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): January 7, 1999
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 January 7, 1999, the Registrant or its subsidiaries simultaneously
closed on three acquisitions (the "Transactions") from three subsidiaries of Kao
Corporation, a Japanese company. In the United States, the Registrant acquired
certain assets and assumed certain contractual rights and obligations of Kao
Infosystems Company pursuant to an Asset Purchase and Sale Agreement dated
November 28, 1998, between the Registrant and Kao Infosystems Company. In
Canada, the Registrant's wholly owned subsidiary, Zomax Canada Company, acquired
certain assets and assumed certain contractual rights and obligations of Kao
Infosystems Canada, Inc., pursuant to an Asset Purchase and Sale Agreement dated
November 28, 1998, between Zomax Canada Company and Kao Infosystems Canada, Inc.
In Ireland, the Registrant's wholly owned Irish subsidiary, Primary Marking
Group Limited, acquired all of the outstanding stock of Kao Infosystems
(Ireland) Limited, pursuant to a Share Purchase and Sale Agreement dated
November 28, 1998, between Primary Marking Group Limited and Kao Corporation.
The assets acquired consist primarily of real property and leasehold
interests in manufacturing facilities, machinery and equipment used in the
manufacture of compact disks, office equipment and inventory. The assets and
businesses acquired by the Registrant were used in the manufacture and sale of
CDs and related businesses, and the Registrant intends to continue to use the
assets and businesses in a similar manner. The amount paid in the Transactions
was negotiated after an extensive audit of the acquired entities and assets by
the Registrant's auditors. The aggregate consideration for the Transactions was
$37,500,000, subject to certain post closing adjustments. The Registrant used
$22,500,000 of its own funds and $15,000,000 obtained from General Electric
Capital Corporation to fund the Transactions.
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 Kao Infosystems Company, Kao Infosystems (Ireland)
Limited and Kao Infosystems Canada, Inc. into the Registrant's current
operation. These acquired 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.
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 Kao Infosystems Company, Kao
<PAGE>
Infosystems Canada, Inc. and Kao Infosystems (Ireland) Limited
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 Asset Purchase and Sale Agreement dated November 28, 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 and Sale Agreement, subject to requests for
confidential treatment of certain information contained in
such exhibits and schedules.
2.2 Asset Purchase and Sale Agreement dated November 28, 1998 by
and among Zomax Canada Company and Kao Infosystems Canada,
Inc. Upon the request of the Commission, the Registrant agrees
to furnish a copy of the exhibits and schedules to the Asset
Purchase and Sale Agreement, subject to requests for
confidential treatment of certain information contained in
such exhibits and schedules.
2.3* Share Purchase and Sale Agreement dated November 28, 1998 by
and among Primary Marketing Group Limited and Kao Corporation.
2.4* Credit Agreement dated as of January 6, 1999 among the
Registrant, Certain Lenders and General Electric Capital
Corporation.
2.5* Credit Agreement as of January 6, 1999 among Zomax Canada
Company, Certain Lenders and General Electric Capital Canada
Inc.
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* To be filed by amendment.
<PAGE>
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: January 22, 1999
ZOMAX OPTICAL MEDIA, INC.
By /s/ James E. Flaherty
James E. Flaherty,
Chief Financial Officer
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBIT INDEX TO FORM 8-K
Date of Report: Commission File No.:
January 7, 1999 0-28426
ZOMAX OPTICAL MEDIA, INC.
EXHIBIT NO. ITEM
2.1 Asset Purchase and Sale Agreement dated November 28, 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 and Sale Agreement,
subject to requests for confidential treatment of certain information
contained in such exhibits and schedules.
2.2 Asset Purchase and Sale Agreement dated November 28, 1998 by and among
Zomax Canada Company and Kao Infosystems Canada, Inc. Upon the request
of the Commission, the Registrant agrees to furnish a copy of the
exhibits and schedules to the Asset Purchase and Sale Agreement,
subject to requests for confidential treatment of certain information
contained in such exhibits and schedules.
2.3* Share Purchase and Sale Agreement dated November 28, 1998 by and among
Primary Marketing Group Limited and Kao Corporation.
2.4* Credit Agreement dated as of January 6, 1999 among the Registrant,
Certain Lenders and General Electric Capital Corporation.
2.5* Credit Agreement as of January 6, 1999 among Zomax Canada Company,
Certain Lenders and General Electric Capital Canada Inc.
- ------------
* To be filed by amendment.
ASSET PURCHASE AND SALE AGREEMENT
BETWEEN
KAO INFOSYSTEMS COMPANY
AND
ZOMAX OPTICAL MEDIA, INC.
NOVEMBER 28 , 1998
<PAGE>
TABLE OF CONTENTS
ASSET PURCHASE AND SALE AGREEMENT
Articles Page
1. DEFINITIONS..........................................................1
2. BUSINESS ASSETS......................................................6
3. INTELLECTUAL PROPERTY................................................8
4. EXCLUDED ASSETS......................................................8
5. PURCHASE PRICE AND MISCELLANEOUS
EXPENSES........................................................9
6. SELLER'S WARRANTIES.................................................13
7. BUYER'S WARRANTIES..................................................18
8. BUYER'S INDEMNITY...................................................20
9. SELLER'S INDEMNITY..................................................21
10. INTERIM PERIOD......................................................21
11. EMPLOYEE BENEFIT MATTERS............................................23
12. GOVERNMENTAL CONSENTS...............................................26
13. CLOSING.............................................................26
14. POST CLOSING........................................................30
15. BULK SALES ACT......................................................35
16. RIGHT OF TERMINATION; DISPUTE SETTLEMENT............................35
17. SURVIVAL, REMEDIES AND PROCEDURE FOR
INDEMNIFICATION................................................36
18. MISCELLANEOUS.......................................................41
EXHIBITS:
Exhibit I Undertaking of Assumption................45
Exhibit II Bill of Sale.............................47
Exhibit III Agreement of Guaranty....................49
SCHEDULES:
Schedule 1.0 Employees Relevant to "Seller's knowledge"
and "Buyer's knowledge"
Schedule 2.01(b) Leases of Real Property
Schedule 2.02 Machinery and Equipment
Schedule 2.04 Permits
Schedule 2.08 Computer Software Assets
Schedule 3.01 Intellectual Property Rights
Schedule 5.03(b) Inventory, Etc. Valuation Procedure
Schedule 5.05 Allocation of Purchase Price
Schedule 6.11(b) Seller's Required Approvals
Schedule 6.20 Exceptions to Required Assets
Schedule 6.21 Software Compliance with Year 2000
Schedule 7.03 Buyer's Required Approvals
Schedule 11.01-A Employees
Schedule 11.01-B Buyer's Employment Policies and Procedures
Schedule 13.02(e) Agreements to be executed by Buyer
Schedule 13.03(d) Agreements to be executed by Seller
Schedule 13.04(f) Consents for Assignment of Contracts
Schedule 14.11 Exceptions to Noncompetition Restrictions
DISCLOSURE SCHEDULES:
Disclosure Schedule 6.05 Litigation and Investigations
Disclosure Schedule 6.06 Environmental Claims
Disclosure Schedule 6.09 Material Contracts
Disclosure Schedule 6.10 Exceptions to Intellectual Property Rights,
Etc.
Disclosure Schedule 6.11 Compliance with Laws, Etc.
Disclosure Schedule 6.14 Employment Contracts, Etc.
Disclosure Schedule 6.15 Employee Benefit Matters
Disclosure Schedule 6.18 Product Liability Matters
<PAGE>
ASSET PURCHASE AND SALE AGREEMENT
THIS AGREEMENT, entered into and effective as of the 28th day of
November, 1998, by and between KAO INFOSYSTEMS COMPANY, a Delaware corporation,
with its principal place of business at 40 Grissom Road, Plymouth, Massachusetts
02360 ("Seller"), and ZOMAX OPTICAL MEDIA, INC., a Minnesota corporation, with
its principal place of business at 5353 Nathan Lane, Plymouth, Minnesota 55442
("Buyer").
W I T N E S S E T H
WHEREAS, Seller owns and operates the Business (as defined below along
with other capitalized terms); and
WHEREAS, Buyer desires to purchase certain assets, and acquire certain
rights of Seller relating to the Business and assume the Assumed Liabilities,
and Seller desires to sell such assets, and transfer such rights and the Assumed
Liabilities; and
WHEREAS, Kao Corporation, a Japanese corporation ("Kao"), owns directly
or indirectly all of the stock of Seller;
NOW, THEREFORE, for good and valuable consideration, the sufficiency
and receipt of which is hereby acknowledged, and subject to the terms,
conditions, covenants and provisions of this Agreement, Seller and Buyer
mutually covenant and agree as follows:
ARTICLE 1
DEFINITIONS
1.01. As used in this Agreement, the following terms have the following
meanings:
"Accounts Payable" means the trade accounts payable in the ordinary
course of business as of Closing (whether or not due) which have arisen from the
purchase of goods and/or services by the Business from its suppliers together
with the amount payable by Seller to Transferred Employees for vacation time
that is accrued and unpaid and together further with any amount referred to in
Section 5.08(a)(i).
"Acquisition Documents" has the meaning ascribed in Section
13.02(d)(ii) of this Agreement.
"Affiliate" means with respect to a specified entity, an entity that
directly, or indirectly through one or more intermediaries, Controls, or is
Controlled by, or is under common Control with the entity specified; provided,
that, without limiting the generality of the foregoing, the term "Affiliate"
shall not include any entity in which a Party has a fifty percent or less
ownership interest.
"Agreement" means this Asset Purchase and Sale Agreement together with
all its Schedules, Disclosure Schedules and Exhibits.
"Assumed Liabilities" has the meaning ascribed in Section 5.01 of this
Agreement.
"Bill of Sale" means that agreement attached as Exhibit II to this
Agreement.
"Business" means the business of compact disc (CD) and digital
versatile disc (DVD) replication, floppy disc duplication, turnkey assembly,
telemarketing and fulfillment presently conducted by Seller at the Leased
Premises.
"Business Assets" has the meaning ascribed in Article 2 of this
Agreement.
"Business Personnel" has the meaning ascribed in Section 6.15 of this
Agreement.
"Business Records" has the meaning ascribed in Section 2.06 of this
Agreement.
"Buyer's knowledge" and phrases of like impact shall mean the actual
knowledge of Buyer's employees listed on Schedule 1.0 hereto.
"Closing" has the meaning ascribed in Section 13.01 of this Agreement.
"Closing Date" means the date on which Closing occurs.
"Code" means the Internal Revenue Code of 1986, as amended, and
corresponding provisions of any subsequent federal revenue act.
"Computer Software Assets" has the meaning ascribed in Section 2.08 of
this Agreement.
"Contracts" has the meaning ascribed in Section 2.05 of this Agreement.
"Control" and phrases of like impact shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and operating policies of the entity in respect of which the
determination is being made, through the ownership of voting securities,
contract, voting trust or otherwise.
"Effective Date" means the effective date of this Agreement and is the
date written in the preamble to this Agreement.
"Environmental Claim" means any claim, action, cause of action,
investigation or written notice by any person or entity alleging potential
liability of Seller arising out of, based on or resulting from, in part or in
whole, (a) the presence, or release into the environment, of any Materials of
Environmental Concern at any Leased Premises or (b) circumstances forming the
basis of any violation, or alleged violation, of Environmental Laws.
"Environmental Laws" means the applicable federal, state, provincial,
regional, county, parish, municipal, and local environmental, health or safety
laws, regulations, ordinances, and rules, and the common law relating to the
use, refinement, handling, treatment, removal, storage, production, manufacture,
transportation, disposal, emissions, discharges, releases or threatened releases
of Materials of Environmental Concern, or otherwise relating to protection of
the environment, as the same may be amended or modified, including, without
limitation, the statutes listed below: Federal Solid Waste Act as amended by the
Resource Conservation and Recovery Act of 1976, 42 U.S.C. ss.6901, et seq.;
Federal Comprehensive Environmental Response, Compensation, and Liability act of
1980, 42 U.S.C. ss.9601, et seq.; Federal Clean Air Act, 42 U.S.C. ss.7401, et
seq.; Federal Water Pollution Control Act, Federal Clean Water Act of 1977, 33
U.S.C. ss.1251, et seq.; Federal Insecticide, Fungicide, and Rodenticide Act,
Federal Pesticide Act of 1978, 7 U.S.C. ss.136, et seq.; Federal Hazardous
Materials Transportation Act, 48 U.S.C. ss.1801, et seq.; Federal Toxic
Substances Control Act, 15 U.S.C. ss.2601, et seq.; and Federal Safe Drinking
Water Act, 42 U.S.C. ss.300f, et seq.
"Environmental Liabilities" has the meaning ascribed in Sections 8.03
and 9.02 of this Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Excluded Assets" has the meaning ascribed in Article 4 of this
Agreement.
"Excluded Liabilities" has the meaning ascribed in Section 5.02 of this
Agreement.
"Excluded Records" has the meaning ascribed in Section 2.06.
"GAAP" means United States generally accepted accounting principles
consistently applied.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Intellectual Property" means patents, trademarks, copyrights and
technical information that is protected by law from infringement.
"Intellectual Property Rights" has the meaning ascribed in Section 2.09
of this Agreement.
"Inventory" has the meaning ascribed in Section 2.07 of this Agreement.
"Irish Agreement" means the agreement dated on or about the date of
this Agreement made between Kao and Buyer or its Affiliate and relating to the
purchase and sale of stock described in such agreement.
"Kao Guaranty" means the Agreement of Guaranty, in the form attached
hereto as Exhibit III providing a guaranty by Kao in favor of Buyer.
"Leased Premises" has the meaning ascribed in Section 2.01(b) of this
Agreement.
"Losses" has the meaning ascribed in the first paragraph of Article 8
of this Agreement.
"Machinery and Equipment" has the meaning ascribed in Section 2.02 of
this Agreement.
"Material Contract" means those contracts to which Seller is a party
(other than purchase orders to sell or buy in the ordinary course of business)
which relate to the Business and have an aggregate remaining value of at least
$25,000. For purposes hereof, "remaining value" refers to the revenue thereon as
to which Seller has a contractual right, or the cost thereof as to which Seller
has a contractual duty, prior to expiration thereof or the possible exercise of
a termination right thereunder.
"Materials of Environmental Concern" means any toxic or hazardous
waste, pollutants or substances, including, without limitations, asbestos,
radon, PCBs, petroleum products and byproducts, substances defined or listed as
a pollutant, air pollutant, "hazardous substance", "toxic substance", "toxic
pollutant", "medical waste" or similarly identified substance or mixture, in or
pursuant to any of the Environmental Laws.
"Miscellaneous Assets" has the meaning ascribed in Section 2.10 of this
Agreement.
"Offeree Employees" has the meaning ascribed in Section 11.01 of this
Agreement.
"Office Equipment" has the meaning ascribed in Section 2.03 of this
Agreement.
"Other Purchase and Sale Agreements" means the other agreements, dated
on or about the date hereof, which Buyer or its Affiliates have entered into
with Kao Infosystems Canada Inc. and Kao, respectively, for the purchase and
sale of assets and stock, respectively, described in those other agreements.
"Party" means either Buyer or Seller.
"Parties" means both Buyer and Seller.
"Permits" has the meaning ascribed in Section 2.04 of this Agreement.
"Profit Sharing Plan" has the meaning ascribed in Section 11.05(b) of
this Agreement.
"Purchase Price" has the meaning ascribed in Section 5.03 of this
Agreement.
"Receivables" means the trade accounts receivable as of Closing arising
from the sale of products and/or services by the Business to its customers.
"Seller's Benefit Plans" has the meaning ascribed in Section 6.15 of
this Agreement.
"Seller's knowledge" and phrases of like impact shall mean the actual
knowledge of Seller's employees listed on Schedule 1.0 hereto.
"Tangible Property" has the meaning ascribed in Section 6.08 of this
Agreement.
"Taxes" has the meaning ascribed in Section 5.06.
"Third Party" shall mean a party other than either of the Parties or
their respective Affiliates.
"Transferred Employee(s)" has the meaning ascribed in Section 11.01 of
this Agreement.
"Undertaking of Assumption" means that agreement attached as Exhibit I
to this Agreement.
1.02. All dollar amounts set forth herein are expressed in United
States currency. If for any reason whatsoever it becomes necessary to convert
any sum due under this Agreement from one currency ("the first currency") into
United States dollars ("the second currency") or vice versa, such conversion
shall be made at the rate of exchange prevailing on the business day prior to
the date such payment is due. For this purpose "rate of exchange" means the rate
at which the party converting such currency could purchase the second currency
with the first currency, using the rates quoted by the New York Times, and
"business day" means a day on which banks in New York City are generally open
for business.
1.03. Reference to Sections are to sections of Articles of this
Agreement and references to Articles and Exhibits are to Articles of and
Exhibits to this Agreement.
1.04 Reference to Schedules or Disclosure Schedules are to the attached
schedules and disclosure schedules hereto which are incorporated herein by
reference.
ARTICLE 2
BUSINESS ASSETS
Seller agrees to grant, sell, convey, assign, transfer and deliver unto
Buyer, and Buyer agrees to purchase, accept and take delivery of the following
assets of Seller (hereinafter collectively referred to as the "Business Assets")
as of the Closing Date:
2.01 Real Property/Leaseholds:
(a) [Intentionally deleted.]
(b) The leasehold interest created by each lease of real property
that is described in Schedule 2.01(b) and constitutes a Contract (the "Leased
Premises").
2.02 Machinery and Equipment: Except as described in Article 4
hereof, manufacturing, storage, distribution, transportation and other machinery
and equipment owned by Seller (or Seller's leasehold interest therein under
leases that are Contracts) and located on the Leased Premises on the date
hereof, including that listed in Schedule 2.02, subject to changes in the
ordinary course of business (the "Machinery and Equipment").
2.03 Office Equipment: The office equipment, furniture, files,
cabinets, computer hardware and related tangible personal property situated, on
the date hereof, at the Leased Premises, and owned by Seller (or Seller's
leasehold interest therein under leases that are Contracts) (the "Office
Equipment") subject to changes in the ordinary course of business; provided,
that software loaded on computers shall be deemed Business Assets only if such
software constitutes Computer Software Assets.
2.04 Permits: To the extent transferable or assignable to Buyer without
breaching any applicable law or regulation or any other enforceable obligation
of Seller, all rights in and to all permits, consents, licenses, authorizations,
and approvals used in the Business, including those listed in Schedule 2.04,
which are required by any governmental entity in order for Seller to conduct the
Business as presently conducted (excluding general corporate and other similar
authorizations not specific to the Business, such as qualifications to transact
business) (the "Permits").
2.05 Contracts: Except as identified in Article 4 hereof, all sales
orders and contracts, purchase orders and contracts, distribution agreements,
development agreements, consulting agreements, real property leases, equipment
and other personal property leases, licenses (including software licenses) and
other contracts or agreements which relate exclusively to the Business, to the
extent they shall not have been terminated on or before the Closing Date, to the
extent the consent of any Third Party to the assignment thereof to Buyer is
either not required or has been obtained and to the extent they are not in
default and such default has not been cured (the "Contracts"). For any such
contract or agreement which is not so assignable by Seller to Buyer without the
consent of a Third Party, Seller shall use reasonable efforts to arrange for
Buyer to obtain such consent prior to Closing, and Buyer shall reasonably assist
Seller's efforts. Seller shall not be required to incur or bear any cost or
expense to obtain such consent, and obtaining such consent shall not be required
or (except as otherwise expressly set forth herein) deemed a condition of
Closing. For the purposes of this Agreement, the following shall not constitute
Contracts: (a) Receivables; (b) Accounts Payable; and (c) agreements between
Seller and its employees, relating to their terms and conditions of employment
with Seller (including without limitation collective bargaining agreements),
except those expressly identified in Disclosure Schedule 6.09.
2.06 Business Records: All business records prepared in the ordinary
course of business and now existing (subject to changes in the ordinary course
of business) relating solely or principally to the Business (other than those
related to the divestiture of the Business or to Seller's Benefit Plans, and
those comprising communications with Seller's Affiliates, attorneys, accountants
and consultants or not pertaining in some material way to the Business Assets or
Assumed Liabilities ("Excluded Records"), subject in all cases to third party
confidentiality restrictions or legally required consents), including market
information, sales aids, customer and supplier lists, sales history and
historical site specific accounting information, and records related to
Intellectual Property Rights, whether or not located, as of the Closing Date, at
the Leased Premises, which relate solely or principally to the Business as it is
conducted by Seller at the Leased Premises (the "Business Records"). For
purposes of this Agreement, the consent of a Transferred Employee to the
disclosure of his or her employment file shall be deemed to be a legally
required consent. Each party shall be allowed reasonable access to and have the
right to copy those records that relate to the Business which are conveyed to or
retained by the other party.
2.07 Inventory: The inventories of raw materials, stores, tools, work
in process, finished goods, supplies and packaging materials held for use or
generated by the Business at Closing, which are located at or in transit to or
from the Leased Premises, field warehouses or customer locations (the
"Inventory").
2.08 Computer Software Assets: All computer software, data rights, and
documentation used in the conduct of the Business as of the date hereof
including those described in Schedule 2.08 (the "Computer Software Assets");
provided, that any such software, data rights and documentation that are subject
to a license or other agreement shall be deemed Computer Software Assets and
included in the Business Assets only if such license or agreement constitutes a
Contract and, then, subject to the terms of said license or agreement. As to any
such software or rights which are not so transferable by Seller, Seller shall
use reasonable efforts to arrange for Buyer to obtain the right to use that
software or those rights, and Buyer shall reasonably assist Seller's efforts.
Except as otherwise explicitly set forth herein, the transfer of any Computer
Software Assets shall not be a condition of closing. Buyer shall be responsible
for any fees or royalty payments required to obtain such right, and Seller shall
not be required to incur or bear any cost or expense in order for Buyer to
obtain such right.
2.09 Intellectual Property Rights: The rights to the Intellectual
Property used by Seller in the conduct of the Business that are delineated in
Article 3 ("Intellectual Property Rights").
2.10 Miscellaneous Assets: The Receivables as of the Closing Date and
prepaid expenses as of the Closing Date that will inure to the benefit of Buyer,
including but not limited to prepaid royalties and prepaid tax assessments
generated or incurred in the Business as prorated to Buyer pursuant to Article 5
("Miscellaneous Assets").
ARTICLE 3
INTELLECTUAL PROPERTY
3.01 Intellectual Property Rights: As of the Closing Date, Seller also
shall grant to Buyer certain rights to Intellectual Property, which rights are
described in Schedule 3.01.
ARTICLE 4
EXCLUDED ASSETS
Notwithstanding anything, express or implied, to the contrary contained
in this Agreement, the following assets of Seller and Seller's Affiliates are
excluded from the transaction described by this Agreement and shall not
constitute a portion of the Business Assets (the "Excluded Assets"):
4.01 Promissory Notes: All promissory notes and indebtedness owing to
Seller, other than that associated with Receivables.
4.02 Cash and Investments: All cash on hand or in banks, including cash
equivalents and investments.
4.03 Prepaid Taxes, Expenses and Advances: All prepaid taxes, expenses
and advances, as prorated to Seller in accordance with Article 5.
4.04 Tax Withholdings: All taxes withheld by Seller from its employees'
salaries and wages, and other taxes of Seller incurred by it as an employer,
vendor or otherwise in the conduct of the Business, which Seller is obligated to
pay, and rights to claims for refunds of any such taxes.
4.05 Seller's Name and Trademarks: Except as expressly set forth in
Section 14.07, all rights in the trade name "KAO" and "KAO INFOSYSTEMS", or any
other trademark or trade name, web site or Internet domain name of Seller, its
Affiliates or any other party not explicitly listed on Schedule 3.01 to this
Agreement.
4.06 Insurance Policies: All insurance policies, proceeds therefrom,
and rights thereunder.
4.07 Business Records: The Excluded Records and all other business
records not specifically described in Section 2.06.
4.08 Corporate Computer Assets: All corporate computer systems
(hardware and software) and licenses (including, but not limited to, the BaaN
computer system (hardware and software) and license and the Oracle software
license, Seller's electronic and voice mail systems, freight related systems and
order entry systems) which are not provided for in Section 2.08 or listed in
Schedule 2.08.
4.09 Causes of Action: All causes of action or claims of Seller against
third parties, relating to the conduct of the Business by Seller prior to
Closing, whether known or unknown on the Closing Date, excluding Receivables.
4.10 Subsidiaries: Any equity or other interest in any corporation,
partnership, joint venture, trust, limited liability company, association or
other legal entity. It is understood and agreed that the assets of Kao
Infosystems Canada Inc. ("KICI"), a subsidiary of Seller, are being sold by KICI
pursuant to a separate agreement, and neither the shares nor any assets of KICI
are being conveyed hereunder.
4.11 Other Sites: All assets of Seller not used in the Business or
located at sites other than the Leased Premises, including but not limited to
sites leased or owned by Seller at Plymouth, Massachusetts; Bothell, Washington;
Wilsonville, Oregon; and Lakeville, Massachusetts.
4.12 Other Assets: All other assets of Seller and Seller's Affiliates
not specifically included in the Business Assets.
ARTICLE 5
PURCHASE PRICE AND MISCELLANEOUS EXPENSES
Subject to the terms and conditions of this Agreement, Buyer and Seller
agree as follows:
5.01 Assumption of Liabilities: Pursuant to the terms of the
Undertaking of Assumption, Buyer shall assume and agree to pay, discharge and
perform when due all liabilities and obligations (whether known or unknown,
fixed or contingent) of Seller, to the extent that they arise out of the
ownership, use or operation of the Business Assets on and after the Closing Date
as well as all Accounts Payable existing on the Closing Date (the foregoing
liabilities and obligations being referred to herein as the "Assumed
Liabilities"). The Assumed Liabilities include, but are not limited to:
(a) All obligations arising from and after the Closing under
Contracts, Permits and other agreements (including, without limitation, the
Contracts and agreements regarding Computer Software Assets) assigned by Seller
to Buyer in accordance with this Agreement; and
(b) All Accounts Payable (net of any credits or refunds accruing
with respect thereto in the period prior to the Closing Date) existing on the
Closing Date and used to calculate the value of Accounts Payable per Section
5.03(a)(4). It is understood and agreed that the Accounts Payable shall be
absolute obligations of Buyer to pay and shall be timely paid by Buyer in strict
accordance with their terms. Buyer's obligation to pay same shall not be subject
to any setoff, withholding, counterclaim or refusal to pay which Buyer may have
or claim to have against either Seller or the payee on any of the Accounts
Payable.
