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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
September 19, 1999
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Date of Report (Date of earliest event reported)
SEDONA CORPORATION
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(Exact name of registrant as specified in its charter)
Pennsylvania 333-71457 95-4091769
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(State or other (Commission (IRS Employer
jurisdiction of File No.) Identification
Incorporation No.)
649 North Lewis Road
Limerick, Pennsylvania 19468
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
610-495-3003
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Not applicable
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Former name or former address, if changed since last report)
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<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
During July 1999, the Board of Directors of the
Registrant decided to sell the Company's Tangent Imaging
Systems unit ("Tangent"). Pursuant to an Asset Purchase
Agreement dated September 17, 1999, the Registrant agreed to
sell substantially all of the assets of Tangent to Colortrac,
Inc., a Maryland Corporation ("Colortrac").
As a result of this transaction, as well as the sale of
its Technology Resource Centers ("TRC") assets in the third
quarter, substantially all of the Registrant's hardware-based
imaging and scanner operations, as well as conversion services
operations, which together constituted substantially all of
the Registrant's revenue generating operations have been
sold. These transactions will enable the Registrant to focus
its resources on the development of its Internet-based
business intelligence software according to its core growth
strategy. Further, it is estimated that a charge for losses
and reserves relating to the Tangent sale of $764,000 will
be included in reporting for the third quarter of 1999.
The purchase price for the soldassets included a cash
payment to the Registrant of $105,000 and assumption of
certain liabilities related principally to the service and
warranty contracts assigned by the Registrant to Colortrac.
In addition, the Registrant may receive certain other payments
for consigned inventory and royalties in the future and will
recognize such payments when realization is assured.
Pursuant to the Asset Purchase Agreement, the Registrant
has agreed for three years not to compete with Colortrac in
providing scanning and imaging hardware and software in the
same geographic region it now services. In addition, the
Registrant has agreed to provide Colortrac with certain
employees to assist in the sale and servicing of Tangent
products until December 31, 1999.
The Registrant issued press releases which are attached
hereto as Exhibits 99.1, 99.2 and 99.3, respectively,
regarding the disposition of Tangent.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements-None
(b) Pro Forma Financial Information*
(c) Exhibits. See Exhibit Index.
<PAGE>
EXHIBIT INDEX
The following exhibits are filed as part of this Current
Report on Form 8-K:
Exhibit
No.
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2 Asset Purchase Agreement between Colortrac, Inc. and
Sedona Corporation, dated September 17, 1999.
99.1 Press Release dated July 16, 1999.
99.2 Press Release dated September 2, 1999.
99.3 Press Release dated September 20, 1999.
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* It is impracticable at this time for the Company to
provide the required pro forma financial information with
respect to the disposition of assets described under Item
2 above. The Company will file such information by
amendment to this Current Report on Form 8-K as soon as
practicable after the date hereof, but in any event
within 60 days.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, as amended, the Registrant has duly caused this
Report to be signed on its behalf by the undersigned thereunto
duly authorized.
SEDONA CORPORATION
Dated: October 5, 1999 By: /s/ MARCO EMRICH
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Marco Emrich
President and Chief Executive
Officer
Dated: October 5, 1999 By: /s/ WILLIAM K. WILLIAMS
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William K. Williams
Vice President and Chief
Financial and Accounting Officer
<PAGE>
Exhibit 2
ASSET PURCHASE AGREEMENT
BETWEEN
Colortrac, Inc.
AND
Sedona Corporation
September 17, 1999
<PAGE>
TABLE OF CONTENTS
Page
1. Definitions . . . . . . . . . . . . . . . . . . . . . .1
2. Basic Transaction . . . . . . . . . . . . . . . . . . .9
2.01 Purchase and Sale of Assets. . . . . . . . . . . .9
2.02 Assumption of Liabilities. . . . . . . . . . . . .9
2.03 Purchase Price . . . . . . . . . . . . . . . . . .9
2.04 Payments for Consigned Inventory . . . . . . . . .9
2.05 Technical Asset Payments . . . . . . . . . . . . 11
2.06 Maximum Purchase Price; Buyer's Discretion . . . 12
2.07 Employees. . . . . . . . . . . . . . . . . . . . 12
2.08 The Closing. . . . . . . . . . . . . . . . . . . 13
3. Representations and Warranties of the Seller. . . . . 13
3.01 Organization of Seller . . . . . . . . . . . . . 13
3.02 Authorization of Transaction . . . . . . . . . . 13
3.03 Non-contravention. . . . . . . . . . . . . . . . 13
3.04 Brokers' Fees. . . . . . . . . . . . . . . . . . 14
3.05 Title to Assets. . . . . . . . . . . . . . . . . 14
3.06 Predecessors . . . . . . . . . . . . . . . . . . 14
3.07 Financial Statements . . . . . . . . . . . . . . 14
3.08 Events Subsequent to the Most Recent Fiscal Month
End. . . . . . . . . . . . . . . . . . . . . . . 15
3.09 Undisclosed Liabilities. . . . . . . . . . . . . 16
3.10 Legal Compliance . . . . . . . . . . . . . . . . 17
3.11 Tax Matters. . . . . . . . . . . . . . . . . . . 17
3.12 Accounts Receivable. . . . . . . . . . . . . . . 17
3.13 Intellectual Property. . . . . . . . . . . . . . 17
3.14 Tangible Assets. . . . . . . . . . . . . . . . . 19
3.15 Inventory. . . . . . . . . . . . . . . . . . . . 19
3.16 Contracts. . . . . . . . . . . . . . . . . . . . 19
3.17 Intentionally Omitted. . . . . . . . . . . . . . 21
3.18 Powers of Attorney . . . . . . . . . . . . . . . 21
3.19 Insurance. . . . . . . . . . . . . . . . . . . . 21
3.20 Litigation . . . . . . . . . . . . . . . . . . . 21
3.21 Warranty . . . . . . . . . . . . . . . . . . . . 21
3.22 Product Liability. . . . . . . . . . . . . . . . 22
3.23 Employees. . . . . . . . . . . . . . . . . . . . 22
3.24 Employee Benefits. . . . . . . . . . . . . . . . 22
3.25 Guaranties . . . . . . . . . . . . . . . . . . . 23
3.26 Environment, Health, and Safety. . . . . . . . . 23
3.27 [Intentionally Omitted]. . . . . . . . . . . . . 24
3.28 Adequacy of Assets . . . . . . . . . . . . . . . 24
3.29 Liabilities. . . . . . . . . . . . . . . . . . . 25
3.30 Disclosure . . . . . . . . . . . . . . . . . . . 25
4. Representations and Warranties of the Buyer . . . . . 25
4.01 Organization of the Buyer. . . . . . . . . . . . 25
4.02 Authorization of Transaction . . . . . . . . . . 25
4.03 Noncontravention . . . . . . . . . . . . . . . . 25
4.04 Brokers' Fees. . . . . . . . . . . . . . . . . . 25
5. Pre-Closing Covenants . . . . . . . . . . . . . . . . 25
5.01 General. . . . . . . . . . . . . . . . . . . . . 26
5.02 Notices and Consents . . . . . . . . . . . . . . 26
5.03 Operation of Business. . . . . . . . . . . . . . 26
5.04 Full Access. . . . . . . . . . . . . . . . . . . 26
5.05 Notice of Developments . . . . . . . . . . . . . 26
5.06 Exclusivity. . . . . . . . . . . . . . . . . . . 26
5.07 Confidentiality. . . . . . . . . . . . . . . . . 27
6. Conditions to Obligation to Close . . . . . . . . . . 27
6.01 Conditions to Obligation of the Buyer. . . . . . 27
6.02 Conditions to Obligation of the Seller . . . . . 29
7. Post-Closing Covenants. . . . . . . . . . . . . . . . 30
7.01 General. . . . . . . . . . . . . . . . . . . . . 30
7.02 Litigation Support . . . . . . . . . . . . . . . 30
7.03 Patent Infringement Payments . . . . . . . . . . 30
7.04 Transition . . . . . . . . . . . . . . . . . . . 31
7.05 Restrictive Covenants. . . . . . . . . . . . . . 32
7.06 Other Obligations. . . . . . . . . . . . . . . . 34
7.07 Good Stewardship . . . . . . . . . . . . . . . . 34
7.08 Preference to Sale of Consigned Inventory. . . . 34
7.09 Certification of 2000g Flatbed Scanner.. . . . . 34
7.10 Escrow.. . . . . . . . . . . . . . . . . . . . . 34
7.11 Release of Security Interests. . . . . . . . . . 35
8. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . 35
8.01 Survival . . . . . . . . . . . . . . . . . . . . 35
8.02 Indemnification Provisions for Benefit of Buyer. 35
8.03 Indemnification Provisions for Benefit of Seller 35
8.04 Matters Involving Third Parties. . . . . . . . . 36
8.05 Other Indemnification Provisions . . . . . . . . 37
8.06 Treatment of Indemnification Payments. . . . . . 37
8.07 Right of Setoff. . . . . . . . . . . . . . . . . 37
9. Termination . . . . . . . . . . . . . . . . . . . . . 37
9.01 Termination of Agreement . . . . . . . . . . . . 37
9.02 Effect of Termination. . . . . . . . . . . . . . 38
10. Miscellaneous . . . . . . . . . . . . . . . . . . . . 38
10.01 Press Releases and Public Announcements . . 38
10.02 No Third-Party Beneficiaries. . . . . . . . 38
10.03 Entire Agreement. . . . . . . . . . . . . . 38
10.04 Succession and Assignment . . . . . . . . . 38
10.05 Counterparts. . . . . . . . . . . . . . . . 39
10.06 Headings. . . . . . . . . . . . . . . . . . 39
10.07 Notices . . . . . . . . . . . . . . . . . . 39
10.08 Governing Law . . . . . . . . . . . . . . . 39
10.09 Amendments and Waivers. . . . . . . . . . . 40
10.10 Severability. . . . . . . . . . . . . . . . 40
10.11 Expenses. . . . . . . . . . . . . . . . . . 40
10.12 Construction. . . . . . . . . . . . . . . . 40
10.13 Incorporation of Exhibits and Schedules . . 40
10.14 Remedy for Disputes.. . . . . . . . . . . . 40
_______________________
Exhibits and Schedules
Exhibit A Patent License Agreement
Exhibit B Escrow Agreement
Schedule I Consigned Inventory - Finished Goods
Schedule II Consigned Inventory - Raw Materials, Work
in Process and Parts
Schedule III Assumed Contracts
Schedule IV Equipment, Furniture and Fixtures
Schedule V Excluded Contracts
Schedule VI Target Prices of Division Products
Schedule VII Purchase Price Allocation
Schedule VIII Loaned Employees and Office Expenses
Schedule IX Excluded Assets
<PAGE>
ASSET PURCHASE AGREEMENT
Agreement entered into on September 17, 1999, by and
between Colortrac, Inc, a Maryland corporation (the "Buyer"),
and Sedona Corporation, a Pennsylvania corporation (the
"Seller"). The Buyer and the Seller are referred to
collectively herein as the "Parties."
This Agreement contemplates a transaction in which the
Buyer will purchase substantially all of the assets and assume
selected, listed liabilities and obligations of Tangent
Imaging Systems, an unincorporated division of the Seller (the
"Division"). The Parties contemplate an ongoing relationship
as Buyer uses and sells the inventory acquired from Seller and
generally pays Seller as, if and when the inventory is Removed
(as defined below); Seller also recognizes its obligation to
help Buyer sell the inventory and support present and future
customers with "loaned" employees, etc. to help assure
customer satisfaction and work jointly in the future for the
Parties' mutual benefit.
Now, therefore, in consideration of the premises and the
mutual promises herein made, and in consideration of the
representations, warranties, and covenants herein contained,
and intending to be legally bound, the Parties agree as
follows.
1. Definitions
"Accounts Receivable" means all accounts, notes and other
receivables of the Division outstanding on the Closing Date
listed on Section 3.12 of the Disclosure Schedule.
"Acquired Assets" means, except for the Excluded
Assets,(i) the business of the Division as a going concern,
(ii) any name or names under which Division has conducted its
business operations and all goodwill associated therewith, and
(iii) all of the assets, properties and rights of Division
constituting any part of the business owned by Division, of
every type and description, tangible and intangible, wherever
located and whether or not reflected on the books and records
of Division (except as may be specifically excluded by this
Agreement), including, without limitation, the following, as
they exist on the Effective Date: all of the Equipment,
Contracts, Licensing Agreements, Inventory (other than
Consigned Inventory), Intellectual Property and Other
Technical Assets, Books and Records, Permits, Furniture and
Fixtures, Customer Documentation, and Other Assets; all
prepaid expenses and refunds of any kind; all causes of action
and choses in action (except for those causes of action which
are related to the Excluded Assets), claims, and demands of
Division related to its business, including, without
limitation, rights to returned or repossessed goods, rights of
recovery, set off, and recoupment, deposits, security deposits
and utility deposits.
"Acquisition Documents" means this Agreement and all
certificates, transfer documents, assumption agreements,
restrictive covenant agreements or other documents or
agreements related to the consummation of the transactions
contemplated in this Agreement.
"Adverse Consequences" means all actions, suits,
proceedings, hearings, investigations, charges, complaints,
claims, demands, injunctions, judgments, orders, decrees,
rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including court costs and reasonable
attorneys' fees and expenses.
"Affiliate" has the meaning set forth in Rule 12b-2 of
the regulations promulgated under the Securities Exchange Act.
