palo Alto, CA 94301 ("Silzer")
Andrew Berg
155 Camino Encanto
Danville, CA 94526 ("Berg")
R. Blake White
584 Morninghome Rd.
Danville, CA 94526 ("White")
Patrick Burke
97 Lucan Heights
Lucan County
Dublin, Ireland ("Burke")
RECITALS:
A. PMG Limited is in the business of providing product recycling,
turnkey, document fulfillment and related services to the computer and software
industries, and in the business of providing sales and marketing assistance as a
manufacturer's representative with respect to the sale of floppy disks and CD
replication, software duplication, turnkey and fulfillment services.
B. Primary Marketing Group, a California corporation, owns 78% of the
issued and outstanding capital stock of PMG Limited. The Shareholders own all of
the remaining issued and outstanding capital stock of PMG Limited.
C. Zomax is engaged in the business of manufacturing compact discs,
cassettes and diskettes as well as providing related services including package
design, graphics design, printing, packaging, warehousing, drop shipping and
returned merchandise authorization processing and inventory recycling services.
D. All of the issued and outstanding capital stock of Subsidiary is
owned by Zomax.
E. Subsidiary desires to acquire from the Shareholders all of their
capital stock of PMG Limited and the Shareholders desire to sell all of such
capital stock to Subsidiary, on the terms and subject to the conditions
hereinafter set forth.
F. Zomax will issue shares of its common stock to the Shareholders in
payment for their PMG Limited capital stock and is willing to make certain
covenants, representations, and warranties in connection therewith.
AGREEMENT:
The parties hereto, each intending to be legally bound, agree as
follows:
ARTICLE 1.
DEFINITIONS
As used in this Agreement and any exhibits hereto, the following words and
phrases shall have the meanings set forth below:
"Average Closing Price" shall mean the average closing price of one share of
Zomax Common Stock as quoted on the Nasdaq Stock Market for the thirty trading
days immediately prior to the Closing.
"Business" shall have the meaning ascribed to it in Section 10.2(a) below.
"Closing" shall mean the consummation of the transactions contemplated herein as
described in Section 2.2 below.
"Competing Transaction" shall mean any of the following: (i) any merger,
consolidation, share exchange, business combination, or other similar
transaction involving PMG Limited (other than the transactions contemplated
hereby), (ii) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition of 5% or more of the assets of PMG Limited, taken as a whole, in a
single transaction or series of transactions, (iii) any person having acquired
beneficial ownership or the right to acquire beneficial ownership of, or any
"group" (as such term is defined under Section 13(d) of the Exchange Act and the
rules and regulations promulgated thereunder) having been formed which
beneficially owns or has the right to acquire beneficial ownership of, 5% or
more of the capital stock of PMG Limited, or (iv) any public announcement of a
proposal, plan or intention to do any of the foregoing or any agreement to
engage in any of the foregoing.
"Employee Plans" shall have the meaning ascribed to it in Section 3.11(b) below.
"Environmental Laws" shall mean all federal, state and local laws, rules,
regulations, ordinances and orders that purport to regulate the release of
hazardous substances or other materials into the environment, or impose
requirements relating to environmental protection.
"Exchange Act" shall mean the Exchange Act of 1934, as amended.
"Financial Statements" shall have the meaning ascribed to it in Section 3.6(a)
below.
"Governmental Entity" shall mean any federal, state, local or foreign
governmental body, agency, official or authority (including courts,
administrative agencies, commissions, self-regulatory agencies or authorities or
other governmental authority or instrumentality).
"Knowledge" shall mean actual knowledge or constructive knowledge if a
reasonably prudent person in a like position would have known, or should have
known, the fact.
"Material Adverse Effect" shall mean a material adverse effect on the assets,
condition, affairs or prospects of the subject entity, financial or otherwise.
"MBCA" shall mean the Minnesota Business Corporation Act.
"Patents" shall have the meaning ascribed to it in Section 3.10 below.
"PMG Limited" shall mean Primary Marketing Group Limited, a corporation
organized under the laws of Ireland.
"PMG Limited Exchange Ratio" shall mean 188.2; provided, however, if the Average
Closing Price is less than $9.00 per share or more than $12.50 per share, the
PMG Limited Exchange Ratio shall be determined by multiplying 188.2 by a
fraction the numerator of which is $9.00 and the denominator of which is the
Average Closing Price.
"PMG Limited Shares" shall mean all of the issued and outstanding shares of
capital stock of PMG Limited owned by the Shareholders at the time of this
Agreement.
"Product Liability Claims" shall have the meaning ascribed to it in Section 3.14
below.
"Purchase" shall mean the purchase of the PMG Limited Shares by Subsidiary as
described in this Agreement.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Shareholders" shall refer collectively to Angelini, Fleury, Silzer, Berg,
White, and Burke.
"Subsidiary" shall mean Zomax Services, Inc., a Minnesota corporation.
"Takeover Laws" shall have the meaning ascribed to it in Section 5.8 below.
"Territory" shall have the meaning ascribed to it in Section 10.2(a) below.
"Trademarks" shall have the meaning ascribed to it in Section 3.9 below.
"Zomax" shall mean Zomax Optical Media, Inc., a Minnesota corporation.
"Zomax Accountant Letter" shall mean a letter from Arthur Andersen LLP addressed
to Zomax dated as of the Closing stating that the Purchase will qualify as
pooling of interest transactions under Opinion 16 of the Accounting Principles
Board and applicable SEC rules and regulations.
"Zomax Common Stock" shall mean the common stock of Zomax, no par value.
"Zomax Filed SEC Documents" shall have the meaning ascribed to it in Section 4.6
below.
"Zomax SEC Documents' shall have the meaning ascribed to it in Section 4.6
below.
ARTICLE 2.
PURCHASE OF PMG LIMITED SHARES; EXCHANGE OF CERTIFICATES
2.1) Purchase. Upon the terms and subject to the conditions set forth
in this Agreement, Subsidiary shall purchase from the Shareholders and the
Shareholders shall sell as beneficial owners to Subsidiary all of the PMG
Limited Shares free from all liens, charges and encumbrances and together with
all rights attaching now or in the future.
2.2) Closing. The Closing of the Purchase will take place at 10:00 a.m.
on a date to be specified by the parties, which shall be no later than the
second business day after satisfaction or, to the extent permitted hereunder,
waiver of the conditions set forth in Article 6 below at the offices of
Fredrikson & Byron, P.A. in Minneapolis, Minnesota, unless another date, time,
or place is agreed to in writing by the parties hereto.
2.3) Exchange of Certificates. At the Closing, the Shareholders shall
deliver to Subsidiary certificates, properly endorsed, representing all of the
PMG Limited Shares, and Zomax shall instruct its stock transfer agent to deliver
to each Shareholder a certificate representing that number of shares of Zomax
Common Stock equal to the PMG Limited Exchange Ratio multiplied by the number of
PMG Limited Shares held by that Shareholder.
2.4) No Fractional Shares. No certificates representing fractional
shares of Zomax Common Stock will be issued pursuant to the previous Sections of
this Article 2 and any such fractional share interests will not entitle the
owner thereof to vote or any rights as a shareholder of Zomax. If the aggregate
number of shares of Zomax Common Stock to be issued to a Shareholder pursuant to
the preceding Sections of this Article 2 contains a fractional share, such
Shareholder shall receive in the aggregate one additional share of Zomax Common
Stock in exchange for such fractional share.
2.5) Legends. Each certificate or instrument representing Zomax Common
Stock to be issued hereunder may be endorsed with legends in substantially the
following forms:
(a) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT') AND ARE
RESTRICTED SECURITIES, AS DEFINED IN THE RULE 144 PROMULGATED UNDER THE
ACT. THE SECURITIES MAY NOT BE SOLD OR OFFERED FOR SALE OR OTHERWISE
DISTRIBUTED EXCEPT (1) IN CONJUNCTION WITH AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER SUCH ACT, OR (II) IN COMPLIANCE WITH
RULE 144, OR (III) PURSUANT TO AN OPINION OF COUNSEL SATISFACTORY TO
THE CORPORATION THAT SUCH REGISTRATION OR COMPLIANCE IS NOT REQUIRED AS
TO SUCH SALE, OFFER OR DISTRIBUTION."
(b) Any other legends required by Minnesota law or other
applicable blue sky or state securities laws.
Zomax need not register a transfer of any shares of Zomax Common Stock issued
hereunder, and may also instruct its transfer agent not to register a transfer
of any such shares, unless the conditions specified in the foregoing legends are
satisfied to the extent applicable.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES
OF THE SHAREHOLDERS
The Shareholders, jointly and severally, make the following
representations and warranties to Zomax and Subsidiary with the intention that
Zomax and Subsidiary may rely upon the same and acknowledge that the same shall
be true as of the Closing (as if made at the Closing).
3.1) Organization. PMG Limited is a corporation duly organized, validly
existing and in good standing under the laws of Ireland, has all requisite power
and authority, corporate and otherwise, to own its properties and assets and
conduct its business as it is now being conducted.
3.2) Qualification and Standing. All statutory, municipal and other
licenses, consents, permits and authorities necessary or desirable for the
carrying on of the business and activities of PMG Limited as now carried on have
been obtained and are valid and subsisting and all conditions thereof have been
complied with in all material respects and none of them are likely to be
suspended, cancelled, revised, refused or revoked. There is no investigation or
inquiry by, or order, decree or judgment of any court, governmental agency or
regulatory body outstanding against PMG Limited which may have a material
adverse effect upon its assets or business. All returns, particulars,
resolutions and other documents required to be delivered on behalf of PMG
Limited to the Registrar of Companies have been properly made and delivered.
3.3) Authority. Each of the Shareholders and PMG Limited has all
requisite power and authority to execute, perform and carry out the provisions
of this Agreement. PMG Limited has taken all requisite corporate action
authorizing and empowering it to enter into this Agreement and to consummate the
transactions contemplated herein.
3.4) Capitalization. The authorized share capital of PMG Limited
consists of 500,000 "A" ordinary shares of IR(pound)1 each and 500,000 "B"
ordinary shares of IR(pound)1 each. As of the date of this Agreement, there are
outstanding 100 "A" ordinary shares of PMG Limited, and no other shares of
capital stock of PMG Limited. All outstanding shares of PMG Limited capital
stock have been duly authorized and validly issued and are fully paid and all
relevant stamp duty paid thereon, and were issued in compliance with all
applicable securities laws. Except as set forth in the preceding sentences of
this Section 3.4, there are outstanding no shares of PMG Limited capital stock
or other voting securities of PMG Limited, no securities convertible into or
exchangeable for shares of PMG Limited capital stock or voting securities, and
no options, warrants or other rights to acquire from PMG Limited and no
obligation of PMG Limited to issue, any capital stock, voting securities or
securities convertible into or exchangeable for capital stock or voting
securities of PMG Limited. There are no outstanding obligations of PMG Limited
to repurchase, redeem or otherwise acquire any PMG Limited securities. Primary
Marketing Group, a California corporation, owns 78 "A" ordinary shares of PMG
Limited, and the Shareholders own all of the remaining outstanding capital stock
of PMG Limited as set forth on Exhibit 3.4 attached hereto.
3.5) Subsidiaries, Joint Ventures or Partnerships. Except as disclosed
in Exhibit 3.5 hereto, PMG Limited has no subsidiary, and is not a shareholder,
member, partner or joint venturer with any other person or legal entity. Any
subsidiary disclosed in Exhibit 3.5 is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation
as set forth in Exhibit 3.5.
3.6) Financial Statements.
(a) Financial Statements. The Shareholders have furnished
Zomax a true and complete copy of the balance sheets and statements of
income for PMG Limited for its fiscal years ended December 31, 1996 and
1997 (collectively the "Financial Statements"). Except as set forth on
Exhibit 3.6(a) hereto, the Financial Statements have been prepared in
conformance with generally accepted accounting principles and
procedures applied on a basis consistent with prior periods, and fairly
present and will fairly present in all material respects the financial
condition of PMG Limited as of the represented dates thereof and the
results of PMG Limited's operations for the periods covered thereby.
For purposes of this Agreement, the Financial Statements shall be
deemed to include any notes thereto.
(b) Books and Records. PMG Limited's books of account and
records (including customer order files, employment records and
production and manufacturing records) are complete, true and correct in
all material respects.
(c) No Adverse Changes. Since December 31, 1997, there has not
occurred or arisen (whether or not in the ordinary course of business):
(i) any material adverse change in the financial condition or
operations of PMG Limited, (ii) any change in PMG Limited's accounting
methods or practices, (iii) any sale or transfer of any asset or any
amendment of any agreement of PMG Limited except in the ordinary course
of business, or (iv) any labor trouble.
3.7) Tax Reports and Returns. Except as disclosed in Exhibit 3.7
hereto, PMG Limited has timely filed all applicable tax or assessment reports
and returns of every kind required to be filed by them, including, without
limitation, income tax, sales and use tax, real estate tax, personal property
tax and unemployment tax, and has duly paid all taxes and other charges
(including interest and penalties) due to or claimed to be due by any taxing
authorities. True and correct copies of the reports and returns filed PMG
Limited during the last three tax years have been made available to Zomax. Where
required, timely estimated payments or installment payments of tax liabilities
have been made to all governmental agencies in amounts sufficient to avoid
underpayment penalties or late payment penalties applicable thereto.
3.8) Assets. PMG Limited is the owner of or otherwise has the right to
use all assets used by it in the conduct of its business as now conducted and as
reflected on the Financial Statements. PMG Limited holds title to all assets
owned by it free and clear of all liens, charges, encumbrances or third party
claims or interests of any kind whatsoever, except as disclosed on the Financial
Statements or in Exhibit 3.8 hereto.
3.9) Trademarks. The tradenames, trademarks and service mark
registrations and applications, common law trademarks, copyrights and copyright
registrations and applications listed on Exhibit 3.9 hereto (the "Trademarks")
constitute all of the tradenames, trademarks and service mark registrations and
applications, common law trademarks, copyrights and copyright registrations and
applications used by PMG Limited. To the Shareholders' knowledge, except as set
forth on Exhibit 3.9 hereto, PMG Limited has good title to, and the full and
unrestricted right to use the Trademarks free and clear of all liens, charges,
encumbrances, or third party claims or interests of any kind whatsoever. To the
Shareholders' knowledge, except as disclosed in Exhibit 3.9 hereto, such use of
the Trademarks does not infringe on any rights of any other person or entity;
the Trademarks are not licensed to or licensed from any other person or entity;
and there have been no claims of any infringement regarding such Trademarks or
such use thereof.
3.10) Patents. Exhibit 3.10 hereto contains a true and complete
description of all domestic and foreign letters patent, patent applications and
patent and know-how licenses used by PMG Limited in the conduct of its business
as now conducted (the "Patents"). To the Shareholders' knowledge, except as set
forth on Exhibit 3.10 hereto, PMG has good title to the Patents, and the full
and unrestricted right to use the Patents free and clear of all liens, charges,
encumbrances or third party claims or interests of any kind whatsoever. To the
Shareholders' knowledge, except as set forth on Exhibit 3.10 hereto, the nature
of the inventions claimed in the Patents do not infringe on any rights of any
other person or entity.
3.11) Agreements, Contracts and Commitments.
(a) Material Contracts. Exhibit 3.11(a) contains an accurate
and complete list of all agreements, contracts, leases and commitments
not yet fully performed by the parties thereto to which PMG Limited is
a party and which are not disclosed in any other Exhibit hereto and
which involve more than (i) $5,000 singly; or (ii) in the case of
related agreements, contracts, leases and commitments, $15,000 in the
aggregate.
(b) Employee Plans. PMG Limited does not maintain any
"Employee Plans" except as set forth in the employee policy manual
attached as Exhibit 3.11(b) hereto. "Employee Plans" means any pension,
retirement, disability, medical, dental, or other health insurance
plan, life insurance or other death benefit plan, profit sharing
deferred compensation, stock option, bonus or other incentive plan,
vacation benefit plan, severance plan, or other employee benefit plan
or arrangement, whether or not any of the foregoing is funded, (i) to
which PMG Limited is a party or by which PMG Limited is bound, or (ii)
with respect to which PMG Limited has made any payments or
contributions or may otherwise have any liability (including any such
plan or other arrangement formerly maintained by PMG Limited).
(c) Union and Employment Contracts and Other Employment
Matters.
(i) Except as set forth on Exhibit 3.11(c) hereto,
PMG Limited is not a party to any collective bargaining
agreement or any other written employment agreement, nor is
PMG Limited a party to any other contract or understanding
(oral or written) that contains any severance pay liabilities
or obligations, except for accrued, unused vacation pay or
accrued and unused sick leave pay.
(ii) Except as set forth in Exhibit 3.11(c) hereto,
PMG has not, nor on the Closing Date will have, any
obligations to its directors, officers, employees or agents
other than obligations arising in the ordinary course of
business on account of wages, salaries and commissions for
prior services performed or business produced.
(d) Breach. Except as disclosed in Exhibit 3.11(d) hereto, PMG
Limited has performed all material obligations required to be performed
by it to date under any material contract, commitment, or arrangement
of any kind to which it is a party or by which it is bound; and neither
PMG Limited nor any other party is in default under any material
contract, commitment, or arrangement of any kind to which PMG Limited
is a party or by which PMG Limited is bound. Except as disclosed in
Exhibit 3.11(d) no event has occurred which after the giving of notice
or the lapse of time or otherwise would constitute a default under, or
result in a breach of by PMG Limited or any other party, any contract,
commitment, or arrangement to which PMG Limited is a party or by which
PMG Limited is bound.
(e) Copies of Contracts; Terms and Binding Effect. True,
complete and correct copies of all agreements, contracts, leases and
commitments that are or should be disclosed in Exhibit 3.11(a) hereto,
and other documents referred to in the Exhibits have been delivered or
made available to Zomax; there are no amendments to or modifications
of, or agreements of the parties relating to, any such contracts,
commitments, and understandings which have not been delivered or made
available to Zomax; and each such contract, commitment, or
understanding, as amended, is considered valid and binding on the
parties to it in accordance with its terms, and the transaction
contemplated by this Agreement will not result in the violation or
breach of any such material contract, commitment, or understanding.
3.12) Contracts with Related Parties. Except as disclosed in Exhibit
3.12 hereto, there are no agreements or contracts between PMG Limited and any of
its employees, agents, officers, directors or shareholders.
3.13) Predominant Customers. Except as disclosed in Exhibit 3.13
hereto, no single customer of PMG Limited accounted for over ten percent (10%)
of PMG Limited's revenues during the fiscal year ending December 31, 1997.
3.14) Product Liability Claims. All products which PMG Limited has sold
have been merchantable, free from material defects in material or workmanship,
and suitable for the purpose for which they were sold. Except as set forth in
Exhibit 3.14 hereto, PMG Limited has not received any claims based upon alleged
breach of product warranty, strict liability in tort, negligent manufacture of
product, or any other allegation of liability arising from PMG Limited's
manufacture or sale of its products (hereafter collectively referred to as
"Product Liability Claims"), during the twenty four months immediately preceding
the date hereof which Product Liability Claims exceeds $10,000. All liability
from any actual and potential Product Liability Claims, whether or not asserted
on or before the Closing Date, is fully covered, except for the deductible
amounts, including all costs of defense and investigation, by PMG Limited's
product liability insurance policies.
3.15) Insurance. The Shareholders have furnished Zomax a true and
complete copy of each insurance policy that PMG Limited has maintained during
the six (6) years prior to the Closing Date. PMG Limited has not been refused
any insurance coverage applied for or sought by it other than in the ordinary
course of business. Exhibit 3.15 hereto contains a true and correct list of all
insurance policies currently maintained by PMG Limited.
3.16) Litigation and Related Matters. Except as disclosed on Exhibit
3.16 hereto, there is no pending or threatened litigation, proceeding, or
investigation (including any environmental, building or safety investigation)
against PMG Limited, nor is PMG Limited subject to any existing judgment, order,
decree, or other action affecting the operation of its business or which would
prevent, impede, or make illegal the consummation of the transactions
contemplated in this Agreement, or which would have a material adverse effect on
PMG Limited.
3.17) Laws and Regulations. To the Shareholders knowledge, PMG Limited
has complied, in all material respects, and is in compliance, with applicable
laws, statutes, orders, rules, regulations and requirements promulgated by
governmental or other authorities relating to its business, including, without
limitation, any relating to wages, hours, hiring, promotion, retirement, working
conditions, nondiscrimination, health, safety, pensions, benefits, the
production, processing, advertising or sale of products, trade regulation,
antikickback, export licensing, antitrust, antiboycott, warranties, or control
of foreign exchange; and PMG Limited has not received any notice of any sort of
alleged violation of any such statute, order, rule, regulation or requirement.
3.18) Breaches of Contracts; Required Consents. Neither the execution
and delivery of this Agreement by the Shareholders or PMG Limited, nor
compliance by any of them with the terms and provisions of this Agreement will:
(a) Conflict with or result in a breach of (i) any of the
terms, conditions or provisions of the Articles of Association, Bylaws
or other governing instruments of PMG Limited, (ii) any judgment,
order, decree or ruling to which PMG Limited is a party, (iii) any
injunction of any court or governmental authority to which any of them
is subject, or (iv) except as disclosed in Exhibit 3.18(a) hereto, any
agreement, contract or commitment which is material to PMG Limited; or
(b) Except as disclosed in Exhibit 3.18(b) hereto, require the
affirmative consent or approval of any third party.