5.02 Excluded Liabilities: Except as provided in Section 5.01, Buyer
shall not assume any liabilities and obligations (whether known or unknown,
fixed or contingent) of Seller to the extent that they arise out of or relate to
the ownership, use or operation of the Business Assets prior to the Closing Date
("Excluded Liabilities"). The Excluded Liabilities include, but are not limited
to, the following:
(a) Indebtedness for borrowed money incurred prior to the Closing
Date;
(b) Wages, salaries and variable compensation earned by employees
in the Business prior to the Closing Date; and
(c) All employee benefit liabilities and claims incurred, accrued
or earned under any arrangement of Seller and its Affiliates (other than those
relating to Accounts Payable).
5.03 (a) Purchase Price: The purchase price ("Purchase Price") shall be
the sum of:
(1) Five Million and Nine Hundred Thousand Dollars
($5,900,000.00) for the Business Assets (other than items described in Section
5.03 (a) (2) and (3)), and for all other rights and obligations contemplated
hereunder;
(2) the value of the Inventory as of Closing computed in
accordance with Schedule 5.03(b); and
(3) the value of the Receivables and other Miscellaneous
Assets as of Closing computed in accordance with the provisions of Schedule
5.03(b); and
(4) the value (expressed as a negative number) of Accounts
Payable (net of any credits or refunds accruing with respect thereto in the
period prior to the Closing Date) as of Closing computed in accordance with the
provisions of Schedule 5.03(b).
(b) (1) Five business days prior to Closing Seller shall provide
to Buyer in writing an estimate of the values described in Section 5.03(a)(2)
(3) and (4) (whether totaling a negative or positive number), which values shall
be added to the amount set forth in Section 5.03(a)(1) in order to determine the
amount paid by Buyer to Seller at the Closing. All estimates shall be computed
in accordance with the methodology set forth in Schedule 5.03(b). Buyer shall be
provided access to the written information used by Seller to calculate such
estimates concurrent with Seller's preparation of such estimates, and such
estimates shall be explained to Buyer promptly after they are calculated.
(2) No later than 45 days following Closing, Seller shall
provide to Buyer a report setting forth the actual amount of the values
described in Section 5.03(a)(2), (3) and (4) as of the Closing, using the same
valuation methods as required herein to be used in preparing the estimates for
such values. Seller shall make available to Buyer Seller's books, records and
personnel related to and involved in the calculation of such actual values, and
Buyer shall make available to Seller the Business books, records and Transferred
Employees to the extent reasonably necessary for Seller to complete such
valuations.
(A) If the actual amount of the values described in
Section 5.03(a)(2), (3) and (4) as of the Closing, when combined, is greater
than the estimate thereof, when combined, used to calculate the Purchase Price,
Buyer shall remit to Seller such difference within 25 days of receipt by Buyer
of Seller's report, assuming objections to the report are not submitted by Buyer
in accordance herewith or if such objections are submitted, within 7 days of
resolution of such objection. Buyer shall pay to Seller within 25 days of
receipt by Buyer of Seller's report all amounts relating to the report that are
not disputed.
(B) If the actual amount of the values described in
Section 5.03(a)(2), (3) and (4) as of the Closing, when combined, is less than
the estimate thereof, when combined, used to calculate the Purchase Price,
Seller shall remit to Buyer such difference within 25 days of receipt by Buyer
of Seller's report, assuming objections to the report are not submitted by Buyer
in accordance herewith or if such objections are submitted, within 7 days of
resolution of such objection. Seller shall pay to Buyer within 25 days of
receipt by Buyer of Seller's report all amounts relating to the report that are
not disputed.
(3) By submittal of a written objection thereto no later than
20 days following receipt of Seller's subsection 5.03(b)(2) report, Buyer may
dispute any amounts reflected on Seller's report but (A) only on the basis that
the amounts reflected thereon were not arrived at in accordance with the terms
of Schedule 5.03(b), and (B) only if the amount disputed exceeds in the
aggregate $25,000. Such objection shall identify each disputed item with a
reasonable description of the amount in dispute and the nature of the objection.
If Buyer and Seller are unable to resolve such dispute within 30 days following
Seller's receipt of Buyer's objection, they shall submit the open matter(s) to a
mutually agreed certified public accountant (or if the Parties shall be unable
to agree within five days of a request by either Party to do so, a certified
public accountant jointly selected by the Parties' respective accountants) who
shall, within 30 days of such submittal, issue a determination to both parties
made in accordance with the terms of this Agreement, which determination shall
be final and binding on the Parties. The fees and expenses of such certified
public accountant shall be allocated between Buyer and Seller in the same
proportion that the aggregate amount of disputed items so submitted that is
unsuccessfully disputed by Buyer bears to the total amount of all disputed items
so submitted.
(c) If by operation of Section 5.03(b) above, an item of Inventory
or a Receivable or a Miscellaneous Asset is accorded no value, Seller at its
option and expense may require Buyer to return such Inventory item or assign
such Receivable or Miscellaneous Asset to Seller for no additional
consideration, and shall allow Seller reasonable access to any documentation
supporting collection of the Receivable or Miscellaneous Asset.
5.04 Payment Terms: The Purchase Price shall be payable in immediately
available funds in United States Dollars by wire transfer to an account at a
bank or banks to be designated by Seller in writing to Buyer prior to the
Closing Date.
5.05 Allocation: The Parties have agreed on a schedule, attached hereto
as Schedule 5.05, to allocate the Purchase Price among the various categories of
Business Assets and other rights to be transferred to or otherwise acquired by
Buyer pursuant to this Agreement. The allocation as provided in Schedule 5.05
(with any resulting adjustments to asset values arising out of application of
Section 5.03(b) above) shall be used by the Parties in reporting the
transactions contemplated by this Agreement for all tax purposes, including as
required by Section 1060 of the Code. Neither Party shall take any position on
any of its tax returns that is inconsistent with such allocation and each Party
shall file U.S. Internal Revenue Service Form 8594, and equivalent forms in
other countries, if necessary, in a manner consistent with this allocation.
5.06 Sales, Use, Transfer and Similar Taxes and Charges: Buyer shall
bear and pay the following ("Taxes"): all sales or use taxes and any transfer,
documentation, gross receipts, custom duties, value added and other taxes and
charges as well as interest and penalties thereon upon or with respect to the
sale or transfer of the Business Assets by Seller to Buyer pursuant to this
Agreement but shall not include income taxes payable by Seller. To the extent
that any applicable law or regulation imposes upon Seller the obligation to
report or to pay Taxes, Buyer shall promptly reimburse Seller therefor upon
receipt of Seller's invoice for the amount of such payments. If the sale or
transfer of any or all of the Business Assets is exempt from such taxes or
charges, Buyer shall provide Seller with appropriate exemption documents prior
to the Closing Date.
5.07 Property Taxes: All applicable real and personal property taxes
levied or assessed for the tax year in which the Closing occurs against the
Business Assets shall be prorated and shall be the responsibility of Seller up
to and including midnight preceding the Closing Date; the balance of any such
taxes shall be borne by Buyer; or, if Seller shall have paid any of the same,
Buyer shall promptly reimburse Seller therefor.
5.08 Miscellaneous Charges:
(a) Concurrently with or promptly after the Closing, the Parties
shall apportion all fees and charges for utilities and other periodic payments
relating to the Business as follows:
(i) those relating to the period prior to and including
midnight preceding the Closing shall be for the
account of Seller but shall be deemed included
within Accounts Payable to the extent not actually
paid by Seller.
(ii) those relating to the period after midnight
preceding the Closing shall be the responsibility of
Buyer and shall be reimbursed by Buyer to Seller to
the extent actually paid by Seller.
(b) [Intentionally omitted.]
(c) [Intentionally omitted.]
ARTICLE 6
SELLER'S WARRANTIES
Except as otherwise provided in this Agreement or disclosed in the
Schedules or Disclosure Schedules, Seller represents and warrants as of the date
hereof and as of the date of Closing as follows:
6.01 Organization; Good Standing: Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has corporate power to own the Business Assets and to carry on the
Business as now being conducted. Kao is a corporation duly organized, validly
existing and in good standing under the laws of Japan and has corporate power to
execute, deliver and perform the Guaranty.
6.02 No Conflict with Other Instruments or Agreements: Neither the
execution, delivery or performance of this Agreement by Seller, nor the
consummation of the transactions contemplated by this Agreement by Seller will:
(a) violate any provision of the Certificate of Incorporation,
Bylaws or similar constitutional documents of Seller, or any law, rule,
regulation, order, judgment or decree by which Seller or any of the Business
Assets may be bound; or
(b) conflict with, result in a breach of the terms and conditions
of, or result in the imposition of any lien or other encumbrance on or with
respect to any of the Business Assets as a result of the provision of, or
constitute a default under, any agreement (except with respect to any Contract
under which a default is caused by the assignment thereof by Seller) to which
Seller is a party or by which it or any of the Business Assets may be bound.
6.03 Authorization: Seller has the corporate power, including all
necessary authorization, to execute, deliver and fulfill the provisions of this
Agreement.
6.04 Binding Effect: This Agreement constitutes a legal, valid and
binding agreement of Seller, enforceable against Seller in accordance with its
terms, except as enforcement may be limited by bankruptcy, insolvency,
reorganization, or similar laws affecting the enforcement of creditors' rights
generally and rules and laws concerning equitable remedies.
6.05 Litigation and Investigations: Except as may be disclosed to Buyer
in Disclosure Schedule 6.05 or as may be set forth below in Section 6.06, there
is no material litigation, action, or proceeding pending against Seller, nor to
Seller's knowledge is any material litigation, proceeding or investigation
threatened against Seller, as a result of its ownership of the Business Assets
or operation of the Business or against the Business Assets for any reason
whatsoever; and the use or operation of the Business Assets is not subject to
any injunction, order, judgment, writ or decree to any material extent.
6.06 Environmental Matters: Except as may be disclosed to Buyer in
Disclosure Schedule 6.06, there are no pending Environmental Claims of a
material nature, nor has Seller received any written notice of any Environmental
Claims of a material nature, nor to Seller's knowledge are there any facts or
circumstances relating to the Business Assets or the Business that give rise to
any Environmental Claims of a material nature, or any noncompliance with or
liability or responsibility under any administrative or judicial judgments or
orders or Environmental Laws.
6.07 [Intentionally Omitted]
6.08 Title to Tangible Property:
(a) Seller has legal and beneficial ownership of the Machinery and
Equipment, Office Equipment, Inventory and Business Records (the "Tangible
Property").
(b) The Tangible Property will, as of Closing, be free and clear
of all liens, mortgages, judgments, security interests, easements, restrictions,
charges, or other encumbrances.
(c) No third party has any option or right of first refusal to
purchase all or any part of the Tangible Property.
6.09 Contracts and Other Agreements:
(a) Disclosure Schedule 6.09 sets forth a list that includes (but
is not necessarily limited to) all Material Contracts. Subject to
confidentiality restrictions, true and correct copies of the Material Contracts
have been provided to Buyer. No other party to any Material Contract has
notified Seller in writing that it considers Seller to be in breach thereof,
and, to Seller's knowledge, no other party to any Material Contract is
threatening to allege such breach. To Seller's knowledge, Seller is not in
material default of any provision of a Material Contract.
(b) Seller makes no warranty with regard to the assignability of
rights or delegation of duties under Contracts or other contracts or agreements
relating to the Business. Subject to confidentiality restrictions, Buyer shall
form its own opinion with regard to the enforceability of the commitments by any
party thereto therein contained, compliance by the other parties thereto with
their undertakings thereunder, assignability and delegation thereof, and ongoing
obligations of Buyer to such other parties after Buyer's assumption of such
obligations as set forth herein.
(c) Seller makes no warranty with regard to the assignability of
rights or delegation of duties under any agreements or arrangements which relate
to the Business but are not exclusive to the Business . For any services that
will not be provided to Buyer under a separate agreement with Seller, Seller
shall provide reasonable assistance to Buyer in Buyer's effort to obtain such
services from entities now providing the same to the Business. Buyer shall be
responsible for all costs associated with obtaining such services.
6.10 Intellectual Property:
(a) Except as may be disclosed to Buyer in Disclosure Schedule
6.10 and as set forth in Section 6.09(c), Seller has legal and beneficial
ownership of, and has the right to convey all of the Intellectual Property
Rights and Seller has not received written notice of any pending, nor to
Seller's knowledge is there currently threatened any, material claim, suit or
proceeding contesting any of the Intellectual Property Rights.
(b) Except as set forth in Disclosure Schedule 6.10, Seller has
not received written notice of any pending, nor to Seller's knowledge is there
currently threatened any material claim, suit or proceeding alleging that the
operation or use of the Business Assets infringes a patent of another party. To
Seller's knowledge, its operation and use of the Business Assets does not
infringe the Intellectual Property of others to any material extent.
6.11 Compliance with Law; Governmental Consents:
(a) Except as set forth in Disclosure Schedule 6.11 or otherwise
set forth herein, to Seller's knowledge, the operations of the Business are in
substantial compliance with all applicable laws and regulations having the force
of law, and the Seller has not been notified in writing of any noncompliance
therewith. This is not intended to relieve Buyer of its responsibility for
ensuring such compliance from the Closing Date forward.
(b) Except for filing and approval requirements under the HSR Act
and except as set forth in Schedule 6.11(b), no consent, authorization, or
approval of, or exemption by, or filing with, any court or governmental, public,
or self-regulatory body of authority, that is material to the operation of the
Business, is required in connection with the execution, delivery and performance
by Seller of this Agreement or of any of the instruments or agreements herein
referred to, or the taking of any action herein contemplated to be taken by
Seller.
6.12 Brokers or Finders: Except for its obligations to KPMG, for which
Seller and its Affiliates are solely responsible, Seller has not incurred an
obligation or liability, contingent or otherwise, for broker's or finder's fees
with respect to the matters provided for in this Agreement.
6.13 Taxes: No taxes related to the Business Assets are in dispute to
any material extent. Seller has, or as of Closing shall have, filed all federal,
provincial, state and local tax returns and reports then required to be filed
and paid all taxes, interest, penalties and other charges then due on such tax
returns and reports or claimed by any taxing authority or otherwise to be due in
respect thereof to any material extent.
6.14 Labor Matters:
(a) Except as set forth in Disclosure Schedule 6.14, the Business
has no employment contracts or collective bargaining agreements relating to the
Transferred Employees other than such contracts which are not Assumed
Liabilities and for which Seller retains all liability.
(b) As of the date of this Agreement, there is no labor dispute,
strike or work stoppage against Seller pending or, to Seller's knowledge,
threatened that may interfere with the Business.
(c) To Seller's knowledge, Seller has complied in all material
respects relating to the Business with all applicable legal requirements
relating to the employment of personnel, plant closing, layoffs, and collective
bargaining. Buyer will have all responsibility for such compliance in the period
on and after Closing.
6.15 Employee Benefit Matters.
Disclosure Schedule 6.15 lists each employee benefit plan, program,
arrangement and contract (including, without limitation, any "employee benefit
plan" as defined in Section 3(3) of ERISA) that (i) is maintained, contributed
to or required to be contributed to by Seller, for the benefit of any current
employee, officer or director who is engaged in connection with the Business
(the "Business Personnel") or under which any Business Personnel has accrued and
remains entitled to any benefits, and (ii) with respect to which Buyer or a plan
of Buyer will under Article 11 hereof provide either substantially comparable
benefits or receive any direct or indirect transfer or rollover of benefits (the
"Seller Benefit Plans"). Seller has made available to Buyer or its agents a copy
of the most recent summary plan description related to each Seller Benefit Plan
for which a summary plan description is required, and the most recent
determination letter issued by the Internal Revenue Service ("IRS") with respect
to any Seller Benefit Plan intended to be qualified under Section 401(a) of the
Code.
6.16 Receivables: The Receivables represent transactions entered into
by the Business for good and valuable consideration resulting from the bona fide
sale of products or performance of services in the ordinary course of the
conduct of the Business.
6.17 Subsidiaries: No equity or other ownership interests in any
corporation, partnership, limited partnership, joint venture, trust, limited
liability company, association or other legal entity are included in the
Business Assets.
6.18 Product Liability: Except as may be disclosed to Buyer in
Disclosure Schedule 6.18, since January 1, 1998, to Seller's knowledge, there
have been no material claims or complaints, and there are no material claims or
complaints existing or threatened against Seller for product liability in
respect of any product manufactured, sold or distributed at any time by Seller
in connection with the Business, including any claim on account of any express
or implied warranty, except for normal returns and allowances in the ordinary
course of business consistent with past practice.
6.19 Financial Statements: Seller has furnished to Buyer and Arthur
Andersen LLP ("AA"), Buyer's accountants and tax advisors, copies of certain
statements of operations, statements of cash flow, balance sheets and general
ledgers with respect to the Business (the "Financial Statements") as well as
certain projections (the "Projections"). Seller makes no representations or
warranties regarding the Financial Statements or the Projections. Seller has
been advised that AA has reviewed and taken certain exceptions to the Financial
Statements based on its due diligence activities. Seller represents that if the
financial books and records provided to Buyer and AA (other than the Financial
Statements) were used and accepted as accurate by competent Certified Public
Accountants to prepare financial statements in accordance with GAAP, such
financial statements would present fairly the financial condition of Seller and
the financial results of Seller with respect to the Business for the dates and
periods, respectively, to which they relate.
6.20 Required Assets: Except as described in Schedule 6.20 or elsewhere
herein, the Business Assets, together with any Material Contracts not included
as a part thereof, include all intellectual property rights needed to conduct
the Business as presently conducted, without infringing on the rights of any
other party, except for the Excluded Assets described in Sections 4.05 and 4.08.
6.21 Year 2000 Compliance: Seller makes no representation or warranty
that any of the Business Assets are compliant with Year 2000 and makes no other
representation or warranty with respect to occurrence of the Year 2000 or any
other date after December 31, 1998. To Seller's knowledge, based solely on
information received from the vendors and/or licensors of software used by
Seller, and without any independent investigation thereof, the software listed
on Schedule 6.21 is or is not Year 2000 compliant as so indicated therein. To
Seller's knowledge, Seller has provided to Buyer all information known to
Seller, including the studies and reports identified on Schedule 6.21, with
respect to Year 2000 compliance, or lack of compliance, of the Business Assets.
6.22 Permits and Licenses: Seller has maintained in full force and
effect all permits, certificates of occupancy and licenses required to operate
the Business prior to Closing.
6.23 Seller's Books and Records: To Seller's knowledge, Seller's
non-financial books and records which, to Seller's knowledge, were provided in
the due diligence process (including customer order files, employment records
and production and manufacturing records) are in all material respects accurate
and, to the extent maintained by Seller in the ordinary course of business,
complete, unless otherwise disclosed therein or otherwise.
6.24 Inventory: The Inventory represents the normal supplies and stock
in trade of Seller on hand as of the close of business on the Closing Date. The
Inventory is and as of Closing will be good, merchantable and saleable in the
ordinary course of business.
Notwithstanding anything herein or elsewhere to the contrary, it is
agreed as follows:
6.25 NO OTHER REPRESENTATIONS OR WARRANTIES: EXCEPT AS OTHERWISE
EXPRESSLY SET FORTH IN THIS AGREEMENT, NEITHER SELLER NOR ANY AFFILIATE, AGENT
OR REPRESENTATIVE OF SELLER HAS MADE, AND SELLER IS NOT LIABLE FOR OR BOUND IN
ANY MANNER BY, ANY EXPRESS OR IMPLIED WARRANTIES, GUARANTEES, PROMISES,
STATEMENTS, INDUCEMENTS, REPRESENTATIONS, OR INFORMATION PERTAINING TO THE
BUSINESS OR THE BUSINESS ASSETS OR ANY PART THEREOF (INCLUDING WITHOUT
LIMITATION THEIR DESIGN, CAPACITY, CONDITION, NON-INFRINGEMENT, MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE). WITHOUT LIMITING THE FOREGOING, EXCEPT AS
EXPRESSLY SET FORTH IN THIS AGREEMENT, SELLER IS NOT LIABLE FOR OR BOUND BY (AND
BUYER HAS NOT RELIED UPON) ANY VERBAL OR WRITTEN STATEMENTS, REPRESENTATIONS, OR
ANY OTHER INFORMATION RESPECTING ANY PORTION OF THE BUSINESS OR THE BUSINESS
ASSETS FURNISHED BY SELLER OR ANY BROKER, EMPLOYEE, AGENT, CONSULTANT OR OTHER
PERSON REPRESENTING OR PURPORTEDLY REPRESENTING SELLER.
6.26 NO WARRANTY OF PROBABLE SUCCESS OR CONDITION OF ASSETS: SELLER
MAKES NO WARRANTY REGARDING THE PROBABLE SUCCESS OR PROFITABILITY OF THE
OWNERSHIP, USE OR OPERATION OF THE BUSINESS OR THE BUSINESS ASSETS AFTER THE
CLOSING. ANY FORECASTS OR PROJECTIONS OR STATEMENTS REGARDING FUTURE PERFORMANCE
OR RESULTS, FINANCIAL OR OTHERWISE, PROVIDED TO BUYER ARE NOT INTENDED TO BE
RELIED UPON BY BUYER, AND BUYER ACKNOWLEDGES AND AGREES THAT IT IS NOT RELYING
ON SAME. EXCEPT AS SPECIFICALLY SET FORTH IN THIS AGREEMENT, SELLER MAKES NO
WARRANTY AS TO THE PHYSICAL CONDITION OR SUITABILITY FOR ANY PARTICULAR PURPOSE
OF ANY OF THE BUSINESS ASSETS, INDIVIDUALLY OR COLLECTIVELY, WHICH ASSETS ARE
ALL BEING PURCHASED ON AN "AS IS", "WHERE IS" AND "WITH ALL FAULTS" BASIS.
ARTICLE 7
BUYER'S WARRANTIES
Buyer represents and warrants that as of the date hereof and as of the
date of Closing:
7.01 Organization; Good Standing: Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Minnesota and has full corporate power to execute, deliver and perform this
Agreement.
7.02 No Conflict with Other Instruments or Agreements: Neither the
execution, delivery or performance of this Agreement by Buyer, nor the
consummation of transactions contemplated by this Agreement by Buyer will:
(a) violate any provision of the Articles of Incorporation, Bylaws
or similar constitutional documents of Buyer, or any law, rule, regulation,
order, judgment or decree by which the Buyer may be bound; or
(b) conflict with, result in a breach of the terms and conditions
of, or constitute a default under, any agreement to which Buyer is a party or by
which it may be bound.
7.03 Authorization; Binding Effect:
(a) Buyer has the corporate power, including all necessary
authorization, to execute, deliver and fulfill the provisions of this Agreement,
and this Agreement constitutes a legal, valid and binding agreement of Buyer
enforceable against Buyer in accordance with its terms, except as enforcement
may be limited by bankruptcy, insolvency, reorganization, or similar laws
affecting the enforcement of creditors' rights generally and rules and laws
concerning equitable remedies.
(b) Except for filing and approval requirements under the HSR Act,
and except as set forth in Schedule 7.03, no consent, authorization, or approval
of, or exemption by, or filing with, any court or governmental, public, or
self-regulatory body or authority, that is material to the operation of the
Business, is required in connection with the execution, delivery and performance
by Buyer of this Agreement or of any of the instruments or agreements herein
referred to, or the taking of any action herein contemplated to be taken by
Buyer.
7.04 Brokers or Finders: Buyer has incurred no obligation or liability,
contingent or otherwise, for brokers' or finders' fees with respect to the
matters provided for in this Agreement.
7.05 Permits and Licenses: Buyer will apply for and retain in full
force and effect all permits, certificates of occupancy and licenses required to
operate the Business on and after Closing.
7.06 No Instigation of Investigations: Except for actions required
under Section 7.05 or taken in the ordinary course of business, Buyer will not
instigate any activity that would require or encourage any governmental or
public body or authority to investigate matters covered by Seller's warranties
or indemnities.
7.07 U.S. Assets: The Buyer is a corporation incorporated within the
United States and is purchasing the Assets in the United States.
ARTICLE 8
BUYER'S INDEMNITY
Subject to the limitations and procedures set forth in Article 17
hereof, Buyer shall indemnify and hold Seller harmless from and against and in
respect of all losses, expenses (including without limitation reasonable
attorneys' fees), fines, debts, liabilities and obligations of any nature
whatsoever ("Losses") incurred by Seller to the extent that they relate to or
arise out of:
8.01 Assumed Liabilities: The Assumed Liabilities.
8.02 Buyer's Ownership, Use or Operation of the Business Assets:
Buyer's ownership, use or operation or occupancy of the Business Assets on or
after the Closing Date.
8.03 Environmental Liabilities:
(a) Any remediation, removal, response, abatement, cleanup,
investigative or monitoring costs, penalties, fines or damages for personal
injury or property damage, pursuant to a final judicial or administrative decree
or order or settlement agreement related to: (i) the generation, transportation,
storage, release or disposal of any Materials of Environmental Concern related
to the Business Assets or the Business on and after the Closing Date, either
during or after Buyer's ownership, use or operation of the Business Assets; and
(ii) violations of federal, provincial, state or local Environmental Laws,
including requirements of environmental permits, by the Business on and after
the Closing Date (the "Buyer's Environmental Liabilities").
(b) [Intentionally omitted.]
8.04 Breach of Warranty: Any breach of any of the representations and
warranties of Buyer contained in this Agreement, or nonfulfillment of any
agreement or covenant on the part of Buyer under this Agreement.
8.05 Liability As to Employees: Any liability arising out of Buyer's
termination of any Transferred Employee or the failure of Buyer to provide
compensation and benefits to any Transferred Employees in accordance herewith
and substantially equivalent to the compensation and benefits paid or provided
to him or her prior to Closing.
8.06 No Consequential Damages: Notwithstanding anything to the
contrary, Buyer shall not be responsible for damages in the nature of punitive,
indirect or consequential damages arising out of any breach by Buyer of Buyer's
obligations under this Agreement.