"Assumed Contracts" means all of the executory
obligations and liabilities of Division arising from and after
the Closing Date pursuant to or arising out of the Contracts
listed on Schedule III hereto, but excluding any obligations
or liabilities arising from or relating to any breach, default
or violation of any such Contracts by Seller.
"Assumed Liabilities" means post-Closing Liabilities
under (i) service and warranty Contracts identified on
Schedule III hereto and (ii) the other contracts listed on
Schedule III hereto.
"Balance Sheet" means the balance sheets contained within
the Financial Statements.
"Basis" means any past or present fact, situation,
circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or
transaction that forms or reasonably should form the basis for
any specified consequence.
"Books and Records" means, except for the Excluded
Assets, all existing data, data bases, books, and records
(other than books of original entry), correspondence, business
plans and projections, records of sales, customer and vendor
lists, files, papers, and, to the extent permitted under
applicable law or regulation, copies (but not the originals)
of historical personnel, payroll and medical records of the
employees in the possession of a Person, including, without
limitation, employment applications, corrective action
reports, disciplinary reports, notices of transfer, notices of
rate changes, other similar documents, and any summaries of
such documents regularly prepared by the Person; and all
manuals and printed instructions of the Person relating to the
Acquired Assets and to the operation of any part of the
business of the Asset Sellers. Seller will keep copies of
selected documents for archival purposes only.
"Business" means the business of the Division as
heretofore conducted.
"Business Day" means any day (Monday through Friday) in
which both the Seller and the Buyer are open for the conduct
of business with the public.
"Cash" means Seller's cash and cash equivalents
(including marketable Securities and short term investments).
"Certification Date" means the date on which Seller has
obtained all necessary Certifications and Permits for the sale
of the 2000g Flatbed Scanner as required in Section 7.09
herein.
"Closing" has the meaning set forth in Section 2.08.
"Closing Date" has the meaning set forth in Section 2.08.
"Code" means the Internal Revenue Code of 1986, as
amended.
"Confidential Information" means any information
concerning the Business and affairs of the Business maintained
as proprietary or confidential that is not already generally
available to the public.
"Consigned Inventory" means the raw materials, work in
process, finished goods and parts Inventory of Seller on the
Closing Date including, without limitation, the Inventory
listed on Schedules I and II hereto.
"Contracts" means all of the agreements, instruments,
contracts, collective bargaining agreements, leases,
warranties, arrangements, loan agreements, credit guaranties
and purchase and sales orders (where goods have not been
shipped or invoices not issued), and the like, whether oral or
written, pursuant to which the Division enjoys any right or
benefit, together with the Division's right to receive
revenue or income thereunder, but shall not include Excluded
Contracts.
"Customer Documentation" means all Division customer
lists, files, and documentation as well as all customer
prospect lists, files and documentation.
"Disclosure Schedule" has the meaning set forth in
Section 3.
"Employee Benefit Plan" means any (a) non-qualified
deferred compensation or retirement plan or arrangement which
is an Employee Pension Benefit Plan, (b) qualified defined
contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension
Benefit Plan (including any Multi-employer Plan), or (d)
Employee Welfare Benefit Plan or material fringe benefit plan
or program.
"Employee Pension Benefit Plan" has the meaning set forth
in ERISA Section 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth
in ERISA Section 3(1).
"Environmental, Health, and Safety Laws" means the
Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Resource Conservation and Recovery
Act of 1976, and the Occupational Safety and Health Act of
1970, each as amended, together with all other laws (including
rules, regulations, codes, plans, injunctions, judgments,
orders, decrees, rulings, and charges thereunder) of federal,
state, local, and foreign governments (and all agencies
thereof) concerning pollution or protection of the
environment, public health and safety, or employee health and
safety, including laws relating to emissions, discharges,
releases, or threatened releases of pollutants, contaminants,
or chemical, industrial, hazardous, or toxic materials or
wastes into ambient air, surface water, ground water, or lands
or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or
handling of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes.
"Equipment" means the machinery, equipment, tools,
computers, terminals, computer equipment, office equipment,
business machines, telephones, telephone numbers and telephone
systems, equipment parts and accessories, and the like
including, without limitation, the items listed on Schedule IV
hereto, wherever located, and any and all assignable
warranties of third parties with respect thereto.
"ERISA" means the Employee Retirement Income Security Act
of 1974, as amended.
"Excluded Assets" means: (a) all Excluded Contracts of
Division (and all deposits) and all Contracts which by their
terms may not be assigned by Seller to Buyer; (b) Division's
Cash and Accounts Receivable; (c) the Equipment and other
assets of Seller listed on Schedule IX hereto; (d) any rights
which accrue or will accrue to the Seller under this Agreement
or any other Acquisition Document; (e) any rights to any of
Division's insurance policies, or proceeds from insurance
coverages relating to the Acquired Assets for any period prior
to the Effective Date; (f) intercompany assets and deposits
related to facilities not being transferred to Buyer; (g) the
assets of any Employee Benefit Plan maintained by or covering
any employee of Division or to which the Seller has made any
contribution; and (h) all Consigned Inventory (which will be
sold by Seller to Buyer in accordance with Section 2.04
herein).
"Excluded Contracts" means any Contract listed on
Schedule V (whether or not listed in Section 3.16 of the
Disclosure Schedule and any other contract of Seller that is
not an Assumed Contract.
"Excluded Liabilities" means all obligations,
commitments, or Liabilities of the Seller, whether known or
unknown, absolute, contingent, or otherwise, and whether or
not related to the Acquired Assets, except for the Assumed
Contracts and the Assumed Liabilities. Without limiting the
generality of the preceding sentence but subject to the same
exceptions therein, the Buyer shall not assume or become
liable for any obligations and Liabilities of the Seller
and/or the Business (including without limitation the
Division) with respect to the following:
(a) Any Liability or obligation arising out of any
Employee Benefit Plan maintained by or covering employees of
Division or to which Seller has made any contribution or under
which Seller could be subject to any liability;
(b) any liability or obligation for accounts
payable, intercompany payables, accrued installation and
warranty reserve, accrued expenses or taxes payable;
(c) Any losses, costs, expenses, damages, claims,
demands and judgments of every kind and nature (including the
defenses thereof and reasonable attorneys' and other
professional fees) related to or arising out of or in
connection with Seller's failure to comply with the Bulk
Transfer Act or any similar statute as enacted in any
jurisdiction, domestic or foreign;
(d) Any Liability or obligation arising out of any
breach by Seller prior to the Effective Date of any provision
of any Contract to which the Seller is a party;
(e) Any Liability of Division with respect to any
claim or cause of action, regardless of when made or asserted,
which arises (i) out of or in connection with the business and
operations of Division prior to the Effective Date, (ii) with
respect to any product sold or manufactured or any service
provided by Division on or prior to the Effective Date,
including without limitation, any liability or obligation (A)
pursuant to any express or implied representation, warranty,
agreement, or guarantee made by Seller or (B) imposed or
asserted to be imposed by operation of law, in connection with
any service performed or product designed, manufactured, sold,
or leased by or on behalf of Division prior to the Effective
Date, including without limitation, any claim related to any
product delivered in connection with the performance of such
service and any claims seeking to recover for consequential
damage, lost revenue, or income, including pursuant to any
doctrine of product liability, or (iii) arising out of or in
connection with the business and operations of Division prior
to the Effective Date under any federal, state, or local law,
rule or regulation relating to (A) environmental protection or
clean-up, (B) taxation, or (C) employment or termination of
employment;
(f) Any Liabilities or obligations relating to the
Excluded Assets;
(g) Any Liabilities or obligations relating to
sales and use, transfer, documentary, income or other taxes
levied on the transfer of the Acquired Assets, payroll taxes,
unclaimed salaries, and vacation liabilities arising prior to
or related to acts or events prior to the Effective Date;
(h) Any Liability or obligation, arising prior to
or as a result of the Closing, to any employee, agent or
independent contractor of the Seller, whether or not employed
by the Buyer after the Closing, or under any benefit
arrangement with respect thereto;
(i) Any Liability or obligation arising or incurred
by Seller in connection with the negotiation, preparation and
execution of this Agreement and the consummation of the
transactions contemplated herein, including, without
limitation, fees and expenses of its counsel, accountants, and
other experts; and
(j) All wages, commissions, vacation, holiday and
sick pay obligations of Division with respect to its employees
for the calendar year in which the Closing Date occurs,
accrued through the Closing Date, and all bonuses and fringe
benefits as to such employees accrued through the Closing
Date, and the severance pay obligations to employees referred
to in Section 2.07 resulting from the consummation of the
transactions contemplated in this Agreement.
"Existing Agreement" has the meaning set forth in Section
7.03 herein.
"Extremely Hazardous Substance" has the meaning set forth
in Section 302 of the Emergency Planning and Community Right-
to-Know Act of 1986, as amended.
"Financial Statements" has the meaning set forth in
Section 3.07.
"Furniture and Fixtures" means all furniture, fixtures,
tangible personal property, and leasehold improvements owned
by Seller and used by the Division in Pennsylvania or Colorado
in the conduct of the Business including, without limitation,
the items listed in Schedule IV hereto, and any and all
assignable warranties covering such furniture, fixtures, and
leasehold improvements.
"GAAP" means United States generally accepted accounting
principles in effect from time to time.
"Indemnified Party" has the meaning set forth in Section
8.04.
"Indemnifying Party" has the meaning set forth in Section
8.04.
"Infringement Payments" means the patent infringement
payments required to be paid by Buyer to Seller under the
Existing Agreement.
"Intellectual Property" means (a) all inventions (whether
patentable or unpatentable and whether or not reduced to
practice), all improvements thereto, and all patents, patent
applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions,
extensions, and reexaminations thereof, (b) all trademarks,
service marks, trade dress, logos, trade names, and corporate
names, together with all translations, adaptations,
derivations, and combinations thereof and including all
goodwill associated therewith, and all applications,
registrations, and renewals in connection therewith, (c) all
copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all
mask works and all applications, registrations, and renewals
in connection therewith, (e) all trade secrets and
confidential business information (including ideas, research
and development, know-how, formulaes, compositions,
manufacturing and production processes and techniques,
technical data, designs, drawings, specifications, customer
and supplier lists, pricing and cost information, and business
and marketing plans and proposals), (f) all computer software
(including data, object and source code, and related
documentation), (g) all other proprietary rights, and (h) all
copies and tangible embodiments thereof (in whatever form or
medium), collectively constituting all of the intellectual
property of the Division used in its business, whether owned
by or negotiated in the name of Seller or as to which Seller
has rights as a licensee and all rights thereunder.
"Inventory" means all goods (raw materials, work in
process and finished) held by the Division for use or sale in
its Business, all samples, promotional literature, and
supplies wherever located, together with all rights against
suppliers of the Inventory including, without limitation,
rights under express or implied warranties with respect to
such Inventory and Inventory previously sold by the Division
and rights to receive refunds or rebates in connection with
its purchase of the Inventory.
"Inventory Payments" means the payments to be made by
Buyer to Seller with respect to the Removal by Buyer of
Consigned Inventory, which shall be equal to (a) for finished
goods Consigned Inventory, the Selling Price thereof
multiplied by the applicable Payment Percentage set forth in
Schedule VI hereto and (b) for all other Consigned Inventory,
Seller's cost thereof.
"Knowledge" means actual knowledge and knowledge
reasonably assumed a Person would have after diligent
investigation.
"Liability" means any liability (whether known or
unknown, asserted or unasserted, absolute or contingent,
accrued or unaccrued, liquidated or unliquidated, or due or to
become due), including any liability for Taxes.
"Licensing Agreements" means Contracts pursuant to which
the Seller licenses Intellectual Property or Technical Assets
as licensor and has received payment or receives royalties or
other consideration, including, without limitation, Contracts
with Contex, Ideal and Vidar.
"Most Recent Financial Statements" has the meaning set
forth in Section 3.07.
"Most Recent Fiscal Month End" has the meaning set forth
in Section 3.07.
"Most Recent Fiscal Year End" has the meaning set forth
in Section 3.07.
"Multi-employer Plan" has the meaning set forth in ERISA
Section 3(37).
"Ordinary Course of Business" means the ordinary course
of business of the Business consistent with past custom and
practice (including with respect to quantity and frequency).
"Other Assets" means the assets of the Division of the
type identified as such in the Most Recent Balance Sheet and
all other assets of the Division (other than the Excluded
Assets) not otherwise specifically described in the definition
of Acquired Assets.
"Payment Percentage" means the applicable percentage of
the Selling Prices of the Division's products listed on
Schedule VI hereto used to calculate the Inventory Payment to
be made by Buyer to Seller for finished goods Consigned
Inventory.
"Permits" means to the extent transfer is permitted under
applicable law or regulation, all licenses, permits,
certificates, and governmental authorizations of a Person,
franchises, approvals, orders, registrations, variances or
similar rights used or held for use in the conduct of a
Person's business.
"Person" means an individual, a partnership, a limited
liability company, a corporation, an association, a joint
stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department,
agency, or political subdivision thereof) or any other entity.
"Real Property" means all real property owned by a
Person, and all of the Person's right, title, and interest in
the buildings, fixtures, and improvements located thereon,
together with all water lines, rights of way, uses, licenses,
easements, hereditaments, tenements, and appurtenances
belonging or appertaining thereto and any and all assignable
warranties of third parties with respect thereto.
"Removal" means the taking of a unit of Consigned
Inventory from the designated location therefor.