3.19) Binding Obligation. This Agreement constitutes the legal, valid
and binding obligation of the Shareholders and PMG Limited in accordance with
the terms hereof. None of the Shareholders or PMG Limited is subject to any
charter, mortgage, lien, lease, agreement, contract, instrument, law, rule,
regulation, order, judgment or decree, or any other restriction of any kind or
character, which would prevent the consummation of the transactions contemplated
in this Agreement.
3.20) Completeness of Disclosures. None of the representations or
warranties made by the Shareholders in this Agreement or the Exhibits, and no
written statement, certificate or Exhibit furnished or to be furnished by or on
behalf of the Shareholders or PMG Limited to Zomax or its agents pursuant
hereto, or in connection with the transaction contemplated by this Agreement,
contains or will contain any untrue statement of a material fact or omits or
will omit any material fact the omission of which would be misleading. The
Exhibits to this Agreement, where provided by or on behalf of the Shareholders
or PMG Limited completely and correctly present the information required by this
Agreement to be set forth in them.
3.21) Investment Representations.
(a) The shares of Zomax Common Stock acquired by the
Shareholders will be acquired for each Shareholder's own account, for
investment and not with a view to, or for resale in connection with,
any distribution or public offering thereof within the meaning of the
Securities Act.
(b) Each Shareholder understands that (i) the shares of Zomax
Common Stock being issued hereunder have not been registered under the
Securities Act by reason of their issuance in a transaction exempt from
the registration and prospectus delivery requirements of the Securities
Act pursuant to Section 4(2) thereof, (ii) Zomax has no present
intention of registering such shares, (iii) such shares must be held by
the Shareholders indefinitely, and (iv) the Shareholders must therefore
bear the economic risk of such shares indefinitely, unless a subsequent
disposition thereof is registered under the Securities Act or is exempt
from registration thereunder.
3.22) Environmental Matters. PMG Limited is in compliance with all
Environmental Laws, except for any noncompliance that, either singly or in the
aggregate, could not have a Material Adverse Effect on PMG Limited. PMG Limited
has made available to Zomax copies of all documents concerning any environmental
or health or safety matter adversely affecting PMG Limited and copies of any
environmental audits or risk assessments, site assessments, documentation
regarding off-site disposal of hazardous materials, spill control plans and
material correspondence with any Governmental Entity regarding the foregoing.
3.23) Next Generation Services Limited. Next Generation Services
Limited, a company organized under the laws of Ireland, has not traded and has
no assets or liabilities of any kind.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF ZOMAX AND SUBSIDIARY
Zomax and Subsidiary make the following representations and warranties
to the Shareholders with the intention that the Shareholders may rely upon the
same, and acknowledge that the same shall be true as of the Closing Date (as if
made at the Closing).
4.1) Organization. Zomax and Subsidiary are both corporations duly
organized, validly existing and in good standing under the laws of the State of
Minnesota, have all requisite power and authority, corporate and otherwise, to
own their properties and assets and conduct their businesses as they are now
being conducted.
4.2) Qualification. Zomax is qualified to do business and in good
standing as a foreign corporation in Colorado, Florida, and Indiana and in all
other states or jurisdictions in which qualification is required by the nature
of its business and in which the failure to so qualify would have a material
adverse effect on Zomax.
4.3) Corporate Authority. Zomax and Subsidiary have all requisite power
and authority to execute, perform and carry out the provisions of this
Agreement. Zomax and Subsidiary have taken all requisite corporate action
authorizing and empowering them to enter into this Agreement and to consummate
the transactions contemplated herein.
4.4) Capitalization. As of the date of this Agreement, Zomax is
authorized to issue 25,000,000 shares, of which 15,000,000 are shares of Zomax
Common Stock and 10,000,000 are undesignated shares; has issued and has
outstanding 4,454,641 shares of Zomax Common Stock; has issued warrants for the
purchase of 140,000 shares of Zomax Common Stock; and has issued options to
purchase 192,000 shares of Zomax Common Stock, and reserved an additional
900,602 shares of Zomax Common Stock, pursuant to employee benefit plans. All
outstanding shares of Zomax Common Stock have been duly authorized and validly
issued and are fully paid and nonassessable, and were issued in compliance with
all applicable federal and state securities laws. Except as set forth in the
preceding sentences of this Section 4.4 or in the Zomax SEC Documents or the
Zomax Filed SEC Documents, there are outstanding no shares of Zomax Common Stock
or other voting securities of Zomax, no securities convertible into or
exchangeable for shares of Zomax Common Stock or voting securities, and no
options, warrants or other rights to acquire from Zomax and no obligation of
Zomax to issue, any capital stock, voting securities or securities convertible
into or exchangeable for capital stock or voting securities of Zomax. There are
no outstanding obligations of Zomax to repurchase, redeem or otherwise acquire
any Zomax securities.
4.5) Breaches of Contracts; Required Consents. Neither the execution
and delivery of this Agreement by Zomax or Subsidiary, nor compliance by Zomax
and Subsidiary with the terms and provisions of this Agreement will:
(a) Conflict with or result in a breach of (i) any of the
terms, conditions or provisions of the Articles of Incorporation,
Bylaws or other governing instruments of Zomax or Subsidiary, (ii) any
judgment, order, decree or ruling to which Zomax or Subsidiary is a
party, (iii) any injunction of any court or governmental authority to
which either of them is subject, or (iv) any agreement, contract or
commitment which is material to Zomax or Subsidiary; or
(b) Except as disclosed in Exhibit 4.5(b) hereto, require the
affirmative consent or approval of any third party.
4.6) SEC Documents. Zomax has filed all required reports, schedules,
forms, statements and other documents with the SEC since December 27, 1996 (the
"Zomax SEC Documents"). As of their respective dates, the Zomax SEC Documents
complied as to form in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such Zomax SEC
Documents, and except as set forth on Exhibit 4.6 hereto, none of the Zomax SEC
Documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Except to the extent that information contained in any Zomax SEC
Document has been revised or superseded by a later-filed Zomax SEC Document,
filed and publicly available prior to the date of this Agreement (the "Zomax SEC
Filed Documents"), as of the date of this Agreement, except as set forth on
Exhibit 4.6 hereto, none of the Zomax SEC Documents contains any untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The financial
statements of Zomax included in the Zomax SEC Documents complied as of their
respective dates of filing with the SEC as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles (except, in the case of unaudited statements, as
permitted by Form 10-Q of the Exchange Act) applied on a consistent basis during
the periods involved (except as may be indicated in the notes thereto) and
fairly present the consolidated financial position of Zomax as of the dates
thereof and the consolidated results of its operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments). Except as set forth in the Zomax Filed SEC
Documents, and except for liabilities and obligations incurred in the ordinary
course of business consistent with past practice, Zomax has no liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
required by generally accepted accounting principles to be set forth on a
consolidated balance sheet of Zomax or in the notes thereto which, individually
or in the aggregate, could reasonably be expected to have a Material Adverse
Effect on Zomax.
4.7) Absence of Certain Changes of Events. Except as disclosed in the
Zomax Filed SEC Documents, and except as expressly contemplated by this
Agreement, since the date of the most recent financial statements included in
the Zomax Filed SEC Documents, Zomax has conducted its business only in the
ordinary course, and there has not been:
(a) any event, occurrence or development of a state of
circumstances of facts which has had a Material Adverse Effect on
Zomax;
(b) any declaration, setting aside or payment of any dividend
or other distribution with respect to any shares of Zomax Common Stock,
or any repurchase, redemption or other acquisition by Zomax of any
outstanding shares of Zomax Common Stock or other securities of, or
other ownership interests in, Zomax;
(c) any split, combination or reclassification of any of Zomax
Common Stock or any issuance or the authorization of any issuance of
any other securities in respect of, in lieu of or in substitution for
shares of Zomax Common Stock;
(d) any incurrence, assumption or guarantee by Zomax of any
indebtedness for borrowed money other than in the ordinary course of
business and in amounts and on terms consistent with past practices
(including any such borrowings under its existing bank credit
facility);
(e) any damage, destruction or other casualty loss (whether or
not covered by insurance) affecting the business assets of Zomax which,
individually or in the aggregate, has had or would reasonably be
expected to have a Material Adverse Effect on Zomax;
(f) any change in any method of accounting or accounting
practice by Zomax, except for any such change required by reason of a
concurrent change in generally accepted accounting principles; or
(g) any agreement to do any of the foregoing.
4.8) Binding Obligation. This Agreement constitutes the legal, valid
and binding obligation of Zomax and Subsidiary in accordance with the terms
hereof. Neither Zomax nor Subsidiary is subject to any charter, mortgage, lien,
lease, agreement, contract, instrument, law, rule, regulation, order, judgment
or decree, or any other restriction of any kind or character, which would
prevent the consummation of the transactions contemplated in this Agreement.
4.9) Completeness of Disclosures. None of the representations or
warranties made by Zomax or Subsidiary in this Agreement or the Exhibits, and no
written statement, certificate or Exhibit furnished or to be furnished by or on
behalf of Zomax or Subsidiary to the Shareholders or their agents pursuant
hereto, or in connection with the transaction contemplated by this Agreement,
contains or will contain any untrue statement of a material fact or omits or
will omit any material fact the omission of which would be misleading. The
Exhibits to this Agreement, where provided by or on behalf of Zomax and
Subsidiary, completely and correctly present the information required by this
Agreement to be set forth in them.
4.10) Issuance of Zomax Common Stock. The Zomax Common Stock issued to
the Shareholders pursuant to this Agreement shall be, when issued in accordance
with the terms hereof, duly authorized, validly issued, fully-paid,
nonassessable, and issued in compliance with all applicable federal and state
securities laws.
ARTICLE 5.
CONDUCT PRIOR TO CLOSING
5.1) Access to Information. During the period prior to the Closing, the
Shareholders and PMG Limited shall give to Zomax and its attorneys, accountants
or other authorized representatives, full access to all of the property, books,
contracts, commitments and records of PMG Limited and shall furnish to Zomax
during such period all such information concerning its business as Zomax
reasonably may request. During the period prior to the Closing, Zomax shall give
to the Shareholders and their attorneys, accountants or other authorized
representatives, full access to the property, books, contracts, commitments and
records of Zomax and shall furnish to the Shareholders during such period all
such information concerning its business as the Shareholders reasonably may
request.
5.2) Restrictions. Except as disclosed in Exhibit 5.2 hereof, the
Shareholders and PMG Limited covenant that during the period from the date of
this Agreement to the Closing (except as Zomax otherwise has consented in
writing):
(a) The business of PMG Limited will be conducted only in the
usual and ordinary manner.
(b) No change will be made in PMG Limited's authorized or
issued corporate shares, or in its capital structure.
(c) No increase will be made in the compensation payable to or
to become payable to any employee, officer, director or shareholder of
PMG Limited, and no bonus payment will be made by PMG Limited to any
such employee, officer, director or shareholder.
(d) PMG Limited will not embark upon any new venture, enter
into or amend any leases or agreements, purchase any fixed assets or
equipment, amend any loan agreements, guarantee any obligation or
increase any existing lines of credit.
(e) PMG Limited will not sell, dispose, transfer, assign or
otherwise remove any of its assets except in the ordinary course of
business.
(f) PMG Limited will timely pay and discharge all bills and
monetary obligations and timely and properly performed all of its
obligations and commitments under all existing contracts and agreements
pertaining to or affecting PMG Limited.
(g) The Shareholders and PMG Limited shall use their best
efforts to preserve the business organization and assets of PMG Limited
and to keep available to Zomax the services of PMG Limited's present
employees, and not to impair relationships with suppliers, customers
and others having business relations with PMG Limited.
(h) The Shareholders and PMG Limited will not take any action
that would prevent Zomax from accounting for the business combinations
to be effected by the Purchase as a pooling of interests.
5.3) Preserve Accuracy of Representations and Warranties. The
Shareholders and PMG Limited shall refrain from taking any action, except with
the prior written consent of Zomax, which would render any representation,
warranty or agreement of the Shareholders in this Agreement inaccurate or
breached as of the Closing. At all times prior to the Closing, the Shareholders
will promptly inform Zomax in writing with respect to any matters that arise
after the date of this Agreement which, if existing or occurring at the date of
this Agreement, would have been required to be set forth or described in the
Exhibits. The Shareholders promptly will notify Zomax in writing of all
lawsuits, claims, proceedings and investigations that may be threatened,
brought, asserted or commenced against PMG Limited or its officers or directors
involving the transaction contemplated by this Agreement or which might have a
material adverse effect on PMG Limited.
5.4) No Solicitation of Transactions. The Shareholders and PMG Limited
shall use their respective commercially reasonable efforts to cause PMG
Limited's officers, directors, employees, agents and representatives (including,
without limitation, any investment banker, attorney or accountant retained by
it) not to initiate, solicit or knowingly encourage, directly or indirectly
(including by way of furnishing information or assistance), or take any other
action to facilitate knowingly, any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Competing
Transaction, or enter into or continue discussions or negotiations with any
person or entity in furtherance of such inquiries or to obtain a Competing
Transaction, or agree to or endorse any Competing Transaction, or authorize any
of their respective officers, directors, governors or employees or any
investment banker, financial advisor, attorney, accountant or other
representative retained by them to take any such action, and the Shareholders
shall notify Zomax of all inquiries or proposals which it receives relating to
any of such matters
5.5) Accountant Letters. Zomax and Subsidiary shall use their
respective best efforts to cause the Zomax Accountant Letter to be delivered to
Zomax.
5.6) Public Announcements. The Shareholders and PMG Limited will not
make any press release or public statement with respect to this Agreement and
the transaction contemplated hereby. Notwithstanding the foregoing, but only to
the extent that prior written consent has been obtained from Zomax, which will
not unreasonably withhold such consent, the Shareholders and PMG Limited may:
(i) discuss the transaction contemplated by this Agreement for legitimate
business purposes; or (ii) in the event that this Agreement is terminated
pursuant to Article 7 herein, disclose that this Agreement has been terminated.
If any of the Shareholders becomes an employee of Zomax or Subsidiary, such
Shareholder may discuss this Agreement and the transaction contemplated hereby
in accordance with any and all policies of Zomax and Subsidiary. Zomax may issue
any press release or make any public statement with respect to this Agreement
and the transactions contemplated hereby as may be required by applicable law or
any listing agreement on a national security exchange or to reasonably limit
liability for failure to make a disclosure. Zomax will issue a press release
upon the execution of this Agreement.
5.7) Appropriate Action; Consents; Filings.
(a) The Shareholders, PMG Limited, Zomax and Subsidiary shall
use their respective best efforts to (i) take, or cause to be taken,
all appropriate action, and do, or cause to be done, all things
necessary, proper or advisable under applicable law or required to be
taken by any Governmental Entity or otherwise to consummate the
Purchase and the transactions contemplated by this Agreement as
promptly as practicable, (ii) obtain from any Governmental Entities any
consents, licenses, permits, waivers, approvals, authorizations or
orders required to be obtained or made by the parties hereto in
connection with the authorization, execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby,
including, without limitation, the Purchase, and (iii) as promptly as
practicable, make all necessary filings, and thereafter make any other
required submissions, with respect to this Agreement and the Purchase
required under any applicable law.
(b) (i) The Shareholders and PMG Limited shall give any
notices to third parties, and use their reasonable best efforts to
obtain any third party consents, (A) necessary to consummate the
Purchase and the transactions contemplated by this Agreement, (B)
disclosed or required to be disclosed in the exhibits to this Agreement
or (C) required to prevent a Material Adverse Effect to PMG Limited.
(ii) In the event that any third party consent
described in subsection (b)(i) above is not obtained, the Shareholders
and PMG Limited shall use their respective reasonable best efforts, and
shall take any such actions reasonably requested by Zomax, to minimize
any adverse effect upon Zomax, Subsidiary, and PMG Limited and their
respective businesses resulting, or which could reasonably be expected
to result after the Closing, from the failure to obtain such consent.
(c) From the date of this Agreement until the Closing, each
party shall promptly notify the other parties of any pending or, to the
actual knowledge of the executive officers of the first party,
threatened action, proceeding or investigation by any Governmental
Entity or any other person (i) challenging or seeking material damages
in connection with the Purchase or (ii) seeking to restrain or prohibit
the consummation of the Purchase or otherwise limit the right of Zomax
or, to the knowledge of such first party, any subsidiary of Zomax to
own or operate all or any portion of the business or assets of PMG
Limited, which in any case is reasonably likely to have a Material
Adverse Effect on Zomax, Subsidiary, or PMG Limited.
5.8) Takeover Laws. If any control share acquisition," "anti-takeover"
or other similar statutes and regulations (collectively, "Takeover Laws") shall
become applicable to the transactions contemplated by this Agreement, PMG
Limited, its Board of Directors, and Shareholders shall use their reasonable
best efforts to grant such approvals and take such actions as are necessary so
that the transactions contemplated by this Agreement may be consummated as
promptly as practicable on the terms contemplated by this Agreement and
otherwise to minimize the effects of such Takeover Law on the transactions
contemplated by this Agreement.
5.9) Pooling Affiliates. Not less than five days prior to the Closing,
each of the Shareholders shall deliver to Zomax an executed affiliate letter in
the form attached hereto as Exhibit 5.9.
5.10) Restrictions on Zomax. Except as disclosed in Exhibit 5.10
hereof, Zomax covenants that during the period from the date of this Agreement
to the Closing (except as the Shareholders otherwise have consented in writing):
(a) The business of Zomax will be conducted only in the usual
and ordinary manner.
(b) No change will be made in Zomax's authorized or issued
corporate shares, or in its capital structure.
(c) Zomax will not sell, dispose, transfer, assign or
otherwise remove any of its assets except in the ordinary course of
business.
(d) Zomax will timely pay and discharge all bills and monetary
obligations and timely and properly perform all of its obligations and
commitments under all existing contracts and agreements pertaining to
or affecting Zomax.
5.11) Preserve Accuracy of Zomax' Representations and Warranties. Zomax
and Subsidiary shall refrain from taking any action, except with the prior
written consent of the Shareholders, which would render any representation,
warranty or agreement of Zomax or Subsidiary in this Agreement inaccurate or
breached as of the Closing. At all times prior to the Closing, Zomax will
promptly inform the Shareholders in writing with respect to any matters that
arise after the date of this Agreement which, if existing or occurring at the
date of this Agreement, would have been required to be set forth or described by
Zomax or Subsidiary in the Exhibits. Zomax promptly will notify the Shareholders
in writing of all lawsuits, claims, proceedings and investigations that may be
threatened, brought, asserted or commenced against Zomax or Subsidiary or their
respective officers or directors involving the transaction contemplated by this
Agreement or which might have a material adverse impact on Zomax or Subsidiary.
5.12) Expenses. Zomax and Subsidiary shall pay all expenses incurred by
them in connection with the transactions contemplated herein. The Shareholders
shall pay all expenses incurred by the Shareholders and PMG Limited in
connection with the transactions contemplated herein, including without
limitation the fees and expenses of the brokers, accountants and attorneys for
the Shareholders and PMG Limited. All fees and expenses of Arthur Andersen LLP
in connection with the transactions contemplated herein including without
limitation the audit of PMG Limited shall be paid by Zomax. The Shareholders
shall not permit PMG Limited to become liable for any expenses which the
Shareholders are obligated to pay pursuant to this Section 5.12.
ARTICLE 6.
CONDITIONS OF CLOSING; ABANDONMENT OF TRANSACTION
6.1) Conditions of Each Party's Obligation to Effect the Purchase. The
respective obligations of the Shareholders, PMG Limited, Zomax and Subsidiary to
consummate the Purchase are subject to the satisfaction upon or prior to the
Closing of the following conditions:
(a) No Injunctions or Restraints. No temporary restraining
order, preliminary or permanent injunction or other order issued by any
Governmental Entity of competent jurisdiction nor other legal restraint
or prohibition preventing the consummation of the Purchase or any other
transaction contemplated by this Agreement shall be in effect.
(b) Statutes. No action shall have been taken, and no statute,
rule, regulation or order shall have been enacted, promulgated or
issued or deemed applicable to the Purchase by any Governmental Entity
which would (i) make the consummation of the Purchase illegal or (ii)
render any party hereto unable to consummate the Purchase.
(c) Merger Closing. A closing shall have occurred, or shall
occur contemporaneously with the Closing, on the transactions described
in the Merger Agreement between Zomax, Subsidiary, Next Generation
Services LLC, Primary Marketing Group, Angelini, Fleury, Silzer, Berg,
and White.
6.2) Conditions of Obligations of Zomax and Subsidiary. The respective
obligations of Zomax and Subsidiary to consummate the Purchase are subject to
the satisfaction prior to or upon the Closing of the following conditions,
unless waived by Zomax.
(a) Representations and Warranties. The representations and
warranties of the Shareholders set forth in this Agreement shall be
true and correct in all respects as of the Closing Date, as though made
on and as of such date (provided that those representations or
warranties made as of a particular date need only be true and correct
as of such date), except for any inaccuracies which, individually or in
the aggregate, have not had, and would not have, a Material Adverse
Effect on PMG Limited.
(b) Performance of Obligations. The Shareholders, and PMG
Limited shall have performed in all material respects all obligations
and covenants required to be performed by them under this Agreement
prior to or as of the Closing Date.
(c) Consents. The consents, approvals and authorizations
described (or required to be described on Exhibits 3.18(b) and 4.5(b)
hereto) on Exhibits 3.18(b) and 4.5(b) hereto shall have been obtained
in form and in substance reasonably satisfactory to Zomax, except for
such consents, approvals and authorizations with respect to which the
failure to obtain would not have a Material Adverse Effect on either
PMG Limited or Subsidiary.
(d) Legal Opinion. Zomax shall have received a duly executed
opinion letter from the Shareholders' legal counsel dated as of the
Closing substantially in the form attached hereto as Exhibit 6.2(d).