ARTICLE 9
SELLER'S INDEMNITY
Subject to the limitations and procedures of Article 17 hereof, Seller
shall, indemnify and hold Buyer harmless from and against and in respect of all
Losses incurred by Buyer to the extent they relate to or arise out of:
9.01 Seller's Ownership, Use or Operation of the Business Assets:
Seller's ownership, use or operation or occupancy of the Business Assets prior
to the Closing Date (except to the extent that such Losses relate to any Account
Payable or the performance on and after the Closing Date of any Contract) and
the Excluded Liabilities.
9.02 Environmental Liabilities: Any remediation, removal, response,
abatement, cleanup, investigative or monitoring costs, penalties, fines or
damages for personal injury or property damage, pursuant to a final judicial or
administrative decree or order or settlement agreement related to: (i) the
generation, transportation, storage, release or disposal of any Materials of
Environmental Concern related to the Business Assets or the Business prior to
Closing, either before or during Seller's ownership, use or operation of the
Business Assets; and (ii) violations of federal, provincial, state or local
Environmental Laws, including requirements of environmental permits, by the
Business prior to Closing (the "Seller's Environmental Liabilities").
9.03 Breach of Warranty: Any breach of any of the representations and
warranties of Seller contained in this Agreement, or nonfulfillment of any
agreement or covenant on the part of Seller under this Agreement.
9.04 No Consequential Damages: Notwithstanding anything to the
contrary, Seller shall not be responsible for damages in the nature of punitive,
indirect or consequential damages arising out of any breach by Seller of
Seller's obligations under this Agreement.
ARTICLE 10
INTERIM PERIOD
Seller and Buyer covenant and agree that between the date of this
Agreement and the Closing Date:
10.01 Operation of the Business Assets: Seller shall not, without
having received the prior written consent or the written request of Buyer, do
any of the following with respect to the Business:
(a) demolish, remove, alter, enlarge or dispose of any of the
Business Assets other than in the ordinary course of business, other than
removal of any of the Excluded Assets described in Article 4;
(b) make any material change in the Leased Premises or Seller's
operation of the Business Assets other than in the ordinary course of business;
(c) sell or otherwise dispose of any of the Business Assets, other
than assets that would be included in the Inventory, Receivables and
Miscellaneous Assets, except in the ordinary course of business;
(d) make or become a party to any contract, commitment, or other
arrangement (other than contracts described as "under negotiation" on Disclosure
Schedule 6.09) or renew, extend, amend or modify any contract, commitment or
other arrangement which in any one case involves an amount in excess of $25,000
except in a manner and on terms consistent with past practices;
(e) pay or agree to pay, conditionally or otherwise, any bonus,
additional compensation, pension, or severance pay to any of its present
employees whose annual base compensation and expected commissions exceed
$50,000, other than such payments as Seller is or may become obligated to pay
pursuant to agreements or benefit plans in effect on the date hereof;
(f) increase the rate of compensation (including salaries, fees,
commission rates, bonuses, profit sharing, incentive, pension, retirement, or
other similar payments and benefits) being paid at the date hereof to any of
Seller's employees whose annual base compensation and expected commissions
exceed $50,000;
(g) hire any employee whose annual base compensation and expected
commissions exceed $50,000;
(h) make any material change in the Business Assets other than the
Excluded Assets or those that would be included in the Inventory, Receivables
and Miscellaneous Assets;
(i) sell or dispose of any leases pertaining to the Business
Assets, or enter into any renewals or extensions of existing leases or enter
into any new leases which in any one case involve an amount in excess of
$25,000;
(j) permit any amendment or termination of any Material Contract
(other than an expiration of the contract) if Seller has the contractual right
to prevent same;
(k) alter or revise its accounting principles, procedures, methods
or practices;
(l) remove or permit to be removed from the Leased Premises any
Business Asset, other than the Excluded Assets or assets that would be included
in the Inventory, Receivables and Miscellaneous Assets, except in the ordinary
course of business; or
(m) change its credit policy as to sales of inventory or
collection of accounts receivable.
10.02 Exceptions: Notwithstanding Section 10.01 or any other provision
of this Agreement, Seller may do any of the following between the date of this
Agreement and the Closing Date:
(a) take action or inaction that affects only the Excluded Assets
or results in the removal or destruction of Excluded Assets and does not
materially and adversely affect the Business Assets.
(b) take action or inaction that results in the reduction,
elimination or removal of Excluded Liabilities and any lien or encumbrance not
contemplated hereunder to exist on the Closing Date.
10.03 Work Diligently Towards Closing: Buyer and Seller shall each use
its reasonable best efforts to work diligently, including obtaining all
necessary governmental approvals and filings, towards completing the transaction
contemplated by this Agreement on the contemplated Closing Date.
ARTICLE 11
EMPLOYEE BENEFIT MATTERS
11.01 Offer of Employment: Except as otherwise set forth in Schedule
11.01-A, Buyer will offer employment to all of the employees of Seller as of the
Closing Date who are actively employed at the Leased Premises and involved in
the conduct or operation of the Business, and to those other employees of Seller
as to whom Seller and Buyer have agreed in writing as of the Effective Date
shall receive such offer (all collectively, the "Offeree Employees"), subject to
Buyer's employment policies and procedures set forth in Schedule 11.01-B and
each such employee's agreement that his or her employment file may be
transferred from Seller to Buyer. Seller shall use reasonable efforts to
encourage such employees to accept Buyer's offers of employment. Those employees
who accept such offers of employment effective as of the Closing Date are
referred to herein as "Transferred Employees". Those employees involved in the
conduct or operation of the Business as of August 14, 1998 are listed in
Schedule 11.01-A hereto. For purposes hereof, "actively employed" refers to
employees of Seller employed by the Business on the Closing Date (including
those on leave) other than those who have been absent from work for more than
six months as of the date hereof (excluding those who are absent pursuant to
applicable laws providing for mandated leave).
11.02 Compensation and Benefits. Buyer shall offer the Offeree
Employees salary, wages, variable compensation and employee benefit plans that
in the aggregate are substantially comparable to salary, wages, variable
compensation and benefit plans paid or provided to Transferred Employees
immediately preceding the Closing Date.
11.03 Pre-Closing Compensation: Seller will pay to all Transferred
Employees wages, salaries and variable compensation and any other type of
compensation earned prior to the Closing Date.
11.04 Employment Liabilities: Except as specifically described herein,
Seller shall assume and be responsible for all liabilities in connection with
any claim incurred prior to the Closing Date by Transferred Employees under
Seller's employee welfare benefit plans (as defined in Section 3(1) of ERISA).
Buyer shall assume and be responsible for all liabilities in connection with
claims incurred on and after the Closing Date by Transferred Employees under any
of Buyer's employee welfare benefit plans (as defined in Section 3(1) of ERISA).
For purpose of this Section, such claims shall be considered incurred on the
date treatment is rendered or a service performed. Worker's Compensation claims
of any Transferred Employees shall be the responsibility and liability of Seller
if the claim is made prior to the Closing Date and shall be the responsibility
and liability of Buyer if the claim is made on or after the Closing Date.
11.05 Employee Benefit Plans. Buyer's offer of employment under Section
11.01 above to Seller's employees shall include the employee benefit plans,
policies and/or programs described in this section.
(a) Tax-qualified Defined Benefit Pension Plans. As of the Closing
Date, the Transferred Employees shall be eligible to participate in any
tax-qualified defined benefit pension plan in which comparable employees of
Buyer participate, and Buyer shall recognize, solely for purposes of eligibility
and vesting (and not for benefit accrual) under said pension plan, the
Transferred Employees' length of employment with Seller prior to the Closing
Date. To the extent plan amendments are necessary to permit such eligibility and
recognition of service for such Transferred Employees, Buyer shall cause such
amendments to be adopted and in effect as of the Closing Date.
(b) Tax-qualified Defined Contribution Plans. As of the Closing
Date, the Transferred Employees shall be eligible to participate in any
tax-qualified defined contribution plan in which comparable employees of Buyer
participate, and Buyer shall recognize, for purposes of eligibility and vesting
under said pension plan, the Transferred Employees' employment with Seller prior
to the Closing Date. To the extent plan amendments are necessary to permit such
eligibility and recognition of service for such Transferred Employees, Buyer
shall cause such amendments to be adopted and in effect as of the Closing Date.
If Buyer does not maintain such a plan, Buyer shall establish, effective as of
the Closing Date, a defined contribution plan, qualified under Sections 401(a)
and (k) of the Code, that is substantially comparable in all material respects
to the Seller's defined contribution plan, the Kao America Inc. Profit Sharing
Plan (hereafter "Profit Sharing Plan"), and which recognizes, for purposes of
eligibility and vesting, the Transferred Employees' employment with Seller prior
to the Closing Date. To the extent permitted by the Code, Buyer shall cause the
Trustee or Trustees of such defined contribution plan maintained or established
by Buyer to accept a transfer of assets (including any promissory notes or other
evidence of indebtedness representing the plan loans of Transferred Employees)
from Seller's Profit Sharing Plan. Prior to such transfer, Buyer shall provide
such documentation as Seller may require evidencing the qualification of such
plan under Section 401(a) of the Code.
(c) Non-qualified Deferred Compensation. As of the Closing Date,
the Transferred Employees shall be eligible to participate in any non-qualified
deferred compensation plans in which comparable employees of the Buyer
participate, and Buyer shall recognize, for purposes of eligibility and vesting
under said deferred compensation plans, the Transferred Employees' employment
with Seller prior to the Closing Date.
(d) Medical, Dental, Life Insurance and Disability Plans: As of
the Closing Date, Buyer shall enroll the Transferred Employees and their
dependents in the medical, dental, life insurance (including accidental death
and dismemberment insurance) and short- and long-term disability plans in which
comparable employees of the Buyer participate. To the extent that Buyer does not
provide one or more of such coverages, Buyer shall establish such plan(s) as may
be necessary to provide substantially comparable benefits to those provided by
the Seller immediately preceding the Closing Date. The Buyer's medical plan
shall waive any waiting period and limitations for pre-existing medical or
dental conditions of Seller's employees and dependents. The Buyer's medical and
dental plans will apply any amounts paid under the Seller's medical and dental
plans by a Transferred Employee for deductibles and copayments during 1998
toward deductibles and out-of-pocket limits of the Buyer's medical and dental
plans for the 1998 plan year.
(e) Vacation: Buyer shall provide the same vacation entitlements
to the Transferred Employees as are provided to comparable employees of the
Buyer, and Buyer shall recognize, for purposes of vacation accrual under Buyer's
vacation program, the Transferred Employees' employment with Seller prior to the
Closing Date. Notwithstanding the foregoing, Buyer may require that the number
of paid vacation days (or parts thereof) used by any such employee under
Seller's vacation program during the calendar year in which the Closing Date
falls shall reduce the number of paid vacation days to which a Transferred
Employee would otherwise be entitled from Buyer for the remainder of such
calendar year; provided, however, that Buyer shall provide to each Transferred
Employee time or pay equivalent to the amount of unpaid vacation time to which
he or she is entitled as of the Closing Date from Seller.
(f) Severance: Buyer shall provide the same severance plan to the
Transferred Employees as is provided to comparable employees of Buyer and for
purpose of eligibility and vesting under such plan, Buyer shall recognize the
Transferred Employees' length of employment with Seller prior to the Closing
Date. Notwithstanding whether Buyer has such a plan and notwithstanding the
terms of such plan, Buyer shall pay to any Transferred Employee who is
involuntarily terminated by Buyer without cause a severance benefit of not less
than two weeks compensation for each year of service with Buyer on and after the
Closing Date and with Seller prior to the Closing Date.
(g) Other Employee Benefits: As of the Closing Date, the
Transferred Employees shall be eligible to participate in such other benefit
plans, programs, arrangements or policies, whether written or unwritten, as are
provided to comparable employees of the Buyer and, for purposes of eligibility
and vesting under such plans, programs, arrangements or policies, Buyer shall
recognize the Transferred Employees' length of employment with Seller prior to
the Closing Date.
11.06 Wage Reporting: Buyer and Seller shall follow the standard
Internal Revenue Service procedure (as set forth in Section 4 of Revenue
Procedure 96-60) with regard to reporting of wages on Form W-2 and disposition
of Forms W-4 and W-5 for Transferred Employees.
11.07 Post Closing Termination Liability: Buyer shall be responsible
for any liability for claims related to the termination, compensation, or
benefits of any Transferred Employee with respect to the period beginning on and
after the Closing including any claim by a Transferred Employee of termination,
constructive or otherwise, by virtue of Buyer's acts or omissions or Buyer's
failing to provide compensation and benefits comparable to that paid or provided
by Seller prior to Closing.
ARTICLE 12
GOVERNMENTAL CONSENTS
12.01 Governmental Consents: The sale contemplated by this Agreement is
conditional upon receipt prior to Closing of the approvals, consents,
authorizations and waivers from governmental and other regulatory agencies which
are required to consummate the sale contemplated by this Agreement (including
the expiration of any applicable premerger notification waiting period), to
enable Buyer to own, use and operate the Business Assets and the Business.
12.02 Efforts: Each Party shall use its reasonable best efforts to
obtain all authorizations, consents, orders and approvals of, and to give all
notices to and make all filings with, all governmental authorities and other
third parties that may be or become necessary for its execution and delivery of,
and the performance of its obligations pursuant to this Agreement, and also to
enable Buyer to own, use and operate the Business Assets and the Business, and
each Party will cooperate fully with the other Party in promptly seeking to
obtain all such authorizations, consents, orders and approvals, giving such
notices, and making such filings. Each Party agrees to make an appropriate
filing of a notification and report form pursuant to the HSR Act with respect to
the transactions contemplated hereby within five business days of the date of
this Agreement and to supply promptly any additional information and documentary
material that may be requested pursuant to the HSR Act. The Parties acknowledge
that time shall be of the essence in this Agreement and agree not to take any
action that will have the effect of unreasonably delaying, impairing or impeding
the receipt of any required authorizations, consents, orders or approvals.
ARTICLE 13
CLOSING
13.01 Place and Date of Closing: The closing of the transaction
contemplated by this Agreement (the "Closing") shall take place at the offices
of Potter Anderson & Corroon LLP in Wilmington, Delaware, at 10:00 am local time
on the business day that is the later of: (a) 15 days after the date of this
Agreement; or (b) the eighth business day following satisfaction (or waiver) by
the Parties of the conditions to the Closing set forth in Section 13.04 or
Section 13.05 of this Agreement, as provided therein.
13.02 Buyer Deliverables at Closing: At the Closing, Buyer shall:
(a) Pay to Seller or Seller's Affiliate, as Seller shall
designate, by wire transfer in immediately available funds in Seller's favor,
the part of the Purchase Price set forth in Section 5.03(a)(1), subject to the
prorations required hereunder.
(b) Pay to Seller by wire transfer in immediately available funds
in Seller's favor, in an amount equal to the estimate of the values described in
Section 5.03(a)(2), (3) and (4) and determined pursuant to Section 5.03(b)(1).
(c) Deliver to Seller a certificate of a duly authorized officer
of Buyer confirming the accuracy on the Closing Date of the representations and
warranties of Buyer contained herein, and that Buyer has performed or complied
with all of the terms, covenants and conditions of this Agreement to be
performed or complied with by Buyer at or prior to Closing.
(d) Deliver to Seller a legal opinion of Buyer's legal counsel
that as of the Closing Date:
(i) Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the
State of Minnesota and has full corporate power to
execute, deliver and fulfill the provisions of this
Agreement.
(ii) Neither the execution, delivery or performance of
this Agreement or the other agreements described
herein to which Buyer is a Party (together with this
Agreement hereinafter collectively referred to as
the "Acquisition Documents") nor the consummation of
transactions contemplated by this Agreement violate
any provision of Buyer's Articles of Incorporation
or Bylaws.
(iii) All necessary corporate proceedings to authorize the
transactions contemplated by the Acquisition
Documents, the performance by Buyer of its
obligations under the Acquisition Documents have
been taken, and Buyer has executed and delivered all
instruments and other documents contemplated hereby.
(e) Execute and deliver the Undertaking of Assumption and other
agreements described in Schedule 13.02(e).
13.03 Seller Deliverables At Closing: At the Closing, Seller shall:
(a) Deliver to Buyer a certificate of a duly authorized officer of
Seller confirming the accuracy on the Closing Date of the representations and
warranties of Seller contained herein, and that Seller has performed or complied
with all of the terms, covenants and conditions of this Agreement to be
performed or complied with by Seller at or prior to the Closing.
(b) Deliver to Buyer a legal opinion of Seller's legal counsel
that as of the Closing Date:
(i) Seller is a corporation duly organized, validly
existing and in good standing under the laws of the
State of Delaware, and has corporate power to carry
on the business as now being conducted.
(ii) Neither the execution, delivery or performance of
this Agreement nor the consummation of transactions
contemplated by this Agreement violate any provision
of Seller's Certificate of Incorporation or Bylaws.
(iii) All necessary corporate proceedings to authorize the
transactions contemplated by this Agreement, the
performance by Seller of its obligations hereunder,
and the execution and delivery by Seller of all
instruments and other documents contemplated hereby
have been taken.
(c) Deliver to Buyer a legal opinion of the Director of Kao's
Legal Department that as of the Closing Date:
(i) Kao is a corporation duly organized, validly
existing and in good standing under the laws of
Japan, and has corporate power to carry on its
business as now being conducted.
(ii) Neither the execution, delivery or performance by
Kao of the Guaranty nor the consummation of
transactions contemplated by this Agreement violate
any provision of Kao's Articles of Incorporation.
(iii) All necessary corporate proceedings to authorize the
transactions contemplated by this Agreement, and the
performance by Kao of its obligations under, and the
execution and delivery of, the Guaranty have been
taken.
(d) Execute and deliver such assignments, bills of sale,
endorsements, notices, consents, assurances and such other instruments of
conveyance and transfer as counsel for Buyer shall reasonably request in order
to vest in Buyer title to all of the Business Assets including, without
limitation, the Bill of Sale, the Undertaking of Assumption, and other
agreements described on Schedule 13.03(d). Simultaneously with the delivery of
the Bill of Sale, Seller shall take all such steps as may be necessary to put
Buyer in actual possession and control of the Business Assets.
13.04 Conditions to Buyer's Obligation. The obligation of Buyer to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction of the following conditions (unless Buyer expressly waives any such
condition):
(a) Buyer and Seller shall have received or obtained all
governmental and regulatory consents and approvals as specified in Article 12
hereof, and the waiting period under the HSR Act shall have expired or been
terminated.
(b) No injunction restraining or prohibiting the transactions
contemplated hereby shall have been issued by a court or governmental authority.
(c) Seller (and its Affiliates where required) and its officers
and counsel shall have executed and delivered the items described in Section
13.03 of this Agreement.
(d) No damage to or loss of the Business Assets by fire or other
casualty shall have occurred between the date of this Agreement and the Closing
Date which has a material adverse impact on the Business Assets as a whole.
(e) The closing of the Other Purchase and Sale Agreements shall
have occurred or shall occur simultaneously with Closing hereunder.
(f) Buyer shall have received consents for the assignment to Buyer
of those Contracts identified in Schedule 13.04(f).
(g) Buyer shall have obtained financing for this transaction
pursuant to a financing commitment letter from GE Capital dated November ___,
1998, a copy of which has been furnished by Buyer to Seller. Buyer shall, and
shall cause each of its Affiliates to, use its best efforts, exercised in good
faith, to secure said financing and shall take no action, or permit any of its
Affiliates to take any action, that is intended to induce or have the effect of
inducing GE Capital to withdraw or not honor its agreement to extend credit to
Buyer or its Affiliates. In the event that GE Capital does not provide financing
for this transaction, Buyer will use, and shall cause each of its Affiliates to
use, its best efforts to secure replacement financing on commercially reasonable
terms. Further, Buyer shall offer its full faith and credit in the effort to
obtain such financing.
(h) In the aggregate no material adverse change in the Business
shall have occurred between the date of this Agreement and the Closing Date,
including any such change with respect to customer or supplier relationships,
other than changes in the ordinary course of business or changes attributable to
a negative reaction among customers or suppliers to the proposed acquisition of
the Business by Buyer. (i) Seller shall have delivered to Buyer with respect to
the Business (i) audited balance sheets for December 31, 1997 and December 31,
1996, (ii) audited statements of operations and cash flows for fiscal years
1997, 1996, and 1995 and (iii) unaudited interim financial statements for the
nine months ended September 30, 1998 and September 30, 1997 (the "Full SEC
Financial Statements"); provided, however, that delivery of the Full SEC
Financial Statements shall not be required to the extent that the U.S.
Securities and Exchange Commission ("SEC") agrees to accept financial statements
of a nature and/or extent that are less burdensome for Seller to prepare (the
"Minimized SEC Financial Statements"). The Parties agree to cooperate and use
their respective best efforts to minimize the nature and/or extent of the
required SEC financial statements, consistent with legal requirements but
subject to any agreement that can be reached with the SEC limiting such nature
and/or extent. The Full SEC Financial Statements (or the Minimized SEC Financial
Statements, as the case may be) shall be used only to satisfy such reporting
obligations of Buyer and for no other purpose. Seller makes no representation or
warranty to Buyer with respect to the completeness, accuracy or information
contained in the Full SEC Financial Statements (or the Minimized SEC Financial
Statements, as the case may be) and nothing contained therein shall be a basis
for Buyer to refuse to close.
13.05 Conditions to Seller's Obligation. The obligation of Seller to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction of the following conditions (unless Seller expressly waives any
such condition):
(a) Buyer and Seller shall have received or obtained all
governmental and regulatory consents and approvals as specified in Article 12
hereof, and the waiting period under the HSR Act shall have expired or been
terminated.
(b) No injunction restraining or prohibiting the transactions
contemplated hereby shall have been issued by a court or governmental authority.
(c) Buyer shall have delivered to Seller the funds required to be
delivered to them pursuant to Sections 13.02(a) and (b) of this Agreement.
(d) Buyer (and its Affiliates where required), and its officers
and counsel shall have executed and delivered the items described in Section
13.02 of this Agreement.
(e) The closing of the Other Purchase and Sale Agreements shall
have occurred or shall occur simultaneously with Closing hereunder.
ARTICLE 14
POST CLOSING
Seller and Buyer agree that after the Closing Date:
14.01 Delivery of Business Records: As soon after the Closing as is
reasonably practicable, Seller shall cause the Business Records to be delivered
to Buyer.
14.02 Delivery of Transferred Employee Records: Seller shall deliver to
Buyer all personnel records, including medical files on the Transferred
Employees who consent to such delivery, as evidenced by a consent form delivered
to Seller by Buyer in form reasonably satisfactory to Seller.
14.03 Buyer Cooperation with Seller's Disposal of Product and Seller's
Warranty Obligations: After the Closing Date:
(a) Buyer shall reasonably cooperate in Seller's efforts to sell
or resell any rejected or returned finished products which have been sold,
shipped or set aside for a customer of the Business prior to the Closing Date.
(b) Buyer shall provide warranty services on mutually agreed terms
on Seller's behalf and at Seller's expense with respect to products sold by the
Business prior to the Closing. At Seller's request and expense, this shall
include accepting the return of non-conforming products and replacement with
conforming products.
14.04 Access to Records: From time to time, upon request by Seller,
Buyer shall permit Seller reasonable access to and copies of the books and
records delivered to Buyer in accordance with Sections 14.01 and 14.02 for
purposes of tax and other legal compliance. Buyer shall retain such books and
records (including employment records) for a period of at least seven years from
the Closing Date or such longer period as may be required by applicable law.
14.05 Cooperation in Litigation: After Closing, each Party shall
reasonably cooperate with the other Party and the other Party's attorneys in the
defense or prosecution of any litigation, action, suit or proceeding instituted
against or by the other Party pertaining to the Business Assets or the Business,
excluding, however, any litigation, action, suit or proceeding between the
Parties (including their Affiliates). Such cooperation shall include, but not be
limited to, conferring with the other Party's attorneys or experts at their
offices during normal business hours at mutually convenient times and making
available to the other Party's attorneys documents or copies of documents
specific to the Business Assets or the Business, and such cooperation shall
include giving testimony voluntarily. Such cooperation shall not require the
cooperating Party to be joined as a Party in any such litigation. Each Party
further agrees that it shall not voluntarily disclose to any third party without
the other Party's consent any information or documents received by it heretofore
or hereafter from the other Party's attorneys in connection with the defense or
prosecution of any litigation or proceedings. The other Party shall pay the
out-of-pocket expenses of the cooperating Party and those expenses of the
cooperating Party's employees and agents reasonably incurred in connection with
providing such cooperation but shall not be responsible for paying any fees or
for reimbursing the cooperating Party for the salaries or costs of fringe
benefits or other similar expenses of the cooperating Party's employees in
connection with time spent providing such cooperation to the other Party.
14.06 Removal of Seller's Name from Property: Not later than 90 days
after the Closing Date, Buyer shall remove Seller's name, logo and identifying
marks from the exterior of the Leased Premises, and from all vehicles, equipment
and other assets (other than Inventory) acquired hereunder from Seller. In the
event Buyer fails to remove Seller's name within the 90 day period, Buyer hereby
grants Seller and its representatives the right of access to said property,
during normal business hours to remove Seller's name, logo and identifying marks
from the exterior of the Leased Premises and other assets. Buyer shall pay the
full cost of such removal at the rates charged by premium companies that do such
work.
14.07 Use of Current Supplies:
(a) Buyer will have after the Closing in Inventory a quantity of
work-in-process, preprinted stationery, packaging material and other supplies
(including all Inventory acquired by Buyer) which bear the "Kao" or "Kao
Infosystems" name and logo. For a period of six months from the Closing Date,
and solely with respect to any Inventory acquired by Buyer pursuant to this
Agreement, Seller shall grant or cause to be granted to Buyer a paid-up,
royalty-free license, to remain in effect until the exhaustion of such Inventory
in the ordinary course of business (not to exceed six months), to use in the
United States and Canada any trademarks, trade names, trade dress, copyright or
other proprietary rights of Seller associated with such Inventory. Such license
shall be non-exclusive and without any warranty of any kind, express or implied,
including but not limited to any warranty of non-infringement. Such license
shall be in addition to other licenses granted hereunder or under the other
documents in accordance with the terms of this Agreement. Buyer shall not be
entitled to use the "Kao" or "Kao Infosystems" name and/or logo for any purpose
whatsoever except as specifically provided in this Section 14.07.