"Reproworks" means (i) the color management software
product which is currently marketed by Seller under the name
of Reproworks (the "Current Reproworks") and (ii) for purposes
of Section 2.05, any color management software product sold by
Buyer after the Closing Date which (x) is the Current
Reproworks product, (y) is sold under the Reproworks name or
(z) uses significant elements of the closed loop color
management system as embedded in the Current Reproworks
product that were neither in the public domain on the Closing
Date nor used in Buyer's color management software on the
Closing Date or within sixty (60) days thereafter.
"Security Interest" means any mortgage, pledge, lien,
encumbrance, charge, or security interest, voluntary and
involuntary.
"Selling Price" means the actual sales price for the
Division's products listed on Schedule VI hereto.
"Survival Termination Date" means the third anniversary
of the Closing Date.
"Tangent Scanner" means the scanner products listed on
Schedule VI hereto.
"Target Prices" means the target sales prices for the
Division's products as set forth on Schedule VI hereto.
"Tax" means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits,
environmental (including taxes under Code Section 59A),
customs, duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever,
including any interest, penalty, or addition thereto, whether
disputed or not.
"Technical Assets" means (i) Reproworks color management
software and technology, (ii) 2000g Flatbed Scanner
technology, (iii)all trademarks, trademark applications,
copyrights, copyright applications, patent applications and
trade knowledge relating thereto, as well as related
documentation, designs, design rights, and files related to
all owned technologies as well as rights, where transferable,
to any licensed technology used by Division in the conduct of
its Business and (iv) all other technology related to
remaining products, including but not limited to, sheetfed
scanners, drum scanners and Unix software.
"Third Party Claim" has the meaning set forth in Section
8.04(a).
"Transfer Date" means the date on which Seller transfers
to Buyer title to an item of Consigned Inventory, which shall
be deemed to be the date of Removal of such item of Consigned
Inventory.
"2000g Flatbed Scanner" means (i) the color scanner
hardware product which is currently manufactured and marketed
by Seller under the name "2000g and 2000r Flatbed Scanner" and
(ii) for purposes of Section 2.05, any large format (D-size or
greater) color scanner hardware product manufactured and sold
by Buyer after the Closing Date which is (x) is the current
2000g or 2000r Flatbed Scanner Product, or (y) adopts a
flatbed configuration (i.e. a moving imaging system with the
target document mounted on a stationary piece of glass) and
which utilizes any significant design element embedded in the
current 2000g product that was neither in the public domain on
the Closing Date nor used in one or more of Buyer's scanner
hardware products on the Closing Date.
"Unreasonable Warranty Costs" means total warranty costs
incurred in excess of $16,000 by Buyer between the Closing
Date and the end of the applicable warranty period with
respect to products sold by the Division prior to the Closing
Date.
2. Basic Transaction.
2.01 Purchase and Sale of Assets.
(a) On the Closing Date and subject to the
terms and conditions of this Agreement, the Buyer agrees to
purchase from the Seller, and the Seller agrees to sell,
transfer, convey, and deliver to the Buyer, all of the
Acquired Assets at the Closing for the consideration specified
in this Section 2.
(b) After the Closing Date and subject to the
terms and conditions of this Agreement, Seller will sell the
Consigned Inventory to Buyer upon Removal of such Inventory.
2.02 Assumption of Liabilities. On the Closing Date
and subject to the terms and conditions of this Agreement, the
Buyer agrees to assume and become responsible for all of the
listed Assumed Liabilities at the Closing. The Buyer will not
assume or have any responsibility, however, with respect to
(i) any Excluded Liabilities or (ii) any debt, obligation or
Liability of the Seller not expressly included within the
definition of Assumed Liabilities. Seller will use its best
efforts to pay or satisfy as and when due all of its
Liabilities not assumed by Buyer.
2.03 Purchase Price. In addition to the assumption
of the Assumed Liabilities, as the purchase price for the
Acquired Assets, the Buyer agrees to pay to the Seller
$105,000 payable by wire transfer or delivery of other
immediately available funds on the Closing Date and certain
royalty payments based upon the sale of certain Technical
Assets by Buyer as more fully described in Section 2.05 below.
2.04 Payments for Consigned Inventory. After
Closing, Consigned Inventory shall be paid for by Buyer to
Seller as follows, (subject to the provisions of Section 2.06
below):
(a) If finished goods Consigned Inventory is
sold by Buyer for its Target Price listed in Schedule VI, then
the Payment Percentage shall be 78%, so that under such
circumstances, Buyer shall pay to Seller $19,500 for each
36SF, $27,300 for each 44SF, $39,000 for each 2000g Flatbed
Scanner, and $58,500 for each Drum. If the Selling Price of
an item of finished goods Consigned Inventory exceeds its
Target Price, then the Payment Percentage will decrease by .5%
for each full $1,000 the Selling Price is above the Target
Price. If the Selling Price of an item of finished goods
Consigned Inventory is less than its Target Price, then the
Payment Percentage will increase by .5% for each full $1,000
the Selling Price is below the Target Price, up to a maximum
of 85%.
(b) Raw materials, work in process and parts
Consigned Inventory shall be paid for at Division's Seller's
actual cost as such Inventory is Removed by Buyer, except that
Buyer shall not be required to make any payments for parts
Removed for the performance of warranty support or maintenance
services (i) under the contracts listed in Schedule III until
the expiration or extension of their present term and (ii) for
all monochrome scanners included in the Consigned Inventory
and sold after the Closing Date.
(c) Buyer shall not be required to pay for
Consigned Inventory which is sold by Buyer after the Closing
Date but is defective and is returned by the purchaser thereof
for credit. Buyer shall be reimbursed by Seller for all
reasonable warranty costs incurred by Buyer with respect to
Consigned Inventory sold by Buyer after the Closing Date. The
reimbursement will be reconciled by Buyer and Seller in their
monthly reconciliation meetings.
(d) With respect to the Consigned Inventory
Removed pursuant to the terms of Sections 2.04(a) and (b),
each month Buyer shall report to Seller the number of items of
Consigned Inventory Removed, the Selling Price and applicable
Payment Percentage for the respective items of finished goods
Consigned Inventory sold (or the book value of the other
Consigned Inventory Removed), the date on which such Inventory
was Removed and the Inventory Payment owed to Seller
(collectively referred to as the "Inventory Sales
Information"). Buyer shall provide supporting documentation
to Seller with respects to the calculation of the Inventory
Payment (the "Supporting Documentation"). Inventory Sales
Information and Supporting Documentation shall be provided to
Seller within seven Business Days after the end of each
calendar month. Seller shall have the right to audit
(including the right to physically inspect the Consigned
Inventory) at its expense, during normal business hours and
after notice to Buyer, the Inventory Sales Information and
Supporting Documentation.
(e) Payment of the amounts shown to be owed as
Inventory Payments on each Inventory Sales Information report
shall be paid by Buyer to Seller forty-five (45) days after
the end of the month covered by such report. If Buyer does
not receive payment on any sale of a unit of Consigned
Inventory on which an Inventory Payment has been paid under
this Section 2.04, then Buyer shall receive a credit against
future Inventory Payments in an amount equal to the amount of
the Inventory Payment made on such unit, except that if the
unit is returned then Buyer shall receive a credit in an
amount equal to the excess of the Inventory Payment made
thereon over Seller's actual manufacturing cost of the
Consigned Inventory sold ("Seller's Cost"). If the unit of
Consigned Inventory returned is sold within three (3) months
after return, the proceeds thereof shall be paid by Buyer to
Seller up to the amount previously credited to Buyer, with any
balance retained by Buyer. If such returned unit has not been
sold at the end of the three month period, Buyer will be
entitled to a credit in an amount equal to Seller's Cost and
the unit shall be deemed returned to Consigned Inventory. For
purposes of this Section, returned items shall be sold before
Buyer sells the same item out of Consigned Inventory.
(f) Seller shall have the right at its cost
and expense to review Buyer's books and records relating to
the Inventory Sales Information and Supporting Documentation
to verify their accuracy.
(g) Immediately after Closing, Buyer and
Seller will jointly conduct a physical count of the Consigned
Inventory and make any adjustment to Schedules I and II to
reflect the actual Consigned Inventory.
2.05 Technical Asset Payments. Technical Assets
shall be paid for as follows:
(a) With respect to Reproworks, Buyer shall
pay to Seller a royalty of 25% of the list price for each unit
of Reproworks software sold by Buyer independently or with
other than a Tangent Scanner which was included in the
Consigned Inventory. Such royalties shall be paid until a
cumulative aggregate total royalty of $1,800,000 has been paid
(subject to the terms of Section 2.06 below). If $360,000 in
such royalty payments have not been paid by Buyer to Seller
within eighteen (18) months of Closing, the intellectual
property rights for Reproworks, including all improvements,
will be licensed by Buyer to Seller on a royalty-free and non-
exclusive basis, unless Buyer pays the unpaid balance of the
$360,000. The list price for Reproworks (currently $7,995.00)
will be reviewed by Buyer and Seller at six month intervals
and will be evaluated against comparable Coala or Colorado
packages or other mutually agreed upon benchmarks.
(b) With respect to 2000g Flatbed Scanners,
Buyer shall pay Seller a royalty for the related technology of
$5,000 per 2000g Flatbed Scanner sold or 10% of the sale price
of such Scanner, whichever is higher, until a cumulative
aggregate royalty payment of $1,000,000 has been paid by Buyer
to Seller (subject to the terms of Section 2.06). One-half of
all amounts paid by Buyer for improvements to the 2000g
Flatbed Scanner will be applied as a reduction to the
$1,000,000 cumulative aggregate maximum royalty payment to
Seller, with a maximum reduction in royalty of $250,000. The
per Scanner royalty will be reduced at a rate of .5% of the
total amount expended with a maximum per unit royalty
reduction of $2,500. Any new royalty structure will take
effect on the commercial release of a new generation of 2000g
Flatbed Scanners. If $60,000 in royalty payments with respect
to the 2000g Scanner have not been paid by Buyer to Seller
within twelve (12) months after the Certification Date, the
2000g Flatbed Scanner Consigned Inventory and the intellectual
property rights relating to the 2000g Flatbed Scanner,
including improvements thereto (collectively, the "2000g
Assets") will be conveyed by Buyer to Seller unless Buyer pays
the unpaid balance of the $60,000.
(c) Each month Buyer shall report to Seller:
(1) the number of copies of Reproworks and 2000g Flatbed
Scanner units sold for which royalties are payable under
Sections 2.05(a) and (b) above; (2) the Selling Price of each;
(3) the amount paid for each copy and unit sold; (4) the date
on which each copy and unit were sold; and (5) the royalty
payment owed to Seller under this Section 2.05 (collectively
referred to as the "Royalty Sales Information"). Buyer shall
provide supporting documentation to Seller with respects to
the calculation of the royalty payments (the "Supporting
Documentation"). Royalty Sales Information and Supporting
Documentation shall be provided to Seller within seven (7)
Business Days after end of each calendar month. Seller shall
have the right to audit at its expense the Royalty Sales
Information and Supporting Documentation.
(d) Payment of the royalties shown to be owed
on each Royalty Sales Information report shall be paid by
Buyer to Seller forty-five (45) days after the end of the
month covered by such report.
(e) Seller shall have the right at its cost
and expense to review Buyer's books and records relating to
the Royalty Sales Information and Supporting Documentation to
verify their accuracy.
(f) If Buyer does not receive payment on any
sale for which a royalty has been paid to Seller under this
Section 2.05, then Buyer shall receive a credit against future
royalties in the amount of the royalty paid on such
uncollected sale.
(g) Buyer will give Seller prior notice of any
proposed project for the improvement of the 2000g Flatbed
Scanner.
2.06 Maximum Purchase Price; Buyer's Discretion.
(a) The total consideration to be paid by
Buyer to Seller under Sections 2.03, 2.04 and 2.05 above and
this entire Agreement shall not exceed $4,000,000 less the sum
of: (i) all Accounts Receivable collected by Seller and (ii)
all reductions to the royalties payable under Section 2.05(b);
once such consideration is paid, Buyer shall have no further
obligation to make any payments under Sections 2.04 and 2.05.
Collections of the Accounts Receivable shall be reported by
Seller to Buyer on a monthly basis within seven (7) Business
Days after the end of each calendar month (such report to
include all collections during such month and also since the
Closing Date) and Buyer shall have the right at its cost and
expense to review Seller's books and records relating to the
collection of the Accounts Receivable.
(b) Nothing in this Agreement shall reduce or
limit Buyer's control over the operation of the Business or
require Buyer to accept or not accept any proposed sale of
Consigned Inventory or of Reproworks or 2000g Flatbed
Scanners; all such decisions shall be in Buyer's sole
discretion made in good faith.
(c) All payments and credits hereunder shall
be on a "net" basis.
2.07 Employees. Following Closing, Buyer may employ
those of Seller's employees not covered by Section 7.04 herein
and working in the Division as Buyer, in its sole discretion,
so chooses. All severance expenses associated with any
employees of the Division not hired by Buyer shall be paid for
by Seller in accordance with its current practice.
2.08 The Closing. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take
place at the offices of Blank Rome Comisky & McCauley LLP in
Philadelphia, PA, commencing at 9:00 a.m. local time or
September, 1999 or such other date as the Parties may mutually
determine (the "Closing Date"); provided, however, that the
Closing Date shall be no later than September 30, 1999.
2.09 Allocation. The Parties agree to allocate the
Purchase Price among the Acquired Assets in accordance with
the allocation schedule attached hereto as Schedule VII.