(e) Pooling. Zomax shall have received the Zomax Accountant
Letter.
(f) Audited Financial Statements. Zomax shall have received
from Arthur Andersen LLP audited combined financial statements of PMG
Limited, Next Generation Services LLC and Primary Marketing Group for
the fiscal years ended December 31, 1996 and 1997 in form and substance
acceptable to Zomax.
(g) Affiliate Letters. Zomax shall have received the affiliate
letters from each of the Shareholders referred to in Section 5.9 above.
6.3) Conditions of Obligation of the Shareholders and PMG Limited. The
obligation of the Shareholders and PMG Limited to effect the Purchase is subject
to the satisfaction prior to or upon the Closing of the following conditions,
unless waived by the Shareholders:
(a) Representations and Warranties. The representations and
warranties of Zomax and Subsidiary set forth in this Agreement shall be
true and correct in all respects as of the Closing Date, as though made
on and as of such date (provided that those representations or
warranties made as of a particular date need only be true and correct
as of such date), except for any inaccuracies which, individually or in
the aggregate, have not had, and would not have, a Material Adverse
Effect on Zomax or Subsidiary.
(b) Performance of Obligations of Zomax and Subsidiary. Zomax
and Subsidiary shall have performed in all material respects all
obligations and covenants required to be performed by them under this
Agreement prior to or as of the Closing Date.
(c) Consents. The consents, approvals and authorizations
described (or required to be described on Exhibits 3.18(b) and 4.5(b)
hereto) on Exhibits 3.18(b) and 4.5(b) hereto shall have been obtained
in form and in substance reasonably satisfactory to the Shareholders,
except for such consents, approvals and authorizations with respect to
which the failure to obtain would not have a Material Adverse Effect on
the Shareholders.
(d) Legal Opinion. The Shareholders shall have received a duly
executed opinion letter from Zomax's legal counsel dated as of the
Closing substantially in the form attached hereto as Exhibit 6.3(d).
ARTICLE 7.
TERMINATION, AMENDMENT AND WAIVER
7.1) Termination. This Agreement may be terminated and the Purchase may
be abandoned at any time prior to the Closing, notwithstanding any requisite
approval of this Agreement and the Purchase by the shareholders of PMG Limited:
(a) by mutual written consent of each of the Shareholders and
Zomax; or
(b) by either the Shareholders or Zomax if the Closing shall
not have occurred on or before February 3, 1998; provided, however,
that the right to terminate this Agreement under this Section 7.1(b)
shall not be available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of, or resulted in,
the failure of the Closing to occur on or before such date; or
(c) by Zomax, if the Average Closing Price is less than $9.00;
or
(d) by Zomax, if (i) the Board of Directors of PMG Limited
withdraws, modifies or changes its recommendation of this Agreement or
the Purchase in a manner adverse to Zomax or shall have resolved to do
any of the foregoing or the Board of Directors of PMG Limited shall
have recommended to the Shareholders any Competing Transaction or
resolved to do so, or (ii) PMG Limited receives an unsolicited proposal
that constitutes a Competing Transaction and the Board of Directors of
PMG Limited, within two calendar days after such proposal is received
by PMG Limited, either fails to terminate discussions with the maker of
such proposal and its agents, or determines to accept, or takes no
position with respect to, such proposal; or
(e) by Zomax, if the Shareholders shall have failed to approve
the Purchase; or
(f) by Zomax, in the event of a material breach by the
Shareholders or PMG Limitedof any representation, warranty, covenant or
agreement contained herein which has not been cured or is not curable
by February 3, 1998; or
(g) by the Shareholders, in the event of a material breach by
Zomax or Subsidiary of any representation, warranty, covenant or
agreement contained herein which has not been cured or is not curable
by February 3, 1998.
7.2) Consequences of Termination.
(a) The Shareholders may pursue any remedies available at law
or equity in the event Zomax or Subsidiary terminates this Agreement
other than in compliance with Section 7.1 above, or in the event the
Shareholders terminate this Agreement in compliance with the provisions
of Section 7.1(g) above.
(b) Zomax and Subsidiary may pursue any remedies available at
law or equity in the event the Shareholders or PMG Limited terminates
this Agreement other than and in compliance with Section 7.1 above, or
in the event Zomax terminates this Agreement in compliance with the
provisions of Sections 7.1(d), (e) or (f) above.
7.3) Amendment. This Agreement may be amended by the parties hereto by
action taken by or on behalf of them or their respective Boards of Directors at
any time prior to the Closing. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.
7.4) Waiver. At any time prior to the Closing, any party hereto may (a)
extend the time for the performance of any obligation or other act of any other
party hereto, (b) waive any inaccuracy in the representations and warranties
contained herein or in any document delivered pursuant hereto and (c) waive
compliance with any agreement or condition contained herein. Any such extension
or waiver shall be valid if set forth in any instrument in writing signed by the
party or parties to be bound thereby.
ARTICLE 8
CLOSING
8.1) Documents to be Delivered by the Shareholders and PMG Limited. The
Shareholders and PMG Limited agree to deliver the following documents, duly
executed, as appropriate, to Zomax at the Closing:
(a) All certificates, schedules, exhibits, and attachments in
completed form and specifying the information required by the
provisions of this Agreement.
(b) A copy of the Certificate of Incorporation of PMG Limited
in the form issued by the Ireland Companies Registration Office and
certified as a true copy by a director of PMG Limited.
(c) A copy of the Memorandum and Articles of Association of
PMG Limited, certified as a true copy by a director of PMG Limited.
(d) A certified copy of the board resolution of PMG Limited
appointing new directors, causing existing directors to resign from
office, authorizing PMG Limited to enter into the transactions
contemplated herein, and approving the transfer of the PMG Limited
Shares from the Shareholders to Subsidiary all with effect from the
Closing.
(e) An opinion of the Shareholders' Counsel as required under
Section 6.2(d) above.
(f) An extract, certified by a director of PMG Limited, from
the share register of PMG Limited reflecting the Shareholders'
ownership of the PMG Limited Shares, and Irish Stock Transfer Forms
signed by each of the Shareholders.
(g) The Affiliate Letters as required under Section 6.2(h)
above.
(h) Letters of resignation by all directors of PMG Limited
acknowledging that they have no claim outstanding against PMG Limited
for compensation or loss of office, redundancy, unfair dismissal or
otherwise.
(i) Such other documents as Zomax may reasonably request.
8.2) Documents to be Delivered by Zomax and Subsidiary. Zomax and
Subsidiary agree to deliver the following documents, duly executed, as
appropriate, to the Shareholders at the Closing:
(a) Articles of Incorporation of Zomax and Subsidiary
certified by the Minnesota Secretary of State.
(b) Bylaws of Zomax and Subsidiary certified by Zomax's and
Subsidiary's Secretary.
(c) Certificate of Good Standing of Zomax and Subsidiary dated
no earlier than ten (10) days prior to the Closing Date.
(d) Certified copies of corporate resolutions of Zomax and
Subsidiary authorizing them to enter into the transactions contemplated
herein.
(e) Opinion of Zomax's counsel as specified in Section 6.2(d)
above.
(f) Such other documents as the Shareholders reasonably may
request to carry out the transactions contemplated under this
Agreement.
(h) Written instructions to Zomax's stock transfer agent to
deliver to each of the Shareholders one or more certificates
representing the number of shares of Zomax Common Stock to which such
Shareholder is entitled pursuant to the terms of Article 2 of this
Agreement.
ARTICLE 9.
INDEMNIFICATION
9.1) Indemnification by the Shareholders. Subject to the limitations
set forth in Section 9.2 below, the Shareholders, jointly and severally, shall
indemnify and hold Zomax harmless at all times from and after the date of this
Agreement, against and in respect of all damages, losses, costs and expenses
(including reasonable attorney fees) which Zomax and Subsidiary may suffer or
incur in connection with the breach by the Shareholders or PMG Limited of any of
their respective representations, warranties or covenants in this Agreement.
9.2) Limitation of Liability.
(a) Zomax shall not assert any claim under Section 9.1 above
unless and until such claims exceed an aggregate of $15,000.
(b) With the exception of claims resulting from the breach by
the Shareholders or PMG Limited of any of their respective
representations or warranties described in Sections 3.7 or 3.22 of this
Agreement, Zomax shall assert any claim under Section 9.1 above within
one year from the Closing or be forever barred from asserting such
claim.
(c) Zomax shall assert any claim under Section 9.1 above
resulting from the breach by the Shareholders or PMG Limited of any of
their respective representations or warranties described in Sections
3.7 or 3.22 of this Agreement within three years from the Closing or be
forever barred from asserting such claim.
(d) The rights of Zomax with respect to any claims arising
under Section 9.1 above shall be limited to recovery of actual losses,
costs and expenses (including reasonable attorneys' fees).
(e) The Shareholders shall not be obligated to indemnify Zomax
under Section 9.1 above to the extent of any amounts recovered (net of
all expenses of such recovery) or any amounts which could be recovered
with reasonable commercial efforts (net of all expenses of such
recovery) from the issuers of the insurance policies listed on Exhibit
3.15 hereto.
9.3) Indemnification by Zomax and Subsidiary.
(a) Subject to the limitations set forth in Section 9.4 below,
Zomax and Subsidiary shall jointly and severally indemnify and hold the
Shareholders harmless at all times from and after the date of this
Agreement, against and in respect of all losses, damages, costs and
expenses (including reasonable attorney fees) which the Shareholders
may suffer or incur in connection with breach by Zomax or Subsidiary of
any their respective representations, warranties or covenants in this
Agreement.
(b) Subject to the limitations set forth in Section 9.4 below,
Zomax and Subsidiary shall jointly and severally indemnify and hold the
Shareholders harmless against and in respect of all losses, damages,
costs and expenses (including reasonable attorney fees) which the
Shareholders may suffer or incur as a result of any liability or
obligation of Zomax or Subsidiary arising after the Closing Date.
9.4) Limitation of Liability.
(a) The Shareholders shall not assert any claim under Section
9.3 above unless and until such claims exceed an aggregate of $50,000.
(b) The Shareholders shall assert any claim under Section 9.3
above within one year from the Closing or be forever barred from
asserting such claim.
(c) The rights of the Shareholders with respect to any claims
arising under Section 9.3 above shall be limited to recovery of actual
losses, costs and expenses (including reasonable attorneys' fees).
9.5) Third Party Claims. If a claim by a third party is made against
any of the indemnified parties, and if any of the indemnified parties intends to
seek indemnity with respect to such claim under this Article, such indemnified
party shall promptly notify the indemnifying party of such claim. The
indemnifying party shall have thirty (30) days after receipt of the
above-mentioned notice to undertake, conduct and control, through counsel of
such party's own choosing (subject to the consent of the indemnified party, such
consent not to be unreasonably withheld) and at such party's expense, the
settlement or defense of it, and the indemnified party shall cooperate with the
indemnifying party in connection with such efforts; provided that: (i) the
indemnifying party shall not by this Agreement permit to exist any lien,
encumbrance or other adverse charge upon any asset of any indemnified party,
(ii) the indemnifying party shall permit the indemnified party to participate in
such settlement or defense through counsel chosen by the indemnified party,
provided that the fees and expenses of such counsel shall be borne by the
indemnified party, and (iii) the indemnifying party shall agree promptly to
reimburse the indemnified party for the full amount of any loss resulting from
such claim and all related expense incurred by the indemnified party pursuant to
this Article. So long as the indemnifying party is reasonably contesting any
such claim in good faith, the indemnified party shall not pay or settle any such
claim. If the indemnifying party does not notify the indemnified party within
thirty (30) days after receipt of the indemnified party's notice of a claim of
indemnity under this Article that such party elects to undertake the defense of
such claim, the indemnified party shall have the right to contest, settle or
compromise the claim in the exercise of the indemnified party's exclusive
discretion at the expense of the indemnifying party.
ARTICLE 10
OTHER AGREEMENTS
10.1) Further Documents and Assurances. At any time and from time to
time after the Closing Date, each party shall, upon request of another party,
execute, acknowledge and deliver all such further and other assurances and
documents, and will take such action consistent with the terms of this
Agreement, as may be reasonably requested to carry out the transactions
contemplated herein and to permit each party to enjoy its rights and benefits
hereunder.
10.2) Covenant Not to Compete.
(a) Covenant. In consideration of the transactions
contemplated herein and the consideration being paid hereunder, each of
the Shareholders agrees that for a period of eighteen months after the
Closing Date, he will not engage in any business that competes with the
business of PMG Limited as such business exists immediately after the
Closing (the "Business") anywhere in North America and Europe (the
"Territory") so long as PMG Limited conducts the Business in the
Territory. This covenant of noncompetition shall be interpreted to
prohibit, without limiting the generality of the foregoing, each of the
Shareholders from serving as a shareholder, partner, director, officer,
employee, agent of or independent contractor to, any person or entity
which directly or indirectly competes in the Territory with the
Business.
(b) Injunctive Relief and Reasonableness. Zomax, Subsidiary
and the Shareholders stipulate and agree that the remedy at law for
breach of this covenant not to compete would be inadequate and that
Zomax and Subsidiary shall be entitled to injunctive relief to enforce
this clause. Zomax, Subsidiary and the Shareholders further stipulate
and agree that the prohibitions contained herein are reasonable as to
time and area, and they specifically waive any objection to the
reasonableness of said prohibitions.
10.3) Compliance with Laws. PMG Limited and the Shareholders each
expressly acknowledges and agrees that certain laws of the United States, which
are applicable to Zomax, including but not limited to, the United States Foreign
Corrupt Practices Act, impose penalties on United States persons, firms, and
entities that participate directly or indirectly in making payments to any
foreign government official, foreign political party or candidate, or foreign
political office. Accordingly, PMG Limited and the Shareholders each hereby
represents, warrants and covenants that, in the performance of his or its
obligations under this Agreement, he or it shall not offer or promise to make
any payment in currency or property, to (i) any such government official or (ii)
any third person, firm or entity that in turn will make a payment to any such
government official.
10.4) Taxes. The Shareholders shall each be jointly and severally
responsible and liable for the prompt payment of all taxes (except the United
States corporate income taxes of Zomax), including without limitation, stamp
taxes and other transfer taxes, to all appropriate governmental agencies and
authorities in connection with the transactions contemplated by this Agreement.
Zomax shall not reimburse the Shareholders for the payment of any such taxes,
and Zomax will have no liabilities whatsoever for any such taxes. The
Shareholders shall each indemnify Zomax for any such taxes that may be assessed
or levied against Zomax which arise out of or result directly or indirectly from
the transactions contemplated by this Agreement or the business of PMG Limited
prior to the Closing.
10.5) Government Approvals.
(a) The Shareholders shall, at their sole cost and expense,
obtain any and all licenses, permits, approvals and authorizations
required by all appropriate governmental agencies and ministries in
order to effectuate the transactions contemplated by this Agreement.
(b) The Shareholders shall, at their sole cost and expense,
register with all appropriate governmental agencies and ministries the
Purchase and the transfer of the PMG Limited Shares to Subsidiary,
including without limitation the filing of the stock transfer forms
relating to the Purchase and transfer with the Irish Revenue
Commissioners, and shall, at no charge to Zomax or Subsidiary, assist
Zomax and Subsidiary in any such registration required of Zomax or
Subsidiary under applicable law, including without limitation, the
filing of the stock transfer forms with the Irish Revenue Commissioners
and the registration of the stock certificates relating to such
Purchase and transfer.
10.6) Irish Registration. The Shareholders shall provide all assistance
requested by Zomax and Subsidiary to bring PMG Limited into compliance with the
filing requirements of the Irish Companies Registration Office within sixty days
of the Closing. The Shareholders shall pay all costs and expenses in connection
with such efforts, including but not limited to filing fees, penalties, and fees
and costs associated with legal counsel.
10.7) NGS Limited. As soon as is practicable, but in no event later
than thirty days after the Closing, the Shareholders shall, at their sole cost
and expense, take or procure all necessary action to ensure that a letter is
written to the Irish Registrar of Companies requesting that Next Generation
Services Limited be struck off the Irish Register of Companies on the basis of
the fact that it has never traded and has no assets or liabilities. Zomax and
Subsidiary shall fully cooperate with the Shareholders to the extent that such
cooperation is required to achieve that Next Generation Services Limited be
struck off the Irish Register of Companies. If within one year following the
Closing, Next Generation Services Limited has not been struck off the Irish
Register of Companies, the Shareholders shall, at their sole cost and expense,
wind up the affairs of, dissolve, liquidate, and terminate the existence of Next
Generation Services Limited under the laws of Ireland at that time. Zomax and
Subsidiary shall cooperate fully with the Shareholders to the extent that such
cooperation is required to achieve such winding up, dissolution, liquidation,
and termination. In no event shall Zomax and Subsidiary be required to pay any
costs in connection with the Shareholders' obligations described in this Section
10.7, including but not limited to filing fees, penalties, and fees and costs
associated with legal counsel.
ARTICLE 11
GENERAL PROVISIONS
11.1) Notices. All notices, requests, claims, demands and other
communications to any party hereunder shall be in writing (including telecopy or
similar writing) and shall be deemed given if delivered personally, by
facsimile, by certified mail (postage prepaid, return receipt requested) or sent
by overnight courier (in each case, providing proof of delivery) to the parties
at the addresses and/or facsimile numbers set forth at the beginning of this
Agreement (or such other address or facsimile number for a party as shall be
specified in like notice).
11.2) Entire Agreement. This Agreement (including the Exhibits and
Schedules hereto) and the other documents referenced herein contain the entire
agreement between the parties with respect to the subject matter hereof and
supersede all prior arrangements and understandings, both written and oral, with
respect thereto.
11.3) Severability. It is the desire and intent of the parties that the
provisions of this Agreement be enforced to the fullest extent permissible under
the law and public policies applied in each jurisdiction in which enforcement is
sought. Accordingly, in the event that any provision of this Agreement would be
held in any jurisdiction to be invalid, prohibited or unenforceable for any
reason, such provision, as to such jurisdiction, shall be ineffective, without
invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of such provision in any other jurisdiction.
Notwithstanding the foregoing, if such provision could be more narrowly drawn so
as not to be invalid, prohibited or unenforceable in such jurisdiction, it
shall, as to such jurisdiction, be so narrowly drawn, without invalidating the
remaining provisions of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction.
11.4) Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, provided that no party may assign, delegate or otherwise
transfer any of its rights or obligations under this Agreement without the
consent of the other parties hereto.
11.5) Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement.
11.6) Enforcement. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of Minnesota or in a Minnesota state court, this being in
addition to any other remedy to which they are entitled at law or in equity.
11.7) Arbitration. This Agreement shall be governed by and construed in
accordance with the federal laws of the United States of America and the state
laws of the State of Minnesota, U.S.A. without regard to the conflicts of laws
and rules thereof. All disputes, controversies or differences arising out of or
in connection with this Agreement or the making thereof, including claims of
fraud in the inducement, which cannot be settled by mutual agreement shall be
finally settled by binding arbitration by a single arbitrator pursuant to the
Rules of Commercial Arbitration of the American Arbitration Association then in
effect and the New York Convention on the Recognition and Enforcement of Foreign
Arbitration Awards dated June 10, 1958, except as specified herein. The
appointing authority shall be the American Arbitration Association. The place of
arbitration shall be Minneapolis, Minnesota, U.S.A. Judgment upon the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof.
11.8) Counterparts; Effectiveness. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument. This
Agreement shall become effective when each party hereto shall have received
counterparts hereof signed by all of the other parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
ZOMAX OPTICAL MEDIA, INC.
By /s/ James T. Anderson
James T. Anderson, President
ZOMAX SERVICES, INC.
By /s/ James T. Anderson
James T. Anderson, President
PRIMARY MARKETING GROUP LIMITED
By /s/ Anthony Angelini
Anthony Angelini, Director
By /s/ Patrick Burke
Patrick Burke, Director
By /s/ Ronald Silzer
Ronald Silzer, Director
/s/ Anthony Angelini
Anthony Angelini
/s/ Brian Fleury
Brian Fleury
/s/ Ronald Silzer
Ronald Silzer
/s/ Andrew Berg
Andrew Berg
/s/ Blake White
Blake White
/s/ Patrick Burke
Patrick Burke
<PAGE>
EXHIBIT LIST
Exhibit Number Title
3.4 Shareholders
3.5 Subsidiaries
3.6(a) Financial Statements
3.7 Tax Returns
3.8 Assets
3.9 Trademarks
3.10 Patents
3.11(a) Contracts
3.11(b) Employee Plans
3.11(c) Collective Bargaining Agreements
3.11(d) Breaches of Material Contracts
3.12 Contracts with Related Parties
3.13 Predominant Customers
3.14 Product Liability Claims
3.15 Insurance Policies
3.16 Litigation
3.18(a) Breaches of Contracts
3.18(b) Consents
4.5(b) Breaches of Contracts, Required Consents
4.6 Zomax SEC Document Exceptions
5.2 Restrictions
5.9 Affiliate Letter
5.10 Restrictions on Zomax
6.2(d) Legal Opinion of Shareholder's Counsel
6.3(d) Legal Opinion of Zomax's Counsel
MERGER AGREEMENT
DATE: February 3, 1998
PARTIES: Zomax Optical Media, Inc.
5353 Nathan Lane
Minneapolis, MN 55442 ("Zomax")
Zomax Services, Inc.