(b) Notwithstanding anything contained in this Section to the
contrary, so that Buyer is not required to remaster existing customer titles for
optical discs, Buyer may do the following to the extent it is consistent in all
respects with applicable laws: Buyer may continue to manufacture existing
customer titles bearing the "Kao" or "Kao Infosystems" name and/or logo on the
mirror band but for a period not to exceed six months from the Closing Date so
long as Buyer also discloses thereon, to the extent required by law, that it is
the manufacturer thereof and such optical disc was made in California and
otherwise complies with applicable law. During such six-month period Buyer shall
be required to use an identification mark that identifies each optical disc with
the "Kao" or "Kao Infosystems" name and/or logo as having been replicated by
Buyer. When a title requires remastering or is remastered, Buyer must remove the
"Kao" or "Kao Infosystems" name and/or logo for such title. The license to Buyer
set forth in this Section shall be deemed to include the rights set forth in the
preceding section. Buyer shall fully indemnify and hold Seller and its
Affiliates harmless from all loss, costs, claims, suits and expenses, including
reasonable attorneys fees, arising out of Buyer's use of the "Kao" or "Kao
Infosystems" name and/or logo. At the end of the aforesaid six-month period,
Buyer shall certify in writing to Seller that it has destroyed and ceased using
all stampers that imprint the "Kao" or "Kao Infosystems" name.
14.08 Tax Matters: Buyer and Seller agree to reasonably cooperate and
assist one another regarding all tax matters related to the Business Assets sold
pursuant to this Agreement. Buyer agrees to cooperate and assist Seller in
connection with any tax audits of Seller for any periods through the Closing
Date.
14.09 Consents to Assignment. Seller is a party to various contracts,
license agreements and other agreements ("agreements" or each an "agreement" for
purposes of this Section 14.09) relating to the Business, which, in order to
constitute a Contract and be assigned to Buyer hereunder as part of the Business
Assets require the consent of a Third Party. If a consent so required has not
been obtained for such an assignment prior to Closing, the Parties shall proceed
as follows after Closing:
(a) the Parties shall cooperate using reasonable efforts to novate
the agreement or have it assigned to Buyer.
(b) until the agreement is novated or assigned Seller shall hold
it in trust for Buyer absolutely and Buyer shall, as Seller's sub-contractor (if
such sub-contracting is permissible and lawful under the agreement), perform all
the obligations of Seller under the agreement to be discharged after Closing and
shall indemnify Seller against all actions, proceedings, costs, damages, claims
and demands in respect of any failure on the part of Buyer to perform those
obligations; and
(c) until the agreement is novated or assigned, Seller shall (so
far as it lawfully may) give all reasonable assistance to Buyer (at Buyer's
request and expense) to enable Buyer to enforce the rights under the agreement
held for Buyer in trust. If the agreement prohibits Buyer from acting as
Seller's sub-contractor (as referred to in paragraph (b) above) or Buyer cannot
be permitted to act as sub-contractor because of confidentiality obligations,
Seller shall, at the cost of Buyer and to the extent that Seller is reasonably
able, do all such acts and things as Buyer may reasonably require to enable due
performance of the agreement and to provide for Buyer the benefits, subject to
the burdens and obligations, of the agreement, and Buyer shall indemnify Seller
in respect of all such acts and things. Buyer agrees to cooperate with such
efforts by Seller to the fullest extent practicable, including without
limitation supplying Seller with products or services at no cost to Seller
provided Seller assigns to Buyer all consideration received therefor from a
purchaser thereof.
14.10 Collection of Receivables. The Parties will cooperate in good
faith to ensure that payments of the Receivables to Seller are forwarded to
Buyer except to the extent any such Receivables are retained by or returned to
Seller hereunder.
14.11 Noncompetition. In consideration of Seller's rights under this
Agreement, Seller agrees that, from and after the Effective Date and continuing
for five years thereafter, Seller will not and will cause Kao and any other
Affiliate of Kao not to, do any of the following, except to the extent otherwise
provided in Schedule 14.11:
(a) directly or indirectly, own any interest in, control, or
render services to (including but not limited to services in research), any
person, entity, or subsidiary, subdivision, division, or joint venture of such
entity in connection with the following activities (collectively, the
"Restricted Activities"): the design, development, manufacture, marketing, or
sale of CD's, the marketing or sale of replicated or duplicated software, or the
assembly, packaging or distribution (including electronic distribution) of
software, other than as an adjunct to or in connection with Core Activities (as
defined in Schedule 14.11 hereto), anywhere in the world;
(b) directly or indirectly, solicit any of the Buyer's present or
future employees, excluding Stephen Fisher, engaged in the Restricted Activities
(while such employees are employed by Buyer) to leave their employment with
Buyer for the purpose of hiring them or inducing them to leave their employment
with Buyer;
(c) directly or indirectly, solicit sales for LOGISTIX (SINGAPORE)
PTE LTD from Buyer's customers or potential customers;
(d) directly or indirectly engage in the Restricted Activities.
14.12 Breach of Noncompetition Provisions of this Agreement. In
addition to any other relief or remedies afforded by law or in equity, if Seller
breaches the non-competition provisions of this Agreement, Seller agrees that
Buyer shall be entitled, as a matter of right, to injunctive relief in any court
of competent jurisdiction plus reasonable attorneys fees for securing such
relief. Seller hereby admits that irreparable damage will result to the Buyer if
Seller violates or threatens to violate the terms of the non-competition
provisions of this Agreement. Buyer shall be able to pursue any other
appropriate relief including, without limitation, money damages against Seller
for breach of the non-competition provisions of this Agreement.
14.13 Management Services. For a reasonable period after Closing,
Seller and its Affiliates shall make its employees, if any, available to Buyer
for a reasonable amount of telephone consultation in connection with the
Business so long as such consultation does not materially interfere with such
employee's other duties. This covenant shall not be deemed to require Seller to
keep any employees employed, and this covenant shall terminate if Seller ceases
to have any employees.
14.14 Use of Computer Software Assets: After the Closing Buyer shall
permit Seller reasonable access to and the right to use Computer Software Assets
to the extent needed by Seller in the period it winds up and concludes its
affairs.
14.15 Misdirected Mail: After Closing, any mail or communication that
is addressed to one Party (addressee) but is received by the other Party
(recipient) will be forwarded by the recipient to the addressee. For purposes of
this Section 14.15, Buyer shall forward any mail that it receives that is
addressed to Seller to Kao Infosystems Company c/o Kao America Inc., 7th Floor,
Hercules Plaza, 1313 N. Market Street, Wilmington, DE 19801.
14.16 SEC Financial Statements: Seller shall provide any other
financial information regarding the Business that is required by the SEC in
order for Buyer to satisfy its reporting obligations pursuant to Form 8-K and
Sections 13 or 15(d) of the Securities Exchange Act of 1934 with respect to the
acquisition contemplated by this Agreement.
ARTICLE 15
BULK SALES ACT
Buyer hereby waives compliance by Seller with the requirements of any
and all laws relating to bulk sales and transfers; and as consideration for such
waiver by Buyer, Seller agrees to indemnify Buyer for any loss to Buyer
resulting from any claim by any creditors of Seller under any such law.
ARTICLE 16
RIGHT OF TERMINATION; DISPUTE SETTLEMENT
16.01 Termination:
(a) The Parties recognize the potential damage to the Business
from a failure to close or a delay in Closing. Therefore, the conditions
precedent to Closing are limited as set forth in Sections 13.04 and 13.05.
(b) This Agreement may, by notice given prior to or at the
Closing, be terminated:
(i) by mutual written consent of Buyer and Seller; or
(ii) by either Buyer or Seller if the Closing has not
occurred for any reason (other than through the
failure of the Party seeking to terminate this
Agreement to comply fully with its obligations under
this Agreement) on or before February 15, 1999; or
(iii) by either Party in the event of a material breach by
the other Party hereunder where such breach has not
been cured within 30 days following receipt of
notice of breach from the non-breaching Party. For
the purposes of this Section 16.01(b)(iii), one or
more breaches will be material if in the aggregate
such breaches have a material adverse impact on the
Business or the Business Assets as a whole. Solely
for purposes of this Section 16.01(b)(iii), in
determining whether one or more breaches will be
material, the provisions of this Agreement
susceptible of breach shall be read as if no
reference for materiality were contained therein.
(c) Each Party's right of termination under this Section 16.01 is
in addition to any other rights it may have under this Agreement or otherwise,
and the exercise of a right of termination will not be an election of remedies.
If this Agreement is terminated pursuant to this Section 16.01, all further
obligations of the Parties shall terminate except that the obligations of
Section 18.09 will survive; provided, however, that if this Agreement is
terminated because of a breach of the Agreement by the other Party or because
one or more conditions to the terminating Party's obligations under this
Agreement is not satisfied as a result of the other Party's failure to comply
with its obligations under this Agreement, the terminating Party's right to
pursue all legal remedies will survive such termination unimpaired.
16.02 Dispute Settlement:
(a) The Parties shall attempt in good faith to promptly resolve
any dispute arising out of or relating to this Agreement by negotiation between
executives who have the authority to settle the controversy and who are at a
higher level of management than the persons with direct responsibility for
administration of this Agreement. Either Party may give the other Party written
notice of a dispute not resolved by such executives in the normal course of
business. If the matter has not been resolved by these persons within two months
of a disputing Party's notice, the dispute shall be referred to a more senior
executive of the Parties.
(b) In the event the Parties have not resolved a dispute pursuant
to Section 16.02(a) above, they shall be free to pursue any other remedy
provided by operation of law.
ARTICLE 17
SURVIVAL, REMEDIES AND PROCEDURE FOR INDEMNIFICATION
17.01 Period for Taking Action: Representations, warranties, covenants
and agreements hereunder shall survive Closing but only to the extent set forth
below.
(a) The representations and warranties of the Parties hereunder
shall survive Closing but only for a period of eighteen months from and after
the Closing Date; provided, however, Seller's representation and warranty
contained in Section 6.22 above shall survive Closing only for a period of
ninety days after Closing.
(b) The obligations of Buyer to indemnify Seller under Sections
8.01, 8.02, and 8.03 above shall survive Closing without any limitation as to
time, subject to applicable statutes of limitations.
(c) The obligations of Buyer to indemnify Seller under Section
8.04 above with respect to breaches of its representations and warranties
contained herein shall survive Closing but expire eighteen months after the
Closing.
(d) The agreements and covenants of Buyer, other than its
representations and warranties, shall survive Closing without limitation as to
time, subject to applicable statutes of limitations.
(e) The obligations of Buyer to indemnify Seller under Section
8.04 above with respect to the nonfulfillment of any agreement or covenant by
Buyer under this Agreement shall survive Closing without any limitation as to
time, subject to applicable statutes of limitations.
(f) The obligations of Seller to indemnify Buyer under Sections
9.01 and 9.02 above shall survive Closing without any limitation as to time,
subject to applicable statutes of limitations.
(g) The obligations of Seller to indemnify Buyer under Section
9.03 above with respect to breaches of its representations and warranties
contained herein shall survive Closing but expire eighteen months after the
Closing; provided, however, Seller's obligation to indemnify Buyer with respect
to Seller's representation and warranty contained in Section 6.22 above shall
survive Closing only for a period of ninety days after Closing.
(h) The agreements and covenants of Seller, other than its
representations and warranties, shall survive Closing without limitation as to
time, subject to applicable statutes of limitations.
(i) The obligations of Seller to indemnify Buyer under Section
9.03 above with respect to the nonfulfillment of any agreement or covenant by
Seller under this Agreement shall survive Closing without any limitation as to
time, subject to applicable statutes of limitations.
(j) Any claim made by Buyer against Seller in accordance with this
Agreement shall (if it has not been previously satisfied, settled or withdrawn)
be deemed to have been waived or withdrawn on the expiry of 6 months after
notice of such claim is received by Seller unless proceedings in respect of such
claim shall then have been commenced against Seller and for this purpose
proceedings shall not be taken to have been commenced unless they have been both
filed and served on Seller. Except as provided in the foregoing sentence, any
on-going claims, actions or demands commenced prior to expiration of the claim
period set forth in Section 17.01 or specifically stipulated elsewhere in this
Agreement may be pursued to conclusion even if final judgment or settlement of
such claim, action or demand occurs after the claim period has elapsed.
17.02 Notice: No claim for indemnification may be made with respect to
any of the indemnification provisions set forth in Articles 8 and 9 unless
notice of such claim for indemnification which satisfies the provisions of
Section 17.06 below or Section 17.07 below with regard to environmental matters
is given to the indemnifying Party on or before the expiration date for such
indemnification provision as set forth in Section 17.01, but the actual costs or
expenses related thereto may be incurred or assessed after such expiration date.
17.03 Claims: Subject to the limitation set forth in Section 17.04
below, a Party shall be liable in respect of any claim brought by the other
Party for indemnification for a breach by such Party of its representations and
warranties set forth in this Agreement only if such Party's liability (but for
this Section 17.03) for such claim exceeds $10,000 and if such Party's aggregate
liability for all such claims which exceed $10,000 exceeds in the aggregate one
and one-half percent (1.5%) of the Purchase Price, in which case such Party
shall be liable for all such claims which exceed $10,000.
17.04 Limit: The aggregate liability of any Party arising by reason of
any and all claims for indemnification or for a breach by such Party of this
Agreement other than those for indemnification pursuant to Sections 8.01, 8.02,
8.03, 8.05, 9.01, and 9.02 above, shall not exceed an amount equal to fifty
percent (50%) of the Purchase Price; provided, however, to the extent that a
breach by Seller of the covenants set forth in Sections 14.11 and 14.12 above
causes such aggregate liability of Seller to exceed an amount equal to fifty
percent (50%) of the Purchase Price, this fifty percent (50%) of the Purchase
Price limitation shall be increased by the amount of the Seller's liability (but
for this Section 17.04) for breach of the covenants set forth in Sections 14.11
and 14.12 above. In no event shall Seller's aggregate liability arising by
reason of any and all claims for indemnification or for a breach by Seller of
this Agreement other than for indemnification pursuant to Sections 9.01 and 9.02
above exceed one hundred percent (100%) of the Purchase Price.
17.05 Not a Release of Other Obligations: Notwithstanding the
expiration of any of the indemnification provisions set forth in Articles 8 or 9
hereof or the limitations in this Article 17, such expiration and limits are not
intended to terminate or in any way modify or reduce the obligation of Seller to
be responsible for the payment and performance of its obligations relating to
Excluded Liabilities and the obligations of Buyer to be responsible for the
payment and performance of its obligations relating to the Assumed Liabilities
and payment of Purchase Price in full.
17.06 Procedure: Except with respect to indemnification of
environmental matters, each Party to this Agreement shall give prompt written
notice to the other Party under each claim for indemnification hereunder
specifying that indemnification is sought pursuant to this Agreement, the amount
(to the extent known), nature of and event giving rise to the claim, and of any
matter which is likely to give rise to an indemnification claim. The
indemnifying Party shall have 30 days after receipt of the above-mentioned
notice to undertake control, at its expense, of the defense of any such matter
or its settlement; 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. Failure to give timely notice of
a matter which may give rise to an indemnification claim shall not affect the
rights of the indemnified Party to collect such claims from the indemnifying
Party so long as such failure to so notify does not adversely affect the
indemnifying Party's ability to defend such claim against a third party. No
indemnifying Party, in the defense of any claim or litigation, shall, except
with the consent of an indemnified Party, which consent shall not be
unreasonably withheld or delayed, consent to entry of any judgment or enter into
any settlement by which such indemnified Party is to be bound and which judgment
or settlement does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such indemnified Party of a release from all
liability in respect to such claim or litigation.
17.07 Environmental Procedure; Access and Use of Real Property:
(a) Buyer will at all times take all reasonable steps to mitigate
the Environmental Liabilities or potential Environmental Liabilities which fall
or may fall within the terms of Article 9. As soon as reasonably practicable
after a Party becomes aware of any Environmental Liabilities (whether or not the
Party is of the opinion that it has a valid claim against the other Party under
Articles 8 or 9), said Party shall give written notice thereof to the other
Party including all material details of any Environmental Liabilities.
(b) With respect to any environmental matter for which Seller may
be required to indemnify Buyer under this Agreement, Seller shall have sole
control over all negotiations with governmental authorities concerning any
environmental measures for such environmental matters; provided that Seller
shall not take any action or fail to take any action with respect thereto that
has a material adverse impact on Buyer or the Business. Seller shall consult
with Buyer from time-to-time as to the status of such negotiations and shall
promptly provide Buyer with copies of all proposed documents involving such
remediation, provided, however, that Seller shall not agree to any environmental
measures which shall adversely affect Buyer's ownership, use or operation of the
Business Assets or the Business to any material extent without the prior written
approval of Buyer, which shall not be unreasonably withheld.
(c) After Closing, Seller shall have access to the Leased Premises
(subject to the terms of the applicable lease) for environmental remediation
work as follows:
(i) Seller retains a right of access to the Leased
Premises after the Closing for purposes of
conducting environmental remediation work. Seller
shall make every reasonable effort in implementing
the work to reduce to the extent practicable any
interference with Buyer's operations at and use of
the property in question. Seller shall coordinate
its need to access the Leased Premises with Buyer's
local management, including at least ten days'
advance notice of use of any heavy equipment.
(ii) At the conclusion of any environmental remediation
project by Seller at the Leased Premises, Seller
shall promptly dispose of and/or decontaminate all
rubbish and debris caused by or otherwise associated
with such work, and shall remove all equipment,
materials and supplies, and shall restore the
property in question to its condition immediately
prior to the initiation of the work and leave the
same ready for ordinary use, taking into account any
necessary above-ground fixtures necessary for the
work such as ground water monitoring equipment.
(d) Buyer acknowledges and agrees that Seller's obligations for
any environmental measures shall be limited to those measures applicable to
property that meets the present zoning classification of the Leased Premises.
17.08 Claim Limitations.
(a) A Party shall not be liable with respect to any claim
hereunder to the extent the liability or loss of the other Party in respect
thereof (i) is incurred or increased as a result of any legislation or
regulation (including those applicable to tax rates) not in force at the
Effective Date, any withdrawal of any published concession or ruling by any
relevant tax authority, or as a result of any change in legislation or
regulation thereafter; (ii) would not have arisen but for an act or omission
carried out after the date of this Agreement (other than in the ordinary course
of business) by Buyer or its Affiliates and which was carried out by a person
who knows or reasonably should have known that it would result in an increase in
the liability of the Seller hereunder; (iii) was or is subject to being offset
or reimbursed by a reduction in tax liability of the other Party or payment to
such other Party of insurance; (iv) a matter which has arisen in respect of any
act or omission stipulated to be carried out or omitted pursuant to this
Agreement or which is carried out or omitted at the written request of the Party
asserting the claim; or (v) a matter which was provided for or taken into
account in calculating the Purchase Price under Section 5.03.
(b) After Closing occurs, a Party may not bring a claim for breach
of a representation or warranty hereunder to the extent the basis for the claim
is known to the Party prior to the Closing (i.e., is within Seller's knowledge
or Buyer's knowledge, as the case may be); provided, however, that if a Party
obtains knowledge of the specific basis of a claim after the date hereof and
prior to the Closing Date that constitutes a material breach of a representation
or covenant and discloses such specific basis to the other Party in writing,
and, if the transaction contemplated herein is consummated, the Party so
disclosing such specific basis shall not be precluded solely by the operation of
this Section 17.08(b) from bringing a claim for breach hereunder; provided
further, however, that the consent of the Party receiving such disclosure to
proceed to Closing shall be required if the Party making such disclosure is
entitled or claims to be entitled to terminate this Agreement under Section
16.01(b)(iii), failing which consent neither Party shall be obligated to close
hereunder.
(c) Nothing in this Article 17 shall derogate from either Party's
obligation to mitigate any loss which it suffers in consequence of a breach of
this Agreement.
(d) It is intended that the provisions of this Agreement with
respect to claims by one Party against the other shall apply to all claims
relating to the transactions contemplated hereby, regardless of whether such
claim is based in tort (including, without limitation, negligence) contract, or
otherwise, and shall provide the sole and exclusive remedy or remedies relating
to the subject matter hereof, the transactions contemplated hereby and the
Business Assets. All such claims are subject to the limitations set forth in
this Article 17 (including but not limited to Section 17.05).
ARTICLE 18
MISCELLANEOUS
18.01 Press Release: Buyer and Seller shall each be at liberty to issue
a press release or public announcement following execution of this Agreement
with respect to the transaction contemplated by this Agreement with the prior
written consent of the other Party, and the Parties shall consult each other in
advance on the form and content of such releases or announcements. Each Party
shall also be entitled to make such disclosures as may be required by applicable
law or by applicable regulations of regulatory authorities ("Required
Disclosure") without the prior consent of the other Party. Each Party shall
provide the other Party with a copy of any Required Disclosure prior to its
release. Any Required Disclosure that contains information that is not required
by applicable laws or regulations must be approved by the other Party, such
approval not to be unreasonably withheld.
18.02 Fees: Except as otherwise specifically provided herein, the
Parties shall pay their own expenses including attorney's fees, incident to the
preparation and performance of this Agreement, whether or not the transactions
contemplated herein are consummated.
18.03 Amendments: This Agreement shall not be amended or modified
except in writing, signed by both Parties.
18.04 Successors: This Agreement shall be binding upon and inure to the
benefit of the Parties hereto and their respective successors and assigns,
provided that prior to the Closing neither Party shall assign this Agreement or
any rights herein without the other Party's prior written consent. This
Agreement is not intended to confer upon any person except Buyer and Seller (and
their respective Affiliates) any rights or remedies hereunder.
18.05 Merger: All understandings and agreements heretofore existing
between the Parties regarding the purchase and sale of the Business Assets are
merged into this Agreement (including the Schedules and Exhibits hereto). This
Agreement fully and completely expresses the agreement of the Parties and was
entered into after adequate investigation. Neither Party relying upon any
statement or representation not embodied in this Agreement, or the Exhibits
hereto, made by the other or the other's Affiliates, or by a representative of
the other or its Affiliates.
18.06 Non-waiver of Remedy: The failure of Seller or Buyer to insist in
any one or more instances upon the strict performance of any of the terms,
conditions or covenants of this Agreement shall not be construed as a waiver or
relinquishment for the future of such term, condition or covenant. A receipt by
Seller or Buyer of any money, with knowledge of the breach of any term,
condition or covenant of this Agreement, shall not be deemed a waiver of such
breach, and no waiver, change, modification or discharge by either Party hereto
of any provision in this Agreement shall be deemed to have been made or shall be
effective unless expressed in writing and signed by both Seller and Buyer. In
addition to the other remedies provided in this Agreement, Seller and Buyer
shall be entitled to the restraint by injunction of the violation, or attempted
or threatened violation of any of the terms, conditions or covenants of this
Agreement, or to a decree compelling performance of any of such term, condition
or covenant.
18.07 Notices: All notices, consents, requests and approvals, any
notice of change in address for the purpose of this Article, and other
communications provided for or required herein, shall be deemed validly given,
made or served, if in writing, and delivered (a) on the day given if served
personally, (b) two days following if sent by telecopy to the facsimile number
indicated below with a confirmatory notice by delivery to a
nationally-recognized express delivery service with instructions and payment for
overnight delivery to the address set forth below; or (c) three days following
if sent by U.S. Certified Mail, postage prepaid:
If to Seller, addressed to:
Kao Infosystems Company
40 Grissom Road
Plymouth, Massachusetts 02360
Attention: President
Facsimile Number: (508) 747-9753
Telephone Number: (508) 747-5520
With copies to:
Potter Anderson & Corroon LLP
Hercules Plaza
1313 North Market Street
Wilmington, Delaware 19801 USA
Attention: David B. Brown
Telephone Number: (302) 984-6000
Facsimile Number: (302) 658-1192
and
Kao America Inc.
c/o The Andrew Jergens Company
2535 Spring Grove Avenue
Cincinnati, OH 45214 USA
Attention: VP Finance and CFO
Telephone Number: (513) 455-5340
Facsimile Number: (513) 455-5343
and
Kao Corporation
14-10, Nihonbashi Kayabacho 1-chome
Chuo-ku, Tokyo 103
JAPAN
Attention: Director, Legal Department
Telephone Number: 011-81-3-3660-7047
Facsimile Number: 011-81-3-3660-7942
And if to Buyer, addressed to:
Zomax Optical Media, Inc.
5353 Nathan Lane
Plymouth, Minnesota 55442
Attn: James T. Anderson
Facsimile Number: (612) 519-3710
Telephone Number: (612) 553-9300
With copy to:
Fredrikson & Byron, P.A.
1100 International Centre
900 2nd Avenue S.
Minneapolis, Minnesota 55402
Attn: Dobson West
Facsimile Number: (612) 347-7077
Telephone Number: (612) 347-7111
18.08 Governing Law: This Agreement shall be governed by and construed
according to the laws of the United States of America and the State of Delaware.
The United Nations Convention on the International Sale of Goods shall not apply
to transactions contemplated by this Agreement. The Parties agree to submit to
the exclusive jurisdiction of the courts located in Delaware and each appoints
the Secretary of State of Delaware (if lacking a registered agent in Delaware)
to accept service of process on its behalf, with copies thereof to be sent by
the other party by certified mail in accordance with the notice provisions set
forth above.
18.09 Confidentiality: The obligations of confidentiality set forth in
that letter from David B. Brown of Potter Anderson & Corroon LLP to Buyer
(Attention: Jim Anderson) dated June 24, 1998 are incorporated herein by
reference and will apply to and be binding on Buyer, to the benefit of Seller
and its Affiliates, as if (a) the parties referred to anonymously therein as
"OC" were expressly referred to therein as Seller and its Affiliates; and (b)
Buyer were the party who had signed such letter, regardless of whether or not
Buyer signed such letter at the time.
18.10 Severability: If any provision, or portion thereof, of this
Agreement is held to be invalid, illegal or unenforceable by a court of
competent jurisdiction, such invalidity, illegality or unenforceability shall
not affect any other provision hereof.
18.11 Schedules and Exhibits: All Schedules and Exhibits referred to
herein are hereby incorporated in this Agreement by reference.
18.12 Headings: The various headings used in this Agreement are for
convenience only and are not to be used in interpreting the text of the Article
in which they appear or to which they relate.
18.13 Counterparts: This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and all of which shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed the day and year first above written.
KAO INFOSYSTEMS COMPANY
By: /s/ George E. Sperzel
Name: George E. Sperzel
Title: Assistant Treasurer
ZOMAX OPTICAL MEDIA, INC.