3. Representations and Warranties of the Seller. The
Seller represents and warrants to the Buyer that the
statements contained in this Section 3 are true, correct and
complete as of the date of this Agreement and will be true,
correct and complete as of the Closing Date (as though made
then and as though the Closing Date were substituted for the
date of this Agreement throughout this Section 3), except as
set forth in the disclosure schedule accompanying this
Agreement and initialed by the Parties (the "Disclosure
Schedule"). The Disclosure Schedule will be arranged in
paragraphs corresponding to the lettered and numbered
paragraphs contained in this Section 3.
3.01 Organization of Seller. Seller is a corporation
organized, existing, and in good standing under the laws of
Pennsylvania, its jurisdiction of its incorporation and is
qualified to do business in and in good standing under the
laws of all of the jurisdictions in which it is required to be
so qualified.
3.02 Authorization of Transaction. Seller has the
corporate power and authority to execute and deliver the
Acquisition Documents and to perform its obligations in all
respects as required by the Acquisition Documents. The board
of directors of Seller has duly authorized the execution,
delivery, and performance of the Acquisition Documents by
Seller and the consummation of the transactions contemplated
by this Agreement. This Agreement has been, and all of the
other Acquisition documents will on the Closing Date be, duly
executed and delivered by the Seller and each constitutes and
will constitute the legal, valid and binding obligation of the
Seller enforceable in accordance with its Terms.
3.03 Non-contravention. Neither the execution and
the delivery of the Acquisition Documents, nor the
consummation or performance of the transactions contemplated
in the Acquisition Documents, will (a) violate any
constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, or other restriction of any government,
governmental agency, or court to which Seller is subject or
any provision of the articles or certificate of incorporation
or bylaws of Seller or (b) except with respect to any required
consents to assignment by third parties, (including, but not
limited to, consents relating to Assumed Contracts), conflict
with, result in a breach of, constitute a default under,
result in the acceleration of, create in any party the right
to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license or
instrument, to which Seller is a party or by which it is bound
or to which any of the Acquired Assets or Consigned Inventory
is subject (or result in the imposition of any Security
Interest upon any of the Acquired Assets or Consigned
Inventory) except where the violation, conflict, breach,
default, acceleration, termination, modification,
cancellation, failure to give notice, or Security Interest
would not have a material adverse effect on the business,
financial condition, operations, or results of operations of
the Business or on the ability of the Parties to consummate
the transactions contemplated in the Acquisition Documents.
Seller does not need to give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any
government or governmental agency in order for the Parties to
consummate the transactions contemplated in the Acquisition
Documents, except where the failure to give notice, to file,
or to obtain any authorization, consent or approval would not
have a material adverse effect on the business, financial
condition, operations, or results of operations of the
Business or on the ability of the Parties to consummate the
transactions contemplated in the Acquisition Documents.
3.04 Brokers' Fees. The Seller has no Liability or
obligation to pay any fees or commissions to any broker,
finder, or agent with respect to the transactions contemplated
in the Acquisition Documents except as disclosed in Section
3.04 of the Disclosure Schedule.
3.05 Title to Assets. Seller has and is transferring
to Buyer good and marketable title to, or a valid leasehold
interest in, the Acquired Assets, free and clear of all
Security Interests or restrictions on transfer. On the
Removal Date, Seller will transfer to Buyer good and
marketable title to the Consigned Inventory, free and clear of
all Security Interests or restrictions on transfer.
3.06 Predecessors. The Division is a result of the
combination of Seller's monochrome scanner business which was
conducted under the Scangraphics name and its color scanner
business which is conducted under the Tangent Imaging Systems
name. The color scanner business became a division of the
Seller through the merger of Tangent Engineering Inc. into
Seller in December 1998; Tangent Engineering Inc. was acquired
by Seller in 1995.
3.07 Financial Statements. Attached as part of
Section 3.07 of the Disclosure Schedule are the following
financial statements (collectively the "Financial
Statements"): (i) unaudited balance sheets and statements of
income as of and for the fiscal year ended December 31, 1997
and 1998 (the "Most Recent Fiscal Year End") for Division; and
(ii) unaudited balance sheet ("Most Recent Balance Sheet") and
statements of income as of and for the eight (8) months ended
August 31, 1999 (the "Most Recent Fiscal Month End") for
Division (the "Most Recent Financial Statements"). The
Financial Statements (including the notes thereto) have been
prepared in accordance with GAAP applied on a consistent basis
throughout the periods covered thereby, present fairly the
financial condition of Division as of such dates and the
results of operations of Division for such periods, and are
consistent with the books and records of Division. As of the
dates of the Financial Statements, Division did not have any
Liabilities or obligations (secured or unsecured, whether
accrued, absolute, direct, indirect, contingent or otherwise,
and whether due or to become due) which are not fully accrued
or reserved against in the Financial Statements. The
Financial Statements do not contain any items of special or
non-recurring income, or other income not earned in the
Ordinary Course of Business. Division has not engaged in any
transaction, maintained any bank account, or used any of the
funds of the Seller, except for transactions, bank accounts,
and funds which have been and are reflected in the normally
maintained books and records of Division. The books, records,
and accounts of Division accurately and fairly reflect the
transactions and the assets and liabilities of Division.
3.08 Events Subsequent to the Most Recent Fiscal
Month End. Since the Most Recent Fiscal Month End, there has
not been any material adverse change, singly or in the
aggregate, in the business, financial condition, operations,
results of operations, liabilities, assets, earnings or
prospects of Division nor has there been any event which has
had or may reasonably be expected to have a material adverse
effect on any of the foregoing. Without limiting the
generality of the foregoing, since the Most Recent Fiscal
Month End:
(a) Division has not sold, leased,
transferred, or assigned any of their assets, tangible or
intangible, other than for a fair consideration in the
Ordinary Course of Business;
(b) Division has not entered into any
agreement, contract, lease, or license (or series of related
agreements, contracts, leases, and licenses) with a supplier
or customer or agent either (i) involving more than $25,000
(ii) outside the Ordinary Course of Business or (iii) where
any other division of Seller (other than payment for services
rendered in the Ordinary Course of Business) or any Affiliate
of Seller is a party or has an interest in the other party to
such agreement.
(c) No party (including Division) has
accelerated, terminated, materially modified, or canceled any
agreement, contract, lease, or license (or series of related
agreements, contracts, leases, and licenses) involving more
than $25,000 to which Division is a party or by which it is
bound;
(d) Division has not imposed any Security
Interest upon any of its assets, tangible or intangible;
(e) Division has not made any capital
expenditure (or series of related capital expenditures) either
involving more than $25,000 or outside the Ordinary Course of
Business;
(f) Other than Excluded Assets, Division has
not made any capital investment in, any loan to, or any
acquisition of the Securities or substantially all of the
assets of, any other Person;
(g) Division has not issued any note, bond, or
other debt security or created, incurred, assumed, or
guaranteed any indebtedness or capitalized lease obligations
or incurred any obligation or Liability of any nature except
in the Ordinary Course of Business;
(h) Division has not delayed or postponed the
payment of accounts payable and other Liabilities or
accelerated the collection of accounts receivable;
(i) Division has not canceled, compromised,
waived, or released any right or claim (or series of related
rights and claims) either involving more than $5,000
individually or outside the Ordinary Course of Business;
(j) Division has not granted, disposed of, or
allowed to lapse any license or sublicense of any rights under
or with respect to any of its Intellectual Property;
(k) Division has not experienced any material
damage, destruction, or loss (whether or not covered by
insurance) to its property;
(l) Division has not made any loan or payment
to, or entered into any other transaction with any of its
officers or employees, any other division of Seller or any
Affiliate of Seller outside the Ordinary Course of Business;
(m) Division has not entered into any
employment contract outside the Ordinary Course of Business or
collective bargaining agreement, written or oral, or
materially modified the terms of any existing such contract or
agreement or experienced any organized slowdown, work
interruption, strike or work stoppage;
(n) Division has not granted any increase in
the compensation of any of its directors, officers, or
employees outside the Ordinary Course of Business;
(o) Division has not adopted, amended,
materially modified or terminated any bonus, profit-sharing,
incentive, severance, or other plan, contract, or commitment
for the benefit of any of its directors, officers, and
employees (or taken any such action with respect to any other
Employee Benefit Plan);
(p) Division has not made any material change
in employment terms for any of its officers and employees
outside the Ordinary Course of Business;
(q) Division has not made or pledged to make
(i) any charitable or other contribution outside the Ordinary
Course of Business or in excess of $1,000 or (ii) any
political contributions;
(r) Division has not paid any amount to any
third party with respect to any Liability or obligation other
than those paid and incurred in the Ordinary Course of
Business;
(s) There has not been any other occurrence,
event, incident, action, failure to act, or transaction
outside the Ordinary Course of Business involving Division;
(t) Division has not made any material change
in any method of accounting, or accounting principle, practice
or policy; and
(u) Division has not committed (other than
non-binding commitments) to any of the foregoing.
3.09 Undisclosed Liabilities. Division has no
Liability and there is no reasonable Basis for any present or
future action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand against either of them
giving rise to any Liability, except for (i) Liabilities
included or disclosed in the Most Recent Balance Sheet; (ii)
Liabilities which have arisen after the Most Recent Fiscal
Month End in the Ordinary Course of Business (none of which
results from, arises out of, relates to, is in the nature of,
or was caused by any breach of contract, breach of warranty,
tort, infringement, or violation of law by Seller), and (iii)
Liabilities listed or identified in Section 3.09 of the
Disclosure Schedule.
3.10 Legal Compliance. The Seller has complied with
all applicable laws (including rules, regulations, codes,
plans, injunctions, judgments, orders, decrees, and rulings
thereunder) of federal, state, local, and foreign governments
(and all agencies thereof), and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand, or
notice has been filed or commenced or is threatened against
the Seller alleging any failure so to comply, and to Seller's
Knowledge, there is no reasonable Basis for any such action.
3.11 Tax Matters.
3.11.1 All Taxes owed by Seller have been
paid. There is no dispute or claim concerning any Tax
Liability of Seller. There are no Security Interests on any
of the Acquired Assets or Consigned Inventory that arose or
may arise as a result of or in connection with any failure (or
alleged failure) to pay any Tax.
3.11.2 Seller has withheld and paid or will
pay all Taxes required to have been withheld and paid in
connection with amounts paid by or to, or owing to, any
employee, officer, director, independent contractor, creditor,
stockholder, customer, or other third party as of the
Effective Date.
3.11.3 Seller files Tax returns in the states
listed in Section 3.11 of the Disclosure Schedule.
3.12 Accounts Receivable. The Division's Accounts
Receivable on the date hereof are as set forth on Section 3.12
to the Disclosure Schedule.
3.13 Intellectual Property.
3.13.1 Division owns or has the right to use
pursuant to license, sublicense, agreement, or permission all
Intellectual Property used by Division in the operation of the
Business as currently conducted. Each item of Intellectual
Property owned or used by Division immediately prior to the
Closing hereunder will be owned or available for use by the
Buyer on identical terms and conditions immediately subsequent
to the Closing provided that the required consents to
assignments are obtained, if required. Seller has taken all
reasonably necessary action to maintain and protect each item
of Intellectual Property that Division owns or uses. All fees
regarding such Intellectual Property due on or before the
Closing have been paid in full by Seller.
3.13.2 Division has not interfered with,
infringed upon, misappropriated, or otherwise misused any
Intellectual Property rights of third parties, and Seller has
never received, nor does Seller have Knowledge of, any charge,
complaint, claim, demand, or notice alleging any such
interference, infringement, misappropriation, or misuse
(including any claim that Seller must license or refrain from
using any Intellectual Property rights of any third party). To
Seller's Knowledge, no third party has interfered with,
infringed upon, misappropriated, or otherwise misused any
Intellectual Property rights of or used by the Division.
3.13.3 Section 3.13.3 of the Disclosure
Schedule identifies each patent and each trademark and service
mark registration which has been issued to Seller with respect
to any of its Intellectual Property used by Division,
identifies each pending patent application or application for
registration of a trademark or service mark which Seller has
made with respect to any of such Intellectual Property, and
identifies each license, agreement, or other permission which
Seller has granted to any third party with respect to any of
such Intellectual Property (together with any exceptions) (the
"IP Licenses"). Except as set forth in Section 3.13.3 of the
Disclosure Schedule, Seller has delivered to the Buyer correct
and complete copies of all such patents, trademarks,
applications, licenses, agreements, and permissions (as
amended) and has made available to the Buyer correct and
complete copies of all other written documentation evidencing
ownership and prosecution (if applicable) of each such item.
Section 3.13.3 of the Disclosure Schedule also identifies each
trade name or unregistered trademark or service mark used by
Seller in connection with the Business and any goods or
services with which each name or mark was or is used. With
respect to each item of Intellectual Property required to be
identified in Section 3.13.3 of the Disclosure Schedule,
except as set forth in Section 3.13.3 of the Disclosure
Schedule: (a) the Seller possesses all right, title, and
interest in and to the item, free and clear of any Security
Interest, license, or other restriction; (b) the item is not
subject to any outstanding injunction, judgment, order,
decree, ruling, or charge; (c) no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand is
pending or threatened, which challenges the legality,
validity, enforceability, use, or ownership of the item;(d)
the Seller has never agreed to indemnify any Person (other
than purchasers of the Division's Products) for or against any
interference, infringement, misuse or misappropriation with
respect to the item; and (e) no IP License contains any term,
provision or conditions which (i) reduces the royalty payable
thereunder, (ii) grants to the licensee thereunder any rights
to or in any new inventions or improvements to the existing
Intellectual Property or (iii) in any other way adversely
affects the Intellectual Property, Seller's (and therefore
Buyer's) rights therein or use thereof and/or Buyer's ability
to conduct adequate Business.