5353 Nathan Lane
Minneapolis, MN 55442 ("Subsidiary")
Next Generation Services, LLC
2277 National Avenue
Hayward, CA 94545 ("NGS")
Primary Marketing Group
2277 National Avenue
Hayward, CA 94545 ("PMG")
Anthony Angelini
1413 Arbor Ave.
Los Altos, CA 94022 ("Angelini")
Brian Fleury
1750 Alameda Diablo Rd.
P.O. Box 397
Diablo, CA 94528 ("Fleury")
Ronald Silzer
527 Hale Street
Palo Alto, CA 94301 ("Silzer")
Andrew Berg
155 Camino Encanto
Danville, CA 94526 ("Berg")
R. Blake White
584 Morninghome Rd.
Danville, CA 94526 ("White")
RECITALS:
A. NGS is engaged in the business of providing product recycling,
turnkey, document fulfillment and related services to the software and computer
industries. PMG is in the business of providing sales and marketing assistance
as a manufacturer's representative with respect to the sale of floppy disks and
CD replication, software duplication, turnkey and fulfillment services.
B. All of the membership interests in NGS and all of the issued and
outstanding shares of capital stock of PMG are owned by the Shareholders.
C. Zomax is engaged in the business of manufacturing compact discs,
cassettes and diskettes as well as providing related services including package
design, graphics design, printing, packaging, warehousing, drop shipping and
Returned Merchandise Authorization processing and inventory recycling services.
D. All of the issued and outstanding capital stock of Subsidiary is
owned by Zomax.
E. The respective Boards of Directors or Boards of Managers of NGS,
PMG, Zomax and Subsidiary have determined that it is in the best interests of
the respective entities and their respective shareholders or members to combine
their respective businesses under common management and control. As a result,
the parties mutually desire that NGS and PMG be merged with and into Subsidiary
with Subsidiary being the surviving corporation, all upon the terms and subject
to the conditions set forth in this Agreement.
AGREEMENT:
The parties hereto, each intending to be legally bound, agree as
follows:
ARTICLE 1.
DEFINITIONS
As used in this Agreement and any exhibits hereto, the following words and
phrases shall have the meanings set forth below:
"Average Closing Price" shall mean the average closing price of one share of
Zomax Common Stock as quoted on the Nasdaq Stock Market for the thirty trading
days immediately prior to the Closing.
"Business" shall have the meaning ascribed to it in Section 11.2(a) below.
"CCC" shall mean the California Corporations Code, including specifically the
California General Corporation Law and the California Limited Liability Company
Act.
"Closing" shall mean the consummation of the transactions contemplated herein as
described in Section 2.4 below.
"Company Interests" shall mean all of the membership interests in NGS.
"Competing Transaction" shall mean any of the following: (i) any merger,
consolidation, share exchange, business combination, or other similar
transaction involving NGS or PMG (other than the transactions contemplated
hereby), (ii) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition of 5% or more of the assets of NGS or PMG, taken as a whole, in a
single transaction or series of transactions, (iii) any person having acquired
beneficial ownership or the right to acquire beneficial ownership of, or any
"group" (as such term is defined under Section 13(d) of the Exchange Act and the
rules and regulations promulgated thereunder) having been formed which
beneficially owns or has the right to acquire beneficial ownership of, 5% or
more of the capital stock of any of NGS or PMG, or (iv) any public announcement
of a proposal, plan or intention to do any of the foregoing or any agreement to
engage in any of the foregoing.
"Effective Time" shall have the meaning ascribed to it in Section 2.2 below.
"Employee Plans" shall have the meaning ascribed to it in Section 4.11(b) below.
"Environmental Laws" shall mean all federal, state and local laws, rules,
regulations, ordinances and orders that purport to regulate the release of
hazardous substances or other materials into the environment, or impose
requirements relating to environmental protection.
"ERISA" shall have the meaning ascribed to it in Section 4.11(b) below.
"Exchange Act" shall mean the Exchange Act of 1934, as amended.
"Financial Statements" shall have the meaning ascribed to it in Section 4.6(a)
below.
"Governmental Entity" shall mean any federal, state, local or foreign
governmental body, agency, official or authority (including courts,
administrative agencies, commissions, self-regulatory agencies or authorities or
other governmental authority or instrumentality).
"Knowledge" shall mean actual knowledge or constructive knowledge if a
reasonably prudent person in a like position would have known, or should have
known, the fact.
"Material Adverse Effect" shall mean a material adverse effect on the assets,
condition, affairs or prospects of the subject entity, financial or otherwise.
"MBCA" shall mean the Minnesota Business Corporation Act.
"Mergers" shall mean the mergers of NGS and PMG with and into Subsidiary with
Subsidiary being the surviving entity as described in this Agreement.
"NGS" shall mean Next Generation Services, LLC, a California limited liability
company.
"Number of NGS Exchange Shares" shall mean 748,800; provided, however, if the
Average Closing Price is less than $9.00 per share or more than $12.50 per
share, the Number of NGS Exchange Shares shall be determined by multiplying
748,800 by a fraction the numerator of which is $9.00 and the denominator of
which is the Average Closing Price.
"Patents" shall have the meaning ascribed to it in Section 4.10 below.
"PMG" shall mean Primary Marketing Group, a California corporation.
"PMG Exchange Ratio" shall mean 0.059568; provided, however, if the Average
Closing Price is less than $9.00 per share or more than $12.50 per share, the
PMG Exchange Ratio shall be determined by multiplying 0.059568 by a fraction the
numerator of which is $9.00 and the denominator of which is the Average Closing
Price.
"PMG Shares" shall mean all of the issued and outstanding shares of capital
stock of PMG.
"Product Liability Claims" shall have the meaning ascribed to it in Section 4.14
below.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Shareholders" shall refer collectively to Angelini, Fleury, Silzer, Berg, and
White.
"State Takeover Laws" shall have the meaning ascribed to it in Section 6.8
below.
"Subsidiary" shall mean Zomax Services, Inc., a Minnesota corporation.
"Surviving Corporation" shall have the meaning ascribed to it Section 2.1 below.
"Territory" shall have the meaning ascribed to it in Section 11.2(a) below.
"Trademarks" shall have the meaning ascribed to it in Section 4.9 below.
"Zomax" shall mean Zomax Optical Media, Inc., a Minnesota corporation.
"Zomax Accountant Letter" shall mean a letter from Arthur Andersen LLP addressed
to Zomax dated as of the Closing stating that the Mergers and the Purchase will
qualify as pooling of interest transactions under Opinion 16 of the Accounting
Principles Board and applicable SEC rules and regulations.
"Zomax Common Stock" shall mean the common stock of Zomax, no par value.
"Zomax Filed SEC Documents" shall have the meaning ascribed to it in Section 5.6
below.
"Zomax SEC Documents' shall have the meaning ascribed to it in Section 5.6
below.
ARTICLE 2.
THE MERGERS
2.1) The Mergers. Upon the terms and subject to the conditions set
forth in this Agreement, at the Effective Time, NGS and PMG shall be merged with
and into Subsidiary in accordance with the MBCA and the CCC, whereupon the
separate existence of NGS and PMG shall cease, and Subsidiary shall continue as
the "Surviving Corporation".
2.2) Articles of Merger; Effective Time. As soon as practicable after
satisfaction or, to the extent permitted hereunder, waiver of all conditions to
the Mergers set forth in Article 7 below, the parties hereto shall execute and
deliver the Articles of Merger, substantially in the form attached hereto as
Exhibit 2.2, and file such Articles of Merger, including the Plan of Merger
attached thereto, with the Secretary of State of the State of Minnesota, and
execute, deliver and file an Agreement and Certificates of Merger with the
Secretary of State of the State of California and make all other filings or
recordings required by the MBCA and the CCC in connection with the Mergers and
the transactions contemplated by this Agreement. The Mergers shall become
effective (a) at such time as the Articles of Merger are duly filed with the
Secretary of State of the State of Minnesota or (b) at such later time as may be
agreed by the parties in writing and specified in the Articles of Merger (the
"Effective Time").
2.3) Effect of Mergers. From and after the Effective Time, the
Surviving Corporation shall possess all the rights, privileges, powers and
franchises and be subject to all of the restrictions, disabilities and duties of
NGS, PMG and Subsidiary, all as provided under the MBCA and the CCC.
2.4) Closing. The closing of the Mergers and the Purchase will take
place at 10:00 a.m. on a date to be specified by the parties, which shall be no
later than the second business day after satisfaction or waiver of the
conditions set forth in Article 7 below at the offices of Fredrikson & Byron,
P.A. in Minneapolis, Minnesota, unless another date, time or place is agreed to
in writing by the parties hereto.
2.5) Articles of Incorporation; By-laws.
(a) At the Effective Time, the articles of incorporation of
Subsidiary, as in effect immediately prior to the Effective Time, shall
be the articles of incorporation of the Surviving Corporation until
thereafter amended as provided by law and such articles of
incorporation.
(b) At the Effective Time, the by-laws of Subsidiary, as in
effect immediately prior to the Effective Time, shall be the by-laws of
the Surviving Corporation until thereafter amended as provided by law,
the articles of incorporation of the Surviving Corporation and such
by-laws.
2.6) Directors and Officers. The directors of Subsidiary immediately
prior to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the articles of
incorporation and by-laws of the Surviving Corporation, and the officers of the
Subsidiary immediately prior to the Effective Time shall be the initial officers
of the Surviving Corporation, in each case until their respective successors are
duly elected or appointed and qualified.
ARTICLE 3.
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
3.1) Conversion of Securities. As of the Effective Time, by virtue of
the Mergers and without any action on the part of the holder of any Company
Interests or PMG Shares:
(a) each Shareholder's ownership of Company Interests as of
the Effective Time shall be converted into the right to receive such
number of shares of Zomax Common Stock as is equal to the product of
the Number of NGS Exchange Shares multiplied by such Shareholder's
percentage ownership of all Company Interests as set forth in Exhibit
4.4 hereto, and each PMG Share outstanding immediately prior to the
Effective Time shall be converted into the right to receive the number
of shares of Zomax Common Stock equal to the PMG Exchange Ratio; and
(b) each share of Subsidiary Common Stock issued and
outstanding immediately prior to the Effective Time shall be converted
into one share of common stock of the Surviving Corporation.
3.2) Rights of Holders of Company Interests and PMG Shares. On and
after the Effective Time, each outstanding certificate which immediately prior
to the Effective Time represented Company Interests or PMG Shares shall be
deemed for all purposes to evidence the right to ownership of and to represent
the number of whole shares of Zomax Common Stock into which such Company
Interests and PMG Shares shall have been converted, and the record holder of
such outstanding certificate shall, after the Effective Time, be entitled to
vote the shares of Zomax Common Stock into which such Company Interests and PMG
Shares have been converted on any matters on which the holders of record of
Zomax Common Stock, as of any date subsequent to the Effective Time, shall be
entitled to vote. At the Closing, the Shareholders shall surrender to Subsidiary
all certificates representing the Company Interests and the PMG Shares properly
endorsed and Zomax shall instruct its stock transfer agent to deliver to each
Shareholder a certificate representing that number of shares of Zomax Common
Stock into which that Shareholder's Company Interests and PMG Shares had been
converted. All shares of Zomax Common Stock issued upon surrender for exchange
of the Company Interests and PMG Shares in accordance with the terms hereof
shall be deemed to have been issued in full satisfaction of all rights
pertaining to the Company Interests and PMG Shares.
3.3) No Fractional Shares. No certificates representing fractional
shares of Zomax Common Stock will be issued pursuant to the previous Sections of
this Article 3 and any such fractional share interests will not entitle the
owner thereof to vote or any rights as a shareholder of Zomax. If the aggregate
number of shares of Zomax Common Stock to be issued to a Shareholder pursuant to
the preceding Sections of this Article 3 contains a fractional share, such
Shareholder shall receive in the aggregate one additional share of Zomax Common
Stock in exchange for such fractional share.
3.4) Legends. Each certificate or instrument representing Zomax Common
Stock to be issued hereunder may be endorsed with legends in substantially the
following forms:
(a) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT') AND ARE
RESTRICTED SECURITIES, AS DEFINED IN THE RULE 144 PROMULGATED UNDER THE
ACT. THE SECURITIES MAY NOT BE SOLD OR OFFERED FOR SALE OR OTHERWISE
DISTRIBUTED EXCEPT (1) IN CONJUNCTION WITH AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER SUCH ACT, OR (II) IN COMPLIANCE WITH
RULE 144, OR (III) PURSUANT TO AN OPINION OF COUNSEL SATISFACTORY TO
THE CORPORATION THAT SUCH REGISTRATION OR COMPLIANCE IS NOT REQUIRED AS
TO SUCH SALE, OFFER OR DISTRIBUTION."
(b) Any other legends required by Minnesota law or other
applicable blue sky or state securities laws.
Zomax need not register a transfer of any shares of Zomax Common Stock issued
hereunder, and may also instruct its transfer agent not to register a transfer
of any such shares, unless the conditions specified in the foregoing legends are
satisfied to the extent applicable.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES
OF THE SHAREHOLDERS
The Shareholders, jointly and severally, make the following
representations and warranties to Zomax and Subsidiary with the intention that
Zomax and Subsidiary may rely upon the same and acknowledge that the same shall
be true as of the Closing (as if made at the Closing).
4.1) Organization. NGS is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of California,
has all requisite power and authority, corporate and otherwise, to own its
properties and assets and conduct its business as it is now being conducted. PMG
is a corporation duly organized, validly existing and in good standing under the
laws of the State of California, has all requisite power and authority,
corporate and otherwise, to own its properties and assets and conduct its
business as it is now being conducted.
4.2) Qualification. NGS is qualified to do business and in good
standing as a foreign corporation in Massachusetts and in all other states or
jurisdictions in which qualification is required by the nature of its business
and in which the failure to so qualify would have a material adverse effect on
NGS. PMG is qualified to do business and in good standing in all states or
jurisdictions in which qualification is required by the nature of its business
and in which the failure to so qualify would have a material adverse effect on
PMG.
4.3) Corporate Authority. Each of the Shareholders, NGS, and PMG has
all requisite power and authority to execute, perform and carry out the
provisions of this Agreement. Each of the Shareholders, NGS, and PMG has taken
all requisite corporate action authorizing and empowering him or it to enter
into this Agreement and to consummate the transactions contemplated herein.
4.4) Capitalization. The Operating Agreement of NGS provides for one
class of ownership, consisting of the Company Interests. The authorized capital
stock of PMG consists of 2,000,000 shares of PMG Common Stock. As of the date of
this Agreement, there are outstanding 100% of the Company Interests, and 790,000
shares of PMG Common Stock and no other shares of capital stock of PMG. All
outstanding Company Interests and shares of PMG Common Stock have been duly
authorized and validly issued and are fully paid and nonassessable, and were
issued in compliance with all applicable federal and state securities laws.
Except as set forth in the preceding sentences of this Section 4.4, there are
outstanding (a) no Company Interests or other voting securities of NGS, (b) no
shares of PMG Common Stock or other voting securities of PMG, (c) no securities
convertible into or exchangeable for Company Interests or shares of PMG capital
stock or voting securities, and (d) no options, warrants or other rights to
acquire from NGS or PMG and no obligation of NGS or PMG to issue, any Company
Interests, capital stock, voting securities or securities convertible into or
exchangeable for Company Interests or capital stock or voting securities of NGS
or PMG. There are no outstanding obligations of NGS or PMG to repurchase, redeem
or otherwise acquire any NGS or PMG securities. All of the Company Interests and
shares of capital stock of PMG are owned by the Shareholders as set forth on
Exhibit 4.4 attached hereto.
4.5) Subsidiaries, Joint Ventures or Partnerships. Except as disclosed
in Exhibit 4.5 hereto, neither NGS nor PMG has any subsidiary, and neither NGS
nor PMG is a shareholder, member, partner or joint venturer with any other
person or legal entity. Any subsidiary disclosed in Exhibit 4.5 is a corporation
duly organized, validly existing and in good standing under the laws of the
state of its incorporation as set forth in Exhibit 4.5.
4.6) Financial Statements.
(a) Financial Statements. The Shareholders have furnished
Zomax a true and complete copy of the balance sheets and statements of
income for NGS and PMG for their respective fiscal years ended December
31, 1996 and 1997 (collectively the "Financial Statements"). Except as
set forth on Exhibit 4.6(a) hereto, the Financial Statements have been
prepared in conformance with generally accepted accounting principles
and procedures applied on a basis consistent with prior periods, and
fairly present and will fairly present in all material respects the
financial condition of NGS and PMG, respectively, as of the represented
dates thereof and the results of NGS's and PMG's respective operations
for the periods covered thereby. For purposes of this Agreement, the
Financial Statements shall be deemed to include any notes thereto.
(b) Books and Records. NGS's and PMG's respective books of
account and records (including customer order files, employment records
and production and manufacturing records) are complete, true and
correct in all material respects.
(c) No Adverse Changes. Since December 31, 1997, there has not
occurred or arisen (whether or not in the ordinary course of business):
(i) any material adverse change in the financial condition or
operations of NGS or PMG, (ii) any change in NGS's or PMG's accounting
methods or practices, (iii) except as disclosed in Exhibit 4.6(c)
hereto, any sale or transfer of any asset or any amendment of any
agreement of NGS or PMG except in the ordinary course of business, or
(iv) any labor trouble.
4.7) Tax Reports and Returns. Except as disclosed in Exhibit 4.7
hereto, each of NGS and PMG has timely filed all federal and applicable state,
local, and foreign tax or assessment reports and returns of every kind required
to be filed by them, including, without limitation, income tax, sales and use
tax, real estate tax, personal property tax and unemployment tax, and has duly
paid all taxes and other charges (including interest and penalties) due to or
claimed to be due by any taxing authorities. True and correct copies of the
reports and returns filed by NGS and PMG during the last three tax years have
been made available to Zomax. Where required, timely estimated payments or
installment payments of tax liabilities have been made to all governmental
agencies in amounts sufficient to avoid underpayment penalties or late payment
penalties applicable thereto.
4.8) Assets. Each of NGS and PMG is the owner of or otherwise has the
right to use all assets used by it in the conduct of its business as now
conducted and as reflected on the Financial Statements. Each of NGS and PMG
holds title to all assets owned by it free and clear of all liens, charges,
encumbrances or third party claims or interests of any kind whatsoever, except
as disclosed on the Financial Statements or in Exhibit 4.8 hereto.
4.9) Trademarks. The tradenames, trademarks and service mark
registrations and applications, common law trademarks, copyrights and copyright
registrations and applications listed on Exhibit 4.9 hereto (the "Trademarks")
constitute all of the tradenames, trademarks and service mark registrations and
applications, common law trademarks, copyrights and copyright registrations and
applications used by NGS and PMG. To the Shareholders' knowledge, except as set
forth on Exhibit 4.9 hereto, NGS and PMG have good title to, and the full and
unrestricted right to use the Trademarks free and clear of all liens, charges,
encumbrances, or third party claims or interests of any kind whatsoever. To the
Shareholders' knowledge, except as disclosed in Exhibit 4.9 hereto, such use of
the Trademarks does not infringe on any rights of any other person or entity;
the Trademarks are not licensed to or licensed from any other person or entity;
and there have been no claims of any infringement regarding such Trademarks or
such use thereof.
4.10) Patents. Exhibit 4.10 hereto contains a true and complete
description of all domestic and foreign letters patent, patent applications and
patent and know-how licenses used by NGS and PMG in the conduct of their
respective businesses as now conducted (the "Patents"). To the Shareholders'
knowledge, except as set forth on Exhibit 4.10 hereto, NGS and PMG have good
title to the Patents, and the full and unrestricted right to use the Patents
free and clear of all liens, charges, encumbrances or third party claims or
interests of any kind whatsoever. To the Shareholders' knowledge, except as set
forth on Exhibit 4.10 hereto, the nature of the inventions claimed in the
Patents do not infringe on any rights of any other person or entity.
4.11) Agreements, Contracts and Commitments.
(a) Material Contracts. Exhibit 4.11(a) contains an accurate
and complete list of all agreements, contracts, leases and commitments
not yet fully performed by the parties thereto to which either of NGS
or PMG is a party and which are not disclosed in any other Exhibit
hereto and which involve more than (i) $5,000 singly; or (ii) in the
case of related agreements, contracts, leases and commitments, $15,000
in the aggregate.
(b) Employee Plans. NGS and PMG do not maintain any "Employee
Plans" except as set forth in the employee policy manual attached as
Exhibit 4.11(b) hereto. "Employee Plans" means any pension, retirement,
disability, medical, dental, or other health insurance plan, life
insurance or other death benefit plan, profit sharing deferred
compensation, stock option, bonus or other incentive plan, vacation
benefit plan, severance plan, or other employee benefit plan or
arrangement including, without limitation, any "pension plan" as
defined in Section 3(2) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), and any "welfare plan" as defined in
Section 3(l) of ERISA, whether or not any of the foregoing is funded,
(i) to which NGS or PMG is a party or by which either of them is bound,
or (ii) with respect to which NGS or PMG has made any payments or
contributions or may otherwise have any liability (including any such
plan or other arrangement formerly maintained by NGS or PMG).
(c) Union and Employment Contracts and Other Employment
Matters.
(i) Except as set forth on Exhibit 4.11(c) hereto,
neither NGS nor PMG is a party to any collective bargaining
agreement or any other written employment agreement, nor is
NGS or PMG a party to any other contract or understanding
(oral or written) that contains any severance pay liabilities
or obligations, except for accrued, unused vacation pay or
accrued and unused sick leave pay.
(ii) Except as set forth in Exhibit 4.11(c) hereto,
neither NGS nor PMG has, or on the Closing Date will have, any
obligations to its managers, directors, officers, employees or
agents other than obligations arising in the ordinary course
of business on account of wages, salaries and commissions for
prior services performed or business produced.