By: /s/ James T. Anderson
Name: James T. Anderson
Title: CEO
[Canada Agreement]
REVISED DRAFT
NOV. 25, 1998 (6:00 P.M. )
ASSET PURCHASE AND SALE AGREEMENT
BETWEEN
KAO INFOSYSTEMS CANADA INC.
AND
3024203 NOVA SCOTIA COMPANY
NOVEMBER 28, 1998
<PAGE>
Articles Page
TABLE OF CONTENTS
ASSET PURCHASE AND SALE AGREEMENT
Articles Page
1. DEFINITIONS..........................................................1
2. BUSINESS ASSETS......................................................6
3. INTELLECTUAL PROPERTY................................................8
4. EXCLUDED ASSETS......................................................8
5. PURCHASE PRICE AND MISCELLANEOUS
EXPENSES.......................................................10
6. SELLER'S WARRANTIES.................................................14
7. BUYER'S WARRANTIES..................................................20
8. BUYER'S INDEMNITY...................................................21
9. SELLER'S INDEMNITY..................................................22
10. INTERIM PERIOD......................................................23
11. EMPLOYEE BENEFIT MATTERS............................................24
12. GOVERNMENTAL CONSENTS...............................................27
13. CLOSING.............................................................28
14. POST CLOSING........................................................32
15. BULK SALES ACT......................................................36
16. RIGHT OF TERMINATION; DISPUTE SETTLEMENT............................37
17. SURVIVAL, REMEDIES AND PROCEDURE FOR
INDEMNIFICATION................................................38
18. MISCELLANEOUS.......................................................42
EXHIBITS:
Exhibit I Undertaking of Assumption................47
Exhibit II Bill of Sale.............................49
Exhibit III Agreement of Guaranty (by Kao)..........51
Exhibit IV Agreement of Guaranty (by Zomax).........54
SCHEDULES:
Schedule 1.0 Employees Relevant to "Seller's knowledge"
and "Buyer's knowledge"
Schedule 2.01(a) Land
Schedule 2.01(b) Leased Premises
Schedule 2.02 Machinery and Equipment
Schedule 2.04 Permits
Schedule 2.08 Computer Software Assets
Schedule 3.01 Intellectual Property Rights
Schedule 5.03(b) Inventory, Etc. Valuation Procedure
Schedule 5.05 Allocation of Purchase Price
Schedule 6.11(b) Seller's Required Approvals
Schedule 6.20 Exceptions to Required Assets
Schedule 6.21 Software Compliance with Year 2000
Schedule 7.03 Buyer's Required Approvals
Schedule 11.01 Employees
Schedule 13.02(f) Agreements to be executed by Buyer
Schedule 13.03(d) Agreements to be executed by Seller
Schedule 13.04(f) Consents for Assignment of Contracts
Schedule 14.11 Exceptions to Noncompetition Restrictions
DISCLOSURE SCHEDULES:
Disclosure Schedule 6.05 Litigation and Investigations
Disclosure Schedule 6.06 Environmental Claims
Disclosure Schedule 6.07 Exceptions to Title to Land
Disclosure Schedule 6.09 Material Contracts
Disclosure Schedule 6.10 Exceptions to Intellectual Property Rights,
Etc.
Disclosure Schedule 6.11 Compliance with Laws, Etc.
Disclosure Schedule 6.14 Employment Contracts, Etc.
Disclosure Schedule 6.15 Employee Benefit Matters
Disclosure Schedule 6.18 Product Liability Matters
<PAGE>
ASSET PURCHASE AND SALE AGREEMENT
THIS AGREEMENT, entered into and effective as of the 28th day of
November, 1998, by and between KAO INFOSYSTEMS CANADA INC., a corporation
incorporated under the laws of the Province of Ontario, with its principal place
of business at, 10 Didak Drive, Arnprior, Ontario, Canada K7S 3H2 ("Seller"),
and 3024203 NOVA SCOTIA COMPANY, a Nova Scotia corporation, with its principal
place of business at c/o Kate Harris, 430-1741 Brunswick Street, Halifax, Nova
Scotia, Canada B3J 3X8 ("Buyer").
W I T N E S S E T H
WHEREAS, Seller owns and operates the Business (as defined below along
with other capitalized terms); and
WHEREAS, Buyer desires to purchase certain assets and acquire certain
rights of Seller relating to the Business and assume the Assumed Liabilities,
and Seller desires to sell such assets, and transfer such rights and the Assumed
Liabilities;
WHEREAS, Kao Corporation, a Japanese corporation ("Kao"), owns directly
or indirectly all of the stock of Seller;
WHEREAS, Zomax Optical Media, Inc., a Minnesota corporation ("Zomax")
owns directly or indirectly all of the stock of Buyer;
NOW, THEREFORE, for good and valuable consideration, the sufficiency
and receipt of which is hereby acknowledged, and subject to the terms,
conditions, covenants and provisions of this Agreement, Seller and Buyer
mutually covenant and agree as follows:
ARTICLE 1
DEFINITIONS
1.01. As used in this Agreement, the following terms have the following
meanings:
"Accounts Payable" means the trade accounts payable in the ordinary
course of business as of Closing (whether or not due) which have arisen from the
purchase of goods and/or services by the Business from its suppliers together
with the amount payable by Seller to Transferred Employees for vacation time
that is accrued and unpaid and together further with any amount referred to in
Section 5.08(a)(i).
"Acquisition Documents" has the meaning ascribed in Section
13.02(d)(ii) of this Agreement.
"Affiliate" means with respect to a specified entity, an entity that
directly, or indirectly through one or more intermediaries, Controls, or is
Controlled by, or is under common Control with the entity specified; provided,
that, without limiting the generality of the foregoing, the term "Affiliate"
shall not include any entity in which a Party has a fifty percent or less
ownership interest.
"Agreement" means this Asset Purchase and Sale Agreement together with
all its Schedules, Disclosure Schedules and Exhibits.
"Assumed Liabilities" has the meaning ascribed in Section 5.01 of this
Agreement.
"Bill of Sale" means that agreement attached as Exhibit II to this
Agreement.
"Business" means the business of compact disc (CD) multi-media
services, replication, duplication, turnkey assembly and fulfillment presently
conducted by Seller at the Plant and the Leased Premises and specifically
excluding the business relating to FD Assets at any time.
"Business Assets" has the meaning ascribed in Article 2 of this
Agreement.
"Business Personnel" has the meaning ascribed in Section 6.15 of this
Agreement.
"Business Records" has the meaning ascribed in Section 2.06 of this
Agreement.
"Buyer's knowledge" and phrases of like impact shall mean the actual
knowledge of Buyer's employees listed on Schedule 1.0 hereto.
"Closing" has the meaning ascribed in Section 13.01 of this Agreement.
"Closing Date" means the date on which Closing occurs.
"Computer Software Assets" has the meaning ascribed in Section 2.08 of
this Agreement.
"Contracts" has the meaning ascribed in Section 2.05 of this Agreement.
"Control" and phrases of like impact shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and operating policies of the entity in respect of which the
determination is being made, through the ownership of voting securities,
contract, voting trust or otherwise.
"Effective Date" means the effective date of this Agreement and is the
date written in the preamble to this Agreement.
"Environmental Claim" means any claim, action, cause of action,
investigation or written notice by any person or entity alleging potential
liability of Seller arising out of, based on or resulting from, in part or in
whole, (a) the presence, or release into the environment, of any Materials of
Environmental Concern at the Plant or any Leased Premises or (b) circumstances
forming the basis of any violation, or alleged violation, of Environmental Laws.
"Environmental Laws" means the applicable federal, provincial,
regional, county, municipal, and local environmental, health or safety laws,
regulations, ordinances, and rules, and the common law relating to the use,
refinement, handling, treatment, removal, storage, production, manufacture,
transportation, disposal, emissions, discharges, releases or threatened releases
of Materials of Environmental Concern, or otherwise relating to protection of
the environment, as the same may be amended or modified, including, without
limitation, the statutes listed below: Canadian Environmental Protection Act of
1985, as amended; Transportation of Dangerous Goods Act (Canada) of 1992, as
amended; Environmental Protection Act (Ontario) of 1990, as amended; and Ontario
Water Resources Act of 1990.
"Environmental Liabilities" has the meaning ascribed in Sections 8.03
and 9.02 of this Agreement.
"Excluded Assets" has the meaning ascribed in Article 4 of this
Agreement.
"Excluded Liabilities" has the meaning ascribed in Section 5.02 of this
Agreement.
"Excluded Records" has the meaning ascribed in Section 2.06 of this
Agreement.
"Fixtures" has the meaning ascribed in Section 2.01(a) of this
Agreement.
"FD" means floppy disk or disks and magnetic media of any kind.
"FD Assets" has the meaning ascribed thereto in Section 4.12 hereof.
"GAAP" means Canadian generally accepted accounting principles
consistently applied.
"Improvements" has the meaning ascribed in Section 2.01(a) of this
Agreement.
"Intellectual Property" means patents, trademarks, copyrights and
technical information that is protected by law from infringement.
"Intellectual Property Rights" has the meaning ascribed in Section 2.09
of this Agreement.
"Inventory" has the meaning ascribed in Section 2.07 of this Agreement.
"Irish Agreement" means the agreement dated on or about the date of
this Agreement made between Kao and Buyer or its Affiliate and relating to the
purchase and sale of stock described in such agreement.
"ITA" means the Income Tax Act (Canada) of 1985, as amended.
"Kao Guaranty" means the Agreement of Guaranty, in the form attached
hereto as Exhibit III, providing a guaranty by Kao in favor of Buyer.
"Land" has the meaning ascribed in Section 2.01(a) of this Agreement.
"Leased Premises" has the meaning ascribed in Section 2.01(b) of this
Agreement.
"Losses" has the meaning ascribed in the first paragraph of Article 8
of this Agreement.
"Machinery and Equipment" has the meaning ascribed in Section 2.02 of
this Agreement.
"Material Contract" means those contracts to which Seller is a party
(other than purchase orders to sell or buy in the ordinary course of business)
which relate to the Business and have an aggregate remaining value of at least
$25,000. For purposes hereof, "remaining value" refers to the revenue thereon as
to which Seller has a contractual right, or the cost thereof as to which Seller
has a contractual duty, prior to expiration thereof or the possible exercise of
a termination right thereunder.
"Materials of Environmental Concern" means any toxic or hazardous
waste, pollutants or substances, including, without limitations, asbestos,
radon, PCBs, petroleum products and byproducts, substances defined or listed as
a pollutant, air pollutant, "hazardous substance", "toxic substance", "toxic
pollutant", "medical waste" or similarly identified substance or mixture, in or
pursuant to any of the Environmental Laws.
"Miscellaneous Assets" has the meaning ascribed in Section 2.10 of this
Agreement.
"Offeree Employees" has the meaning ascribed in Section 11.01 of this
Agreement.
"Office Equipment" has the meaning ascribed in Section 2.03 of this
Agreement.
"Other Purchase and Sale Agreements" means the other agreements (viz.
the Irish Agreement and the U.S. Agreement), dated on or about the date hereof,
which Buyer or its Affiliates have entered into with Kao Infosystems Company,
and Kao, respectively, for the purchase and sale of assets and stock,
respectively, described in those other agreements.
"Party" means either Buyer or Seller.
"Parties" means both Buyer and Seller.
"PBA" means the Pension Benefit Act (Ontario) of 1990, as amended.
"Permits" has the meaning ascribed in Section 2.04 of this Agreement.
"Permitted Exceptions" has the meaning ascribed in Section 6.07 of this
Agreement.
"Plant" has the meaning ascribed in Section 2.01(a) of this Agreement.
"Profit Sharing Plan" has the meaning ascribed in Section 11.05(b) of
this Agreement.
"Purchase Price" has the meaning ascribed in Section 5.03 of this
Agreement.
"Receivables" means the trade accounts receivable as of Closing arising
from the sale of products and/or services by the Business to its customers.
"Seller's Benefit Plans" has the meaning ascribed in Section 6.15 of
this Agreement.
"Seller's knowledge" and phrases of like impact shall mean the actual
knowledge of Seller's employees listed on Schedule 1.0 hereto.
"Tangible Property" has the meaning ascribed in Section 6.08 of this
Agreement.
"Taxes" has the meaning ascribed in Section 5.06.
"Third Party" shall mean a party other than either of the Parties or
their respective Affiliates.
"Transferred Employee(s)" has the meaning ascribed in Section 11.01 of
this Agreement.
"Undertaking of Assumption" means that agreement attached as Exhibit I
to this Agreement.
"U.S. Agreement" means the agreement dated on or about the date of this
Agreement made between Kao Infosystems Company and Buyer or its Affiliate and
relating to the purchase and sale of assets described in such agreement.
"Zomax Guaranty" means the Agreement of Guaranty, in the form related
hereto as Exhibit IV, providing a guaranty by Zomax in favor of Seller.
1.02. Unless otherwise noted, all dollar amounts set forth herein are
expressed in United States currency. If for any reason whatsoever it becomes
necessary to convert any sum due under this Agreement from one currency ("the
first currency") into United States dollars ("the second currency") or vice
versa, such conversion shall be made at the rate of exchange prevailing on the
business day prior to the date such payment is due. For this purpose "rate of
exchange" means the rate at which the party converting such currency could
purchase the second currency with the first currency, using the rates quoted by
the New York Times, and "business day" means a day on which banks in New York
City are generally open for business.
1.03. Reference to Sections are to sections of Articles of this
Agreement and references to Articles and Exhibits are to Articles of and
Exhibits to this Agreement.
1.04 Reference to Schedules or Disclosure Schedules are to the attached
schedules and disclosures schedules hereto which are incorporated herein by
reference.
ARTICLE 2
BUSINESS ASSETS
Seller agrees to grant, sell, convey, assign, transfer and deliver unto
Buyer, and Buyer agrees to purchase, accept and take delivery of the following
assets of Seller relating to the Business (hereinafter collectively referred to
as the "Business Assets") as of the Closing Date:
2.01 Real Property/Leaseholds:
(a) The land described in Schedule 2.01 (a) hereto (the "Land"),
together with all buildings, improvements and structures located on the Land
(the "Improvements"), and all permanently affixed equipment, machinery,
fixtures, and other items of real and/or personal property used in connection
with and permanently affixed to or incorporated into the Improvements (the
"Fixtures"); provided, that any such equipment, machinery, fixtures, etc. leased
by Seller shall be deemed Fixtures and included in the Business Assets only if
the lease agreement relating thereto constitutes a Contract and, then, subject
to the terms of said lease agreement. The Land, the Improvements and the
Fixtures are collectively referred to herein as the "Plant".
(b) The leasehold interest created by each lease of real property
that is described in Schedule 2.01(b) and constitutes a Contract (the "Leased
Premises").
2.02 Machinery and Equipment: Except as described in Article 4 hereof,
manufacturing, storage, distribution, transportation and other machinery and
equipment owned by Seller (or Seller's leasehold interest therein under leases
that are Contracts) and located at the Plant or Leased Premises on the date
hereof excluding FD Assets, including that listed in Schedule 2.02, subject to
changes in the ordinary course of business (the "Machinery and Equipment").
2.03 Office Equipment: The office equipment, furniture, files,
cabinets, computer hardware and related tangible personal property situated, on
the date hereof excluding FD Assets, at the Plant, and owned by Seller (or
Seller's leasehold interest therein under leases that are Contracts) (the
"Office Equipment") subject to changes in the ordinary course of business;
provided, that software loaded on computers shall be deemed Business Assets only
if such software constitutes Computer Software Assets.
2.04 Permits: To the extent transferable or assignable to Buyer without
breaching any applicable law or regulation or any other enforceable obligation
of Seller, all rights in and to all permits, consents, licenses, authorizations,
and approvals used in the Business, including those listed in Schedule 2.04,
which are required by any governmental entity in order for Seller to conduct the
Business as presently conducted (excluding general corporate and other similar
authorizations not specific to the Business, such as qualifications to transact
business) (the "Permits").
2.05 Contracts: Except as identified in Article 4 hereof, all sales
orders and contracts, purchase orders and contracts, distribution agreements,
development agreements, consulting agreements, real property leases, equipment
and other personal property leases, licenses (including software licenses) and
other contracts or agreements which relate exclusively to the Business, to the
extent they shall not have been terminated on or before the Closing Date, and to
the extent the consent of any Third Party to the assignment thereof to Buyer is
either not required or has been obtained and to the extent they are not in
default and such default has not been cured (the "Contracts"). For any such
contract or agreement which is not so assignable by Seller to Buyer without the
consent of a Third Party, Seller shall use reasonable efforts to arrange for
Buyer to obtain such consent prior to Closing, and Buyer shall reasonably assist
Seller's efforts. Seller shall not be required to incur or bear any cost or
expense to obtain such consent, and obtaining such consent shall not be required
or (except as otherwise expressly set forth herein) deemed a condition of
Closing. For the purposes of this Agreement, the following shall not constitute
Contracts: (a) Receivables; (b) Accounts Payable; and (c) agreements between
Seller and its employees, relating to their terms and conditions of employment
with Seller (including without limitation collective bargaining agreements),
except those expressly identified in Disclosure Schedule 6.09.
2.06 Business Records: All business records prepared in the ordinary
course of business and now existing (subject to changes in the ordinary course
of business) relating solely or principally to the Business (other than those
related to the divestiture of the Business or to Seller's Benefit Plans, and
those comprising communications with Seller's Affiliates, attorneys, accountants
and consultants or not pertaining in some material way to the Business Assets or
Assumed Liabilities ("Excluded Records"), subject in all cases to third party
confidentiality restrictions or legally required consents), including market
information, sales aids, customer and supplier lists, sales history and
historical site specific accounting information, and records related to
Intellectual Property Rights, whether or not located, as of the Closing Date, at
the Leased Premises, which relate solely or principally to the Business as it is
conducted by Seller at the Leased Premises (the "Business Records"). For
purposes of this Agreement, the consent of a Transferred Employee to the
disclosure of his or her employment file shall be deemed to be a legally
required consent. Each party shall be allowed reasonable access to and have the
right to copy those records that relate to the Business which are conveyed to or
retained by the other party.
2.07 Inventory: The inventories of raw materials, stores, tools, work
in process, finished goods, supplies and packaging materials held for use or
generated by the Business at Closing, which are located at or in transit to or
from the Leased Premises, field warehouses or customer locations (the
"Inventory").
2.08 Computer Software Assets: All computer software, data rights, and
documentation used in the conduct of the Business as of the date hereof
including those described in Schedule 2.08 (the "Computer Software Assets");
provided, that any such software, data rights and documentation that are subject
to a license or other agreement shall be deemed Computer Software Assets and
included in the Business Assets only if such license or agreement constitutes a
Contract and, then, subject to the terms of said license or agreement. As to any
such software or rights which are not so transferable by Seller, Seller shall
use reasonable efforts to arrange for Buyer to obtain the right to use that
software or those rights, and Buyer shall reasonably assist Seller's efforts.
Except as otherwise explicitly set forth herein, the transfer of any Computer
Software Assets shall not be a condition of closing. Buyer shall be responsible
for any fees or royalty payments required to obtain such right, and Seller shall
not be required to incur or bear any cost or expense in order for Buyer to
obtain such right.
2.09 Intellectual Property Rights: The rights to the Intellectual
Property used by Seller in the conduct of the Business that are delineated in
Article 3 ("Intellectual Property Rights").
2.10 Miscellaneous Assets: The Receivables as of the Closing Date and
prepaid expenses as of the Closing Date that will inure to the benefit of Buyer,
including but not limited to prepaid royalties and prepaid tax assessments
generated or incurred in the Business as prorated to Buyer pursuant to Article 5
("Miscellaneous Assets").
ARTICLE 3
INTELLECTUAL PROPERTY
3.01 Intellectual Property Rights: As of the Closing Date, Seller also
shall grant to Buyer certain rights to Intellectual Property, which rights are
described in Schedule 3.01.
ARTICLE 4
EXCLUDED ASSETS
Notwithstanding anything, express or implied, to the contrary contained
in this Agreement, the following assets of Seller and Seller's Affiliates are
excluded from the transaction described by this Agreement and shall not
constitute a portion of the Business Assets (the "Excluded Assets"):
4.01 Promissory Notes: All promissory notes or indebtedness owing to
Seller, gother than that associated with Receivables.
4.02 Cash and Investments: All cash on hand or in banks, including cash
equivalents and investments.
4.03 Prepaid Taxes, Expenses and Advances: All prepaid taxes, expenses
and advances, as prorated to Seller in accordance with Article 5.
4.04 Tax Withholdings: All taxes withheld by Seller from its employees'
salaries and wages, and other taxes of Seller incurred by it as an employer,
vendor or otherwise in the conduct of the Business, which Seller is obligated to
pay, and rights to claims for refunds of any such taxes.
4.05 Seller's Name and Trademarks: Except as expressly set forth in
Section 14.07, all rights in the trade name "KAO" , "KAO INFOSYSTEMS", and "KAO
INFOSYSTEMS CANADA", or any other trademark or trade name, web site or Internet
domain name of Seller , its Affiliates or any other party not explicitly listed
on the Schedule 3.01 to this Agreement.
4.06 Insurance Policies: All insurance policies, proceeds therefrom,
and rights thereunder.
4.07 Business Records: The Excluded Records and all other business
records not specifically described in Section 2.06.
4.08 Corporate Computer Assets: All corporate computer systems
(hardware and software) and licenses (including, but not limited to, the BaaN
computer system (hardware and software) and license and the Oracle software
license, Seller's electronic and voice mail systems, freight related systems and
order entry systems) which are not provided for in Section 2.08 or listed in
Schedule 2.08.
4.09 Causes of Action: All causes of action or claims of Seller against
third parties, relating to the conduct of the Business by Seller prior to
Closing, whether known or unknown on the Closing Date, excluding Receivables.
4.10 Subsidiaries: Any equity or other interest in any corporation,
partnership, joint venture, trust, limited liability company, association or
other legal entity.
4.11 Other Sites: All assets of Seller not used in the Business or
located at sites other than the Plant and Leased Premises.
4.12. FD Assets: The following assets ("FD Assets"): all equipment and
other personal property used in the manufacture or sale of FD or other media,
including but not limited to FD manufacturing and certifying equipment, as well
as any inventory or receivables relating to FD, media, computer tape, CD-R,
printer and copier paper and other products not used or sold in the Business.
4.13. Other Assets: All other assets of Seller and Seller's Affiliates
not specifically included in the Business Assets.
ARTICLE 5
PURCHASE PRICE AND MISCELLANEOUS EXPENSES
Subject to the terms and conditions of this Agreement, Buyer and Seller
agree as follows:
5.01 Assumption of Liabilities: Pursuant to the terms of the
Undertaking of Assumption, Buyer shall assume and agree to pay, discharge and
perform when due all liabilities and obligations (whether known or unknown,
fixed or contingent) of Seller, to the extent that they arise out of the
ownership, use or operation of the Business Assets on and after the Closing Date
as well as all Accounts Payable existing on the Closing Date (the foregoing
liabilities and obligations being referred to herein as the "Assumed
Liabilities"). The Assumed Liabilities include, but are not limited to:
(a) All obligations arising from and after the Closing under
Contracts, Permits and other agreements (including, without limitation, the
Contracts and agreements regarding Computer Software Assets) assigned by Seller
to Buyer in accordance with this Agreement; and
(b) All Accounts Payable (net of any credits or refunds accruing
with respect thereto in the period prior to the Closing Date) existing on the
Closing Date and used to calculate the value of Accounts Payable per Section
5.03(a)(4). It is understood and agreed that the Accounts Payable shall be
absolute obligations of Buyer to pay and shall be timely paid by Buyer in strict
accordance with their terms. Buyer's obligation to pay same shall not be subject
to any setoff, withholding, counterclaim or refusal to pay which Buyer may have
or claim to have against either Seller or the payee on any of the Accounts
Payable.
5.02 Excluded Liabilities: Except as provided in Section 5.01, Buyer
shall not assume any liabilities and obligations (whether known or unknown,
fixed or contingent) of Seller to the extent that they arise out of or relate to
the ownership, use or operation of the Business Assets prior to the Closing Date
("Excluded Liabilities"). The Excluded Liabilities include, but are not limited
to, the following:
(a) Indebtedness for borrowed money incurred prior to the Closing
Date;
(b) Wages, salaries and variable compensation earned by employees
in the Business prior to the Closing Date; and
(c) All employee benefit liabilities and claims incurred, accrued
or earned under any arrangement of Seller and its Affiliates (other than those
relating to Accounts Payable).
5.03 (a) Purchase Price: The purchase price ("Purchase Price") shall be
the sum of:
(1) Six Million and Two Hundred Thousand Dollars
($6,200,000.00) for the Business Assets (other than items described in Section
5.03(a) (2) and (3)), and for all other rights and obligations contemplated
hereunder;
(2) the value of the Inventory as of Closing computed in
accordance with Schedule 5.03(b); and
(3) the value of the Receivables and other Miscellaneous
Assets as of Closing computed in accordance with the provisions of Schedule
5.03(b); and
(4) the value (expressed as a negative number) of Accounts
Payable (net of any credits or refunds accruing with respect thereto in the
period prior to the Closing Date) as of Closing computed in accordance with the
provisions of Schedule 5.03(b).
(b) (1) Five business days prior to Closing Seller shall provide
to Buyer in writing an estimate of the values described in Section 5.03(a)(2)
(3) and (4) (whether totaling a negative or positive number), which values shall
be added to the amount set forth in Section 5.03(a)(1) in order to determine the
amount paid by Buyer to Seller at the Closing. All estimates shall be computed
in accordance with the methodology set forth in Schedule 5.03(b). Buyer shall be
provided access to the written information used by Seller to calculate such
estimates concurrent with Seller's preparation of such estimates, and such
estimates shall be explained to Buyer promptly after they are calculated.
(2) No later than 45 days following Closing, Seller shall
provide to Buyer a report setting forth the actual amount of the values
described in Section 5.03(a)(2), (3) and (4) as of the Closing, using the same
valuation methods as required herein to be used in preparing the estimates for
such values. Seller shall make available to Buyer Seller's books, records and
personnel related to and involved in the calculation of such actual values, and
Buyer shall make available to Seller the Business books, records and Transferred
Employees to the extent reasonably necessary for Seller to complete such
valuations.