3.13.4 Section 3.13.4 of the Disclosure
Schedule identifies each item of Intellectual Property that
any third party owns and that Seller uses in the Business of
Division. No Intellectual Property of a third party is used
except pursuant to license, sublicense, agreement, or
permission and the Seller has delivered to the Buyer correct
and complete copies of any such licenses, sublicenses,
agreements, and permissions relating thereto (as amended to
date). With respect to each item of Intellectual Property
required to be identified in Section 3.13.4 of the Disclosure
Schedule: (a) the license, sublicense, agreement, or
permission covering the item is legal, valid, binding,
enforceable, and in full force and effect, except to the
extent that the same may be limited by insolvency, bankruptcy,
reorganization, moratorium, or similar laws affecting the
enforcement of creditors' rights generally, or by general
principles of equity; (b) subject to obtaining consent from
the other parties thereto, if required, the license,
sublicense, agreement, or permission will continue to be
legal, valid, binding, enforceable, and in full force and
effect, except to the extent that the same may be limited by
insolvency, bankruptcy, reorganization, moratorium, or similar
laws affecting the enforcement of creditors' rights generally,
or by general principles of equity on identical terms (subject
to the terms of the consent) following the consummation of the
transactions contemplated by the Acquisition Documents; (c) no
party to the license, sublicense, agreement, or permission is
in breach or default, and no event has occurred which with
notice or lapse of time would constitute a breach or default
or permit termination, modification, or acceleration
thereunder; (d) no party to the license, sublicense,
agreement, or permission has repudiated any provision thereof;
(e) the underlying item of Intellectual Property is not
subject to any outstanding injunction, judgment, order, decree
or ruling; (g) no action, suit, proceeding, hearing,
investigation, complaint, claim, or demand is pending or
threatened which challenges the legality, validity, or
enforceability of the underlying item of Intellectual
Property; and (h) Seller has not granted (except by sale of
products in the ordinary course of the Division's business)
any sublicense or similar right with respect to the license,
sublicense, agreement, or permission.
3.13.5 The Buyer will not interfere with,
infringe upon or misappropriate, any intellectual property
rights of third parties as a result of the continued operation
of the Business as presently conducted by Seller.
3.14 Tangible Assets. Seller owns or leases all
machinery, equipment, and other tangible assets which are
reasonably necessary for the conduct of Business as presently
conducted. Each tangible asset used by Division listed in
Schedule IV hereto is in good operating condition and is
suitable for the purposes for which it presently is used.
Schedule IV lists all Equipment and Furniture and Fixtures
with an original Purchase Price greater than $1,000 owned,
leased or used in the Business as of August 31, 1999 and
indicates the owner of each such listed item.
3.15 Inventory. The Consigned Inventory as listed on
Schedules I and II consists of raw materials and supplies,
manufactured and purchased parts, work in process, and
finished goods, each of which is usable or saleable in the
Ordinary Course of Business. On each Transfer Date, Seller
will transfer to Buyer good and marketable title to the
Consigned Inventory being sold to Buyer, free and clear of all
Security Interests and encumbrances.
3.16 Contracts. Section 3.16 of the Disclosure
Schedule lists the following Contracts to which the Seller is
a party relating to Division or its Business:
(a) any Contract for the lease of personal
property to or from any Person providing for lease payments in
excess of $3,000 per annum;
(b) any Contract (the performance of which will
by its express terms extend over a period of more than one
year) for the purchase or sale of raw materials, commodities,
supplies, products, or other personal property, or for the
furnishing or receipt of services, or cannot be terminated on
30 days' notice, or which is expected to result in a loss to
Seller in excess of $10,000, or involves consideration in
excess of $25,000;
(c) any agreement concerning a partnership or
joint venture, and any distribution, dealer, representative,
agent, franchise, commission or other similar sales agreement;
(d) any agreement under which Division has
created, incurred, assumed, or guaranteed any indebtedness, or
any capitalized lease obligation, in excess of $5,000 or under
which it has imposed a Security Interest on any of its assets,
tangible or intangible;
(e) any agreement concerning confidentiality,
non-solicitation or non-competition;
(f) any agreement to which any of Seller's
Affiliates are a party;
(g) any profit sharing, phantom stock, stock
option, stock purchase, stock appreciation, deferred
compensation, severance, or other compensation plan or
arrangement for the benefit of its current or former
directors, officers, and employees;
(h) any collective bargaining agreement;
(i) any agreement for the employment (other
than at will) of any individual on a full-time, part-time,
consulting, or other basis providing annual compensation in
excess of $50,000 or providing severance benefits;
(j) any agreement under which Division has
advanced or loaned any amount to any of its officers and
employees or any of their Affiliates;
(k) any agreement under which the consequences
of a default or termination could have a material adverse
effect on the business, financial condition, operations, or
results of operations, assets, Liabilities or prospects of
Division;
(l) any agreement or commitment for any
charitable or political contributions;
(m) any agreement not in the Ordinary Course of
Business; and/or
(n) any other agreement (or group of related
agreements) the performance of which involves consideration in
excess of $20,000.
Seller has delivered to the Buyer a correct and complete copy
of each written Contract (as amended) listed in Section 3.16
of the Disclosure Schedule (as amended) and a written summary
setting forth the terms and conditions of each oral Contract
referred to in Section 3.16 of the Disclosure Schedule which
is part of the Assumed Contracts. With respect to each such
agreement: (a) the agreement is legal, valid, binding,
enforceable, and in full force and effect, except to the
extent that the same may be limited by insolvency, bankruptcy,
reorganization, moratorium, or similar laws affecting the
enforcement of creditors' rights generally, or by general
principles of equity; (b) subject to obtaining consents from
the other parties thereto, if required, the agreement will
continue to be legal, valid, binding, enforceable, and in full
force and effect, except to the extent that the same may be
limited by insolvency, bankruptcy, reorganization, moratorium,
or similar laws affecting the enforcement of creditors' rights
generally, or by general principles of equity on identical
terms following the consummation of the transactions
contemplated in the Acquisition Documents; (c) no Person is in
material breach or default, and no event has occurred which
with notice or lapse of time would constitute a material
breach or default, or permit termination, modification, or
acceleration, under the agreement; and (d) no Person has
repudiated any provision of the agreement. Seller has not
retained for its own benefit any contracts for sales of
finished goods where the goods have not been shipped and an
invoice issued except for the two contracts for sales to Saudi
Arabia set forth in Schedule V hereto.
3.17 Intentionally Omitted.
3.18 Powers of Attorney. There are no outstanding
powers of attorney executed on behalf of Division.
3.19 Insurance. Section 3.19 of the Disclosure
Schedule sets forth the following information with respect to
each insurance policy (including policies providing property,
casualty, liability, errors and omissions and workers'
compensation coverage and bond and surety arrangements) to
which Seller has been a party, a named insured, or otherwise
the beneficiary of coverage at any time within the past five
(5) years as related to Division: (a) the name, address, and
telephone number of the agent; (b) the name of the insurer,
the name of the policyholder, and the name of each insured;
(c) the policy number and the period of coverage; (d) the
scope (including an indication of whether the coverage was on
a claims made, occurrence, or other basis) and amount
(including a description of how deductibles and ceilings are
calculated and operate) of coverage; and (e) a description of
any retroactive premium adjustments or other loss-sharing
arrangements. Section 3.19 of the Disclosure Schedule
describes any self-insurance arrangements affecting the
Seller. With respect to each such insurance policy, Seller is
not in material breach or default (including with respect to
the payment of premiums or the giving of notices).
3.20 Litigation. Section 3.20 of the Disclosure
Schedule sets forth each instance in which Division (a) is
subject to any outstanding injunction, judgment, order,
decree, ruling, or charge or (b) is a party or is threatened
in writing to be made a party, to any action, suit,
proceeding, hearing, or investigation of, in, or before any
court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any
arbitrator. None of the actions, suits, proceedings, hearings,
and investigations set forth in Section 3.20 of the Disclosure
Schedule are reasonably expected to have a material adverse
effect on the business, financial condition, operations, or
results of operations of Division. There are no facts or
circumstances that cause Seller to believe that any such
action, suit, proceeding, hearing, or investigation will be
brought against Division.
3.21 Warranty. Seller has no material Liability,
singly or in the aggregate (and to the Knowledge of Seller
there is no reasonable Basis for any present or future action,
suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand against any of them giving rise to any
material Liability, singly or in the aggregate) in connection
with the products and services provided by the Division prior
to the Closing Date. No product or service provided by
Division is subject to any guaranty, warranty, or other
indemnity beyond the standard terms and conditions disclosed
to Buyer. Section 3.21 of the Disclosure Schedule includes a
copy of the standard terms and conditions for all applicable
guaranty, warranty, and indemnity provisions.
3.22 Product Liability. Division has no Liability
(and there is no reasonable Basis for any present or future
action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand against Division giving rise to
any Liability) arising out of any injury to individuals or
property as a result of the ownership, possession, or use of
any product manufactured, sold, leased, or delivered by
Division prior to the Closing Date.
3.23 Employees.
3.23.1 The Division's employees are not
covered by any collective bargaining agreement and there is
no organizational effort presently being made or threatened by
or on behalf of any labor union with respect to employees of
Division. Section 3.23.1 of the Disclosure Schedule is a
complete list of all employees and consultants receiving wages
from Division for the three months ended on August 31, 1999.
3.23.2 Seller is in material compliance with
all applicable federal, state, local and foreign laws and
regulations concerning the employer-employee relationship and
with all agreements relating to the employment of its
employees and including applicable wage and hour laws, fair
employment laws, safety laws, worker compensation statutes,
unemployment laws, and social security laws. With respect to
Division, there are no pending or threatened, claims,
investigations, charges, citations, hearings, consent decrees,
or litigation concerning: wages, compensation, bonuses,
commissions, awards, or payroll deductions, equal employment
or violations of applicable laws regarding race, color,
religion, sex, national origin, age, handicap, veteran's
status, marital status, disability, or any other recognized
class, status, or attribute under any federal, state, local or
foreign equal employment law prohibiting discrimination;
representation petitions or unfair labor practices; grievances
or arbitrations pursuant to current or expired collective
bargaining agreements; occupational safety and health; workers
compensation; wrongful termination, negligent hiring, invasion
of privacy or defamation; immigration or any other claim based
on the employment relationship or termination of the
employment relationship (collectively "Labor Claims").
Division is not liable for any unpaid wages, bonuses, or
commissions (other than those not yet due) or any tax,
penalty, assessment, or forfeiture for failure to comply with
any of the foregoing.
3.24 Employee Benefits.
3.24.1 Section 3.24.1 of the Disclosure
Schedule lists each Employee Benefit Plan that Seller
maintains or to which it contributes on behalf of the
employees working in the Division.
3.24.2 Each such Employee Benefit Plan (and
each related trust, insurance contract, or fund) complies in
form and in operation in all material respects with the
applicable requirements of ERISA, the Code, and all other
applicable laws, and all contributions (including all employer
contributions and employee salary reduction contributions)
which are due have been paid to each such Employee Benefit
Plan (including an Employee Pension Benefit Plan) and all
contributions for any period ending on or before the Closing
Date which are not yet due have been paid to each such
Employee Benefit Plan (including an Employee Pension Benefit
Plan) or accrued in accordance with the past custom and
practice of the Seller. All premiums or other payments for
all periods ending on or before the Closing Date have been
paid with respect to each such Employee Benefit Plan
(including an Employee Welfare Benefit Plan).
3.24.3 With respect to Division, Seller does
not contribute to, has never contributed to, nor has Seller
ever been required to contribute to any Multi-employer Plan or
has any Liability (including withdrawal Liability) under any
Multi-employer Plan.
3.25 Guaranties. Division is not a guarantor or
otherwise liable for any Liability or obligation (including
indebtedness) of any other Person.
3.26 Environment, Health, and Safety.
3.26.1 Seller has complied in all material
respects with all Environmental, Health, and Safety Laws, and
no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been filed or
commenced against it alleging any failure so to comply.
3.26.2 Division has no Liability (and Division
has never treated, handled or disposed of any substance,
arranged for the disposal of any substance, exposed any
employee or other individual to any substance or condition, or
owned or operated any property or facility in any manner that
could reasonably form the Basis for any present or future
action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand against Division giving rise to
any Liability) for damage to any site, location, or body of
water (surface or subsurface), for any illness of or personal
injury to any employee or other individual, or for any reason
under any Environmental, Health, and Safety Law in effect on
the Closing Date.
3.26.3 All properties and equipment used in
the Business of Division have to Seller's knowledge been free
of asbestos, PCB's, methylene chloride, trichloroethylene,
1,2-trans-dichloroethylene, dioxins, dibenzofurans, and
Extremely Hazardous Substances.
3.26.4 Seller has not received any written or
oral notice, report or other information regarding any actual
or alleged violation of Environmental, Health, and Safety
Laws, or any liabilities or potential liabilities (whether
accrued, absolute, contingent, unliquidated or otherwise),
including any investigatory, remedial or corrective
obligations, relating to any of them or its facilities arising
under Environmental, Health, and Safety Laws.