(d) Breach. Except as disclosed in Exhibit 4.11(d) hereto,
each of NGS, and PMG has performed all material obligations required to
be performed by it to date under any material contract, commitment, or
arrangement of any kind to which it is a party or by which it is bound;
and neither NGS nor PMG nor any other party is in default under any
material contract, commitment, or arrangement of any kind to which NGS
or PMG is a party or by which NGS or PMG is bound. Except as disclosed
in Exhibit 4.11(d) no event has occurred which after the giving of
notice or the lapse of time or otherwise would constitute a default
under, or result in a breach of by NGS or PMG or any other party, any
contract, commitment, or arrangement to which NGS or PMG is a party or
by which NGS or PMG is bound.
(e) Copies of Contracts; Terms and Binding Effect. True,
complete and correct copies of all agreements, contracts, leases and
commitments that are or should be disclosed in Exhibit 4.11(a) hereto,
and other documents referred to in the Exhibits have been delivered or
made available to Zomax; there are no amendments to or modifications
of, or agreements of the parties relating to, any such contracts,
commitments, and understandings which have not been delivered or made
available to Zomax; and each such contract, commitment, or
understanding, as amended, is considered valid and binding on the
parties to it in accordance with its respective terms, and the
transaction contemplated by this Agreement will not result in the
violation or breach of any such material contract, commitment, or
understanding.
4.12) Contracts with Related Parties. Except as disclosed in Exhibit
4.12 hereto, there are no agreements or contracts between either NGS or PMG and
any of their respective employees, agents, officers, directors, managers,
members or shareholders.
4.13) Predominant Customers. Except as disclosed in Exhibit 4.13
hereto, no single customer of NGS or PMG accounted for over ten percent (10%) of
NGS's or PMG's respective revenues during the fiscal year ending December 31,
1997.
4.14) Product Liability Claims. All products which NGS and PMG have
sold have been merchantable, free from material defects in material or
workmanship, and suitable for the purpose for which they were sold. Except as
set forth in Exhibit 4.14 hereto, NGS and PMG have not received any claims based
upon alleged breach of product warranty, strict liability in tort, negligent
manufacture of product, or any other allegation of liability arising from NGS's
or PMG's manufacture or sale of their respective products (hereafter
collectively referred to as "Product Liability Claims"), during the twenty four
months immediately preceding the date hereof which Product Liability Claims
exceeds $10,000. All liability from any actual and potential Product Liability
Claims, whether or not asserted on or before the Closing Date, are fully
covered, except for the deductible amounts, including all costs of defense and
investigation, by NGS's or PMG's product liability insurance policies.
4.15) Insurance. The Shareholders have furnished Zomax a true and
complete copy of each insurance policy that NGS or PMG has maintained during the
six (6) years prior to the Closing Date. Neither NGS nor PMG has been refused
any insurance coverage applied for or sought by any of them other than in the
ordinary course of business. Exhibit 4.15 hereto contains a true and correct
list of all insurance policies currently maintained by NGS and PMG.
4.16) Litigation and Related Matters. Except as disclosed on Exhibit
4.16 hereto, there is no pending or threatened litigation, proceeding, or
investigation (including any environmental, building or safety investigation)
against NGS or PMG, nor is NGS or PMG subject to any existing judgment, order,
decree, or other action affecting the operation of its business or which would
prevent, impede, or make illegal the consummation of the transactions
contemplated in this Agreement, or which would have a material adverse effect on
NGS or PMG.
4.17) Laws and Regulations. To the Shareholders knowledge, NGS and PMG
have complied, in all material respects, and are in compliance, with applicable
laws, statutes, orders, rules, regulations and requirements promulgated by
governmental or other authorities relating to its business, including, without
limitation, any relating to wages, hours, hiring, promotion, retirement, working
conditions, nondiscrimination, health, safety, pensions, benefits, the
production, processing, advertising or sale of products, trade regulation,
antikickback, export licensing, antitrust, antiboycott, warranties, or control
of foreign exchange; and neither NGS nor PMG has received any notice of any sort
of alleged violation of any such statute, order, rule, regulation or
requirement.
4.18) Breaches of Contracts; Required Consents. Neither the execution
and delivery of this Agreement by the Shareholders, NGS or PMG, nor compliance
by any of them with the terms and provisions of this Agreement will:
(a) Conflict with or result in a breach of (i) any of the
terms, conditions or provisions of the Articles of Organization,
Articles of Incorporation, Operating Agreement, Bylaws or other
governing instruments of NGS or PMG, (ii) any judgment, order, decree
or ruling to which NGS or PMG is a party, (iii) any injunction of any
court or governmental authority to which any of them is subject, or
(iv) except as disclosed in Exhibit 4.18(a), any agreement, contract or
commitment which is material to NGS or PMG; or
(b) Except as disclosed in Exhibit 4.18(b) hereto, require the
affirmative consent or approval of any third party.
4.19) Binding Obligation. This Agreement constitutes the legal, valid
and binding obligation of the Shareholders, NGS and PMG in accordance with the
terms hereof. None of the Shareholders, NGS or PMG is subject to any charter,
mortgage, lien, lease, agreement, contract, instrument, law, rule, regulation,
order, judgment or decree, or any other restriction of any kind or character,
which would prevent the consummation of the transactions contemplated in this
Agreement.
4.20) Completeness of Disclosures. None of the representations or
warranties made by the Shareholders in this Agreement or the Exhibits, and no
written statement, certificate or Exhibit furnished or to be furnished by or on
behalf of the Shareholders, NGS or PMG to Zomax or its agents pursuant hereto,
or in connection with the transaction contemplated by this Agreement, contains
or will contain any untrue statement of a material fact or omits or will omit
any material fact the omission of which would be misleading. The Exhibits to
this Agreement, where provided by or on behalf of the Shareholders, NGS or PMG
completely and correctly present the information required by this Agreement to
be set forth in them.
4.21) Investment Representations.
(a) The shares of Zomax Common Stock acquired by the
Shareholders will be acquired for each Shareholder's own account, for
investment and not with a view to, or for resale in connection with,
any distribution or public offering thereof within the meaning of the
Securities Act.
(b) Each Shareholder understands that (i) the shares of Zomax
Common Stock being issued hereunder have not been registered under the
Securities Act by reason of their issuance in a transaction exempt from
the registration and prospectus delivery requirements of the Securities
Act pursuant to Section 4(2) thereof, (ii) Zomax has no present
intention of registering such shares, (iii) such shares must be held by
the Shareholders indefinitely, and (iv) the Shareholders must therefore
bear the economic risk of such shares indefinitely, unless a subsequent
disposition thereof is registered under the Securities Act or is exempt
from registration thereunder.
4.22) Environmental Matters. NGS and PMG are in compliance with all
Environmental Laws, except for any noncompliance that, either singly or in the
aggregate, could not have a Material Adverse Effect on NGS or PMG. NGS and PMG
have made available to Zomax copies of all documents concerning any
environmental or health or safety matter adversely affecting NGS or PMG and
copies of any environmental audits or risk assessments, site assessments,
documentation regarding off-site disposal of hazardous materials, spill control
plans and material correspondence with any Governmental Entity regarding the
foregoing.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF ZOMAX AND SUBSIDIARY
Zomax and Subsidiary make the following representations and warranties
to the Shareholders with the intention that the Shareholders may rely upon the
same, and acknowledge that the same shall be true as of the Closing Date (as if
made at the Closing).
5.1) Organization. Zomax and Subsidiary are both corporations duly
organized, validly existing and in good standing under the laws of the State of
Minnesota, have all requisite power and authority, corporate and otherwise, to
own their properties and assets and conduct their businesses as they are now
being conducted.
5.2) Qualification. Zomax is qualified to do business and in good
standing as a foreign corporation in Colorado, Florida, and Indiana and in all
other states or jurisdictions in which qualification is required by the nature
of its business and in which the failure to so qualify would have a material
adverse effect on Zomax.
5.3) Corporate Authority. Zomax and Subsidiary have all requisite power
and authority to execute, perform and carry out the provisions of this
Agreement. Zomax and Subsidiary have taken all requisite corporate action
authorizing and empowering them to enter into this Agreement and to consummate
the transactions contemplated herein.
5.4) Capitalization. As of the date of this Agreement, Zomax is
authorized to issue 25,000,000 shares, of which 15,000,000 are shares of Zomax
Common Stock and 10,000,000 are undesignated shares; has issued and has
outstanding 4,454,641 shares of Zomax Common Stock; has issued warrants for the
purchase of 140,000 shares of Zomax Common Stock; and has issued options to
purchase 192,000 shares of Zomax Common Stock, and reserved an additional
900,602 shares of Zomax Common Stock, pursuant to employee benefit plans. All
outstanding shares of Zomax Common Stock have been duly authorized and validly
issued and are fully paid and nonassessable, and were issued in compliance with
all applicable federal and state securities laws. Except as set forth in the
preceding sentences of this Section 5.4 or in the Zomax SEC Documents or the
Zomax Filed SEC Documents, there are outstanding no shares of Zomax Common Stock
or other voting securities of Zomax, no securities convertible into or
exchangeable for shares of Zomax Common Stock or voting securities, and no
options, warrants or other rights to acquire from Zomax and no obligation of
Zomax to issue, any capital stock, voting securities or securities convertible
into or exchangeable for capital stock or voting securities of Zomax. There are
no outstanding obligations of Zomax to repurchase, redeem or otherwise acquire
any Zomax securities.
5.5) Breaches of Contracts; Required Consents. Neither the execution
and delivery of this Agreement by Zomax or Subsidiary, nor compliance by Zomax
and Subsidiary with the terms and provisions of this Agreement will:
(a) Conflict with or result in a breach of (i) any of the
terms, conditions or provisions of the Articles of Incorporation,
Bylaws or other governing instruments of Zomax or Subsidiary, (ii) any
judgment, order, decree or ruling to which Zomax or Subsidiary is a
party, (iii) any injunction of any court or governmental authority to
which either of them is subject, or (iv) any agreement, contract or
commitment which is material to Zomax or Subsidiary; or
(b) Except as disclosed in Exhibit 5.5(b) hereto, require the
affirmative consent or approval of any third party.
5.6) SEC Documents. Zomax has filed all required reports, schedules,
forms, statements and other documents with the SEC since December 27, 1996 (the
"Zomax SEC Documents"). As of their respective dates, the Zomax SEC Documents
complied as to form in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such Zomax SEC
Documents, and except as set forth on Exhibit 5.6 hereto, none of the Zomax SEC
Documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Except to the extent that information contained in any Zomax SEC
Document has been revised or superseded by a later-filed Zomax SEC Document,
filed and publicly available prior to the date of this Agreement (the "Zomax
Filed SEC Documents"), as of the date of this Agreement, except as set forth on
Exhibit 5.6 hereto, none of the Zomax SEC Documents contains any untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The financial
statements of Zomax included in the Zomax SEC Documents complied as of their
respective dates of filing with the SEC as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles (except, in the case of unaudited statements, as
permitted by Form 10-Q of the Exchange Act) applied on a consistent basis during
the periods involved (except as may be indicated in the notes thereto) and
fairly present the consolidated financial position of Zomax as of the dates
thereof and the consolidated results of its operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments). Except as set forth in the Zomax Filed SEC
Documents, and except for liabilities and obligations incurred in the ordinary
course of business consistent with past practice, Zomax has no liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
required by generally accepted accounting principles to be set forth on a
consolidated balance sheet of Zomax or in the notes thereto which, individually
or in the aggregate, could reasonably be expected to have a Material Adverse
Effect on Zomax.
5.7) Absence of Certain Changes of Events. Except as disclosed in the
Zomax Filed SEC Documents, and except as expressly contemplated by this
Agreement, since the date of the most recent financial statements included in
the Zomax Filed SEC Documents, the Company has conducted its business only in
the ordinary course, and there has not been:
(a) any event, occurrence or development of a state of
circumstances of facts which has had a Material Adverse Effect on
Zomax;
(b) any declaration, setting aside or payment of any dividend
or other distribution with respect to any shares of Zomax Common Stock,
or any repurchase, redemption or other acquisition by Zomax of any
outstanding shares of Zomax Common Stock or other securities of, or
other ownership interests in, Zomax;
(c) any split, combination or reclassification of any of Zomax
Common Stock or any issuance or the authorization of any issuance of
any other securities in respect of, in lieu of or in substitution for
shares of Zomax Common Stock;
(d) any incurrence, assumption or guarantee by Zomax of any
indebtedness for borrowed money other than in the ordinary course of
business and in amounts and on terms consistent with past practices
(including any such borrowings under its existing bank credit
facility);
(e) any damage, destruction or other casualty loss (whether or
not covered by insurance) affecting the business assets of Zomax which,
individually or in the aggregate, has had or would reasonably be
expected to have a Material Adverse Effect on Zomax;
(f) any change in any method of accounting or accounting
practice by Zomax, except for any such change required by reason of a
concurrent change in generally accepted accounting principles; or
(g) any agreement to do any of the foregoing.
5.8) Binding Obligation. This Agreement constitutes the legal, valid
and binding obligation of Zomax and Subsidiary in accordance with the terms
hereof. Neither Zomax nor Subsidiary is subject to any charter, mortgage, lien,
lease, agreement, contract, instrument, law, rule, regulation, order, judgment
or decree, or any other restriction of any kind or character, which would
prevent the consummation of the transactions contemplated in this Agreement.
5.9) Completeness of Disclosures. None of the representations or
warranties made by Zomax or Subsidiary in this Agreement or the Exhibits, and no
written statement, certificate or Exhibit furnished or to be furnished by or on
behalf of Zomax or Subsidiary to the Shareholders or their agents pursuant
hereto, or in connection with the transaction contemplated by this Agreement,
contains or will contain any untrue statement of a material fact or omits or
will omit any material fact the omission of which would be misleading. The
Exhibits to this Agreement, where provided by or on behalf of Zomax and
Subsidiary, completely and correctly present the information required by this
Agreement to be set forth in them.
5.10) Issuance of Zomax Common Stock. The Zomax Common Stock issued to
the Shareholders pursuant to this Agreement shall be, when issued in accordance
with the terms hereof, duly authorized, validly issued, fully-paid,
nonassessable, and issued in compliance with all applicable federal and state
securities laws.
ARTICLE 6.
CONDUCT PRIOR TO CLOSING
6.1) Access to Information. During the period prior to the Closing, the
Shareholders, NGS and PMG shall give to Zomax and its attorneys, accountants or
other authorized representatives, full access to all of the property, books,
contracts, commitments and records of NGS and PMG and shall furnish to Zomax
during such period all such information concerning its business as Zomax
reasonably may request. During the period prior to the Closing, Zomax shall give
to the Shareholders and their attorneys, accountants or other authorized
representatives, full access to the property, books, contracts, commitments and
records of Zomax and shall furnish to the Shareholders during such period all
such information concerning its business as the Shareholders reasonably may
request.
6.2) Restrictions on NGS and PMG. Except as disclosed in Exhibit 6.2
hereof, the Shareholders, NGS and PMG covenant that during the period from the
date of this Agreement to the Closing (except as Zomax otherwise has consented
in writing):
(a) The business of NGS and PMG will be conducted only in the
usual and ordinary manner.
(b) No change will be made in the ownership of Company
Interests or PMG's authorized or issued corporate shares, or in their
respective capital structures.
(c) No increase will be made in the compensation payable to or
to become payable to any employee, officer, director, manager,
shareholder or member of NGS or PMG, and no bonus payment will be made
by NGS or PMG to any such employee, officer, director, manager,
shareholder or member.
(d) Neither NGS nor PMG will embark upon any new venture,
enter into or amend any leases or agreements, purchase any fixed assets
or equipment, amend any loan agreements, guarantee any obligation or
increase any existing lines of credit.
(e) Neither NGS nor PMG will sell, dispose, transfer, assign
or otherwise remove any of their respective assets except in the
ordinary course of business.
(f) NGS and PMG will timely pay and discharge all bills and
monetary obligations and timely and properly perform all of their
respective obligations and commitments under all existing contracts and
agreements pertaining to or affecting NGS or PMG.
(g) The Shareholders, NGS and PMG shall use their best efforts
to preserve the business organizations and assets of NGS and PMG and to
keep available to Zomax the services of NGS's and PMG's present
employees, and not to impair relationships with suppliers, customers
and others having business relations with NGS or PMG.
(h) The Shareholders, NGS and PMG will not take any action
that would prevent Zomax from accounting for the business combinations
to be effected by the Mergers and the Purchase as a pooling of
interests.
6.3) Preserve Accuracy of Representations and Warranties. The
Shareholders, NGS and PMG shall refrain from taking any action, except with the
prior written consent of Zomax, which would render any representation, warranty
or agreement of the Shareholders in this Agreement inaccurate or breached as of
the Closing. At all times prior to the Closing, the Shareholders will promptly
inform Zomax in writing with respect to any matters that arise after the date of
this Agreement which, if existing or occurring at the date of this Agreement,
would have been required to be set forth or described in the Exhibits. The
Shareholders promptly will notify Zomax in writing of all lawsuits, claims,
proceedings and investigations that may be threatened, brought, asserted or
commenced against NGS or PMG or their respective officers, managers or directors
involving the transaction contemplated by this Agreement or which might have a
material adverse impact on NGS or PMG.
6.4) No Solicitation of Transactions. The Shareholders, NGS and PMG
shall use their respective commercially reasonable efforts to cause NGS's and
PMG's officers, directors, managers, employees, agents and representatives
(including, without limitation, any investment banker, attorney or accountant
retained by it) not to initiate, solicit or knowingly encourage, directly or
indirectly (including by way of furnishing information or assistance), or take
any other action to facilitate knowingly, any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to, any
Competing Transaction, or enter into or continue discussions or negotiations
with any person or entity in furtherance of such inquiries or to obtain a
Competing Transaction, or agree to or endorse any Competing Transaction, or
authorize any of their respective officers, directors, managers or employees or
any investment banker, financial advisor, attorney, accountant or other
representative retained by them to take any such action, and the Shareholders
shall notify Zomax of all inquiries or proposals which it receives relating to
any of such matters
6.5) Accountant Letters. Zomax and Subsidiary shall use their
respective best efforts to cause the Zomax Accountant Letter to be delivered to
Zomax.
6.6) Public Announcements. The Shareholders, NGS and PMG will not make
any press release or public statement with respect to this Agreement and the
transaction contemplated hereby. Notwithstanding the foregoing, but only to the
extent that prior written consent has been obtained from Zomax, which will not
unreasonably withhold such consent, the Shareholders, NGS and PMG may: (i)
discuss the transaction contemplated by this Agreement for legitimate business
purposes; or (ii) in the event that this Agreement is terminated pursuant to
Article 8 herein, disclose that this Agreement has been terminated. If any of
the Shareholders becomes an employee of Zomax or Subsidiary, such Shareholder
may discuss this Agreement and the transaction contemplated hereby in accordance
with any and all policies of Zomax and Subsidiary. Zomax may issue any press
release or make any public statement with respect to this Agreement and the
transactions contemplated hereby as may be required by applicable law or any
listing agreement on a national security exchange or to reasonably limit
liability for failure to make a disclosure. Zomax will issue a press release
upon the execution of this Agreement.
6.7) Appropriate Action; Consents; Filings.
(a) The Shareholders, NGS, PMG, Zomax and Subsidiary shall use
their respective best efforts to (i) take, or cause to be taken, all
appropriate action, and do, or cause to be done, all things necessary,
proper or advisable under applicable law or required to be taken by any
Governmental Entity or otherwise to consummate the Mergers, the
Purchase and the transactions contemplated by this Agreement as
promptly as practicable, (ii) obtain from any Governmental Entities any
consents, licenses, permits, waivers, approvals, authorizations or
orders required to be obtained or made by the parties hereto in
connection with the authorization, execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby,
including, without limitation, the Mergers and the Purchase, and (iii)
as promptly as practicable, make all necessary filings, and thereafter
make any other required submissions, with respect to this Agreement,
the Mergers and the Purchase required under any applicable law.
(b) (i) The Shareholders, NGS and PMG shall give any notices
to third parties, and use their reasonable best efforts to obtain any
third party consents, (A) necessary to consummate the Mergers, the
Purchase and the transactions contemplated by this Agreement, (B)
disclosed or required to be disclosed in the exhibits to this Agreement
or (C) required to prevent a Material Adverse Effect to NGS or PMG.
(ii) In the event that any third party consent
described in subsection (b)(i) above is not obtained, the Shareholders,
NGS and PMG shall use their respective reasonable best efforts, and
shall take any such actions reasonably requested by Zomax, to minimize
any adverse effect upon Zomax, Subsidiary, NGS and PMG and their
respective businesses resulting, or which could reasonably be expected
to result after the Effective Time, from the failure to obtain such
consent.
(c) From the date of this Agreement until the Effective Time,
each party shall promptly notify the other parties of any pending or,
to the actual knowledge of the executive officers of the first party,
threatened action, proceeding or investigation by any Governmental
Entity or any other person (i) challenging or seeking material damages
in connection with the Mergers or the Purchase or (ii) seeking to
restrain or prohibit the consummation of the Mergers or the Purchase or
otherwise limit the right of Zomax or, to the knowledge of such first
party, any subsidiary of Zomax to own or operate all or any portion of
the businesses or assets of NGS and PMG, which in any case is
reasonably likely to have a Material Adverse Effect on Zomax,
Subsidiary, NGS or PMG.