(A) If the actual amount of the values described in
Section 5.03(a)(2), (3) and (4) as of the Closing, when combined, is greater
than the estimate thereof, when combined, used to calculate the Purchase Price,
Buyer shall remit to Seller such difference within 25 days of receipt by Buyer
of Seller's report, assuming objections to the report are not submitted by Buyer
in accordance herewith or if such objections are submitted, within 7 days of
resolution of such objection. Buyer shall pay to Seller within 25 days of
receipt by Buyer of Seller's report all amounts relating to the report that are
not disputed.
(B) If the actual amount of the values described in
Section 5.03(a)(2), (3) and (4) as of the Closing, when combined, is less than
the estimates thereof, when combined, used to calculate the Purchase Price,
Seller shall remit to Buyer such difference within 25 days of receipt by Buyer
of Seller's report, assuming objections to the report are not submitted by Buyer
in accordance herewith or if such objections are submitted, within 7 days of
resolution of such objection. Seller shall pay to Buyer within 25 days of
receipt by Buyer of Seller's report all amounts relating to the report that are
not disputed.
(3) By submittal of a written objection thereto no later than
20 days following receipt of Seller's subsection 5.03(b)(2) report, Buyer may
dispute any amounts reflected on Seller's report but (A) only on the basis that
the amounts reflected thereon were not arrived at in accordance with the terms
of Schedule 5.03(b), and (B) only if the amount disputed exceeds in the
aggregate $25,000. Such objection shall identify each disputed item with a
reasonable description of the amount in dispute and the nature of the objection.
If Buyer and Seller are unable to resolve such dispute within 30 days following
Seller's receipt of Buyer's objection, they shall submit the open matter(s) to a
mutually agreed certified public accountant (or if the Parties shall be unable
to agree within five days of a request by either Party to do so, a certified
public accountant jointly selected by the Parties' respective accountants) who
shall, within 30 days of such submittal, issue a determination to both parties
made in accordance with the terms of this Agreement, which determination shall
be final and binding on the Parties. The fees and expenses of such certified
public accountant shall be allocated between Buyer and Seller in the same
proportion that the aggregate amount of disputed items so submitted that is
unsuccessfully disputed by Buyer bears to the total amount of all disputed items
so submitted.
(c) If by operation of Section 5.03(b) above, an item of Inventory
or a Receivable or a Miscellaneous Asset is accorded no value, Seller at its
option and expense may require Buyer to return such Inventory item or assign
such Receivable or Miscellaneous Asset to Seller for no additional
consideration, and shall allow Seller reasonable access to any documentation
supporting collection of the Receivable or Miscellaneous Asset.
5.04 Payment Terms: The Purchase Price shall be payable in immediately
available funds in United States Dollars by wire transfer to an account at a
bank or banks to be designated by Seller in writing to Buyer prior to the
Closing Date.
5.05 Allocation: The Parties have agreed on a schedule, attached hereto
as Schedule 5.05, to allocate the Purchase Price among the various categories of
Business Assets and other rights to be transferred to or otherwise acquired by
Buyer pursuant to this Agreement. The allocation as provided in Schedule 5.05
(with any resulting adjustments to asset values arising out of application of
Section 5.03(b)(3) above) shall be used by the Parties in reporting the
transactions contemplated by this Agreement for all tax purposes. Neither Party
shall take any position on any of its tax returns that is inconsistent with such
allocation.
5.06 Sales, Use, Transfer and Similar Taxes and Charges:
(a) Buyer shall bear and pay the following ("Taxes"): all sales or
use taxes and any transfer, documentation, gross receipts, custom duties, value
added and other taxes and charges, as well as all interest and penalties thereon
upon or with respect to the sale or transfer of the Business Assets by Seller to
Buyer pursuant to this Agreement but shall not include income taxes payable by
Seller. To the extent that any applicable law or regulation imposes upon Seller
the obligation to report or to pay Taxes, Buyer shall promptly reimburse Seller
therefor upon receipt of Seller's invoice for the amount of such payments. If
the sale or transfer of any or all of the Business Assets is exempt from such
taxes or charges, Buyer shall provide Seller with appropriate exemption
documents prior to the Closing Date.
(b) Provided that the Seller and the Buyer are so entitled
pursuant to Section 167 of the Excise Tax Act, the Seller and the Buyer shall,
on or before Closing, jointly execute an election, in prescribed form containing
prescribed information, to have subsection 167(1.1) of the Excise Tax Act apply
to the transfer of the Business Assets hereunder, such that no tax is payable in
respect of such transfer under Part IX of the Excise Tax Act and the Buyer shall
file such election with the Minister of National Revenue within the time
prescribed by the Excise Tax Act.
(c) Provided that the Seller and the Buyer are so entitled
pursuant to the Quebec Sales Tax Act, the Buyer and the Seller shall, on or
before Closing, jointly execute an election, in prescribed form containing
prescribed information, to have Section 75.1 of the Quebec Sales Tax Act apply
to the transfer of the Business Assets hereunder, such that no tax is payable in
respect of such transfer under the Quebec Sales Tax Act and the Buyer shall file
such election with the Minister of Revenue of Quebec within the time prescribed
by the Quebec Sales Tax Act.
5.07 Property Taxes: All applicable real and personal property taxes
levied or assessed for the tax year in which the Closing occurs against the
Business Assets shall be prorated and shall be the responsibility of Seller up
to and including midnight preceding the Closing Date; the balance of any such
taxes shall be borne by Buyer; or, if Seller shall have paid any of the same,
Buyer shall promptly reimburse Seller therefor.
5.08 Miscellaneous Charges:
(a) Concurrently with or promptly after the Closing, the Parties
shall apportion all fees and charges for utilities and other periodic payments
relating to the Business as follows:
(i) those relating to the period prior to and including
midnight preceding the Closing shall be for the
account of Seller but shall be deemed included
within Accounts Payable to the extent not actually
paid by Seller.
(ii) those relating to the period after midnight
preceding the Closing shall be the responsibility of
Buyer and shall be reimbursed by Buyer to Seller to
the extent actually paid by Seller.
(b) Premiums and other charges for the issuance of an Owner's
Title Insurance Policy on the Plant, if any is desired by Buyer, shall be paid
by Buyer.
(c) The cost of making a new survey of the Plant, and preparing a
plat thereof, if any is desired by Buyer, shall be paid by Buyer.
ARTICLE 6
SELLER'S WARRANTIES
Except as otherwise provided in this Agreement or disclosed in the
Schedules or Disclosure Schedules, Seller represents and warrants as of the date
hereof and as the date of Closing as follows:
6.01 Organization; Good Standing: Seller is a corporation duly
organized, validly existing and in good standing under the laws of the Province
of Ontario and has corporate power to own the Business Assets and to carry on
the Business as now being conducted. Kao is a corporation duly organized,
validly existing and in good standing under the laws of Japan and has corporate
power to execute, deliver and perform the Guaranty.
6.02 No Conflict with Other Instruments or Agreements: Neither the
execution, delivery or performance of this Agreement by Seller, nor the
consummation of the transactions contemplated by this Agreement by Seller will:
(a) violate any provision of the Articles of Incorporation, Bylaws
or similar constitutional documents of Seller, or any law, rule, regulation,
order, judgment or decree by which Seller or any of the Business Assets may be
bound; or
(b) conflict with, result in a breach of the terms and conditions
of, or result in the imposition of any lien or other encumbrance on or with
respect to any of the Business Assets as a result of the provision of, or
constitute a default under, any agreement (except with respect to any Contract
under which a default is caused by the assignment thereof by Seller) to which
Seller is a party or by which it or any of the Business Assets may be bound.
6.03 Authorization: Seller has the corporate power, including all
necessary authorization, to execute, deliver and fulfill the provisions of this
Agreement.
6.04 Binding Effect: This Agreement constitutes a legal, valid and
binding agreement of Seller, enforceable against Seller in accordance with its
terms, except as enforcement may be limited by bankruptcy, insolvency,
reorganization, or similar laws affecting the enforcement of creditors' rights
generally and rules and laws concerning equitable remedies.
6.05 Litigation and Investigations: Except as may be disclosed to Buyer
in Disclosure Schedule 6.05 or as may be set forth below in Section 6.06, there
is no material litigation, action, or proceeding pending against Seller, nor to
Seller's knowledge is any material litigation, proceeding or investigation
threatened against Seller, as a result of its ownership of the Business Assets
or operation of the Business or against the Business Assets for any reason
whatsoever; and the use or operation of the Business Assets is not subject to
any injunction, order, judgment, writ or decree to any material extent.
6.06 Environmental Matters: Except as may be disclosed to Buyer in
Disclosure Schedule 6.06, there are no pending Environmental Claims of a
material nature, nor has Seller received any written notice of any Environmental
Claims of a material nature, nor to Seller's knowledge are there any facts or
circumstances relating to the Business Assets or the Business that give rise to
any Environmental Claims of a material nature, or any noncompliance with or
liability or responsibility under any administrative or judicial judgments or
orders or Environmental Laws.
6.07 Title to Plant: Seller has good and marketable title in fee simple
to the Plant, which will as of Closing be free and clear of any mortgage,
judgment, security interest, lease, lien or other encumbrance, and insurable at
regular rates by a nationally recognized title insurance company selected by
Buyer doing business in Canada, subject, however, to the following ("Permitted
Exceptions"):
(a) all matters which an inspection of the Plant would show;
(b) real estate taxes and installments of governmental assessments
for public improvements benefiting the Plant, which are not delinquent;
(c) any encroachments or other defects which a survey of the Plant
would reveal;
(d) any registered restrictions or covenants that run with the
Land provided that such are complied with; any registered municipal agreements
and registered agreements with publicly regulated utilities provided such have
been complied with, or security has been posted to ensure compliance and
completion; any easements for the supply of domestic utility or telephone
services to the Plant or adjacent properties; and any easements for drainage,
storm or sanitary sewers, public utility lines, telephone lines, cable
television lines or other services which do not materially affect the present
use of the Plant; and
(e) all exceptions and reservations to Seller's title in the Land
as set forth in Disclosure Schedule 6.07.
6.08 Title to Tangible Property:
(a) Seller has legal and beneficial ownership of the Machinery and
Equipment, Office Equipment, Inventory and Business Records (the "Tangible
Property").
(b) The Tangible Property will, as of Closing, be free and clear
of all liens, mortgages, judgments, security interests, easements, restrictions,
charges, or other encumbrances.
(c) No third party has any option or right of first refusal to
purchase all or any part of the Tangible Property.
6.09 Contracts and Other Agreements:
(a) Disclosure Schedule 6.09 sets forth a list that includes (but
is not necessarily limited to) all Material Contracts. Subject to
confidentiality restrictions, true and correct copies of the Material Contracts
have been provided to Buyer. No other party to any Material Contract has
notified Seller in writing that it considers Seller to be in breach thereof,
and, to Seller's knowledge, no other party to any Material Contract is
threatening to allege such breach. To Seller's knowledge, Seller is not in
material default of any provision of a Material Contract.
(b) Seller makes no warranty with regard to the assignability of
rights or delegation of duties under Contracts or other contracts or agreements
relating to the Business. Subject to confidentiality restrictions, Buyer shall
form its own opinion with regard to the enforceability of the commitments by any
party thereto therein contained, compliance by the other parties thereto with
their undertakings thereunder, assignability and delegation thereof, and ongoing
obligations of Buyer to such other parties after Buyer's assumption of such
obligations as set forth herein.
(c) Seller makes no warranty with regard to the assignability of
rights or delegation of duties under any agreements or arrangements which relate
to the Business but are not exclusive to the Business . For any services that
will not be provided to Buyer under a separate agreement with Seller, Seller
shall provide reasonable assistance to Buyer in Buyer's effort to obtain such
services from entities now providing the same to the Business. Buyer shall be
responsible for all costs associated with obtaining such services.
6.10 Intellectual Property:
(a) Except as may be disclosed to Buyer in Disclosure Schedule
6.10 and as set forth in Section 6.09(c), Seller has legal and beneficial
ownership of, and has the right to convey all of the Intellectual Property
Rights and Seller has not received written notice of any pending, nor to
Seller's knowledge is there currently threatened any, material claim, suit or
proceeding contesting any of the Intellectual Property Rights.
(b) Except as set forth in Disclosure Schedule 6.10, Seller has
not received written notice of any pending, nor to Seller's knowledge is there
currently threatened any material claim, suit or proceeding alleging that the
operation or use of the Business Assets infringes a patent of another party. To
Seller's knowledge, its operation and use of the Business Assets does not
infringe the Intellectual Property of others to any material extent.
6.11 Compliance with Law; Governmental Consents:
(a) Except as set forth in Disclosure Schedule 6.11 or otherwise
set forth herein, to Seller's knowledge, the operations of the Business are in
substantial compliance with all material applicable laws and regulations having
the force of law, and the Seller has not been notified in writing of any
noncompliance therewith. This is not intended to relieve Buyer of its
responsibility for ensuring such compliance from the Closing Date forward.
(b) Except as set forth in Schedule 6.11(b), no consent,
authorization, or approval of, or exemption by, or filing with, any court or
governmental, public, or self-regulatory body of authority, that is material to
the operation of the Business, is required in connection with the execution,
delivery and performance by Seller of this Agreement or of any of the
instruments or agreements herein referred to, or the taking of any action herein
contemplated to be taken by Seller.
6.12 Brokers or Finders: Except for its obligations to KPMG, for which
Seller and its Affiliates are solely responsible, Seller has not incurred an
obligation or liability, contingent or otherwise, for broker's or finder's fees
with respect to the matters provided for in this Agreement.
6.13 Taxes: No taxes related to the Business Assets are in dispute to
any material extent. Seller has, or as of Closing shall have, filed all federal,
provincial, state and local tax returns and reports then required to be filed
and paid all taxes, interest, penalties and other charges then due on such tax
returns and reports or claimed by any taxing authority or otherwise to be due in
respect thereof to any material extent.
6.14 Labor Matters:
(a) Except as set forth in Disclosure Schedule 6.14, the Business
has no employment contracts or collective bargaining agreements relating to the
Transferred Employees other than such contracts which are not Assumed
Liabilities and for which Seller retains all liability.
(b) As of the date of this Agreement, there is no labor dispute,
strike or work stoppage against Seller pending or, to Seller's knowledge,
threatened that may interfere with the Business.
(c) To Seller's knowledge, Seller has complied in all material
respects relating to the Business with all applicable legal requirements
relating to the employment of personnel, plant closing, layoffs, and collective
bargaining. Buyer will have all responsibility for such compliance in the period
on and after Closing.
6.15 Employee Benefit Matters.
Disclosure Schedule 6.15 lists each employee benefit plan,
program, arrangement and contract (including, without limitation, any "Benefit
Plan", as specified in Part X of the Employment Standards Act (Ontario) R.S.O.
1990, as amended that (i) is maintained, contributed to or required to be
contributed to by Seller, for the benefit of any current employee, officer or
director who is engaged in connection with the Business (the "Business
Personnel") or under which any Business Personnel has accrued and remains
entitled to any benefits, and (ii) with respect to which Buyer or a plan of
Buyer will under Article 11 hereof provide either substantially comparable
benefits or receive any direct or indirect transfer or rollover of benefits (the
"Seller Benefit Plans"). Seller has made available to Buyer or its agents a copy
of the most recent summary plan description related to each Seller Benefit Plan.
6.16 Receivables: The Receivables represent transactions entered into
by the Business for good and valuable consideration resulting from the bona fide
sale of products or performance of services in the ordinary course of the
conduct of the Business.
6.17 Subsidiaries: No equity or other ownership interests in any
corporation, partnership, limited partnership, joint venture, trust, limited
liability company, association or other legal entity are included in the
Business Assets.
6.18 Product Liability: Except as may be disclosed to Buyer in
Disclosure Schedule 6.18, since January 1, 1998, to Seller's knowledge, there
have been no material claims or complaints, and there are no material claims or
complaints existing or threatened against Seller for product liability in
respect of any product manufactured, sold or distributed at any time by Seller
in connection with the Business, including any claim on account of any express
or implied warranty, except for normal returns and allowances in the ordinary
course of business consistent with past practice.
6.19 Financial Statements: Seller has furnished to Buyer and/or Zomax
and Arthur Andersen LLP ("AA"), Buyer's and/or Zomax's accountants and tax
advisors, copies of certain statements of operations, statements of cash flow,
balance sheets and general ledgers with respect to the Business (the "Financial
Statements") as well as certain projections (the "Projections"). Seller makes no
representations or warranties regarding the Financial Statements or the
Projections. Seller has been advised that AA has reviewed and taken certain
exceptions to the Financial Statements based on its due diligence activities.
Seller represents that if the financial books and records provided to Buyer
and/or Zomax and AA (other than the Financial Statements) were used and accepted
as accurate by competent Certified Public Accountants to prepare financial
statements in accordance with GAAP, such financial statements would present
fairly the financial condition of Seller and the financial results of Seller
with respect to the Business for the dates and periods, respectively, to which
they relate.
6.20 Required Assets: Except as described in Schedule 6.20 or elsewhere
herein, the Business Assets, together with any Material Contracts not included
as a part thereof, include all intellectual property rights needed to conduct
the Business as presently conducted, without infringing on the rights of any
other party, except for the Excluded Assets described in Sections 4.05 and 4.08.
6.21 Year 2000 Compliance: Seller makes no representation or warranty
that any of the Business Assets are compliant with Year 2000 and makes no other
representation or warranty with respect to occurrence of the Year 2000 or any
other date after December 31, 1998. To Seller's knowledge, based solely on
information received from the vendors and/or licensors of software used by
Seller, and without any independent investigation thereof, the software listed
on Schedule 6.21 is or is not Year 2000 compliant as so indicated therein. To
Seller's knowledge, Seller has provided to Buyer all information known to
Seller, including the studies and reports identified on Schedule 6.21, with
respect to Year 2000 compliance, or lack of compliance, of the Business Assets.
6.22 Permits and Licenses: Seller has maintained in full force and
effect all permits, certificates of occupancy and licenses required to operate
the Business prior to Closing.
6.23 Seller's Books and Records: To Seller's knowledge, Seller's
non-financial books and records which, to Seller's knowledge, were provided in
the due diligence process (including customer order files, employment records
and production and manufacturing records) are in all material respects accurate
and, to the extent maintained by Seller in the ordinary course of business,
complete unless otherwise disclosed therein or otherwise.
6.24 Inventory: The Inventory represents the normal supplies and stock
in trade of Seller on hand as of the close of business on the Closing Date. The
Inventory is and as of Closing will be good, merchantable and saleable in the
ordinary course of business.
Notwithstanding anything herein or elsewhere to the contrary, it is
agreed as follows:
6.25 NO OTHER REPRESENTATIONS OR WARRANTIES: EXCEPT AS OTHERWISE
EXPRESSLY SET FORTH IN THIS AGREEMENT, NEITHER SELLER NOR ANY AFFILIATE, AGENT
OR REPRESENTATIVE OF SELLER HAS MADE, AND SELLER IS NOT LIABLE FOR OR BOUND IN
ANY MANNER BY, ANY EXPRESS OR IMPLIED WARRANTIES, GUARANTEES, PROMISES,
STATEMENTS, INDUCEMENTS, REPRESENTATIONS, OR INFORMATION PERTAINING TO THE
BUSINESS OR THE BUSINESS ASSETS OR ANY PART THEREOF (INCLUDING WITHOUT
LIMITATION THEIR DESIGN, CAPACITY, CONDITION, NON-INFRINGEMENT, MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE). WITHOUT LIMITING THE FOREGOING, EXCEPT AS
EXPRESSLY SET FORTH IN THIS AGREEMENT, SELLER IS NOT LIABLE FOR OR BOUND BY (AND
BUYER HAS NOT RELIED UPON) ANY VERBAL OR WRITTEN STATEMENTS, REPRESENTATIONS, OR
ANY OTHER INFORMATION RESPECTING ANY PORTION OF THE BUSINESS OR THE BUSINESS
ASSETS FURNISHED BY SELLER OR ANY BROKER, EMPLOYEE, AGENT, CONSULTANT OR OTHER
PERSON REPRESENTING OR PURPORTEDLY REPRESENTING SELLER.
6.26 NO WARRANTY OF PROBABLE SUCCESS OR CONDITION OF ASSETS: SELLER
MAKES NO WARRANTY REGARDING THE PROBABLE SUCCESS OR PROFITABILITY OF THE
OWNERSHIP, USE OR OPERATION OF THE BUSINESS OR THE BUSINESS ASSETS AFTER THE
CLOSING. ANY FORECASTS OR PROJECTIONS OR STATEMENTS REGARDING FUTURE PERFORMANCE
OR RESULTS, FINANCIAL OR OTHERWISE, PROVIDED TO BUYER ARE NOT INTENDED TO BE
RELIED UPON BY BUYER, AND BUYER ACKNOWLEDGES AND AGREES THAT IT IS NOT RELYING
ON SAME. EXCEPT AS SPECIFICALLY SET FORTH IN THIS AGREEMENT, SELLER MAKES NO
WARRANTY AS TO THE PHYSICAL CONDITION OR SUITABILITY FOR ANY PARTICULAR PURPOSE
OF ANY OF THE BUSINESS ASSETS, INDIVIDUALLY OR COLLECTIVELY, WHICH ASSETS ARE
ALL BEING PURCHASED ON AN "AS IS", "WHERE IS" AND "WITH ALL FAULTS" BASIS.
ARTICLE 7
BUYER'S WARRANTIES
Buyer represents and warrants that as of the date hereof and as of the
date of Closing:
7.01 Organization; Good Standing: Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the Province
of Nova Scotia and has full corporate power to execute, deliver and perform this
Agreement.
7.02 No Conflict with Other Instruments or Agreements: Neither the
execution, delivery or performance of this Agreement by Buyer, nor the
consummation of transactions contemplated by this Agreement by Buyer will:
(a) violate any provision of the Articles of Incorporation, Bylaws
or similar constitutional documents of Buyer, or any law, rule, regulation,
order, judgment or decree by which the Buyer may be bound; or
(b) conflict with, result in a breach of the terms and conditions
of, or constitute a default under, any agreement to which Buyer is a party or by
which it may be bound.
7.03 Authorization; Binding Effect:
(a) Buyer has the corporate power, including all necessary
authorization, to execute, deliver and fulfill the provisions of this Agreement,
and this Agreement constitutes a legal, valid and binding agreement of Buyer
enforceable against Buyer in accordance with its terms, except as enforcement
may be limited by bankruptcy, insolvency, reorganization, or similar laws
affecting the enforcement of creditors' rights generally and rules and laws
concerning equitable remedies.
(b) Except as set forth in Schedule 7.03, no consent,
authorization, or approval of, or exemption by, or filing with, any court or
governmental, public, or self-regulatory body or authority, that is material to
the operation of the Business, is required in connection with the execution,
delivery and performance by Buyer of this Agreement or of any of the instruments
or agreements herein referred to, or the taking of any action herein
contemplated to be taken by Buyer.
7.04 Brokers or Finders: Buyer has incurred no obligation or liability,
contingent or otherwise, for brokers' or finders' fees with respect to the
matters provided for in this Agreement.
7.05 Permits and Licenses: Buyer will apply for and retain in full
force and effect all permits, certificates of occupancy and licenses required to
operate the Business on and after Closing.
7.06 No Instigation of Investigations: Except for actions required
under Section 7.05 or taken in the ordinary course of business, Buyer will not
instigate any activity that would require or encourage any governmental or
public body or authority to investigate matters covered by Seller's warranties
or indemnities.
ARTICLE 8
BUYER'S INDEMNITY
Subject to the limitations and procedures set forth in Article 17
hereof, Buyer shall indemnify and hold Seller harmless from and against and in
respect of all losses, expenses (including without limitation reasonable
attorneys' fees), fines, debts, liabilities and obligations of any nature
whatsoever ("Losses") incurred by Seller to the extent that they relate to or
arise out of:
8.01 Assumed Liabilities: The Assumed Liabilities.
8.02 Buyer's Ownership, Use or Operation of the Business Assets:
Buyer's ownership, use or operation or occupancy of the Business Assets on or
after the Closing Date.
8.03 Environmental Liabilities:
(a) Any remediation, removal, response, abatement, cleanup,
investigative or monitoring costs, penalties, fines or damages for personal
injury or property damage, pursuant to a final judicial or administrative decree
or order or settlement agreement related to: (i) the generation, transportation,
storage, release or disposal of any Materials of Environmental Concern related
to the Business Assets or the Business on and after the Closing Date, either
during or after Buyer's ownership, use or operation of the Business Assets; and
(ii) violations of federal, provincial, state or local Environmental Laws,
including requirements of environmental permits, by the Business on and after
the Closing Date (the "Buyer's Environmental Liabilities").
(b) [Intentionally omitted.]
8.04 Breach of Warranty: Any breach of any of the representations and
warranties of Buyer contained in this Agreement, or nonfulfillment of any
agreement or covenant on the part of Buyer under this Agreement.
8.05 Liability As to Employees: Any liability arising out of Buyer's
termination of any Transferred Employee or the failure of Buyer to provide
compensation and benefits to any Transferred Employees equivalent to the
compensation and benefits paid or provided to him or her prior to Closing.
8.06 No Consequential Damages: Notwithstanding anything to the
contrary, Buyer shall not be responsible for damages in the nature of punitive,
indirect or consequential damages arising out of any breach by Buyer of Buyer's
obligations under this Agreement.
ARTICLE 9
SELLER'S INDEMNITY
Subject to the limitations and procedures of Article 17 hereof, Seller
shall, indemnify and hold Buyer harmless from and against and in respect of all
Losses incurred by Buyer to the extent they relate to or arise out of:
9.01 Seller's Ownership, Use or Operation of the Business Assets:
Seller's ownership, use or operation or occupancy of the Business Assets prior
to the Closing Date (except to the extent that such Losses relate to any Account
Payable or the performance on and after the Closing Date of any Contract) and
the Excluded Liabilities.
9.02 Environmental Liabilities: Any remediation, removal, response,
abatement, cleanup, investigative or monitoring costs, penalties, fines or
damages for personal injury or property damage, pursuant to a final judicial or
administrative decree or order or settlement agreement related to: (i) the
generation, transportation, storage, release or disposal of any Materials of
Environmental Concern related to the Business Assets or the Business prior to
Closing, either before or during Seller's ownership, use or operation of the
Business Assets; and (ii) violations of federal, provincial, state or local
Environmental Laws, including requirements of environmental permits, by the
Business prior to Closing (the "Seller's Environmental Liabilities").