3.26.5 To Seller's knowledge, none of the
following exists at any property or facility owned or operated
by Division: (a) underground storage tanks, (b) asbestos-
containing material in any form or condition, (c) materials or
equipment containing polychlorinated biphenyls, or (d)
landfills, surface impoundments, or disposal areas.
3.26.6 Neither the Seller nor its
predecessors or Affiliates has treated, stored, disposed of,
arranged for or permitted the disposal of, transported,
handled, or released any substance, including without
limitation any hazardous substance, or owned or operated any
property or facility (and no such property or facility is
contaminated by any such substance) in a manner that has given
or would give rise to liabilities, including any liability for
response costs, corrective action costs, personal injury,
property damage, natural resources damages or attorney fees,
pursuant to the Comprehensive Environment Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"),
the Solid Waste Disposal Act, as amended ("SWDA") or any other
Environmental, Health, and Safety Requirements.
3.26.7 Neither this Agreement nor the
consummation of the transaction that is the subject of this
Agreement will result in any obligations for site
investigation or cleanup, or notification to or consent of
government agencies or third parties, pursuant to any of the
so-called "transaction-triggered" or "responsible property
transfer" Environmental, Health, and Safety Laws or any other
law or regulation.
3.26.8 Neither the Seller, nor its
predecessors or Affiliates has, either expressly or by
operation of law, assumed or undertaken any liability,
including without limitation any obligation for corrective or
remedial action, of any other Person relating to
Environmental, Health, and Safety Laws.
3.26.9 To Seller's knowledge, no facts,
events or conditions relating to the past or present
facilities, properties or operations of Division will prevent,
hinder or limit continued compliance with Environmental,
Health, and Safety Laws, give rise to any investigatory,
remedial or corrective obligations pursuant to Environmental,
Health, and Safety Laws; or give rise to any other liabilities
(whether accrued, absolute, contingent, unliquidated or
otherwise) pursuant to Environmental, Health, and Safety Laws,
including without limitation any relating to onsite or offsite
releases or threatened releases of hazardous materials,
substances or wastes, personal injury, property damage or
natural resources damage.
3.27 [Intentionally Omitted]
3.28 Adequacy of Assets. The Acquired Assets and the
Consigned Inventory include all rights, properties, and assets
reasonably necessary to permit the Buyer to carry on the
Business as currently conducted by Division. There will be no
assets included in the Closing Balance Sheet which will not be
usable and useful in the conduct of the Business after the
Closing Date. The Parties agree that any unusable assets in
Colorado will be disposed of by the Buyer and that any
unusable assets in Pennsylvania which Buyer designates for
disposal will be disposed of by Seller. Seller agrees to make
available to Buyer (F.O.B. Pennsylvania) any usable assets
found in or among otherwise disposable assets in Pennsylvania.
3.29 Liabilities. No Liabilities included in the
Closing Balance Sheet will be overdue or incurred outside the
Ordinary Course of Business.
3.30 Disclosure. No representation or warranty of
the Seller in this Agreement or in any statement, certificate
or Schedule furnished by the Seller, or in connection with the
transactions contemplated herein, contains any untrue
statement of fact or omits to state any fact necessary in
order to make the statements contained therein not misleading.
Nothing in the Disclosure Schedule shall be deemed adequate to
disclose an exception to a representation or warranty unless
the Disclosure Schedule identifies the exception with
reasonable particularity and describes the relevant facts in
reasonable detail. The Disclosure Schedule will be arranged
in paragraphs corresponding to the numbered paragraphs
contained in this Article 3.
4. Representations and Warranties of the Buyer. The
Buyer represents and warrants to the Seller that the
statements contained in this Section 4 are correct and
complete as of the date of this Agreement and will be correct
and complete as of the Closing Date (as though made then and
as though the Closing Date were substituted for the date of
this Agreement throughout this Section 4), except as set forth
in the Disclosure Schedule. The Disclosure Schedule will be
arranged in paragraphs corresponding to the lettered and
numbered paragraphs contained in this Section 4.
4.01 Organization of the Buyer. The Buyer is a
corporation duly organized, validly existing, and in good
standing under the laws of the jurisdiction of its
incorporation.
4.02 Authorization of Transaction. The Buyer has full
power and authority (including full corporate power and
authority) to execute and deliver this Agreement and to
perform its obligations hereunder. This Agreement constitutes
the valid and legally binding obligation of the Buyer,
enforceable in accordance with its terms and conditions.
4.03 Noncontravention. Neither the execution and the
delivery of this Agreement, nor the consummation of the
transactions contemplated hereby will conflict with, or result
in a breach or violation of, any of the terms, conditions and
provisions of (i) any of Buyer's corporate documents, (ii) any
judgment, order, injunction, decree, or ruling of any court or
governmental authority to which Seller is subject, (iii) any
agreement, contract, lease, license or commitment to which
Buyer is party or to which it is subject, or (iv) applicable
laws to which Buyer is subject. The Buyer does not need to
give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or
governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement.
4.04 Brokers' Fees. The Buyer has no liability or
obligation to pay any fees or commissions to any broker,
finder, or agent with respect to the transactions contemplated
by this Agreement for which the Seller could become liable or
obligated.
5. Pre-Closing Covenants. The Parties agree as follows
with respect to the period between the execution of this
Agreement and the Closing.
5.01 General. Each of the Parties will use its best
efforts to take all action and to do all things necessary in
order to consummate and make effective the transactions
contemplated by this Agreement (including satisfaction, but
not waiver, of the closing conditions set forth in Section 7
below).
5.02 Notices and Consents. With respect to the
transaction contemplated by this Agreement, the Parties shall
give any required notices to third parties and Seller shall
take all steps necessary to obtain any and all required
consents.
5.03 Operation of Business. The Seller will operate
the Division in the Ordinary Course of Business, will not make
any significant decisions or take any significant actions
relating to the Acquired Assets or Consigned Inventory, the
Assumed Liabilities or the Business without consulting with
Buyer, nor cause any material change (either individually or
in the aggregate) to the Acquired Assets or Consigned
Inventory, Assumed Liabilities or Business, or the business,
operations, financial condition or prospects of the Business,
or which cause or permit any representation or warranty made
by Seller therein to be untrue or incorrect as of the Closing
Date or any condition set forth in Section 6 below to be
unsatisfied.
5.04 Full Access. The Seller will permit
representatives of the Buyer at Buyer's full cost and expense
to have full access at all reasonable times, and in a manner
so as not to unreasonably interfere with the normal business
operations of Division, to all premises, properties,
personnel, books, records (including tax records), contracts,
and documents of or pertaining to Division. The Buyer will
treat and hold in trust and confidence any Confidential
Information it receives from the Seller in the course of the
reviews contemplated by this Section 5(d), will not use any of
the Confidential Information except in connection with this
Agreement. If this Agreement is terminated for any reason
whatsoever, Buyer will return to the Seller all tangible
embodiments (and all copies) of the Confidential Information
which are in its possession, and will not use nor disclose
any such confidential information unless: (i) such Information
is provided to Buyer from an independent source not under an
obligation to maintain confidentiality; (ii) it becomes
publicly available; (iii) for business information, for a
period of two years; (iv) for technical information, for a
period of five years; (v) it is required to be disclosed by
law or lawful order of a court; or (vi) upon notice to Seller
and with the written approval of Seller (such approval not to
be unreasonably withheld or delayed).
5.05 Notice of Developments.
Each Party will give prompt written notice to
the other Party of any material adverse development causing a
breach of any of its own representations and warranties. No
disclosure by any Party pursuant to this Section 5.05,
however, shall be deemed to amend or supplement the Disclosure
Schedule or to prevent or cure any misrepresentation or breach
of warranty unless expressly agreed to in a writing signed by
the adversely affected Party.
5.06 Exclusivity. The Seller will not, and will not
cause or permit Division to, solicit, initiate, or encourage
the submission of any proposal or offer from any Person
relating to the acquisition of all or substantially all of the
assets of Division (including any acquisition structured as a
merger, consolidation, or share exchange).
5.07 Confidentiality. The Parties and their
respective employees, consultants and agents acknowledge their
obligation to maintain confidentiality regarding the existence
of this Agreement and the transactions contemplated hereby.
Neither Seller or Buyer nor any of their respective employees,
consultants or agents shall disclose the existence of the
transactions contemplated hereby without the express written
consent of the Parties.
6. Conditions to Obligation to Close.
6.01 Conditions to Obligation of the Buyer. The
obligation of the Buyer to consummate the transactions to be
performed by it in connection with the Closing is subject to
satisfaction of the following conditions:
(a) the representations and warranties set forth
in Section 3 above shall be true and correct in all material
respects at and as of the Closing Date as though made on and
as of the Closing Date;
(b) the Seller shall have performed and complied
with all of its covenants hereunder in all material respects
through the Closing;
(c) there shall not be any injunction, judgment,
order, decree, ruling, or charge in effect preventing
consummation of any of the transactions contemplated by this
Agreement;
(d) the Seller shall have delivered to the Buyer
a certificate to the effect that each of the conditions
specified above is satisfied in all respects;
(e) Intentionally Omitted.
(f) all actions to be taken by the Seller in
connection with consummation of the transactions contemplated
hereby and all certificates, opinions, instruments, and other
documents required to effect the transactions contemplated
hereby will be reasonably satisfactory in form and substance
to the Buyer.
(g) there shall have been no material adverse
change in the Business of the Division or the assets,
liabilities, operations, or prospects thereof, or the
financial condition or results of operations of Division,
separately or in the aggregate, from December 31, 1998.
Without limiting the foregoing, Division shall not have
suffered any loss or damage to any of the Assets, whether or
not insured, or been subject to any adverse action, which
would, individually or in the aggregate, materially affect or
impair its ability to conduct its business.
(h) Each holder of a Security Interest in the
Consigned Inventory shall have irrevocably agreed in writing
to release such Security Interest on the applicable Transfer
Date thereof.
(i) Seller shall have executed and/or delivered
to Buyer, on or before the Closing Date, the following, which
shall be in form and substance acceptable to Buyer and Buyer's
counsel:
(A) Documents and instruments of transfer
for the Acquired Assets including, without limitation, bills
of sale for all Tangible Property, and assignments of
Intellectual Property, and assignments of all licenses and
Permits relating to the Acquired Assets or the use, occupancy
or operation thereof;
(B) Transfers of certificates of title for
all Assets if applicable and all keys for vehicles;
(C) Documents necessary to assign the
Division's names;
(D) Copies of all originals of all files,
papers, books and records, licenses, permits, approvals,
applications, correspondence, and other Documents relative to
the Acquired Assets;
(E) UCC, judgment and tax lien searches
against the Division in all appropriate locations and
jurisdictions evidencing that the Acquired Assets are free and
clear of all Encumbrances and, if any Encumbrances exist,
payoff letters from Seller's lenders (including per diem
interest amounts and appropriate release language),
termination statements and any other termination documents
required to terminate all Encumbrances on or against the
Acquired Assets and the Consigned Inventory;
(j) Copies of the minutes of the meetings of the
board of directors of Seller authorizing the execution,
delivery and performance of this Agreement and the Documents
contemplated hereby, certified as being true and correct by
Seller's Secretary or other appropriate officer or
representative;
(k) A certificate, dated no earlier than fifteen
(15) days prior to the Closing Date, that Seller is in good
standing in its state of organization;
(l) Intentionally Omitted.
(m) A certificate of incumbency and specimen
signatures of all signatory officers of Seller;
(n) No Proceeding shall have been instituted or
threatened to restrain or prevent the carrying out of the
transactions contemplated hereby or to seek damages in
connection with such transactions, or which has or may have,
in the opinion of Buyer, an adverse effect on Division, the
Acquired Assets or the Business.
(o) Unless otherwise agreed to in writing by
Buyer, Seller shall have delivered or caused to be delivered
to Buyer, or Buyer shall have otherwise obtained, all Permits
and Consents.
(p) Seller shall not be in default in any
respect under any material Contract or other material Document
related to the Division or the Business to which it is a
party, nor shall it have received written notice of a
violation of, or be in violation of, any Law related to the
Division or the Business or any Judgment.
(q) Assignments by Seller to Buyer of all
Intellectual Property listed on Section 3.13.3 of the
Disclosure Schedule.
(r) All such further Documents and Contracts
which may reasonably be requested by Buyer or its counsel, in
order to more effectively transfer title to the Assets, or to
effectuate and carry out any provision of this Agreement and
the transactions provided herein.
The Buyer may waive any condition specified in this
Section 6.01 at or prior to the Closing in a written waiver
executed by an authorized officer of Buyer.
6.02 Conditions to Obligation of the Seller. The
obligation of the Seller to consummate the transactions to be
performed by it in connection with the Closing is subject to
satisfaction of the following conditions:
(a) the representations and warranties set forth
in Section 4 above shall be true and correct in all material
respects at and as of the Closing Date;
(b) the Buyer shall have performed and complied
with all of its covenants hereunder in all material respects
through the Closing;
(c) there shall not be any injunction, judgment,
order, decree, ruling, or charge in effect preventing
consummation of any of the transactions contemplated by this
Agreement;
(d) the Buyer shall have delivered to the Seller
a certificate to the effect that each of the conditions
specified above is satisfied in all respects; and
(e) Intentionally Omitted.
(f) all actions to be taken and payments made by
the Buyer in connection with consummation of the transactions
contemplated hereby and all certificates, opinions,
instruments, and other documents required to effect the
transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Seller.