6.8) State Statutes. If any state "control share acquisition,"
"anti-takeover" or other similar statutes and regulations (collectively, "State
Takeover Laws") shall become applicable to the transactions contemplated by this
Agreement, each of NGS and PMG, as the case may be, and their respective Boards
of Managers/Directors, Members and Shareholders shall use their reasonable best
efforts to grant such approvals and take such actions as are necessary so that
the transactions contemplated by this Agreement may be consummated as promptly
as practicable on the terms contemplated by this Agreement and otherwise to
minimize the effects of such State Takeover Law on the transactions contemplated
by this Agreement.
6.9) Pooling Affiliates. Not less than five days prior to the Effective
Time, each of the Shareholders shall deliver to Zomax an executed affiliate
letter in the form attached hereto as Exhibit 6.9.
6.10) Restrictions on Zomax. Except as disclosed in Exhibit 6.10
hereof, Zomax covenants that during the period from the date of this Agreement
to the Closing (except as the Shareholders otherwise have consented in writing):
(a) The business of Zomax will be conducted only in the usual
and ordinary manner.
(b) No change will be made in Zomax's authorized or issued
corporate shares, or in its capital structure.
(c) Zomax will not sell, dispose, transfer, assign or
otherwise remove any of its assets except in the ordinary course of
business.
(d) Zomax will timely pay and discharge all bills and monetary
obligations and timely and properly perform all of its obligations and
commitments under all existing contracts and agreements pertaining to
or affecting Zomax.
6.11) Preserve Accuracy of Zomax' Representations and Warranties. Zomax
and Subsidiary shall refrain from taking any action, except with the prior
written consent of the Shareholders, which would render any representation,
warranty or agreement of Zomax or Subsidiary in this Agreement inaccurate or
breached as of the Closing. At all times prior to the Closing, Zomax will
promptly inform the Shareholders in writing with respect to any matters that
arise after the date of this Agreement which, if existing or occurring at the
date of this Agreement, would have been required to be set forth or described by
Zomax or Subsidiary in the Exhibits. Zomax promptly will notify the Shareholders
in writing of all lawsuits, claims, proceedings and investigations that may be
threatened, brought, asserted or commenced against Zomax or Subsidiary or their
respective officers or directors involving the transaction contemplated by this
Agreement or which might have a material adverse impact on Zomax or Subsidiary.
6.12) Expenses. Zomax and Subsidiary shall pay all expenses incurred by
them in connection with the transactions contemplated herein. The Shareholders
shall pay all expenses incurred by the Shareholders, NGS and PMG in connection
with the transactions contemplated herein, including without limitation the fees
and expenses of Jack Krause and the accountants and attorneys for the
Shareholders, NGS and PMG. All fees and expenses of Arthur Andersen LLP in
connection with the transactions contemplated herein including without
limitation the audits of NGS and PMG shall be paid by Zomax. The Shareholders
shall not permit NGS or PMG to become liable for any expenses which the
Shareholders are obligated to pay pursuant to this Section 6.12.
ARTICLE 7.
CONDITIONS OF CLOSING; ABANDONMENT OF TRANSACTION
7.1) Conditions of Each Party's Obligation to Effect the Merger. The
respective obligations of the Shareholders, NGS, PMG, Zomax and Subsidiary to
consummate the Merger are subject to the satisfaction upon or prior to the
Closing of the following conditions:
(a) No Injunctions or Restraints. No temporary restraining
order, preliminary or permanent injunction or other order issued by any
Governmental Entity of competent jurisdiction nor other legal restraint
or prohibition preventing the consummation of the Merger, Purchase or
any other transaction contemplated by this Agreement shall be in
effect.
(b) Statutes. No action shall have been taken, and no statute,
rule, regulation or order shall have been enacted, promulgated or
issued or deemed applicable to the Merger or Purchase by any
Governmental Entity which would (i) make the consummation of the Merger
or Purchase illegal or (ii) render any party hereto unable to
consummate the Merger or Purchase.
(c) Stock Purchase Closing. A closing shall have occurred, or
shall occur contemporaneously with the Closing, on the transactions
described in the Stock Purchase Agreement between Zomax, Subsidiary,
Primary Marketing Group Limited, the Shareholders and Patrick Burke.
7.2) Conditions of Obligations of Zomax and Subsidiary. The respective
obligations of Zomax and Subsidiary to consummate the Merger and Purchase are
subject to the satisfaction prior to or upon the Closing of the following
conditions, unless waived by Zomax:
(a) Representations and Warranties. The representations and
warranties of the Shareholders set forth in this Agreement shall be
true and correct in all respects as of the Closing Date, as though made
on and as of such date (provided that those representations or
warranties made as of a particular date need only be true and correct
as of such date), except for any inaccuracies which, individually or in
the aggregate, have not had, and would not have, a Material Adverse
Effect on NGS or PMG.
(b) Performance of Obligations. The Shareholders, NGS and PMG
shall have performed in all material respects all obligations and
covenants required to be performed by them under this Agreement prior
to or as of the Closing Date.
(c) Consents. The consents, approvals and authorizations
described (or required to be described on Exhibits 4.18(b) and 5.5(b)
hereto) on Exhibits 4.18(b) and 5.5(b) hereto shall have been obtained
in form and in substance reasonably satisfactory to Zomax, except for
such consents, approvals and authorizations with respect to which the
failure to obtain would not have a Material Adverse Effect on either
NGS or the Surviving Corporation.
(d) Legal Opinion. Zomax shall have received a duly executed
opinion letter from the Shareholders' legal counsel dated as of the
Closing substantially in the form attached hereto as Exhibit 7.2(d).
(e) Pooling. Zomax shall have received the Zomax Accountant
Letter.
(f) Audited Financial Statements. Zomax shall have received
from Arthur Andersen LLP audited combined financial statements of NGS,
PMG and Primary Marketing Group Limited for the fiscal years ended
December 31, 1996 and 1997 in form and substance acceptable to Zomax.
(g) Affiliate Letters. Zomax shall have received the affiliate
letters from each of the Shareholders referred to in Section 6.9 above.
7.3) Conditions of Obligation of the Shareholders, NGS and PMG. The
obligation of the Shareholders, NGS and PMG to effect the Merger and the
Purchase is subject to the satisfaction prior to or upon the Closing of the
following conditions, unless waived by the Shareholders:
(a) Representations and Warranties. The representations and
warranties of Zomax and Subsidiary set forth in this Agreement shall be
true and correct in all respects as of the Closing Date, as though made
on and as of such date (provided that those representations or
warranties made as of a particular date need only be true and correct
as of such date), except for any inaccuracies which, individually or in
the aggregate, have not had, and would not have, a Material Adverse
Effect on Zomax or Subsidiary.
(b) Performance of Obligations of Zomax and Subsidiary. Zomax
and Subsidiary shall have performed in all material respects all
obligations and covenants required to be performed by them under this
Agreement prior to or as of the Closing Date.
(c) Consents. The consents, approvals and authorizations
described (or required to be described on Exhibits 4.18(b) and 5.5(b)
hereto) on Exhibits 4.18(b) and 5.5(b) hereto shall have been obtained
in form and in substance reasonably satisfactory to the Shareholders,
except for such consents, approvals and authorizations with respect to
which the failure to obtain would not have a Material Adverse Effect on
the Shareholders.
(d) Legal Opinion. The Shareholders shall have received a duly
executed opinion letter from Zomax's legal counsel dated as of the
Closing substantially in the form attached hereto as Exhibit 7.3(d).
ARTICLE 8.
TERMINATION, AMENDMENT AND WAIVER
8.1) Termination. This Agreement may be terminated and the Merger may
be abandoned at any time prior to the Effective Time, notwithstanding any
requisite approval of this Agreement and the Merger by the members of NGS and
the shareholders of PMG:
(a) by mutual written consent of each of the Shareholders and
Zomax; or
(b) by either the Shareholders or Zomax if the Effective Time
shall not have occurred on or before February 3, 1998; provided,
however, that the right to terminate this Agreement under this Section
8.1(b) shall not be available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of, or resulted in,
the failure of the Effective Time to occur on or before such date; or
(c) by Zomax, if the Average Closing Price is less than $9.00;
or
(d) by Zomax, if (i) the Board of Managers of NGS withdraws,
modifies or changes its recommendation of this Agreement or the Mergers
in a manner adverse to Zomax or shall have resolved to do any of the
foregoing or the Board of Managers of NGS shall have recommended to the
members of NGS any Competing Transaction or resolved to do so, or (ii)
NGS receives an unsolicited proposal that constitutes a Competing
Transaction and the Board of Managers of NGS, within two calendar days
after such proposal is received by NGS, either fails to terminate
discussions with the maker of such proposal and its agents, or
determines to accept, or takes no position with respect to, such
proposal; or (iii) the Board of Directors of PMG withdraws, modifies or
changes its recommendation of this Agreement or the Mergers in a manner
adverse to Zomax or shall have resolved to do any of the foregoing or
the Board of Directors of PMG shall have recommended to the
shareholders of PMG any Competing Transaction or resolved to do so, or
(iv) PMG receives an unsolicited proposal that constitutes a Competing
Transaction and the Board of Directors of PMG, within two calendar days
after such proposal is received by PMG, either fails to terminate
discussions with the maker of such proposal and its agents, or
determines to accept, or takes no position with respect to, such
proposal; or
(e) by Zomax, if the members of NGS or the shareholders of PMG
shall have failed to approve the Mergers; or
(f) by Zomax, in the event of a material breach by the
Shareholders, NGS or PMG of any representation, warranty, covenant or
agreement contained herein which has not been cured or is not curable
by February 3, 1998; or
(g) by the Shareholders, in the event of a material breach by
Zomax or Subsidiary of any representation, warranty, covenant or
agreement contained herein which has not been cured or is not curable
by February 3, 1998.
8.2) Consequences of Termination.
(a) The Shareholders may pursue any remedies available at law
or equity in the event Zomax or Subsidiary terminate this Agreement
other than in compliance with Section 8.1 above, or in the event the
Shareholders terminates this Agreement in compliance with the
provisions of Section 8.1(g) above.
(b) Zomax and Subsidiary may pursue any remedies available at
law or equity in the event the Shareholders, NGS or PMG terminates this
Agreement other than and in compliance with Section 8.1 above, or in
the event Zomax terminates this Agreement in compliance with the
provisions of Sections 8.1(d), (e) or (f) above.
8.3) Amendment. This Agreement may be amended by the parties hereto by
action taken by or on behalf of their respective Boards of Directors at any time
prior to the Effective Time. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.
8.4) Waiver. At any time prior to the Effective Time, any party hereto
may (a) extend the time for the performance of any obligation or other act of
any other party hereto, (b) waive any inaccuracy in the representations and
warranties contained herein or in any document delivered pursuant hereto and (c)
waive compliance with any agreement or condition contained herein. Any such
extension or waiver shall be valid if set forth in any instrument in writing
signed by the party or parties to be bound thereby.
ARTICLE 9
CLOSING
9.1) Documents to be Delivered by the Shareholders, NGS and PMG. The
Shareholders, NGS and PMG agree to deliver the following documents, duly
executed, as appropriate, to Zomax at the Closing:
(a) All certificates, schedules, exhibits, and attachments in
completed form and specifying the information required by the
provisions of this Agreement.
(b) Articles of Organization of NGS and Articles of
Incorporation of PMG certified by the California Secretary of State.
(c) Operating Agreement of NGS and Bylaws of PMG certified by
their respective Secretaries.
(d) Certificate of Good Standing for NGS and PMG dated no
earlier than ten (10) days prior to the Closing.
(e) Certified copies of resolutions of NGS, PMG and the
Shareholders authorizing the transactions contemplated herein.
(f) Opinion of the Shareholders' Counsel as required under
Section 7.2(d) above.
(g) Certificates representing the Company Interests and the
PMG Shares properly endorsed for transfer hereunder.
(h) The Articles of Merger properly executed by PMG and NGS.
(i) The Affiliate Letters as required under Section 7.2(h)
above.
(j) Copies of applications filed by the Shareholders for tax
clearance certificates of the California Franchise Tax Board to the
effect that NGS and PMG have no known unpaid tax liability in
California.
(k) Such other documents as Zomax may reasonably request.
9.2) Documents to be Delivered by Zomax and Subsidiary. Zomax and
Subsidiary agree to deliver the following documents, duly executed, as
appropriate, to the Shareholders at the Closing:
(a) Articles of Incorporation of Zomax and Subsidiary
certified by the Minnesota Secretary of State.
(b) Bylaws of Zomax and Subsidiary certified by Zomax's and
Subsidiary's Secretary.
(c) Certificate of Good Standing of Zomax and Subsidiary dated
no earlier than ten (10) days prior to the Closing Date.
(d) Certified copies of corporate resolutions of Zomax and
Subsidiary authorizing them to enter into the transactions contemplated
herein.
(e) Opinion of Zomax's counsel as specified in Section 7.2(d)
above.
(f) Articles of Merger properly executed by Subsidiary.
(g) Such other documents as the Shareholders reasonably may
request to carry out the transactions contemplated under this
Agreement.
(h) Written instructions to Zomax's stock transfer agent to
deliver to each of the Shareholders one or more certificates
representing the number of shares of Zomax Common Stock to which such
Shareholder is entitled pursuant to the terms of Article 3 of this
Agreement.
ARTICLE 10.
INDEMNIFICATION
10.1) Indemnification by the Shareholders. Subject to the limitations
set forth in Section 10.2 below, the Shareholders, jointly and severally, shall
indemnify and hold Zomax harmless at all times from and after the date of this
Agreement, against and in respect of all damages, losses, costs and expenses
(including reasonable attorney fees) which Zomax and Subsidiary may suffer or
incur in connection with the breach by the Shareholders, NGS or PMG of any of
their respective representations, warranties or covenants in this Agreement.
10.2) Limitation of Liability.
(a) Zomax shall not assert any claim under Section 10.1 above
unless and until such claims exceed an aggregate of $15,000.
(b) With the exception of claims resulting from the breach by
the Shareholders, NGS or PMG of any of their respective representations
or warranties described in Sections 4.7 or 4.22 of this Agreement,
Zomax shall assert any claim under Section 10.1 above within one year
from the Closing or be forever barred from asserting such claim.
(c) Zomax shall assert any claim under Section 10.1 above
resulting from the breach by the Shareholders, NGS or PMG of any of
their respective representations or warranties described in Sections
4.7 or 4.22 of this Agreement within three years from the Closing or be
forever barred from asserting such claim.
(d) The rights of Zomax with respect to any claims arising
under Section 10.1 above shall be limited to recovery of actual losses
in an amount not to exceed $9,000,000 in the aggregate plus costs and
expenses (including reasonable attorneys' fees).
(e) The Shareholders shall not be obligated to indemnify Zomax
under Section 10.1 above to the extent of any amounts recovered (net of
all expenses of such recovery) or any amounts which could be recovered
with reasonable commercial efforts (net of all expenses of such
recovery) from the issuers of the insurance policies listed on Exhibit
4.15 hereto.
10.3) Indemnification by Zomax and Subsidiary.
(a) Subject to the limitations set forth in Section 10.4
below, Zomax and Subsidiary shall jointly and severally indemnify and
hold the Shareholders harmless at all times from and after the date of
this Agreement, against and in respect of all losses, damages, costs
and expenses (including reasonable attorney fees) which the
Shareholders may suffer or incur in connection with breach by Zomax or
Subsidiary of any their respective representations, warranties or
covenants in this Agreement.
(b) Subject to the limitations set forth in Section 10.4
below, Zomax and Subsidiary shall jointly and severally indemnify and
hold the Shareholders harmless against and in respect of all losses,
damages, costs and expenses (including reasonable attorney fees) which
the Shareholders may suffer or incur as a result of any liability or
obligation of Zomax or Subsidiary arising after the Closing Date.
10.4) Limitation of Liability.
(a) The Shareholders shall not assert any claim under Section
10.3 above unless and until such claims exceed an aggregate of $50,000.
(b) The Shareholders shall assert any claim under Section 10.3
above within one year from the Closing or be forever barred from
asserting such claim.
(c) The rights of the Shareholders with respect to any claims
arising under Section 10.3 above shall be limited to recovery of actual
losses, costs and expenses (including reasonable attorneys' fees).
10.5) Third Party Claims. If a claim by a third party is made against
any of the indemnified parties, and if any of the indemnified parties intends to
seek indemnity with respect to such claim under this Article, such indemnified
party shall promptly notify the indemnifying party of such claim. The
indemnifying party shall have thirty (30) days after receipt of the
above-mentioned notice to undertake, conduct and control, through counsel of
such party's own choosing (subject to the consent of the indemnified party, such
consent not to be unreasonably withheld) and at such party's expense, the
settlement or defense of it, and the indemnified party shall cooperate with the
indemnifying party in connection with such efforts; provided that: (i) the
indemnifying party shall not by this Agreement permit to exist any lien,
encumbrance or other adverse charge upon any asset of any indemnified party,
(ii) the indemnifying party shall permit the indemnified party to participate in
such settlement or defense through counsel chosen by the indemnified party,
provided that the fees and expenses of such counsel shall be borne by the
indemnified party, and (iii) the indemnifying party shall agree promptly to
reimburse the indemnified party for the full amount of any loss resulting from
such claim and all related expense incurred by the indemnified party pursuant to
this Article. So long as the indemnifying party is reasonably contesting any
such claim in good faith, the indemnified party shall not pay or settle any such
claim. If the indemnifying party does not notify the indemnified party within
thirty (30) days after receipt of the indemnified party's notice of a claim of
indemnity under this Article that such party elects to undertake the defense of
such claim, the indemnified party shall have the right to contest, settle or
compromise the claim in the exercise of the indemnified party's exclusive
discretion at the expense of the indemnifying party.
ARTICLE 11
OTHER AGREEMENTS
11.1) Further Documents and Assurances. At any time and from time to
time after the Closing Date, each party shall, upon request of another party,
execute, acknowledge and deliver all such further and other assurances and
documents, and will take such action consistent with the terms of this
Agreement, as may be reasonably requested to carry out the transactions
contemplated herein and to permit each party to enjoy its rights and benefits
hereunder.
11.2) Covenant Not to Compete.
(a) Covenant. In consideration of the transactions
contemplated herein and the consideration being paid hereunder, each of
the Shareholders agrees that for a period of three years after the
Closing Date, he will not engage in any business that competes with the
businesses of Zomax, NGS or PMG as such businesses exist immediately
after the Closing (the "Business") anywhere in North America and Europe
(the "Territory") so long as Zomax or Subsidiary continues to conduct
the Business in the Territory. This covenant of noncompetition shall be
interpreted to prohibit, without limiting the generality of the
foregoing, each of the Shareholders from serving as a shareholder,
partner, director, officer, employee, agent of or independent
contractor to, any person or entity which directly or indirectly
competes in the Territory with the Business.
(b) Injunctive Relief and Reasonableness. Zomax, Subsidiary
and the Shareholders stipulate and agree that the remedy at law for
breach of this covenant not to compete would be inadequate and that
Zomax and the Surviving Corporation shall be entitled to injunctive
relief to enforce this clause. Zomax, Subsidiary and the Shareholders
further stipulate and agree that the prohibitions contained herein are
reasonable as to time and area, and they specifically waive any
objection to the reasonableness of said prohibitions.
11.3) Tax Clearance Certificates. Within three months after the
Closing, the Shareholders shall deliver to Zomax one or more tax clearance
certificates of the California Franchise Tax Board dated no more than ten (10)
days prior to such delivery to the effect that NGS and PMG have no known unpaid
tax liability in California.
ARTICLE 12
GENERAL PROVISIONS
12.1) Notices. All notices, requests, claims, demands and other
communications to any party hereunder shall be in writing (including telecopy or
similar writing) and shall be deemed given if delivered personally, by
facsimile, by certified mail (postage prepaid, return receipt requested) or sent
by overnight courier (in each case, providing proof of delivery) to the parties
at the addresses and/or facsimile numbers set forth at the beginning of this
Agreement (or such other address or facsimile number for a party as shall be
specified in like notice).
12.2) Entire Agreement. This Agreement (including the Exhibits and
Schedules hereto) and the other documents referenced herein contain the entire
agreement between the parties with respect to the subject matter hereof and
supersede all prior arrangements and understandings, both written and oral, with
respect thereto.
12.3) Severability. It is the desire and intent of the parties that the
provisions of this Agreement be enforced to the fullest extent permissible under
the law and public policies applied in each jurisdiction in which enforcement is
sought. Accordingly, in the event that any provision of this Agreement would be
held in any jurisdiction to be invalid, prohibited or unenforceable for any
reason, such provision, as to such jurisdiction, shall be ineffective, without
invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of such provision in any other jurisdiction.
Notwithstanding the foregoing, if such provision could be more narrowly drawn so
as not to be invalid, prohibited or unenforceable in such jurisdiction, it
shall, as to such jurisdiction, be so narrowly drawn, without invalidating the
remaining provisions of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction.
12.4) Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, provided that no party may assign, delegate or otherwise
transfer any of its rights or obligations under this Agreement without the
consent of the other parties hereto.
12.5) Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement.
12.6) Enforcement. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of Minnesota or in a Minnesota state court, this being in
addition to any other remedy to which they are entitled at law or in equity.