9.03 Breach of Warranty: Any breach of any of the representations and
warranties of Seller contained in this Agreement, or nonfulfillment of any
agreement or covenant on the part of Seller under this Agreement.
9.04 No Consequential Damages: Notwithstanding anything to the
contrary, Seller shall not be responsible for damages in the nature of punitive,
indirect or consequential damages arising out of any breach by Seller of
Seller's obligations under this Agreement.
ARTICLE 10
INTERIM PERIOD
Seller and Buyer covenant and agree that between the date of this
Agreement and the Closing Date:
10.01 Operation of the Business Assets: Seller shall not, without
having received the prior written consent or the written request of Buyer, do
any of the following with respect to the Business:
(a) demolish, remove, alter, enlarge or dispose of any of the
Business Assets other than in the ordinary course of business, other than
removal of any of the Excluded Assets described in Article 4;
(b) make any material change in the Plant, the Leased Premises or
Seller's operation of the Business Assets other than in the ordinary course of
business;
(c) sell or otherwise dispose of any of the Business Assets, other
than assets that would be included in the Inventory, Receivables and
Miscellaneous Assets, except in the ordinary course of business;
(d) make or become a party to any contract, commitment, or other
arrangement (other than contracts described as "under negotiation" on Disclosure
Schedule 6.09) or renew, extend, amend or modify any contract, commitment or
other arrangement which in any one case involves an amount in excess of $25,000
except in a manner and on terms consistent with past practices;
(e) pay or agree to pay, conditionally or otherwise, any bonus,
additional compensation, pension, or severance pay to any of its present
employees whose annual base compensation and expected commissions exceed
$50,000, other than such payments as Seller is or may become obligated to pay
pursuant to agreements or benefit plans in effect on the date hereof;
(f) increase the rate of compensation (including salaries, fees,
commission rates, bonuses, profit sharing, incentive, pension, retirement, or
other similar payments and benefits) being paid at the date hereof to any of
Seller's employees whose annual base compensation and expected commissions
exceed $50,000;
(g) hire any employee whose annual base compensation and expected
commissions exceed $50,000;
(h) make any material change in the Business Assets other than the
Excluded Assets or those that would be included in the Inventory, Receivables
and Miscellaneous Assets;
(i) sell or dispose of any leases pertaining to the Business
Assets, or enter into any renewals or extensions of existing leases or enter
into any new leases which in any one case involve an amount in excess of
$25,000;
(j) permit any amendment or termination of any Material Contract
(other than an expiration of the contract) if Seller has the contractual right
to prevent same;
(k) alter or revise its accounting principles, procedures, methods
or practices;
(l) remove or permit to be removed from the Leased Premises any
Business Asset other than the Excluded Assets or assets that would be included
in the Inventory, Receivables and Miscellaneous Assets except in the ordinary
course of business; or
(m) change its credit policy as to sales of inventory or
collection of accounts receivable.
10.02 Exceptions: Notwithstanding Section 10.01 or any other provision
of this Agreement, Seller may do any of the following between the date of this
Agreement and the Closing Date:
(a) take action or inaction that affects only the Excluded Assets
or results in the removal or destruction of Excluded Assets and does not
materially and adversely affect the Business Assets.
(b) take action or inaction that results in the reduction,
elimination or removal of Excluded Liabilities and any lien or encumbrance not
contemplated hereunder to exist on the Closing Date.
10.03 Work Diligently Towards Closing: Buyer and Seller shall each use
its reasonable best efforts to work diligently, including obtaining all
necessary governmental approvals and filings, towards completing the transaction
contemplated by this Agreement on the contemplated Closing Date.
ARTICLE 11
EMPLOYEE BENEFIT MATTERS
11.01 Offer of Employment: Except as otherwise set forth in Schedule
11.01, Buyer will offer employment to all of the employees of Seller as of the
Closing Date who are actively employed at the Plant or Leased Premises, involved
in the conduct or operation of the Business, and to those other employees of
Seller as to whom Seller and Buyer have agreed in writing as of the Effective
Date shall receive such offer (all collectively, the "Offeree Employees").
Seller shall use reasonable efforts to encourage such employees to accept
Buyer's offers of employment. Those employees who accept such offers of
employment effective as of the Closing Date are referred to herein as
"Transferred Employees". Those employees involved in the conduct or operation of
the Business as of November 16, 1998 are listed in Schedule 11.01 hereto. For
purposes hereof, "actively employed" refers to employees of Seller employed by
the Business on the Closing Date (including those on leave) other than those who
have been absent from work for more than six months as of the date hereof
(excluding those who are absent pursuant to applicable laws providing for
mandated leave).
11.02 Compensation and Benefits. Buyer shall offer each of the Offeree
Employees salary, wages, variable compensation and employee benefit plans that
in the aggregate are substantially comparable to salary, wages, variable
compensation and benefit plans paid or provided to Transferred Employees
immediately preceding the Closing Date.
11.03 Pre-Closing Compensation: Seller will pay to all Transferred
Employees wages, salaries and variable compensation and any other type of
compensation earned prior to the Closing Date.
11.04 Employment Liabilities: Except as specifically described herein,
Seller shall assume and be responsible for all liabilities in connection with
any claim incurred prior to the Closing Date by Transferred Employees under
Seller's Benefit Plans (as described in Section 6.15 hereof). Buyer shall assume
and be responsible for all liabilities in connection with claims incurred on and
after the Closing Date by Transferred Employees under any of Buyer's employee
benefit plans (of the kind described in Section 6.15 hereof). For purpose of
this Section, a claim shall be considered incurred on the date treatment is
rendered or a service performed. Worker's Compensation claims of any Transferred
Employees shall be the responsibility and liability of Seller if the claim is
made prior to the Closing Date and shall be the responsibility and liability of
Buyer if the claim is made on or after the Closing Date.
11.05 Employee Benefit Plans. Buyer's offer of employment under Section
11.01 above to Seller's employees shall include the employee benefit plans,
policies and/or programs described in this section.
(a) Tax-qualified Defined Benefit Pension Plans. As of the Closing
Date, the Transferred Employees shall be eligible to participate in any
tax-qualified defined benefit pension plan in which comparable employees of
Buyer participate, and Buyer shall recognize, solely for purposes of eligibility
and vesting (and not for benefit accrual) under said pension plan, the
Transferred Employees' length of employment with Seller prior to the Closing
Date. To the extent plan amendments are necessary to permit such eligibility and
recognition of service for such Transferred Employees, Buyer shall cause such
amendments to be adopted and in effect as of the Closing Date.
(b) Tax-qualified Defined Contribution Plans. As of the Closing
Date, the Transferred Employees shall be eligible to participate in any
tax-qualified defined contribution plan in which comparable employees of Buyer
participate, and Buyer shall recognize, for purposes of eligibility and vesting
under said pension plan, the Transferred Employees' employment with Seller prior
to the Closing Date. To the extent plan amendments are necessary to permit such
eligibility and recognition of service for such Transferred Employees, Buyer
shall cause such amendments to be adopted and in effect as of the Closing Date.
If Buyer does not maintain such a plan, Buyer shall establish, effective as of
the Closing Date, a defined contribution plan, qualified under the PBA and ITA
that is substantially comparable in all material respects to the Seller's
defined contribution plan, (hereafter "Profit Sharing Plan"), and which
recognizes, for purposes of eligibility and vesting, the Transferred Employees'
employment with Seller prior to the Closing Date. To the extent permitted by the
PBA and ITA, Buyer shall cause the Trustee or Trustees of such defined
contribution plan maintained or established by Buyer to accept a transfer of
assets (including any promissory notes or other evidence of indebtedness
representing the plan loans of Transferred Employees) from Seller's Profit
Sharing Plan. Prior to such transfer, Buyer shall provide such documentation as
Seller may require evidencing the qualification of such plan under the PBA and
ITA.
(c) Non-qualified Deferred Compensation. As of the Closing Date,
the Transferred Employees shall be eligible to participate in any non-qualified
deferred compensation plans in which comparable employees of the Buyer
participate, and Buyer shall recognize, for purposes of eligibility and vesting
under said deferred compensation plans, the Transferred Employees' employment
with Seller prior to the Closing Date.
(d) Medical, Dental, Life Insurance and Disability Plans: As of
the Closing Date, Buyer shall enroll the Transferred Employees and their
dependents in the medical, dental, life insurance (including accidental death
and dismemberment insurance) and short- and long-term disability plans in which
comparable employees of the Buyer participate. To the extent that Buyer does not
provide one or more of such coverages, Buyer shall establish such plan(s) as may
be necessary to provide substantially comparable benefits to those provided by
the Seller immediately preceding the Closing Date. The Buyer's medical plan
shall waive any waiting period and limitations for pre-existing medical or
dental conditions of Seller's employees and dependents. The Buyer's medical and
dental plans will apply any amounts paid under the Seller's medical and dental
plans by a Transferred Employee for deductibles and copayments during 1998
toward deductibles and out-of-pocket limits of the Buyer's medical and dental
plans for the 1998 plan year.
(e) Vacation: Buyer shall provide the same vacation entitlements
to the Transferred Employees as are provided to comparable employees of the
Buyer, and Buyer shall recognize, for purposes of vacation accrual under Buyer's
vacation program, the Transferred Employees' employment with Seller prior to the
Closing Date. Notwithstanding the foregoing, Buyer may require that the number
of paid vacation days (or parts thereof) used by any such employee under
Seller's vacation program during the calendar year in which the Closing Date
falls shall reduce the number of paid vacation days to which a Transferred
Employee would otherwise be entitled from Buyer for the remainder of such
calendar year; provided, however, that Buyer shall provide to each Transferred
Employee time or pay equivalent to the amount of unpaid vacation time to which
he or she is entitled as of the Closing Date from Seller.
(f) Severance: Buyer shall provide the same severance plan to the
Transferred Employees as is provided to comparable employees of Buyer and for
purpose of eligibility and vesting under such plan, Buyer shall recognize the
Transferred Employees' length of employment with Seller prior to the Closing
Date. Notwithstanding whether Buyer has such a plan and notwithstanding the
terms of such plan, Buyer shall pay to any Transferred Employee who is
involuntarily terminated by Buyer without cause a severance benefit of not less
than two weeks compensation for each year of service with Buyer on and after the
Closing Date and with Seller prior to the Closing Date.
(g) Other Employee Benefits: As of the Closing Date, the
Transferred Employees shall be eligible to participate in such other benefit
plans, programs, arrangements or policies, whether written or unwritten, as are
provided to comparable employees of the Buyer and, for purposes of eligibility
and vesting under such plans, programs, arrangements or policies, Buyer shall
recognize the Transferred Employees' length of employment with Seller prior to
the Closing Date.
11.06 Wage Reporting: Buyer and Seller shall follow all Revenue Canada
required procedures with regard to reporting of wages for Transferred Employees.
11.07 Post Closing Termination Liability: Buyer shall be responsible
for any liability for claims related to the termination, compensation, or
benefits of any Transferred Employee with respect to the period beginning on and
after the Closing including any claim by a Transferred Employee of termination,
constructive or otherwise, by virtue of Buyer's acts or omissions or Buyer's
failing to provide compensation and benefits comparable to that paid or provided
by Seller prior to Closing.
ARTICLE 12
GOVERNMENTAL CONSENTS
12.01 Governmental Consents: The sale contemplated by this Agreement is
conditional upon receipt prior to Closing of the approvals, consents,
authorizations and waivers from governmental and other regulatory agencies which
are required to consummate the sale contemplated by this Agreement (including
the expiration of any applicable premerger notification waiting period), to
enable Buyer to own, use and operate the Business Assets and the Business.
12.02 Efforts: Each Party shall use its reasonable best efforts to
obtain all authorizations, consents, orders and approvals of, and to give all
notices to and make all filings with, all governmental authorities and other
third parties that may be or become necessary for its execution and delivery of,
and the performance of its obligations pursuant to this Agreement, and also to
enable Buyer to own, use and operate the Business Assets and the Business, and
each Party will cooperate fully with the other Party in promptly seeking to
obtain all such authorizations, consents, orders and approvals, giving such
notices, and making such filings. The Parties acknowledge that time shall be of
the essence in this Agreement and agree not to take any action that will have
the effect of unreasonably delaying, impairing or impeding the receipt of any
required authorizations, consents, orders or approvals.
ARTICLE 13
CLOSING
13.01 Place and Date of Closing: The closing of the transaction
contemplated by this Agreement (the "Closing") shall take place at the offices
of Gowling Strathy & Henderson, in Ottawa, Ontario, Canada, at 10:00 am local
time on the business day that is the later of: (a) 15 days after the date of
this Agreement; or (b) the eighth business day following satisfaction (or
waiver) by the Parties of the conditions to the Closing set forth in Section
13.04 or Section 13.05 of this Agreement, (as provided for therein).
13.02 Buyer Deliverables at Closing: At the Closing, Buyer shall:
(a) Pay to Seller or Seller's Affiliate, as Seller shall
designate, by wire transfer in immediately available funds in Seller's favor,
the part of the Purchase Price set forth in Section 5.03(a)(1), subject to the
prorations required hereunder.
(b) Pay to Seller by wire transfer in immediately available funds
in Seller's favor, in an amount equal to the estimate of the values described in
Section 5.03(a)(2), (3) and (4) and determined pursuant to Section 5.03(b)(1).
(c) Deliver to Seller a certificate of a duly authorized officer
of Buyer confirming the accuracy on the Closing Date of the representations and
warranties of Buyer contained herein, and that Buyer has performed or complied
with all of the terms, covenants and conditions of this Agreement to be
performed or complied with by Buyer at or prior to Closing.
(d) Deliver to Seller a legal opinion of Buyer's legal counsel
that as of the Closing Date:
(i) Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the
Province of Nova Scotia and has full corporate power
to execute, deliver and fulfill the provisions of
this Agreement.
(ii) Neither the execution, delivery nor performance of
this Agreement or the other agreements described
herein to which Buyer is a Party (together with this
Agreement hereinafter collectively referred to as
the "Acquisition Documents") nor the consummation of
transactions contemplated by this Agreement violate
any provision of Buyer's Articles of Incorporation
or Bylaws.
(iii) All necessary corporate proceedings to authorize the
transactions contemplated by the Acquisition
Documents, the performance by Buyer of its
obligations under the Acquisition Documents have
been taken, and Buyer has executed and delivered all
instruments and other documents contemplated hereby.
(e) Deliver to Seller a legal opinion of Zomax's legal counsel
that as of the Closing Date:
(i) Zomax is a corporation duly organized, validly
existing and in good standing under the laws of the
State of Minnesota, and has corporate power to carry
on its business as now being conducted;
(ii) neither the execution, delivery or performance by
Zomax of the Zomax Guaranty nor the consummation of
transactions contemplated by this Agreement violate
any provision of Zomax's Articles of Incorporation
or Bylaws; and
(iii) all necessary corporate proceedings to authorize the
transactions contemplated by this Agreement, and the
performance by Zomax of its obligation under, and
the execution and delivery of, the Zomax Guaranty
have been taken.
(f) Execute and deliver the Undertaking of Assumption and other
agreements described in Schedule 13.02(f) and cause to be executed and delivered
the Zomax Guaranty.
13.03 Seller Deliverables At Closing: At the Closing, Seller shall:
(a) Deliver to Buyer (a) a certificate of a duly authorized
officer of Seller confirming the accuracy on the Closing Date of the
representations and warranties of Seller contained herein, and that Seller has
performed or complied with all of the terms, covenants and conditions of this
Agreement to be performed or complied with by Seller at or prior to the Closing
and (b) an affidavit of a duly authorized officer of the Seller confirming that
on the Closing Date the Seller is not a non-resident of Canada within the
meaning of the Income Tax Act (Canada).
(b) Deliver to Buyer a legal opinion of Seller's legal counsel
that as of the Closing Date:
(i) Seller is a corporation duly organized, validly
existing and in good standing under the laws of the
Province of Ontario, and has corporate power to
carry on the business as now being conducted.
(ii) Neither the execution, delivery or performance of
this Agreement nor the consummation of transactions
contemplated by this Agreement violate any provision
of Seller's Articles of Incorporation or Bylaws.
(iii) All necessary corporate proceedings to authorize the
transactions contemplated by this Agreement, the
performance by Seller of its obligations hereunder,
and the execution and delivery by Seller of all
instruments and other documents contemplated hereby
have been taken.
(c) Execute and deliver a Transfer/Deed of Land pursuant to the
Land Registration Reform Act (Ontario) reasonably acceptable to Buyer and
otherwise in content, form and substance complying with local law and custom
acceptable to the Title Company conveying the Land and the Fixtures and
Improvements to Buyer, subject only to the Permitted Exceptions.
(d) Deliver to Buyer a legal opinion of the Director of Kao's
Legal Department that as of the Closing Date:
(i) Kao is a corporation duly organized, validly
existing and in good standing under the laws of
Japan, and has corporate power to carry on its
business as now being conducted.
(ii) Neither the execution, delivery or performance by
Kao of the Kao Guaranty nor the consummation of
transactions contemplated by this Agreement violate
any provision of Kao's Articles of Incorporation.
(iii) All necessary corporate proceedings to authorize the
transactions contemplated by this Agreement, and the
performance by Kao of its obligations under, and the
execution and delivery of, the Kao Guaranty have
been taken.
(e) Execute and deliver such assignments, bills of sale,
endorsements, notices, consents, assurances and such other instruments of
conveyance and transfer as counsel for Buyer shall reasonably request in order
to vest in Buyer title to all of the Business Assets including, without
limitation, the Bill of Sale, the Undertaking of Assumption, and other
agreements described on Schedule 13.03(d). Simultaneously with the delivery of
the Bill of Sale, Seller shall take all such steps as may be necessary to put
Buyer in actual possession and control of the Business Assets.
(f) Cause to be executed and delivered the Kao Guaranty.
13.04 Conditions to Buyer's Obligation. The obligation of
Buyer to consummate the transactions contemplated by this Agreement is subject
to the satisfaction of the following conditions (unless Buyer expressly waives
any such condition):
(a) Buyer and Seller shall have received or obtained all
governmental and regulatory consents and approvals as specified in Article 12
hereof, and any applicable waiting period with respect thereto shall have
expired or been terminated.
(b) No injunction restraining or prohibiting the transactions
contemplated hereby shall have been issued by a court or governmental authority.
(c) Seller (and its Affiliates where required) and its officers
and counsel shall have executed and delivered the items described in Section
13.03 of this Agreement.
(d) No material damage to or loss of the Business Assets by fire
or other casualty shall have occurred between the date of this Agreement and the
Closing Date which has a material adverse impact on the Business Assets as a
whole.
(e) The closing of the Other Purchase and Sale Agreements shall
have occurred or shall occur simultaneously with Closing hereunder.
(f) Buyer shall have received consents for the assignment to Buyer
of those Contracts identified in Schedule 13.04(f).
(g) Buyer and/or Zomax shall have obtained financing for this
transaction pursuant to a financing commitment letter from GE Capital dated
November [ ], 1998, a copy of which has been furnished by Buyer and/or Zomax to
Seller. Buyer shall, and cause Zomax and each of its Affiliates to, use its best
efforts, exercised in good faith, to secure said financing and shall take no
action, or permit any of its Affiliates to take any action that is intended to
induce or have the effect of inducing GE Capital to withdraw or not honor its
agreement to extend credit to Buyer and/or Zomax or its Affiliates. In the event
that GE Capital does not provide financing for the transaction, Buyer will use,
and shall cause each of its Affiliates to use, its best efforts to secure
replacement financing on commercially reasonable terms. Further, Buyer shall
offer its full faith and credit in the effort to obtain such financing.
(h) In the aggregate no material adverse change in the Business
shall have occurred between the date of this Agreement and the Closing Date,
including any such change with respect to customer or supplier relationships,
other than changes in the ordinary course of business or changes attributable to
a negative reaction among customers or suppliers to the proposed acquisition of
the Business by Buyer.
13.05 Conditions to Seller's Obligation. The obligation of Seller to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction of the following conditions (unless Seller expressly waives any
such condition):
(a) Buyer and Seller shall have received or obtained all
governmental and regulatory consents and approvals as specified in Article 12
hereof, and any applicable waiting period with respect thereto shall have
expired or been terminated.
(b) No injunction restraining or prohibiting the transactions
contemplated hereby shall have been issued by a court or governmental authority.
(c) Buyer shall have delivered to Seller the funds required to be
delivered to them pursuant to Sections 13.02(a) and (b) of this Agreement.
(d) Buyer (and its Affiliates where required), and its officers
and counsel shall have executed and delivered the items described in Section
13.02 of this Agreement.
(e) The closing of the Other Purchase and Sale Agreements shall
have occurred or shall occur simultaneously with Closing hereunder.
ARTICLE 14
POST CLOSING
Seller and Buyer agree that after the Closing Date:
14.01 Delivery of Business Records: As soon after the Closing as is
reasonably practicable, Seller shall cause the Business Records to be delivered
to Buyer.
14.02 Delivery of Transferred Employee Records: Seller shall deliver to
Buyer all personnel records, including medical files, on the Transferred
Employees who consent to such delivery, as evidenced by a consent form delivered
to Seller by Buyer in form reasonably satisfactory to Seller.
14.03 Buyer Cooperation with Seller's Disposal of Product and Seller's
Warranty Obligations: After the Closing Date:
(a) Buyer shall reasonably cooperate in Seller's efforts to sell
or resell any rejected or returned finished products which have been sold,
shipped or set aside for a customer of the Business prior to the Closing Date.
(b) Buyer shall provide warranty services on mutually agreed terms
on Seller's behalf and at Seller's expense with respect to products sold by the
Business prior to the Closing. At Seller's request and expense, this shall
include accepting the return of non-conforming products and replacement with
conforming products.
14.04 Access to Records: From time to time, upon request by Seller,
Buyer shall permit Seller reasonable access to and copies of the books and
records delivered to Buyer in accordance with Sections 14.01 and 14.02 for
purposes of tax and other legal compliance. Buyer shall retain such books and
records (including employment records) for a period of at least seven years from
the Closing Date or such longer period as may be required by applicable law.
14.05 Cooperation in Litigation: After Closing, each Party shall
reasonably cooperate with the other Party and the other Party's attorneys in the
defense or prosecution of any litigation, action, suit or proceeding instituted
against or by the other Party pertaining to the Business Assets or the Business,
excluding, however, any litigation, action, suit or proceeding between the
Parties (including their Affiliates). Such cooperation shall include, but not be
limited to, conferring with the other Party's attorneys or experts at their
offices during normal business hours at mutually convenient times and making
available to the other Party's attorneys documents or copies of documents
specific to the Business Assets or the Business, and such cooperation shall
include giving testimony voluntarily. Such cooperation shall not require the
cooperating Party to be joined as a Party in any such litigation. Each Party
further agrees that it shall not voluntarily disclose to any third party without
the other Party's consent any information or documents received by it heretofore
or hereafter from the other Party's attorneys in connection with the defense or
prosecution of any litigation or proceedings. The other Party shall pay the
out-of-pocket expenses of the cooperating Party and those expenses of the
cooperating Party's employees and agents reasonably incurred in connection with
providing such cooperation but shall not be responsible for paying any fees or
for reimbursing the cooperating Party for the salaries or costs of fringe
benefits or other similar expenses of the cooperating Party's employees in
connection with time spent providing such cooperation to the other Party.
14.06 Removal of Seller's Name from Property: Not later than 90 days
after the Closing Date, Buyer shall remove Seller's name, logo and identifying
marks from the exterior of the Plant and the Leased Premises, and from all
vehicles, equipment and other assets (other than Inventory) acquired hereunder
from Seller. In the event Buyer fails to remove Seller's name within the 90 day
period, Buyer hereby grants Seller and its representatives the right of access
to said property, during normal business hours to remove Seller's name, logo and
identifying marks from the exterior of the Plant and Leased Premises and other
assets. Buyer shall pay the full cost of such removal at the rates charged by
premium companies that do such work.
14.07 Use of Current Supplies:
(a) Buyer will have after the Closing in Inventory a quantity of
work-in-process, preprinted stationery, packaging material and other supplies
(including all Inventory acquired by Buyer) which bear the "Kao" or "Kao
Infosystems" name and logo. For a period of six months from the Closing Date,
and solely with respect to any Inventory acquired by Buyer pursuant to this
Agreement, Seller shall grant or cause to be granted to Buyer a paid-up,
royalty-free license, to remain in effect until the exhaustion of such Inventory
in the ordinary course of business (not to exceed six months), to use in the
United States and Canada any trademarks, trade names, trade dress, copyright or
other proprietary rights of Seller associated with such Inventory. Such license
shall be non-exclusive and without any warranty of any kind, express or implied,
including but not limited to any warranty of noninfringement. Such license shall
be in addition to other licenses granted hereunder or under the other documents
in accordance with the terms of this Agreement. Buyer shall not be entitled to
use the "Kao", "Kao Infosystems" or "Kao Infosystems Canada" name and/or logo
for any purpose whatsoever except as specifically provided in this Section
14.07.
(b) Notwithstanding anything contained in this Section to the
contrary, so that Buyer is not required to remaster existing customer titles for
optical discs, Buyer may do the following to the extent it is consistent in all
respects with applicable laws: Buyer may continue to manufacture existing
customer titles bearing the "Kao", "Kao Infosystems", or "Kao Infosystems Canada
Inc." name and/or logo on the mirror band but for a period not to exceed six
months from the Closing Date so long as Buyer also discloses thereon, to the
extent required by law, that it is the manufacturer thereof and such optical
disc was made in Canada and otherwise complies with applicable law. During such
six-month period Buyer shall be required to use an identification mark that
identifies each optical disc with the "Kao", "Kao Infosystems" or "Kao
Infosystems Canada Inc." name and/or logo as having been replicated by Buyer.
When a title requires remastering or is remastered, Buyer must remove the "Kao",
"Kao Infosystems", or "Kao Infosystems Canada Inc." name and/or logo for such
title. The license to Buyer set forth in this Section shall be deemed to include
the rights set forth in the preceding section. Buyer shall fully indemnify and
hold Seller and its Affiliates harmless from all loss, costs, claims, suits and
expenses, including reasonable attorneys fees, arising out of Buyer's use of the
"Kao", "Kao Infosystems", or "Kao Infosystems Canada Inc." name and/or logo. At
the end of the aforesaid six-month period, Buyer shall certify in writing to
Seller that it has destroyed and ceased using all stampers that imprint the
"Kao" , "Kao Infosystems", or "Kao Infosystems Canada Inc." name.