The Seller may waive any condition specified in this
Section 6.02 in a written waiver executed by an authorized
officer of the Buyer at or prior to the Closing.
6.03 Deliveries at the Closing. At the Closing, (i)
the Seller will deliver to the Buyer the various certificates,
instruments, and documents referred to in Section 6.01 above;
(ii) the Buyer will deliver to the Seller the various
certificates, instruments, and documents referred to in
Section 6.02 above; (iii) the Seller will execute, acknowledge
(if appropriate), and deliver to the Buyer assignments
(including real and personal property leases and intellectual
property transfer documents) and such other instruments of
sale, transfer, conveyance, and assignment as the Buyer and
its counsel reasonably may request; (iv) the Buyer will
execute, acknowledge (if appropriate), and deliver to the
Seller such instruments of assumption as the Seller and its
counsel reasonably may request; and (v) the Buyer will deliver
to the Seller the cash consideration specified in Section 2.03
above.
7. Post-Closing Covenants. The Parties agree as follows
with respect to the period following the Closing.
7.01 General. In case at any time after the Closing
any further act is necessary to carry out the purposes of this
Agreement, each of the Parties will take such further action
(including the execution and delivery of such further
instruments and documents) as the other Party reasonably may
request, all at the sole cost and expense of the requesting
Party (unless the requesting Party is entitled to
indemnification therefor under Section 8 below).
7.02 Litigation Support. If and for so long as
either Party actively is contesting or defending against any
action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand in connection with (i) any
transaction contemplated under this Agreement or (ii) any
fact, situation, circumstance, status, condition, activity,
practice, plan, occurrence, event, incident, action, failure
to act, or transaction on or prior to the Closing Date which
is, has or may have been based upon or in any way related to
the Business of the Division, the other Party will cooperate
with the contesting or defending Party and its counsel in the
contest or defense, make available its personnel, and provide
such testimony and access to its books and records as shall be
necessary in connection with the contest or defense, all at
the sole cost and expense of the contesting or defending Party
(unless the contesting or defending Party is entitled to
indemnification therefor under Section 8 below).
7.03 Patent Infringement Payments. The parties are
subject to that certain Patent License Agreement dated as of
May 26, 1999, attached hereto as Exhibit A (the "Existing
Agreement") whereby the Seller granted Buyer a nonexclusive
license to make, have made, use and sell products covered by
the Patent Rights, as set forth more fully therein. Subject
to the provisions of Section 7.09 below, Buyer will make the
Infringement Payments owed to Seller pursuant to the terms
thereof (payable $50,000 on December 31, 1999 and $25,000 on
the last day of each calendar quarter from March 31, 2000
through December 31, 2000). At Closing, Seller waives its
right to receive the $125 payments payable by Buyer to Seller
for each scanner sold or to be sold by Buyer. Buyer will not
offset against the Infringement Payments any credits owed by
Seller to Buyer under Sections 2.04 or 2.05 herein.
7.04 Transition.
(a) Seven employees of Seller identified on
Schedule VIII hereto (the "Loaned Employees") will remain
Seller's employees but will be utilized by Buyer on a
full-time basis between the Closing Date and December 31,
1999. Salary and benefits costs of those Employees shall be
paid for by Buyer as set forth in Schedule VIII hereto by wire
transfer to Seller's account on each day that payroll checks
are distributed. If the employment of any Loaned Employee
providing customer support is terminated prior to December 31,
1999, Seller will use its reasonable best efforts to provide a
suitable replacement and any such replacement shall become a
Loaned Employee hereunder, but Buyer shall be responsible for
the salary and benefits costs of such replacement up to the
salary and benefits costs of the terminated employee. The
office expenses listed on Schedule VIII and any incentive
payments for the sale of Consigned Inventory for those
Employees will be paid for by Seller in accordance with
Seller's practices prior to the Closing Date. Seller will make
Alan Day available to Buyer to assist Buyer on the transition
of the 2000g Flatbed Scanner, such availability to be without
charge to Buyer and to continue through the end of 1999 as
mutually agreed to and scheduled by the Parties.
(b) If Buyer wishes to employ any Loaned
Employees beginning on January 1, 2000, Buyer will notify
Seller no later than October 31, 1999 that it wishes to do so
and then Buyer will make the employment offers. If an offer
is accepted, then the Loaned Employee's length of service will
be transferred to Buyer for severance purposes. If such
Employee is then terminated without cause by Buyer within 6
months after January 1, 2000, then Seller will have the option
to re-employ such Employee, in which case no severance will be
due to the Employee; if Seller does not wish to re-employ,
then Seller will make up any shortfall in severance payable to
such Employee due to differences in the companies' severance
policies (Seller's is two weeks per year of service) at
Closing.
(c) Following Closing Buyer shall provide labor
for warranty support for those Contracts listed in Schedule
III, subject to Seller performing its obligations set forth in
Section 7.06(a) below and subject to the provisions of Section
2.04(c) above. Any costs incurred by Buyer in providing
Unreasonable Warranty Support shall be submitted by Buyer to
Seller in an invoice and such invoice shall either be paid for
by Seller within 30 days of receipt of such invoice or Buyer
may deduct such invoice from the next Inventory Payment due
hereunder.
(d) Sales shall be conducted by the Loaned
Employees who are the Division's current sales staff. The
sales staff will be represented to the market as Buyer's
representatives and will work under Buyer's direction and
control.
(e) Buyer and Seller will periodically (each
month through June, 2000, and thereafter as mutually agreed)
meet (in person or by conference telephone) at mutually agreed
upon times and places, for operational reviews of the
transition and reconciliation of payments and credits owing
under this Agreement. If there are any disputes which cannot
be resolved as part of the reconciliation process, such
disputes shall be submitted to arbitration pursuant to Section
10.14 herein and payments of the disputed amounts are not
required until the dispute is resolved. Unless otherwise
designated by Buyer, all communications from Seller to Buyer
shall be through Graham Tinn, Buyer's President, and unless
otherwise designated by Seller, all communications from Buyer
to Seller shall be through Robert J. Griffin.
(f) All tangible Acquired Assets and Consigned
Inventory located at the Seller's facility in Pennsylvania
(the "Pennsylvania Assets") can remain at such location at no
cost to Buyer until January 2, 2000. Buyer will arrange for
the transportation of those Assets and Consigned Inventory it
wants at its cost and expense. Buyer will give Seller
instructions on or before November 30, 1999 with respect to
the disposal of any Pennsylvania Assets which Buyer does not
want. If Seller moves from its current facility in
Pennsylvania before January 2, 2000, Seller shall pay all
costs and expenses of moving the Pennsylvania Assets to the
new location.
(g) Seller will continue to invoice customers
until the Closing Date. Seller will be responsible for
collecting its Accounts Receivable; however, if a customer
sends to Buyer a check payable to Seller on account of
Seller's Accounts Receivable, Buyer will send the check to
Seller without depositing it or, if Buyer deposits the check
in error, Buyer will remit to Seller on a weekly basis
together with copies of any documentation accompanying the
check deposited. Buyer and Seller will cooperate to reduce
and/or eliminate any confusion of customers who owe money to
both Seller and Buyer.
(h) Except as expressly set forth in this
Agreement, from and after the Closing Date Buyer shall have
complete control and absolute discretion over the operation of
the Business.
7.05 Restrictive Covenants.
(a) Seller agrees that for a period of three (3)
years commencing with the date of Closing, it will not (i)
engage or compete anywhere within the Geographic Area
(directly or indirectly) either for its own account or as an
agent, consultant, joint venturer, partner, stockholder of or
for any Person in any aspect of a Competing Business, or in
the management, operation or control of a Competing Business,
(ii) solicit or endorse the services of or become affiliated
with, directly or indirectly, or refer business for or to any
Competing Person or (iii) take or solicit away any employees
of the Buyer including, without limitation, any former
employees of the Seller who become employees of the Buyer.
(b) The Seller shall not at any time after the date
hereof, directly or indirectly, use (for its own benefit or
the benefit of any Person) or communicate, disclose or divulge
to any Person, any secret, confidential or proprietary
information of the Business (including, but not limited to,
financial statements and financial information), unless such
information is or shall have become public other than through
a breach of this Agreement by Seller except:
(i) in connection with the enforcement of this
Agreement or the other Transaction Documents;
(ii) pursuant to any statutory or regulatory
requirement or any mandatory court order, subpoena or other
legal process; provided, however, that Seller shall promptly
notify Buyer in writing of the receipt of any such mandatory
court order, subpoena or other legal process and will, at
Buyer's request and expense, cooperate with it in permitting
Buyer, in its own name or in the name of Seller, to intervene
to challenge such order, subpoena or process;
(iii) to Seller's legal counsel, accountants
and other professional advisors with an instruction to each
such Person to keep such information confidential; and
(iv) to any other Person with the prior written
consent of the Buyer (which will not be unreasonably
withheld), upon receipt by Buyer of a written confidentiality
agreement (in form and substance reasonably satisfactory to
Buyer and its counsel) from such other Person.
(c) Seller agrees and acknowledges that a violation
of the covenants contained in paragraphs (a) and (b) above
will cause immediate and irreparable injury to the Buyer and
it is and will be impossible to estimate and determine the
damage that will be suffered by Buyer as a result of the
violation of such covenant. Seller further agrees that Buyer
shall have the right to equitable relief by injunction or
otherwise. Seller further agrees and acknowledges that
greater injury will result by refusing Buyer or the respective
successors or assigns injunctive relief than by granting such
injunctive relief. The injunctive relief is cumulative in
addition to whatever remedies the Buyer may have. If Buyer
must resort to litigation to enforce any of the covenants
which has a fixed term, then such term shall be extended for a
period of time equal to the period during which a breach of
such covenant occurring. If the Buyer must resort to
litigation to successfully enforce any of the covenants, it
shall be entitled to recover any and all reasonable attorneys'
fees and costs which it incurs in connection with any such
successful enforcement. If Buyer is wholly unsuccessful in
enforcing the covenants sought to be enforced, it will
reimburse Seller for Seller's reasonable attorney's fees and
costs which Seller incurs in connection with such enforcement
action.
(d) It is specifically agreed with regard to the
covenants set forth above that they are severable and if they
are held illegal, invalid or unenforceable by reason of length
of time, area or activity covered or any combination thereof,
or for any other reason, such covenants shall be adjusted and
reduced to the extent necessary to cure such illegality,
invalidity or unenforceability and protect the interest of the
Buyer to the fullest extent of the law.
(e) As used in this Section 7.05, "Competing
Business" means any business which provides products or
services which compete with Buyer's or the Division's products
and/or services in the Geographic Area, "Competing Person"
means any Person that is directly or indirectly involved in
any Competing Business, "Seller" means Seller and its
Affiliates, "Buyer" means Buyer and its Affiliates, and
"Geographic Area" means the United States, its territories and
possessions, and all other countries in which the products of
the Division are sold by the Buyer.
(f) The provisions of Section 7.05(a)(i) shall not
apply to Seller's sale of (i) Reproworks if Seller receives a
license under Section 2.05(a) or (ii) the 2000g Flatbed
Scanner if Seller receives a conveyance of the 2000g Assets
under Sections 2.05(b) or 7.09(c)(i).
7.06 Other Obligations.
(a) Seller will pay all travel expenses in
connection with Buyer's provision of warranty and service
support under the contracts listed on Schedule III hereto
provided Ken Fillman (or his replacement) is notified by Buyer
prior to travel and Buyer uses the same policies with respect
to warranty claims hereunder as it uses for warranty service
on its own products. Travel expenses exceeding $500 per
warranty call will, at Seller's request, be reviewed at the
periodic meetings. Seller shall provide to Buyer a list of
customers eligible for warranty support (and the end date of
their warranty entitlements) and shall set forth its estimate
of potential support requirements.
(b) Seller will provide Buyer with a list of
Division's Accounts Receivable as of the Closing Date and
Buyer will cooperate with Seller in the collection of the
Accounts Receivable, including accepting payments on account
thereof and forward them to Seller weekly.
7.07 Good Stewardship. Buyer will save and protect the
Consigned Inventory in the same manner as it protects its own
inventory. The Consigned Inventory will be segregated and
designated as the property of Seller until Removed. Seller
shall maintain insurance on the Consigned Inventory and shall
bear risk of loss until an item of Consigned Inventory is
Removed by Buyer.
7.08 Preference to Sale of Consigned Inventory. Buyer
agrees to make its best effort to sell items of finished goods
Consigned Inventory before manufacturing or having
manufactured new units of the same Consigned Inventory.
7.09 Certification of 2000g Flatbed Scanner. (a) Seller
shall create a plan reasonably acceptable to Buyer for, and
shall thereby obtain as soon as possible, FCC certification
and all other Permits necessary for the sale of the 2000g
Flatbed Scanner, which certification and Permits must be
obtained no later than June 30, 2000. Seller shall bear all
costs and expenses of such certification and permitting
including without limitation Buyer's costs and expenses of
providing assistance and cooperation to Seller at Seller's
request.
(b) Until the necessary certification and Permits
are obtained, Buyer shall have no obligation to pay to Seller
any of the Infringement Payments, and if the certification and
Permits are not obtained until after December 31, 1999, the
date of each of the Infringement Payments will be pushed back
by the number of days after December 31, 1999 until such
certification and permits are obtained.
(c) If the Certification Date has not occurred on or
before June 30, 2000, Buyer may at any time thereafter (until
the occurrence of the Certification Date) return the 2000g
Assets to Seller; upon such return, (i) Buyer's obligation to
make the Infringement Payments automatically terminate and
(ii) the $4,000,000 amount in Section 2.06(a) is reduced to
$3,000,000.