12.7) Arbitration. This Agreement shall be governed by and construed in
accordance with the laws of the State of Minnesota without regard to the
conflicts of laws and rules thereof. All disputes, controversies or differences
arising out of or in connection with this Agreement or the making thereof,
including claims of fraud in the inducement, which cannot be settled by mutual
agreement shall be finally settled by binding arbitration pursuant to the Rules
of Commercial Arbitration of the American Arbitration Association then in
effect, except as specified herein and judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction thereof. Any
arbitration hereunder shall be held in Minneapolis, Minnesota. The arbitration
shall be conducted by a single arbitrator selected by the parties. The
arbitrator shall be a retired state or federal judge or an attorney who has
practiced business litigation for at least 10 years. In the event that the
parties are unable to agree on an arbitrator, the arbitrator shall be selected
by the American Arbitration Association. The hearings shall be conducted on an
expedited schedule. They shall commence no later than 20 days after initiation
of proceedings and shall be completed within 20 days, and the arbitrator shall
make the award within ten days of the close of the hearings. The arbitrator
shall have the authority to award any remedy or relief that a court of the State
of Minnesota could order or grant, including, without limitation, equitable
remedies, specific performance of any obligation created under this Agreement,
the awarding of punitive damages, the issuance of an injunction or the
imposition of sanctions for abuse or frustration of the arbitration process.
12.8) Counterparts; Effectiveness. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument. This
Agreement shall become effective when each party hereto shall have received
counterparts hereof signed by all of the other parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
ZOMAX OPTICAL MEDIA, INC.
By /s/ James T. Anderson
James T. Anderson, President
ZOMAX SERVICES, INC.
By /s/ James T. Anderson
James T. Anderson, President
NEXT GENERATION SERVICES LLC
By /s/ Anthony Angelini
Anthony Angelini, Member
By /s/ Andrew Berg
Andrew Berg, Member
By /s/ Brian Fleury
Brian Fleury, Member
By /s/ Ronald Silzer
Ronald Silzer, Member
By /s/ R. Blake White
R. Blake White, Member
PRIMARY MARKETING GROUP
By /s/ Ronald Silzer
Ronald Silzer, President
By /s/ Brian Fleury
Brian Fleury, Secretary
/s/ Anthony Angelini
Anthony Angelini
/s/ Brian Fleury
Brian Fleury
/s/ Ronald Silzer
Ronald Silzer
/s/ Andrew Berg
Andrew Berg
/s/ Blake White
Blake White
<PAGE>
EXHIBIT LIST
Exhibit Number Title
2.2 Articles of Merger
4.4 Shareholders
4.5 Subsidiaries
4.6(a) Financial Statements
4.6(c) Sale or Transfer of Assets
4.7 Tax Returns
4.8 Assets
4.9 Trademarks
4.10 Patents
4.11(a) Contracts
4.11(b) Employee Plans
4.11(c) Collective Bargaining Agreements
4.11(d) Breaches of Material Contracts
4.12 Contracts with Related Parties
4.13 Predominant Customers
4.14 Product Liability Claims
4.15 Insurance Policies
4.16 Litigation
4.18(a) Breaches of Contracts
4.18(b) Consents
5.5(b) Breaches of Contracts, Required Consents
5.6 Zomax SEC Document Exceptions
6.2 Restrictions
6.9 Affiliate Letter
6.10 Restrictions on Zomax
7.2(d) Legal Opinion of Shareholder's Counsel
7.3(d) Legal Opinion of Zomax's Counsel
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is entered into effective as of the day of 3rd day of
February 1998, by and between KAO INFOSYSTEMS COMPANY, a Delaware Corporation
(hereinafter referred to as "KIC"); and ZOMAX OPTICAL MEDIA, INC., a Minnesota
corporation (hereinafter referred to as "Zomax').
RECITALS
A. KIC is engaged in the business of, among other things,
providing software duplication, CD and DVD replication and fulfillment services,
and bulk sales of magnetic media to the computer industry.
B. KIC currently conducts business operations from facilities
located at 1640 Berryessa Road, San Jose, California, held under a sublease with
Novell, Inc. (hereinafter referred to as the "Facility") from which KIC conducts
complex service manufacturing, warehouse and distribution activities for certain
customers (hereinafter referred to as the "Business').
C. KIC is desirous of transferring certain tangible and
intangible assets associated with the operation of the Business, including,
those associated with the business operations conducted at the Facility, to
Zomax, and Zomax is desirous of acquiring such assets from KIC, in accordance
with the terms and conditions hereinafter set forth.
D. KIC is a party to a Representative Agreement dated July 1,
1995 (hereinafter referred to as the "Rep Agreement"), with Primary Marketing
Group (hereinafter referred to as "PMG") to provide sales and marketing
assistance with respect to the sale of floppy disks, CD replication, software
duplication. turnkey and fulfillment services. PMG has responsibility for the
Novell, Inc. (hereinafter referred to as "Novell), and other accounts of KIC,
and is involved in the business and activities of the Facility. Concurrently
with the Closing of this transaction, KIC and PMG will terminate the Rep
Agreement.
E. Zomax intends to cause a merger of a wholly owned
subsidiary of Zomax with PMG and Next Generation Services LLC (hereinafter
referred to as "NGS") pursuant to the terms of which such subsidiary of Zomax is
the surviving entity.
NOW THEREFORE, in consideration of the mutual promises in this
Agreement and for other good and valuable consideration as set forth herein, the
adequacy and receipt of which are hereby acknowledged. the parties hereto.
intending to be bound, agree as follows:
1. SALE OF BUSINESS ASSETS: KIC shall transfer, sell, and deliver to
Zomax. free and clear of all liens and encumbrances, unless otherwise noted
(subject, however, to the terms and conditions of the contracts listed on
Schedule "1-C-2") and Zomax shall acquire from KIC, the following assets used in
the operation of the Business (hereinafter referred to as the "Business
Assets"), as follows:
<PAGE>
A. All equipment, machinery, tools and other tangible assets,
wherever located, described in the attached Schedule "l-A" free and clear of all
liabilities, claims, liens and encumbrances (subject, however, to the terms and
conditions of the contracts listed on Schedule "1-C-2."
B. A royalty free, non-exclusive right and license to use
KIC's rights, title and interest, if any, and to the extent transferable by KIC,
in all patents, copyrights, trademarks, service marks, trade secrets,
information, inventions, computer programs (in any form), non-proprietary policy
and procedure manuals, and non-proprietary processes described in Schedule "1-B"
(collectively the "Intellectual Property Rights");
C. KIC's rights and interest, subject to all duties, if any,
in and to the contracts listed on Schedule "l-C" to the extent KIC has the
lawful right to assign such rights and interests (hereinafter referred to as the
"Assigned Contracts"); and to the extent assigned in the Assignment and
Assumption Agreements attached hereto as Schedule "1-C-1," KIC's rights and
interests, if any, in and to the contracts listed on Schedule "1-C-2" to the
extent KIC has the lawful right to assign such rights and interests (hereinafter
referred to s the "Partially Assigned Contracts").
D. The Inventory (hereinafter defined) as provided in
Paragraph 12, below and the Other Inventory acquired in accordance with
provisions herein.
1.1 It is specifically agreed that the contracts and
customers listed on Schedule "1.1" shall be retained by KIC and will not be
assigned to Zomax pursuant to this Agreement. It is specifically agreed that no
portion of the Business Assets shall include and the assignment of the Assigned
Contracts or Partially Assigned Contracts shall not assign assets associated
with (i) products or services supplied by KIC or its affiliates from outside of
North America (the "Foreign Work") or (ii) Fulfillment Services; as used herein
"Fulfillment Services" means call center activities; or pick pack and ship
distribution tied to or associated with orders taken in the KIC call center
and/or managed by a KIC call center in a database system such as a subscription
program.
2. PURCHASE PRICE. The parties acknowledge and agree that the Purchase
Price (as hereinafter defined) for the Business Assets has been negotiated to
reflect their current condition and existence, and that Zomax and PMG have had
ample opportunity to diligently examine and investigate to its satisfaction the
condition and status of the assets and their existence. Zomax contemplates its
merger with PMG prior to the Closing, and agrees that the knowledge of PMG
concerning the Business, the Facility, the Business Assets, and other facts
relevant to this Agreement and the transactions contemplated thereby shall, for
purposes of this Agreement, be considered the knowledge of Zomax, to which KIC's
representations and warranties and the transactions contemplated hereby are
subject. The Business Assets are being transferred without any warranty being
given by KIC, except as expressly set forth in Paragraph 6. Zomax will at the
Closing acquire the Business Assets in their current and AS IS condition,
without warranty as to condition or any other warranty. KIC DISCLAIMS AND ZOMAX
AGREES THAT KIC IS NOT BOUND BY NOR LIABLE FOR ANY AND ALL OTHER WARRANTIES,
GUARANTIES, STATEMENTS, REPRESENTATIONS OR INFORMATION PERTAINING TO THE
BUSINESS ASSETS, WHETHER EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO ANY
WARRANTY OF MERCHANTABILITY, FITNESS FOR USE, OR FITNESS FOR A PARTICULAR
PURPOSE, OR ANY WARRANTY OF QUALITY, DESIGN, CONDITION, CAPACITY, SUITABILITY,
NON-INFRINGEMENT OR PERFORMANCE, WHETHER MADE BY KIC OR AN AGENT OR OTHER
REPRESENTATIVE OF KIC. Without limiting the effect of the foregoing disclaimers,
in no event shall KIC be liable for any incidental, consequential, indirect or
reliance damages, including, without limitation, damages for loss of business
profits, business interruption, loss of business information or other pecuniary
loss arising from, out of or in connection with the Business Assets.
In consideration for the transfer of the Business Assets by KIC to
Zomax, Zomax shall pay to KIC the following amounts (hereinafter referred to as
the "Purchase Price"):
A. An amount equal to the sum of Two Hundred Forty Thousand
Dollars ($240,000.00) (hereinafter referred to as the "Other Consideration");
plus
B. An amount equal to the sum of Thirty-Three Thousand Two
Hundred and Sixty Dollars and Eighty-Seven Cents ($33,260.87), being the book
value as appearing on the financial records of KIC as of January 1, 1998 of the
tangible personal property which was acquired by KIC under the Asset Purchase
Agreement between Novell and KIC dated November 1, 1997 the ("Novell APA"), more
particularly described in Schedule "2-B" (the "Novell Property"); less the
amount of Ninety Thousand Dollars ($90,000.00) being the amount of Service
Credits under the Novell Asset Purchase Agreement, the obligation for the
payment of such Service Credits being assumed by Zomax hereunder.
C. An amount equal to the sum of Seventy-Five Thousand Four
Hundred and Twenty-Eight Dollars and Ninety-Nine Cents ($75,428.99) which is (i)
the book value as appearing on the financial records of KIC of the tangible
personal property listed on Schedule "1-A" other than the Novell Property as of
January 1, 1998, or (ii) such other value as may be agreed upon by KIC and
Zomax; provided, however, that Zomax shall not be required to purchase such
property having a value in excess of Two Hundred Fifty Thousand Dollars
($250,000.00); plus
D. The amount equal to the sum of $775,655.82 which is the
lesser of: (i) the aggregate KIC inventory value, as provided on Schedule "12-A"
or (ii) the aggregate fair market value, as provided on Schedule "12-A", of the
Inventory to be acquired at Closing by Zomax pursuant to Paragraph 12, below.
3. PAYMENT - ALLOCATION OF PURCHASE PRICE: That portion of the Purchase
Price allocable to inventory (Paragraph 2.D) shall be paid by Zomax to KIC on or
before the ninetieth (90th) day after the Closing Date (hereinafter defined).
The balance of the Purchase Price shall be paid by Zomax to KIC as follows:
fifty percent (50%) on or before the ninetieth (90th) day after the Closing Date
and fifty percent (50%) on or before the One Hundred Eightieth (180th) day after
the Closing Date. The Purchase Price shall be represented by promissory notes
containing all of the terms and conditions of the promissory notes attached
hereto as Exhibits "A-1," "A-2," and "A-3". The promissory note attached as
Exhibit "A-2" given with respect to the Novell Property and the tangible
personal property listed in Schedule "1-A" shall be secured by a pledge of the
Novell Property and the tangible personal property listed in Schedule "1-A"
pursuant to a security agreement containing all of the terms and conditions of
the security agreement attached hereto as Exhibit "A-4," together with a
financing statement filed with the California Secretary of State in the form
attached hereto as Exhibit "A-5." The promissory note attached as Exhibit "A-3"
given with respect to the Inventory (as hereinafter defined) shall be secured by
a pledge of the Inventory pursuant to a security agreement containing all of the
terms and conditions of the security agreement attached hereto as Exhibit "A-6,"
together with a financing statement filed with the California Secretary of State
in the form attached hereto as Exhibit "A-7." All such notes, security
agreements and financing statements shall be executed and delivered by Zomax at
the Closing.
Zomax and KIC agree that the Purchase Price shall be allocated in
accordance with the allocation set forth in Schedule "3", attached hereto. The
parties further agree to report this transaction for California State and
Federal tax purposes in accordance with such allocation.
4. ASSUMPTION OF LIABILITIES: Effective as of the Closing Date, Zomax
shall assume those liabilities of KIC as set forth below (hereinafter referred
to as the "Assumed Liabilities");
(a) all liabilities and obligations of KIC arising under the
Equipment Leases listed on Schedule "4(a)" to the extent relating to performance
after the Closing Date: and
(b) all liabilities and obligations of KIC under the contracts
listed on Schedule 1-C to the extent relating to performance after the Closing
Date; and
(c) the liabilities and obligations of KIC assigned to and
assumed by Zomax through the Assignment and Assumption Agreements provided in
Schedule "1-C-1" under the contracts listed in Schedule "1-C-2" including,
without limitation, the Service Credits under the Asset Purchase Agreement
between KIC and Novell entered into as of November 1, 1997 (attached hereto as
Schedule "4(c)") that accrue on or after January 1, 1998.
(d) the liabilities and obligations of KIC under the Standard
Form Sublease between Novell and KIC which commenced November 1, 1997 (the
"Sublease") of the Premises, other than liabilities and obligations of KIC
thereunder arising prior to the Closing, regardless of whether the Sublease is
assigned to Zomax.
A. Zomax does not assume and shall not be liable for any
obligations or liabilities of KIC of any kind or nature, however arising,
whether contingent, matured or otherwise, known or unknown, except for those
obligations expressly assumed by Zomax pursuant to this Agreement. Without
limiting the generality of the foregoing, except as specifically provided in
Paragraph 8.C., Zomax specifically disclaims and does not assume herein any
obligation or liability with respect to employees of KIC, including obligations
and liabilities of KIC under any collective bargaining agreements or under the
Workers' Adjustment and Retraining Notification Act (29 USC ss. 2101, et seq.),
or any other obligation to hire, continue in employment, or pay benefits to such
employees. All such obligations shall be and remain the sole and exclusive
obligations of KIC.
B. KIC specifically disclaims and does not assume hereby any
obligation or liability arising after Closing with respect to employees of KIC
hired by Zomax including, without limitation, obligations or liabilities of
Zomax under any collective bargaining agreement on under the Worker's Adjustment
and Retraining Modification Act (29 U.S.C. ss. 2101, et seq.) or any other
obligation to hire, continue in employment or pay benefits to such employees.
All such obligations shall be and remain the sole and exclusive obligations of
Zomax.
5. SALES AND PROPERTY TAXES: KIC acknowledges that it will be
responsible for all taxes it incurs related to the sale of the Business Assets,
including but not limited to, personal property, sales, transfer, use
documentary transfer, stamp or excise taxes or other similar taxes of any type
imposed or levied on it by reason of this Agreement and the transactions
contemplated hereby. KIC shall prepare or cause to be prepared and file, all
required tax returns and other documents required to be filed in connection
therewith. Anything to the contrary herein notwithstanding, KIC and Zomax
acknowledge and agree that KIC shall be responsible and shall pay all sales
taxes associated with the Business Asset transferred hereunder, other than
Inventory, and Zomax shall pay all sales taxes associated with Inventory
transferred hereunder. KIC and Zomax shall provide each other with their
respective employer identification number for federal income tax purposes, and
the parties shall file Internal Revenue Service form 8594 containing allocations
as provided in Schedule "3."
6. REPRESENTATIONS: KIC represents and warrants to Zomax as follows:
A. Authority: KIC has the right, power, legal capacity and
authority to enter into and perform its obligations under this Agreement, and
except as set forth in Schedule "6-A" no approvals or consents with regard to
KIC are necessary in connection therewith.
B. Broker: KIC has retained no finder or broker in connection
with this Agreement or the consummation of the transactions contemplated
hereunder.
C. Title To Assets Listed on Schedule A: The assets listed on
Schedule "1-A", Schedule "2-B" and Inventory Schedule are property of KIC and
will be conveyed and transferred to Zomax free and clear of liens, pledges,
charges, encumbrances or equities of any persons or entities, subject, however,
to the terms of the Assigned Contracts and Partially Assigned Contracts.
D. No Breach of Violation: To KIC's knowledge, there is no
default or breach of any lease or license or other agreement, instrument or
arrangement to which KIC is a party or by which KIC is bound which will prevent
the consummation of the transaction contemplated by this Agreement or the
transfer of the Business Assets. The consummation of the transactions
contemplated by this Agreement will not result in or constitute the creation or
imposition of any lien, charge, or encumbrance on any of the Business Assets,
other than the security interest granted by Zomax to KIC as provided herein. The
representations contained in the foregoing two sentences assume that all
conditions precedent to KIC's performance hereunder have been satisfied.
E. Litigation: To KIC's actual knowledge, there is no pending
or threatened action, suit, proceeding or investigation in which KIC is a party
in any court or by or before any federal, state local or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, or before any arbitrator of any kind, which, individually or in the
aggregate, does or could materially and adversely affect the value of the
Business Assets or interfere with Zomax's ownership or use of the Business
Assets after the Closing Date. All references in this Agreement to the knowledge
or the actual knowledge or awareness (or similar terms) of KIC shall mean actual
knowledge or constructive knowledge of the officers of KIC if a reasonably
prudent person in a like position would have known or should have known the fact
and is exclusive of any knowledge which Zomax or PMG principals have and of any
imputed or constructive knowledge of Zomax or PMG principals.
F. Inventory: The Inventory and Other Inventory sold hereunder
consists of items that are in good and saleable condition; Zomax's sole and
exclusive remedy for any breach of such representation or warranty regarding
Inventory or Other Inventory shall be that KIC, at its option, shall either
replace and/or repair defective Inventory or Other Inventory within ten (10)
days after Zomax provides notice of the defect or provide Zomax with a refund
for the amount paid for same. No item included in the Inventory or Other
Inventory is subject to any security interests, has been pledged as collateral
or is held on consignment from others.
G. Contracts. To KIC's actual knowledge, the Assigned
Contracts and Partially Assigned Contracts are in full force and effect, and no
party to any such contract is in material default of its obligations thereunder,
nor does there exist any facts or circumstances which, with the passage of time
and\or the giving of an appropriate notice, would result in the material breach
by any party thereunder.
H. Assurances: None of the representations or warranties made
by KIC in this Agreement or the Exhibits or Schedules hereto, and no certificate
furnished or to be furnished by KIC in connection with the transactions
contemplated by this Agreement contains or will contain to KIC's actual
knowledge any untrue statement of a material fact.
7. ZOMAX'S REPRESENTATIONS: Zomax represents and warrants to KIC as
follows:
A. Authority for Agreement: Zomax has the requisite power and
authority to enter into this Agreement and to carry out the transactions
contemplated hereby and perform its obligations hereunder, and except as set
forth on Schedule "7-A", no approvals or consents with respect to Zomax are
necessary in connection therewith.
B. Broker: Zomax has not retained or dealt with any finder or
broker in connection with this Agreement or the consummation of the transactions
contemplated hereunder.
C. Assets: Zomax and PMG will have at the time of the Closing
examined and inspected all of the Business Assets, and will at the Closing
acquire the Business Assets in their current and as is condition, without
warranty as to condition or any other warranty, except as set forth in Paragraph
6, above and subject to the knowledge of Zomax and PMG regarding the Business
Assets. Except as set forth in this Agreement, neither KIC nor any broker, agent
or other representative of KIC has made any representations or warranties
whatsoever regarding this transaction or any fact relating thereto, including,
without limitation, any representations or warranties concerning the physical
condition of the Business Assets, zoning law, environmental matters, utilities
or any other matter affecting the Business Assets or the use thereof on which
Zomax is relying, and Zomax has relied solely on its own inspections, tests,
audits, studies and investigations. Zomax has not relied and will not rely on,
and KIC disclaims and is not liable for or bound by any express or implied
warranties, guarantees, statements, representations or information pertaining to
the assets, their use, compliance with law or otherwise relating thereto made or
furnished by KIC or any broker or agent representing or purporting to represent
KIC, to whomever made or given, directly or indirectly, verbally or in writing,
except the express representations and warranties herein.
D. Assurances: None of the representations or warranties made
by Zomax in this Agreement or the Exhibits or Schedules hereto, and no
certificate furnished or to be furnished by Zomax in connection with the
transactions contemplated by this Agreement contains or will contain any untrue
statement of a material fact or omits or will omit any material fact.
8. OBLIGATIONS OF THE PARTIES BEFORE CLOSING:
A. Consents: From the date of this Agreement to the Closing,
KIC and Zomax will each exercise its reasonable good faith efforts to obtain the
consent of the other parties to the Assigned Contracts and the Partially
Assigned Contracts to the assignment of such contracts to Zomax, provided,
however, in no event shall KIC be required to provide a guarantee of, or remain
liable under such contract, as a condition of obtaining such consents. Such
consents shall include; (i) with respect to the Partially Assigned Contracts,
consent to separating out of the pertinent contracts that portion of the
obligations of KIC which are set forth on Schedule 8-A, which work KIC will
retain and continue to perform; and (ii) with respect to all of the Assigned
Contracts or Partially Assigned Contracts, consent to separating out of the
pertinent contracts all Fulfillment Services as defined on Schedule "8-A" and
Foreign Work, all of which KIC will retain and continue to perform.