14.08 Tax Matters: Buyer and Seller agree to reasonably cooperate and
assist one another regarding all tax matters related to the Business Assets sold
pursuant to this Agreement. Buyer agrees to cooperate and assist Seller in
connection with any tax audits of Seller for any periods through the Closing
Date.
14.09 Consents to Assignment. Seller is a party to various contracts,
license agreements and other agreements ("agreements" or each an "agreement" for
purposes of this Section 14.09) relating to the Business, which, in order to
constitute a Contract and be assigned to Buyer hereunder as part of the Business
Assets requires the consent of a Third Party. If a consent so required has not
been obtained for such an assignment prior to Closing, the Parties shall proceed
as follows after Closing:
(a) the Parties shall cooperate using reasonable efforts to novate
the agreement or have it assigned to Buyer.
(b) until the agreement is novated or assigned Seller shall hold
it in trust for Buyer absolutely and Buyer shall, as Seller's sub-contractor (if
such sub-contracting is permissible and lawful under the agreement), perform all
the obligations of Seller under the agreement to be discharged after Closing and
shall indemnify Seller against all actions, proceedings, costs, damages, claims
and demands in respect of any failure on the part of Buyer to perform those
obligations; and
(c) until the agreement is novated or assigned, Seller shall (so
far as it lawfully may) give all reasonable assistance to Buyer (at Buyer's
request and expense) to enable Buyer to enforce the rights under the agreement
held for Buyer in trust. If the agreement prohibits Buyer from acting as
Seller's sub-contractor (as referred to in paragraph (b) above) or Buyer cannot
be permitted to act as sub-contractor because of confidentiality obligations,
Seller shall, at the cost of Buyer and to the extent that Seller is reasonably
able, do all such acts and things as Buyer may reasonably require to enable due
performance of the agreement and to provide for Buyer the benefits, subject to
the burdens and obligations, of the agreement, and Buyer shall indemnify Seller
in respect of all such acts and things. Buyer agrees to cooperate with such
efforts by Seller to the fullest extent practicable, including without
limitation supplying Seller with products or services at no cost to Seller
provided Seller assigns to Buyer all consideration received therefor from a
purchaser thereof.
14.10 Collection of Receivables. The Parties will cooperate in good
faith to ensure that payments of the Receivables to Seller are forwarded to
Buyer except to the extent any such Receivables are retained by or returned to
Seller hereunder.
14.11 Noncompetition. In consideration of Seller's rights under this
Agreement, Seller agrees that, from and after the Effective Date and continuing
for five years thereafter, Seller will not and will cause Kao and any other
Affiliate of Kao not to, do any of the following, except to the extent otherwise
provided in Schedule 14.11:
(a) directly or indirectly, own any interest in, control, or
render services to (including but not limited to services in research), any
person, entity, or subsidiary, subdivision, division, or joint venture of such
entity in connection with the following activities (collectively, the
"Restricted Activities"): the design, development, manufacture, marketing, or
sale of CD's, the marketing or sale of replicated or duplicated software, or the
assembly, packaging or distribution (including electronic distribution) of
software, other than as an adjunct to or in connection with Core Activities (as
defined in Schedule 14.11 hereto), anywhere in the world;
(b) directly or indirectly, solicit any of the Buyer's present or
future employees, excluding Stephen Fisher, engaged in the Restricted Activities
(while such employees are employed by Buyer) to leave their employment with
Buyer for the purpose of hiring them or inducing them to leave their employment
with Buyer;
(c) directly or indirectly, solicit sales for LOGISTIX (SINGAPORE)
PTE LTD from Buyer's customers or potential customers;
(d) directly or indirectly engage in the Restricted Activities.
14.12 Breach of Noncompetition Provisions of this Agreement. In
addition to any other relief or remedies afforded by law or in equity, if Seller
breaches the non-competition provisions of this Agreement, Seller agrees that
Buyer shall be entitled, as a matter of right, to injunctive relief in any court
of competent jurisdiction plus reasonable attorneys fees for securing such
relief. Seller hereby admits that irreparable damage will result to the Buyer if
Seller violates or threatens to violate the terms of the non-competition
provisions of this Agreement. Buyer shall be able to pursue any other
appropriate relief including, without limitation, money damages against Seller
for breach of the non-competition provisions of this Agreement.
14.13 Management Services. For a reasonable period after Closing,
Seller and its Affiliates shall make its employees, if any, available to Buyer
for a reasonable amount of telephone consultation in connection with the
Business so long as such consultation does not materially interfere with such
employee's other duties. This covenant shall not be deemed to require Seller to
keep any employees employed, and this covenant shall terminate if Seller ceases
to have any employees.
14.14 Use of Computer Software Assets: After the Closing Buyer shall
permit Seller reasonable access to and the right to use Computer Software Assets
to the extent needed by Seller in the period it winds up and concludes its
affairs.
14.15 Misdirected Mail. After Closing, any mail or communication that
is addressed to one Party (addressee) but is received by the other Party
(recipient) will be forwarded by the recipient to the addressee. For purposes of
this Section 14.15, Buyer shall forward any mail that it receives that is
addressed to Seller to Kao Infosystems Canada Inc. c/o Kao America, Inc., 7th
Floor, Hercules Plaza, 1313 N. Market Street, Wilmington, DE 19801 U.S.A.
14.16 Employer Health Tax. The Seller acknowledges and agrees that,
notwithstanding completion of the transaction contemplated by this Agreement, it
shall continue to have sole responsibility and liability for the payment of tax
pursuant to the Employer Health Tax Act, 1989 (Ontario) or any similar
legislation in respect of all remuneration paid to employees of the Seller in
the Business, in respect of services required during the period prior to the
Closing Date (the "Pre-Closing Remuneration"), unless such obligation is
included within the Accounts Payable as calculated under Section 5.03(a)(4) to
determine the final Purchase Price, whether or not the same be paid by the
Seller or the Buyer and whether or not before or after the Closing Date.
ARTICLE 15
BULK SALES ACT
Buyer hereby waives compliance by Seller with the requirements of any
and all laws relating to bulk sales and transfers; and as consideration for such
waiver by Buyer, Seller agrees to indemnify Buyer for any loss to Buyer
resulting from any claim by any creditors of Seller under any such law.
ARTICLE 16
RIGHT OF TERMINATION; DISPUTE SETTLEMENT
16.01 Termination:
(a) The Parties recognize the potential damage to the Business
from a failure to close or a delay in Closing. Therefore, the conditions
precedent to Closing are limited as set forth in Sections 13.04 and 13.05.
(b) This Agreement may, by notice given prior to or at the
Closing, be terminated
(i) by mutual written consent of Buyer and Seller; or
(ii) by either Buyer or Seller if the Closing has not
occurred for any reason (other than through the
failure of the Party seeking to terminate this
Agreement to comply fully with its obligations under
this Agreement) on or before February 15, 1999; or
(iii) by either Party in the event of a material breach by
the other Party hereunder where such breach has not
been cured within 30 days following receipt of
notice of breach from the non-breaching Party. For
the purposes of this Section 16.01(b)(iii), one or
more breaches will be material if in the aggregate
such breaches have a material adverse impact on the
Business or the Business Assets as a whole. Solely
for purposes of this Section 16.01(b)(iii), in
determining whether one or more breaches will be
material for such purposes, the provisions of this
Agreement susceptible of breach shall be read as if
no reference for materiality were contained therein.
(c) Each Party's right of termination under this Section 16.01 is
in addition to any other rights it may have under this Agreement or otherwise,
and the exercise of a right of termination will not be an election of remedies.
If this Agreement is terminated pursuant to this Section 16.01, all further
obligations of the Parties shall terminate except that the obligations of
Section 18.09 will survive; provided, however, that if this Agreement is
terminated because of a breach of the Agreement by the other Party or because
one or more conditions to the terminating Party's obligations under this
Agreement is not satisfied as a result of the other Party's failure to comply
with its obligations under this Agreement, the terminating Party's right to
pursue all legal remedies will survive such termination unimpaired.
16.02 Dispute Settlement:
(a) The Parties shall attempt in good faith to promptly resolve
any dispute arising out of or relating to this Agreement by negotiation between
executives who have the authority to settle the controversy and who are at a
higher level of management than the persons with direct responsibility for
administration of this Agreement. Either Party may give the other Party written
notice of a dispute not resolved by such executives in the normal course of
business. If the matter has not been resolved by these persons within two months
of a disputing Party's notice, the dispute shall be referred to a more senior
executive of the Parties.
(b) In the event the Parties have not resolved a dispute pursuant
to Sections 16.02(a) above, they shall be free to pursue any other remedy
provided by operation of law.
ARTICLE 17
SURVIVAL, REMEDIES AND PROCEDURE FOR INDEMNIFICATION
17.01 Period for Taking Action: Representations, warranties, covenants
and agreements hereunder shall survive Closing but only to the extent set forth
below.
(a) The representations and warranties of the Parties hereunder
shall survive Closing but only for a period of eighteen months from and after
the Closing Date; provided, however, Seller's representation and warranty
contained in Section 6.22 above shall survive Closing only for a period of
ninety days after Closing.
(b) The obligations of Buyer to indemnify Seller under Sections
8.01, 8.02, and 8.03 above shall survive Closing without any limitation as to
time, subject to applicable statutes of limitations.
(c) The obligations of Buyer to indemnify Seller under Section
8.04 above with respect to breaches of its representations and warranties
contained herein shall survive Closing but expire eighteen months after the
Closing.
(d) The agreements and covenants of Buyer, other than its
representations and warranties, shall survive Closing without limitation as to
time, subject to applicable statutes of limitations.
(e) The obligations of Buyer to indemnify Seller under Section
8.04 above with respect to the nonfulfillment of any agreement or covenant by
Buyer under this Agreement shall survive Closing without any limitation as to
time, subject to applicable statutes of limitations.
(f) The obligations of Seller to indemnify Buyer under Sections
9.01 and 9.02 above shall survive Closing without any limitation as to time,
subject to applicable statutes of limitations.
(g) The obligations of Seller to indemnify Buyer under Section
9.03 above with respect to breaches of its representations and warranties
contained herein shall survive Closing but expire eighteen months after the
Closing; provided, however, Seller's obligation to indemnify Buyer with respect
to Seller's representation and warranty contained in Section 6.22 above shall
survive Closing only for a period of ninety days after Closing.
(h) The agreements and covenants of Seller, other than its
representations and warranties, shall survive Closing without limitation as to
time, subject to applicable statutes of limitations.
(i) The obligations of Seller to indemnify Buyer under Section
9.03 above with respect to the nonfulfillment of any agreement or covenant by
Seller under this Agreement shall survive Closing without any limitation as to
time, subject to applicable statutes of limitations.
(j) Any claim made by Buyer against Seller in accordance with this
Agreement shall (if it has not been previously satisfied, settled or withdrawn)
be deemed to have been waived or withdrawn on the expiry of 6 months after
notice of such claim is received by Seller unless proceedings in respect of such
claim shall then have been commenced against Seller and for this purpose
proceedings shall not be taken to have been commenced unless they have been both
filed and served on Seller. Except as provided in the foregoing sentence, any
on-going claims, actions or demands commenced prior to expiration of the claim
period set forth in Section 17.01 or specifically stipulated elsewhere in this
Agreement may be pursued to conclusion even if final judgment or settlement of
such claim, action or demand occurs after the claim period has elapsed.
17.02 Notice: No claim for indemnification may be made with respect to
any of the indemnification provisions set forth in Articles 8 and 9 unless
notice of such claim for indemnification which satisfies the provisions of
Section 17.06 below or Section 17.07 below with regard to environmental matters
is given to the indemnifying Party on or before the expiration date for such
indemnification provision as set forth in Section 17.01, but the actual costs or
expenses related thereto may be incurred or assessed after such expiration date.
17.03 Claims: Subject to the limitations set forth in Section 17.04
below, a Party shall be liable in respect of any claim brought by the other
Party for indemnification for a breach by such Party of its representations and
warranties set forth in this Agreement only if such Party's liability (but for
this Section 17.03) for such claim exceeds $10,000 and if such Party's aggregate
liability for all such claims which exceed $10,000 exceeds in the aggregate one
and one-half percent (1.5%) of the Purchase Price, in which case such Party
shall be liable for all such claims which exceed $10,000.
17.04 Limit: The aggregate liability of any Party arising by reason of
any and all claims for indemnification or for a breach by such Party of this
Agreement other than those for indemnification pursuant to Sections 8.01, 8.02,
8.03, 8.05, 9.01 and 9.02 above, shall not exceed an amount equal to fifty
percent (50%) of the Purchase Price; provided, however, to the extent that a
breach by Seller of the covenants set forth in Sections 14.11 and 14.12 above
causes such aggregate liability of Seller to exceed an amount equal to fifty
percent (50%) of the Purchase Price, this fifty percent (50%) of the Purchase
Price limitation shall be increased by the amount of the Seller's liability (but
for this Section 17.04) for breach of the covenants set forth in Sections 14.11
and 14.12 above. In no event shall Seller's aggregate liability arising by
reason of any and all claims for indemnification or for a breach by Seller of
this Agreement other than for indemnification pursuant to Sections 9.01 and 9.02
above exceed one hundred percent (100%) of the Purchase Price.
17.05 Not a Release of Other Obligations: Notwithstanding the
expiration of any of the indemnification provisions set forth in Articles 8 or 9
hereof or the limitations in this Article 17, such expiration and limits are not
intended to terminate or in any way modify or reduce the obligation of Seller to
be responsible for the payment and performance of its obligations relating to
Excluded Liabilities and the obligation of Buyer to be responsible for the
payment and performance of its obligations relating to the Assumed Liabilities
and payment of Purchase Price in full.
17.06 Procedure: Except with respect to indemnification of
environmental matters, each Party to this Agreement shall give prompt written
notice to the other Party under each claim for indemnification hereunder
specifying that indemnification is sought pursuant to this Agreement, the amount
(to the extent known), nature of and event giving rise to the claim, and of any
matter which is likely to give rise to an indemnification claim. The
indemnifying Party shall have 30 days after receipt of the above-mentioned
notice to undertake control, at its expense, of the defense of any such matter
or its settlement; 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. Failure to give timely notice of
a matter which may give rise to an indemnification claim shall not affect the
rights of the indemnified Party to collect such claims from the indemnifying
Party so long as such failure to so notify does not adversely affect the
indemnifying Party's ability to defend such claim against a third party. No
indemnifying Party, in the defense of any claim or litigation, shall, except
with the consent of an indemnified Party, which consent shall not be
unreasonably withheld or delayed, consent to entry of any judgment or enter into
any settlement by which such indemnified Party is to be bound and which judgment
or settlement does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such indemnified Party of a release from all
liability in respect to such claim or litigation.
17.07 Environmental Procedure; Access and Use of Real Property:
(a) Buyer will at all times take all reasonable steps to mitigate
the Environmental Liabilities or potential Environmental Liabilities which fall
or may fall within the terms of Article 9. As soon as reasonably practicable
after a Party becomes aware of any Environmental Liabilities (whether or not the
Party is of the opinion that it has a valid claim against the other Party under
Articles 8 or 9), said Party shall give written notice thereof to the other
Party including all material details of any Environmental Liabilities.
(b) With respect to any environmental matter for which Seller may
be required to indemnify Buyer under this Agreement, Seller shall have sole
control over all negotiations with governmental authorities concerning any
environmental measures for such environmental matters; provided that Seller
shall not take any action or fail to take any action with respect thereto that
has a material adverse impact on Buyer or the Business. Seller shall consult
with Buyer from time-to-time as to the status of such negotiations and shall
promptly provide Buyer with copies of all proposed documents involving such
remediation, provided, however, that Seller shall not agree to any environmental
measures which shall adversely affect Buyer's ownership, use or operation of the
Business Assets or the Business to any material extent without the prior written
approval of Buyer, which shall not be unreasonably withheld.
(c) After Closing, Seller shall have access to the Plant and
Leased Premises (subject to the terms of the applicable lease) for environmental
remediation work as follows:
(i) Seller retains a right of access to the Plant and
the Leased Premises after the Closing for purposes
of conducting environmental remediation work. Seller
shall make every reasonable effort in implementing
the work to reduce to the extent practicable any
interference with Buyer's operations at and use of
the property in question. Seller shall coordinate
its need to access the Plant and Leased Premises
with Buyer's local management, including at least
ten days' advance notice of use of any heavy
equipment.
(ii) At the conclusion of any environmental remediation
project by Seller at the Plant or Leased Premises,
Seller shall promptly dispose of and/or
decontaminate all rubbish and debris caused by or
otherwise associated with such work, and shall
remove all equipment, materials and supplies, and
shall restore the property in question to its
condition immediately prior to the initiation of the
work and leave the same ready for ordinary use,
taking into account any necessary above-ground
fixtures necessary for the work such as ground water
monitoring equipment.
(iii) Buyer shall take no action with regard to portions
of the real property that Seller has identified
prior to Closing as subject to possible
environmental remediation that will increase
Seller's cost of such remediation or constrict
Seller's present access to such property.
(d) Buyer acknowledges and agrees that:
(i) The Land is currently used by Seller for industrial
purposes, and
(ii) Seller's obligations for any environmental measures
shall be limited to those measures applicable to
property that meets the present zoning
classification of the Land or the Leased Premises,
as the case may be.
17.08 Claim limitations.
(a) A Party shall not be liable with respect to any claim
hereunder to the extent the liability or loss of the other Party in respect
thereof (i) is incurred or increased as a result of any legislation or
regulation (including those applicable to tax rates) not in force at the
Effective Date, any withdrawal of any published concession or ruling by any
relevant tax authority, or as a result of any change in legislation or
regulation thereafter; (ii) would not have arisen but for an act or omission
carried out after the date of this Agreement (other than in the ordinary course
of business) by Buyer or its Affiliates and which was carried out by a person
who knows or reasonably should have known that it would result in an increase in
the liability of the Seller hereunder; (iii) was or is subject to being offset
or reimbursed by a reduction in tax liability of the other Party or payment to
such other Party of insurance; (iv) a matter which has arisen in respect of any
act or omission stipulated to be carried out or omitted pursuant to this
Agreement or which is carried out or omitted at the written request of the Party
asserting the claim; or (v) a matter which was provided for or taken into
account in calculating the Purchase Price under Section 5.03.
(b) After Closing occurs, a Party may not bring a claim for breach
of a representation or warranty hereunder to the extent the basis for the claim
is known to the Party prior to the Closing (i.e., is within Seller's knowledge
or Buyer's knowledge, as the case may be); provided, however, that if a Party
obtains knowledge of the specific basis of a claim after the date hereof and
prior to the Closing Date that constitutes a material breach of a representation
or covenant and discloses such specific basis to the other Party in writing,
and, if the transaction contemplated herein is consummated, the Party so
disclosing such specific basis shall not be precluded solely by the operation of
this Section 17.08(b) from bringing a claim for breach hereunder; provided
further, however, that the consent of the Party receiving such disclosure to
proceed to Closing shall be required if the Party making such disclosure is
entitled or claims to be entitled to terminate this Agreement under Section
16.01(b)(iii), failing which consent neither Party shall be obligated to close
hereunder.
(c) Nothing in this Article 17 shall derogate from either Party's
obligation to mitigate any loss which it suffers in consequence of a breach of
this Agreement.
(d) It is intended that the provisions of this Agreement with
respect to claims by one Party against the other shall apply to all claims
relating to the transactions contemplated hereby, regardless of whether such
claim is based in tort (including, without limitation, negligence) contract, or
otherwise, and shall provide the sole and exclusive remedy or remedies relating
to the subject matter hereof, the transactions contemplated hereby and the
Business Assets. All such claims are subject to the limitations set forth in
this Article 17 (including but not limited to Section 17.05).
ARTICLE 18
MISCELLANEOUS
18.01 Press Release: Buyer and Seller shall each be at liberty to issue
a press release or public announcement following execution of this Agreement
with respect to the transaction contemplated by this Agreement with the prior
written consent of the other Party, and the Parties shall consult each other in
advance on the form and content of such releases or announcements. Each Party
shall also be entitled to make such disclosures as may be required by applicable
law or by applicable regulations of regulatory authorities ("Required
Disclosure") without the prior consent of the other Party. Each Party shall
provide the other Party with a copy of any Required Disclosure prior to its
release. Any Required Disclosure that contains information that is not required
by applicable laws or regulations must be approved by the other Party, such
approval not to be unreasonably withheld.
18.02 Fees: Except as otherwise specifically provided herein, the
Parties shall pay their own expenses including attorney's fees, incident to the
preparation and performance of this Agreement, whether or not the transactions
contemplated herein are consummated.
18.03 Amendments: This Agreement shall not be amended or modified
except in writing, signed by both Parties.
18.04 Successors: This Agreement shall be binding upon and inure to the
benefit of the Parties hereto and their respective successors and assigns,
provided that prior to the Closing neither Party shall assign this Agreement or
any rights herein without the other Party's prior written consent. This
Agreement is not intended to confer upon any person except Buyer and Seller (and
their respective Affiliates) any rights or remedies hereunder.
18.05 Merger: All understandings and agreements heretofore existing
between the Parties regarding the purchase and sale of the Business Assets are
merged into this Agreement (including the Schedules and Exhibits hereto). This
Agreement fully and completely expresses the agreement of the Parties and was
entered into after adequate investigation. Neither Party is relying upon any
statement or representation not embodied in this Agreement, or the Exhibits
hereto, made by the other or the other's Affiliates, or by a representative of
the other or its Affiliates.
18.06 Non-waiver of Remedy: The failure of Seller or Buyer to insist,
in any one or more instances, upon the strict performance of any of the terms,
conditions or covenants of this Agreement shall not be construed as a waiver or
relinquishment for the future of such term, condition or covenant. A receipt by
Seller or Buyer of any money with knowledge of the breach of any term, condition
or covenant of this Agreement, shall not be deemed a waiver of such breach, and
no waiver, change, modification or discharge by either Party hereto of any
provision in this Agreement shall be deemed to have been made or shall be
effective unless expressed in writing and signed by both Seller and Buyer. In
addition to the other remedies provided in this Agreement, Seller and Buyer
shall be entitled to the restraint by injunction of the violation, or attempted
or threatened violation of any of the terms, conditions or covenants of this
Agreement, or to a decree compelling performance of any of such term, condition
or covenant.
18.07 Notices: All notices, consents, requests and approvals, any
notice of change in address for the purpose of this Article, and other
communications provided for or required herein, shall be deemed validly given,
made or served, if in writing, and delivered (a) on the day given if served
personally, (b) two days following if sent by telecopy to the facsimile number
indicated below with a confirmatory notice by delivery to a
nationally-recognized express delivery service with instructions and payment for
overnight delivery to the address set forth below; or (c) three days following
if sent by Certified Mail, postage prepaid:
If to Seller, addressed to:
Kao Infosystems Canada Inc.
c/o Kao Infosystems Company
40 Grissom Road
Plymouth, MA 02360
Attention: President
Facsimile Number: (508) 747-9753
Telephone Number: (508) 747-5520
With copies to:
Potter Anderson & Corroon, LLP
Hercules Plaza
1313 North Market Street
Wilmington, Delaware 19801 USA
Attention: David B. Brown
Telephone Number: (302) 984-6000
Facsimile Number: (302) 658-1192
and
Kao Corporation
14-10 Nihonbashi Kayabacho 1-chome
Chuo-ku, Tokyo 103-8210
JAPAN
Attention: Director, Legal Department
Telephone Number: 81-33-660-7047
Facsimile Number: 81-33-660-7942
Kao America Inc.
c/o The Andrew Jergens Company
2535 Spring Grove Avenue
Cincinnati, OH 45214 USA
Attention: VP Finance and CFO
Telephone Number: (513) 421-1400
Facsimile Number: (513) 632-7760
And if to Buyer, addressed to:
3024203 Nova Scotia Company
c/o Zomax Optical Media Inc.
5353 Nathan Lane
Plymouth, Minnesota 55441
Attn: James T. Anderson
Facsimile Number: (612) 519-3710
Telephone Number: (612) 553-9300
With copy to:
Fredrikson & Byron, P.A.
1100 International Centre
900 2nd Avenue S.
Minneapolis, Minnesota 55402
Attn: Dobson West
Facsimile Number (612) 347-7077
Telephone Number (612) 347-7111
18.08 Governing Law: This Agreement shall be governed by and construed
according to the laws of the United States of America and the State of Delaware.
The United Nations Convention on the International Sale of Goods shall not apply
to transactions contemplated by this Agreement. The Parties agree to submit to
the exclusive jurisdiction of the courts located in Delaware and each appoints
the Secretary of State of Delaware (if lacking a registered agent in Delaware)
to accept service of process on its behalf, with copies thereof to be sent by
the other party by certified mail in accordance with the notice provisions set
forth above.
18.09 Confidentiality: The obligations of confidentiality set forth in
that letter from David B. Brown of Potter Anderson & Corroon LLP to Zomax
(Attention: Jim Anderson) dated June 24, 1998 are incorporated herein by
reference and will apply to and be binding on Buyer, to the benefit of Seller
and its Affiliates, as if (a) the parties referred to anonymously therein as
"OC" were expressly referred to therein as Seller and its Affiliates; and (b)
Buyer were the party who had signed such letter, regardless of whether or not
Buyer signed such letter at the time.
18.10 Severability: If any provision, or portion thereof, of this
Agreement is held to be invalid, illegal or enforceable by a court of competent
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision hereof.
18.11 Schedules and Exhibits: All Schedules and Exhibits referred to
herein are hereby incorporated in this Agreement by reference.
18.12 Headings: The various headings used in this Agreement are for
convenience only and are not to be used in interpreting the text of the Article
in which they appear or to which they relate.
18.13 Counterparts: This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and all of which shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed the day and year first above written.
KAO INFOSYSTEMS CANADA INC.
By: /s/ George E. Sperzel
Name: George E. Sperzel
Title: Assistant Treasurer
3024203 NOVA SCOTIA COMPANY
By: /s/ James T. Anderson
Name: James T. Anderson
Title: CEO