B. Release: From the date of this Agreement to the Closing,
KIC and Zomax will each exercise its good faith efforts to obtain the release of
KIC from all liability under the Assigned Contracts and Partially Assigned
Contracts from and after the effective date of assignment; provided, however, in
no event shall any principal of Zomax or PMG or any person or entity affiliated
with Zomax or PMG be required to provide a personal or corporate guarantee as a
condition to obtaining such release.
C. Employees: Prior to the Closing, Zomax shall offer
employment on terms and conditions to be determined by Zomax in its sole and
absolute discretion, to the individuals listed on Schedule "8-C".
D. Access: Prior to the Closing KIC shall allow Zomax, and its
authorized representatives, access on advance notice and during normal business
hours to the Business Assets for the purpose of inspection and determining the
condition thereof.
E. Terminate Rep Agreement: At or prior to the Closing, Zomax
and KIC shall cause PMG to terminate the Rep Agreement.
F. Merger. At or prior to the Closing, Zomax shall cause a
wholly owned subsidiary to merge with PMG and NGS, and the resulting
organization shall be a subsidiary of Zomax.
9. CONDITIONS PRECEDENT TO KIC'S PERFORMANCE: The obligations of KIC to
sell the Business Assets under this Agreement are subject to the satisfaction,
at or before the Closing, of the following conditions. KIC may waive any or all
of these conditions in whole or in part without prior notice; provided that no
such waiver shall constitute a waiver by KIC of any of its other rights or
remedies, at law or in equity, if Zomax is in default of any of its
representations, warranties or covenants under this Agreement.
A. Accuracy of Zomax' Warranties: All representations and
warranties by Zomax in this Agreement must be true on the Closing Date as though
made at that time.
B. Performance by Zomax: On or before the Closing Date, Zomax
will have performed, satisfied and complied with all covenants, agreements and
conditions required of it under this Agreement.
C. Company Approval: The execution and delivery of this
Agreement by Zomax and the performance of its covenants and obligations under
it, will have been duly authorized by all necessary company action and Zomax
shall have provided KIC with certificates of good standing and of resolutions
providing such authorization.
D. Consents: All necessary agreements and consents of any
parties to the consummation of the transactions contemplated by this Agreement,
or otherwise pertaining to the matters covered by it, including, without
limitation, the consent of the other parties to the Assigned Contracts and
Partially Assigned Contracts to the assignment thereof to Zomax and the release
of KIC from all liability thereunder for the period after Closing will have been
obtained by KIC and Zomax. At or prior to the Closing, Novell and KIC shall have
terminated the Sublease, Zomax and Novell shall have entered into a sublease of
the Premises, and Aetna Life Insurance shall have consented to such termination
and such sublease.
E. Termination of Rep Agreement: At or prior to the Closing,
KIC and PMG will have terminated the Rep Agreement by executing and delivering
the Termination Agreement in the form attached hereto as Exhibit 9-E.
F. Merger: At or prior to the Closing, PMG and NGS shall have
merged with a wholly owned subsidiary of Zomax.
10. CONDITIONS PRECEDENT TO ZOMAX'S PERFORMANCE: The obligations of
Zomax to purchase the Business Assets under this Agreement are subject to the
satisfaction, at or before the Closing, of the following conditions. Zomax may
waive any or all of these conditions in whole or in part without prior notice;
provided that no such waiver shall constitute a waiver by Zomax of any of its
other rights or remedies, at law or in equity, if KIC is in default of any of
its representations, warranties or covenants under this Agreement.
A. Accuracy of KIC's Warranties: All representations and
warranties by KIC in this Agreement must be true on the Closing Date as though
made at that time.
B. Performance by KIC: On or before the Closing Date, KIC will
have performed, satisfied and complied with all covenants, agreements and
conditions required of it under this Agreement.
C. Corporate Approval: The execution and delivery of this
Agreement by KIC and the performance of its covenants and obligations under it,
will have been duly authorized by all necessary corporate action and KIC shall
have provided Zomax with certificates of good standing and of resolutions
providing such authorization.
D. Consents: All necessary agreements and consents of any
parties to the consummation of the transactions contemplated by this Agreement,
or otherwise pertaining to the matters covered by it, including, without
limitation, the consent of the other parties to the Assigned Contracts and the
Partially Assigned Contracts to the assignment thereof to Zomax will have been
obtained by KIC and Zomax.
11. CLOSING: The sale and purchase provided in this Agreement shall be
consummated at a Closing to be held by mail or facsimile or at the offices of
KIC, 800 Corporate Way, Fremont, CA, on January 31, 1998, or at such other
place, time and date as the parties hereto shall mutually agree upon. The date
and event of the sale and purchase are hereinafter referred to, respectively, as
the "Closing Date" and the "Closing." At the Closing, KIC shall execute and
deliver to Zomax a Bill of Sale in the form attached hereto as Exhibit "B",
transferring title to the Business Assets to Zomax.
12. INVENTORY: Zomax will acquire from KIC the following inventory:
A. Customer Buy-Backs: All customer buy-back agreements which
are either assignable without consent or for which consent to the assignment has
been obtained, and which are otherwise enforceable according to their terms are
hereinafter referred to as Enforceable Buy-Back Agreements. At the Closing Date,
Zomax shall acquire all of the inventory listed on Schedule "12-A" (hereinafter
referred to as the "Inventory"). The Inventory which on or before the Closing
Date has not been delivered to the Facility shall be delivered to the Facility
within a reasonable time, as agreed to by both parties, after the Closing Date,
but in no event later than thirty (30) days after the Closing Date. All shipping
costs (on a F.O.B. basis) shall be shared equally by KIC and Zomax, payable
within ninety (90) days after shipment.
B. Other Inventory: During the One Hundred Twenty (120) day
period following the Closing Date, Zomax will exercise reasonable good faith
efforts to utilize any active material related to the Business comprising
inventory or used by KIC as a component in manufacturing for the Assigned
Contracts or the Partially Assigned Contracts which is either located at the
Facility at the Closing, or which is listed on Schedule "12-B" (hereinafter
referred to as the "Other Inventory") and Zomax shall have the right to acquire
any such Other Inventory owned by KIC by giving written notice to KIC of its
election to do so, which notice shall identify the Other Inventory to be
acquired and, if the particular Other Inventory so identified or any a part
thereof is not located at the Facility, the location where such Other Inventory
shall be delivered.
That portion of the Other Inventory which on the Closing Date is not
located at the Facility shall be delivered to the Facility or to such other
destination as may be designated by Zomax, within a reasonable time, as agreed
to by both parties, after the Closing Date and notice from Zomax electing to
acquire such particular Other Inventory, but in no event later than thirty (30)
days after such notice from Zomax. All shipping costs of Other Inventory shall
be shared equally by KIC and Zomax. KIC shall cause all such materials acquired
by Zomax to be delivered and/or turned over to Zomax in good and saleable
condition. KIC shall bear the risk of loss of Other Inventory until date of
receipt by Zomax. Zomax shall purchase and KIC shall sell such Other Inventory
at a price equal to the lower of KIC's inventory value as provided on Schedule
"12-B" or market value, and Zomax shall pay KIC for such Other Inventory within
thirty (30) days of receipt of KIC's invoice therefor.
C. Contract Inventory: Upon the assignment after Closing of
each of the Assigned Contracts, Zomax shall acquire the inventory in the
possession of KIC as of the date of such assignment associated with such
Assigned Contract (the "Contract Inventory") at a price equal to the lower of
KIC's inventory value as provided on Schedule 12-C or market value. Zomax shall
pay KIC for such Contract Inventory within 30 days of Zomax's receipt of KIC's
invoice therefor. Any Contract Inventory not delivered to the Facility prior to
such assignment date shall be delivered to the Facility or such other
destination as may be designated by Zomax, within a reasonable time, as agreed
by both parties, but in no event later than 30 days after such assignment date.
All shipping costs of Contract Inventory shall be shared equally by KIC and
Zomax. KIC shall cause all such Contract Inventory to be delivered and/or turned
over to Zomax in good and saleable condition. KIC shall bear the risk of loss of
Contract Inventory until date of receipt by Zomax.
D. Disposition of Remaining Inventory: KIC shall retain all
Other Inventory related to the Business for a period of one hundred twenty (120)
days after the Closing Date. At the expiration of such one hundred twenty (120)
day period, all such Other Inventory which Zomax has not elected to acquire
(including, without limitation any such Other Inventory located at the Facility)
shall belong to KIC and may be disposed of in any lawful manner selected by KIC.
KIC shall be responsible for all cost and expense of the disposition of such
Other Inventory.
13. RIGHTS AND OBLIGATIONS OF THE PARTIES CONCURRENT WITH OR AFTER
CLOSING:
A. Solicitation for Employment: During the thirty (30) day
period following the Closing Date, Zomax shall have the right to solicit for
employment the KIC employees listed on Schedule "13-A." With the aforementioned
exception, KIC and Zomax each agree that they will not prior to July 1, 1998,
hire or approach for hire any employee of the other party without the other
party's prior written consent, which consent may be withheld in such party's
sole and absolute discretion. The foregoing prohibition against hiring or
approaching for hire shall not apply to restrain a party from approaching for
hire or hiring any former employee of a party after the date of termination of
the employment of such employee.
B. Collections: During the one hundred eighty (180) day period
following the Closing Date, Zomax will exercise good faith efforts to assist KIC
in collecting any outstanding accounts receivable due KIC which were generated
through sales with respect to which PMG is entitled to a commission under the
Rep Agreement.
C. IS Services: KIC will, to the extent of its contractual
rights, provide Zomax IS services substantially equivalent to what is currently
provided in the Facility and at KIC's Fremont facility and as more particularly
described in Exhibit 13.C, for use with the customers assigned to Zomax by KIC
and such other customers as Zomax may designate, for a period of six (6) months
after Closing, at no cost to Zomax, assuming that the software vendors involved
impose no additional cost. KIC will use good faith efforts to provide such
services, but they will be provided without warranty. It is understood and
agreed that outages, downtime and inability to perform IS services shall not be
a failure of KIC's good faith efforts to provide such services unless KIC
willfully refuses to act in good faith to provide or restore such services. KIC
shall not be liable for consequential, special or incidental damages except for
a failure of KIC to make good faith efforts to provide such services; further
provided that KIC's liability for any and all damages, including but not limited
to, consequential, special or incidental damages, relating to this Section shall
be limited to an aggregate amount of Two Hundred and Forty Thousand Dollars
($240,000.00). The fact that the IS services are provided without warranty shall
not negate the obligations of KIC as set forth in this Section.
D. Requirements Contracts: KIC and Zomax shall enter into at
the Closing a Requirements Contract in the form attached hereto as Exhibit "D".
E. Competition:
(i) For a period of six (6) months following the
Closing, KIC shall not, directly, or through its affiliates, solicit or seek to
obtain orders for delivery during such six (6) month period, from any of the
customers listed on Exhibit "B-1" for the products or services supplied by KIC
to such customer which were supplied to such customer by KIC during such
previous six (6) month period listed on Schedule 13.E(i), but excluding, without
limitation, Foreign Work and Fulfillment Services.
Further, for a period commencing with the Closing and ending March 31,
1998, KIC shall not, directly or through its affiliates, solicit any work from
the customers listed on Exhibit "B-1" from KIC's California operation without
the prior agreement from Zomax California Management. As used herein, "Zomax
California Management" means Anthony Angelini or his successor as shall be
designated by Zomax. Such approval shall be in writing.
(ii) For a period of six (6) months following the
Closing, Zomax shall not, and shall cause it affiliates, including, without
limitation, NGS and PMG, to not directly, or through their affiliates, solicit
or seek to obtain orders for delivery during such six (6) month period, from any
of the customers listed on Schedule "1.F.1" which were represented by PMG under
the Rep Agreement, for the products or services listed on Schedule 13.E.(ii).
The foregoing limitation upon Zomax shall not, however, restrict Zomax from
providing products or services to any such customer which were supplied to such
customer by Zomax during such previous six (6) month period.
Further, for a period commencing with the Closing and ending March 31,
1998, Zomax shall not, directly or through its affiliates, solicit any work from
the customers listed on Exhibit "l-F-1" from Zomax's California operation
without the prior agreement from KIC's California Management. As used herein,
"KIC's California Management" means Jay Waltz or his successor as shall be
designated by KIC. Such approval shall be in writing.
F. Sales Representative Agreement: At or prior to February 15,
1998, with an effective date of January 1, 1998, Kao Infosystems (Ireland)
Limited ("KIC Ireland") and PMG Ltd. shall have entered into a manufacturer's
representative agreement in substantially the form attached hereto as Schedule
"8-G" pursuant to the terms of which PMG Ltd., either directly or through an
affiliate entity, will act as the exclusive sales representative of KIC Ireland
in Ireland for the sale of KIC Ireland products to Novell, Inc. Such agreement
shall be terminable by either party upon sixty (60) days notice, provided that
the effective date of termination is no earlier than March 31, 1998.
G. Activity Under Novell Contracts Between 1/1/98 and the
Closing: The effective date of the assignment of the Partially Assigned
Contracts and Assigned Contracts between KIC and Novell shall be January 1,
1998. The revenue accruing from Novell under the assigned portion of such
contracts and under the product purchase portion of Agreement for Manufacturing
Turnkey Products for the Software Industry between Novell, Inc. and KAO
Infosystems Company dated as of November 7, 1995 (the "Turnkey Agreement") from
and including January 1, 1998 through the Closing (the "Novell Revenue") shall
be billed to Novell by Zomax, and Zomax shall be responsible for the collection
of the Novell Revenue. KIC shall invoice, and Zomax shall pay KIC for the
services and products provided by KIC from and including January 1, 1998 through
the Closing associated with the Novell Revenue in an amount as provided in the
calculation on Exhibit 13-F, but in no event shall such amount be less than one
hundred seventy-five thousand dollars ($175,000). Zomax shall pay KIC the amount
of such invoice within thirty (30) days of Zomax's receipt of such invoice. All
of the limitation of liability and disclaimer of warranty provisions, including
without limitation, the warranty of MERCHANTABILITY disclaimer applicable to the
Business Assets as provided in Section 2 hereof shall also be applicable to such
products and services.
H. Employee Benefits: As soon as practicable after the Closing
but no later than sixty (60) days after the Closing Date, assets and liabilities
representing the account balances of the KIC employees who are hired by Zomax
(the "Continuing Employees") in the Kao Corporation of America Profit Sharing
Plan (the "KIC 401(k) Plan") shall be transferred to a tax-qualified defined
contribution plan sponsored by Zomax for its eligible employees in a
trust-to-trust transfer that satisfies Section 414(l) of the Internal Revenue
Code of 1986, as amended (the "Code"). Prior to such transfer, Zomax shall
cooperate with KIC in the preparation, execution and delivery of such
documentation as KIC may deem necessary to complete the trust-to-trust transfer,
Zomax will, at the request of KIC and with the approval of a Continuing
Employee, withhold from the Continuing Employee's compensation and transfer to
the trustee of the KIC 401(k) Plan, such installment payments as may be required
to repay the Continuing Employee's loan under the KIC 401(k) Plan.
KIC shall automatically continue coverage under its Flexible Plan
("KIC's Health Care Plan") for Continuing Employees and their eligible
dependents effective as of the Closing Date and shall be reimbursed by Zomax for
coverage provided to Continuing Employees who remain employed by Zomax at the
applicable COBRA premium rate imposed by KIC's Health Care Plan. Zomax shall
make such COBRA payments to KIC by the first of each month for which the
coverage is provided. KIC's obligation under this Agreement to provide coverage
under KIC's Health Care Plan for Continuing Employees and their eligible
dependents shall terminate on March 1, 1998, provided the Continuing Employee
and/or eligible dependent becomes covered under the Zomax Health Care Plans. In
the event a Continuing Employee terminates employment with Zomax prior to March
1, 1998, or a Continuing Employee and/or eligible dependent does not become
covered under Zomax's Health Care Plans on March 1, 1998, KIC shall continue to
provide COBRA coverage under KIC's Health Care Plan to the extent required by
COBRA and at the expense of the Continuing Employee or eligible dependent. For
purposes of COBRA, the qualifying event (i.e., termination of employment) shall
occur on the date of Closing, and applicable COBRA coverage period (e.g., 18
months) shall run from the date of Closing.
14. Confidentiality: The parties will not, except as is appropriate in
connection with the operation of their respective businesses or to consummate
the provisions of this Agreement, release to the press or otherwise make public
any information regarding those transactions without the prior consent of each
other unless those transactions are abandoned in which case either party may
announce or disclose that fact.
15. ATTORNEYS' FEES: In the event that any litigation, arbitration, or
other proceeding is commenced between the parties hereto or their personal
representatives, successors or assigns concerning the enforcement or
interpretation of any provision of this Agreement or the rights and duties of
any party in relation thereto, the party or parties prevailing in such
litigation, arbitration or other proceeding shall be entitled, in addition to
such other relief as may be granted, to a reasonable sum as and for attorneys'
fees, which sum shall be determined by the Court in such litigation or by a
separate legal action brought for that purpose. For the purposes of this
paragraph, the "prevailing party" shall be determined in accordance with the
provisions of California Civil Code ss. 1717.
16. NOTICES: All notices and other communications to be made pursuant
to this Agreement shall be in writing and shall be deemed to have been duly
given on the date of service, if served personally on the party to whom service
is given, or on the second (2nd) day after mailing, if mailed to the party to
whom notice is to be given, by first-class mail, registered or certified,
postage prepaid, and properly addressed as follows:
KIC: 40 Grissom Road
Plymouth, MA 02360
Attn: Kelvin William, Esq.
With a copy to: Potter Anderson & Corroon LLP
Hercules Plaza
P.O. Box 951
Wilmington, DE 19899
Attn: David B. Brown, Esq.
Zomax: 5353 Nathan Lane
Plymouth, MN 55442
Attn: CFO
With a copy to: Fredrikson & Byron, P.A.
1100 International Center
900 Second Avenue South
Minneapolis, MN 55402-3397
Attn: Dobson West
Any party may change its address for the purpose of receiving notice in the
manner provided for notices above.
17. INDEMNIFICATION: Subject to the limitations hereinafter set forth,
Zomax (in its capacity as indemnifying party, as "Indemnifying Party") hereby
agrees to indemnify KIC (in its capacity as indemnified party, as "Indemnitee")
and hold KIC harmless, and KIC (in its capacity as indemnifying party, as
"Indemnifying Party") hereby agrees to indemnify Zomax (in its capacity as
indemnified party, as "Indemnitee") and hold Zomax harmless, from, against and
in respect of any and all damages, deficiencies, actions, suits, proceedings,
demands, assessments, judgments, claims, losses, costs, expenses, obligations
and liabilities (including costs of collection and reasonable experts' and
attorneys' fees and expenses) exceeding in the aggregate the amount of
Twenty-Five Thousand Dollars ($25,000.00) arising from or related to:
(i) any breach or inaccuracy, or any allegation by a third
party of any fact which, if true as alleged, would give rise to such a breach or
inaccuracy, in any representation or warranty of such Indemnifying Party;
(ii) the failure of such Indemnifying Party to perform any
covenant or agreement hereunder to be performed by it.
Notwithstanding the foregoing, no claims may be made or suit instituted
under this Section 17 after the first anniversary date of the Closing Date.
18. MISCELLANEOUS PROVISIONS:
A. Successors And Assigns: This Agreement may not be assigned
except with the prior written consent of the parties hereto. This Agreement
shall be binding on and inure to the benefit of the parties and their respective
successors and assigns.
B. Exhibits: All Exhibits referred to are attached hereto and
incorporated herein by this reference.
C. Governing Law: This Agreement shall be construed in
accordance with the laws of the State of California, without giving effect to
any choice or conflict or law provision or rule that would cause the application
of the laws of any other jurisdiction.
D. Integrated Agreement Modification: This instrument contains
the entire agreement of the parties and cannot be amended or modified except by
a written Agreement, executed by each of the parties hereto.
E. Captions: The captions in this Agreement are for
convenience purposes only, and shall have no effect on its construction or
interpretation.
F. Singular And Plural: Gender: When required by the context
of this Agreement, the singular shall include the plural, and the masculine
shall include the feminine, and the impersonal pronoun "it" shall refer to
either of the above, a corporation, partnership, joint venture, or other entity,
regardless of number or gender.
G. Severability: The unenforceability, invalidity, or
illegality of any provision shall not render the other provisions unenforceable,
invalid or illegal.
H. Waiver: No consent or waiver, express or implied, by either
party to this Contract of any breach or default by the other in the performance
of any obligation hereunder shall be deemed or construed to be a consent to or
waiver of any other breach or default by such party hereunder. Failure on the
part of any party hereto to complain of any act or failure to act of the other
party or to declare the other party in default hereunder, irrespective of how
long such failure continues, shall not constitute a waiver of the rights of such
party hereunder.
I. Execution of Documents: The parties hereto hereby agree to
execute and deliver such further instruments, agreements, contracts and
documents, as may be reasonably required to effectuate the stated and intended
purposes of this Agreement.
J. Counterparts: This Agreement may be executed in one (1) or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
K. Survival of Warranties: All warranties and representations
of the parties contained in paragraphs 6 and 7 shall survive the Closing.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
Dated: 2/3/98 KAO INFOSYSTEMS COMPANY
By: /s/ Vincent G. Borazini
Its: VP West Coast PDS
KIC
Dated: 2/3/98 ZOMAX OPTICAL MEDIA, INC., a
Minnesota Corporation
By: /s/ James T. Anderson
Its: CEO
ZOMAX