7.10 Escrow. On or before October 31, 1999, Buyer and
Seller will perform their obligations under the Escrow
Agreement attached as Exhibit "B" hereto.
7.11 Release of Security Interests. On or prior to the
Transfer Date thereof, Seller will cause all Security
Interests on the Consigned Inventory being sold by Seller to
Buyer to be released.
8. INDEMNIFICATION
8.01 Survival.
The representations and warranties contained in
Sections 3.01, 3.02, 3.03, 3.05, 3.09, 3.11, 3.13, 3.21, 3.24
and 3.26 shall survive the Closing (even if the Buyer knew or
had reason to know of any misrepresentation or breach of
warranty at the time of Closing) and continue in full force
and effect subject only to any applicable statutes of
limitations. All other representations and warranties shall
survive the Closing (even if Buyer knew or had reason to know
of any misrepresentation or breach of warranty at the time of
Closing) and continue in full force and effect until the
Survival Termination Date at which time they shall expire then
no claim for indemnification may be brought with respect
thereto.
8.02 Indemnification Provisions for Benefit of the
Buyer.
(a) In the event Seller breaches any of its
representations or warranties contained in this Agreement,
provided that the Buyer makes a timely written claim for
indemnification against the Seller, then the Seller agrees,
subject to the limitations of Section 8.05 below, to indemnify
the Buyer from and against the entirety of any Adverse
Consequences the Buyer may suffer resulting from, arising out
of, relating to, or caused by the breach. However, in the
event of a breach of Section 3.13 by Seller, Buyer will offer
reasonable assistance to Seller to defend against any
intellectual property infringement claims at Seller's sole
cost and expense.
(b) Seller agrees to indemnify the Buyer from
and against the entirety of any Adverse Consequences the Buyer
may suffer resulting from, arising out of, relating to, or
caused by: (i) any Liability of the Seller which is not an
Assumed Liability, (ii) any Liability of the Seller for Taxes,
(iii) any other Liability arising out of or relating to the
operations of the Division or the manufacture, use or
ownership of the Acquired Assets, the manufacture and/or sale
of the Consigned Inventory or Seller's facilities at any time
prior to the Closing Date (whether such liability arises
before or after the Closing Date), or (iv) Seller's breach of
any of its covenants and agreements in this Agreement.
8.03 Indemnification Provisions for Benefit of the
Seller.
(a) In the event the Buyer breaches any of its
representations or warranties contained in this Agreement and
provided that Seller makes a timely written claim for
indemnification against the Buyer, then the Buyer agrees to
indemnify the Seller from and against the entirety of any
Adverse Consequences the Seller may suffer through and after
the date of Seller's claim for indemnification resulting from,
arising out of, relating to, or caused by the breach.
(b) The Buyer shall indemnify the Seller from
and against the entirety of any Adverse Consequences the
Seller may suffer resulting from, arising out of, relating to,
or caused after the Effective Date by (i) Buyer's failure to
pay or perform, or breach of any obligations with respect to
any Assumed Liability, Assumed Contract, or Acquired Asset,
(ii)Buyer's breach of any of its covenants and agreements in
this Agreement, or (iii) any act, event, occurrence or
circumstance arising from the Business after the Effective
Date, provided Buyer is not indemnified hereunder by Seller
with respect to such act, event, occurrence or circumstance.
8.04 Matters Involving Third Parties.
(a) If any third party shall notify any Party
(the "Indemnified Party") with respect to any matter (a "Third
Party Claim") which may give rise to a claim for
indemnification against any other Party (the "Indemnifying
Party"), then the Indemnified Party shall promptly notify each
Indemnifying Party thereof in writing; provided, however, that
no delay on the part of the Indemnified Party in notifying any
Indemnifying Party shall relieve the Indemnifying Party from
any obligation hereunder unless (and then solely to the
extent) the Indemnifying Party thereby is prejudiced.
(b) Any Indemnifying Party will have the right
to defend the Indemnified Party against the Third Party Claim
with counsel of its choice reasonably satisfactory to the
Indemnified Party so long as (i) the Indemnifying Party
notifies the Indemnified Party in writing within 30 days after
the Indemnified Party has given notice of the Third Party
Claim that the Indemnifying Party will defend and indemnify
the Indemnified Party from and against the entirety of any
Adverse Consequences the Indemnified Party may suffer
resulting from, arising out of, relating to, in the nature of,
or caused by the Third Party Claim, (ii) the Indemnifying
Party provides the Indemnified Party with evidence reasonably
acceptable to the Indemnified Party that the Indemnifying
Party has an at all times will have the financial resources to
defend against the Third Party Claim and fulfill its
indemnification obligations taking into account all reasonably
likely Adverse Consequences as to the Third Party Claim and
any other Third Party Claims then outstanding, (iii) the Third
Party Claim involves only money damages and does not seek an
injunction or other equitable relief that would result in or
have an adverse affect on the business or operation of Buyer
after entry of such injunction or other equitable relief, and
(iv) the Indemnifying Party conducts the defense of the Third
Party Claim actively and diligently.
(c) So long as the Indemnifying Party is
conducting the defense of the Third Party Claim in accordance
with (b) above, (i) the Indemnified Party may retain separate
co-counsel at its sole cost and expense and participate in the
defense of the Third Party Claim, (ii) the Indemnified Party
will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without
the prior written consent of the Indemnifying Party (such
consent not to be withheld unreasonably), and (iii) the
Indemnifying Party will not consent to the entry of any
judgment or enter into any settlement with respect to the
Third Party Claim without the prior written consent of the
Indemnified Party (such consent not to be withheld
unreasonably).
(d) In the event any of the conditions in
Subparagraph 8.04(b) is or becomes unsatisfied, the
Indemnified Party may control and actively and diligently
conduct the defense of the Third Party Claim, and such control
shall not release the Indemnifying Parties from any
indemnification obligation they may have under this Section
with respect to such Third Party Claim. So long as the
Indemnified Party is conducting the defense of the Third Party
Claim, (i) the Indemnifying Party may retain separate
co-counsel at its sole expense and participate in the defense
of Third Party Claim, and (ii) the Indemnified Party will not
consent to the entry of any judgment or enter into any
settlement with respect to the Third Party Claim without (A)
the prior written consent of the Indemnifying Party (such
consent not to be unreasonably withheld) and (B) obtaining a
release of the Indemnifying Party from such Third Party Claim.
8.05 Other Indemnification Provisions. Neither the
Seller nor Buyer shall be liable for Adverse Consequences
under Section 8.02 or 8.03, respectively, unless and until the
aggregate amount of Adverse Consequences for which the
indemnifying party would, but for the provisions of this
Section 8.05, be liable exceeds on an aggregate basis $10,000,
at which time the Indemnifying Party's indemnification
obligation shall be for the full amount thereof. The
obligation of an indemnifying party to an indemnified party
shall be reduced by the amount of any insurance proceeds (net
of deductibles) received or receivable by such indemnified
party as a result of the Adverse Consequences for which
indemnification is sought.
8.06 Treatment of Indemnification Payments. Any
indemnification payment made hereunder shall be treated as an
adjustment to the Purchase Price.
8.07 Right of Setoff. In addition to all other
remedies available to Buyer, Buyer may offset the amount of
any claim for indemnification it has hereunder against all
payments otherwise payable to Seller hereunder including,
without limitation, all payments under Sections 2.04, 2.05 and
7.03 herein. All amounts so offset shall be deemed to have
been paid by Buyer for purposes of Section 2.06(a) herein.
9. Termination.
9.01 Termination of Agreement. Certain of the Parties
may terminate this Agreement as provided below:
(a) the Buyer and the Seller may terminate this
Agreement by mutual written consent at any time prior to the
Closing;
(b) the Buyer may terminate this Agreement by
giving written notice to the Seller at any time prior to the
Closing (i) in the event the Seller has breached any
representation, warranty, or covenant contained in this
Agreement in any material respect, the Buyer has notified the
Seller of the breach, and the breach has continued without
cure for a period of 10 days after the notice of breach or
(ii) if the Closing shall not have occurred on or before
September 30, 1999, by reason of the failure of any condition
precedent under Section 6.01 hereof (unless the failure
results primarily from the Buyer itself breaching any
representation, warranty, or covenant in any material respect
contained in this Agreement); and
(c) the Seller may terminate this Agreement by
giving written notice to the Buyer at any time prior to the
Closing (i) in the event the Buyer has breached any material
representation, warranty, or covenant contained in this
Agreement in any material respect, the Seller has notified the
Buyer of the breach, and the breach has continued without cure
for a period of 10 days after Buyer's receipt of the notice of
breach or (ii) if the Closing shall not have occurred on or
before September 30, 1999, by reason of the failure of any
condition precedent under Section 6.02 hereof (unless the
failure results primarily from the Seller itself breaching any
representation, warranty, or covenant contained in this
Agreement).
9.02 Effect of Termination. If any Party terminates
this Agreement pursuant to Section 9.01 above, all rights and
obligations of the Parties hereunder shall terminate without
any liability of any Party to the other Party (except for any
liability of any Party then in breach); provided, however,
that the confidentiality provisions of the Existing Agreement
and the provisions contained in Section 5.04 above shall
survive termination.
10. Miscellaneous.
10.01 Press Releases and Public Announcements. No
Party shall issue any press release or make any public
announcement relating to the subject matter of this Agreement
without the prior written approval of the other Party;
provided, however, that any Party may make any public
disclosure it believes in good faith is required by applicable
law or any listing or trading agreement concerning its
publicly-traded securities (in which case the disclosing Party
will use its reasonable best efforts to advise the other Party
prior to making the disclosure).
10.02 No Third-Party Beneficiaries. This
Agreement shall not confer any rights or remedies upon any
Person other than the Parties and their respective successors
and permitted assigns.
10.03 Entire Agreement. This Agreement (including
the documents referred to herein) constitutes the entire
agreement between the Parties and supersedes any prior
understandings, agreements, or representations by or between
the Parties (except the Existing Agreement referred to in
Section 7.03 herein), written or oral, to the extent they
related in any way to the subject matter hereof.
10.04 Succession and Assignment. This Agreement
shall be binding upon and inure to the benefit of the Parties
named herein and their respective successors and permitted
assigns. No Party may assign either this Agreement or any of
its rights, interests, or obligations hereunder without the
prior written approval of the other Party ; provided, however,
that the Buyer may assign any or all of its rights and
interests hereunder and delegate its obligations hereunder to
one or more of its Affiliates (in any or all of which cases
the Buyer nonetheless shall remain responsible for the
performance of all of its obligations hereunder).
10.05 Counterparts. This Agreement may be
executed in one or more counterparts, each of which shall be
deemed an original but all of which together will constitute
one and the same instrument.
10.06 Headings. The Section headings contained in
this Agreement are inserted for convenience only and shall not
affect in any way the meaning or interpretation of this
Agreement.
10.07 Notices. All notices, requests, demands,
claims, and other communications hereunder will be in writing.
Any notice, request, demand, claim, or other communication
hereunder shall be deemed duly given if (and then two Business
Days after) it is sent by certified mail, return receipt
requested, postage prepaid, and addressed to the intended
recipient as set forth below:
If to the Seller: Copy to:
Sedona Corporation Dale Goodfriend, Esquire
649 North Lewis Road 617 South West Ninth Ave.
Limerick, PA 19468 2nd Floor
Attn: Robert J. Griffin Rochester, MN 55902
If to the Buyer: Copies to:
Colortrac, Inc. Colortrac, Ltd
Attn: Chuck Bettis, Exec V.P. Kings Hall
10499 Bradford Road St. Ives Business Park
Littleton, CO 80127 St. Ives
Huntingdon
Cambridgeshire PE174WY
United Kingdom
and
Lawrence Finkelstein, Esquire
Blank Rome Comisky & McCauley
One Logan Square
Philadelphia, PA 19103
Any Party may send any notice, request, demand, claim, or
other communication hereunder to the intended recipient at the
address set forth above using any other means (including
personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no
such notice, request, demand, claim, or other communication
shall be deemed to have been duly given unless and until it
actually is received by the intended recipient. Any Party may
change the address to which notices, requests, demands,
claims, and other communications hereunder are to be delivered
by giving the other Party notice in the manner herein set
forth.
10.08 Governing Law. This Agreement shall be
governed by and construed in accordance with the domestic laws
of the Commonwealth of Pennsylvania without giving effect to
any choice or conflict of law provision or rule (whether of
the Commonwealth of Pennsylvania or any other jurisdiction)
that would cause the application of the laws of any
jurisdiction other than the Commonwealth of Pennsylvania.
10.09 Amendments and Waivers. No amendment of any
provision of this Agreement shall be valid unless the same
shall be in writing and signed by the Buyer and the Seller. No
waiver by any Party of any default, misrepresentation, or
breach of warranty or covenant hereunder, whether intentional
or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of
any prior or subsequent such occurrence.
10.10 Severability. Any term or provision of this
Agreement that is invalid or unenforceable in any situation in
any jurisdiction shall not affect the validity or
enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or
provision in any other situation or in any other jurisdiction.
10.11 Expenses. Each of the Seller and the Buyer
will bear its own costs and expenses (including legal fees and
expenses) incurred in connection with this Agreement and the
transactions contemplated hereby.
10.12 Construction. The Parties have participated
jointly in the negotiation and drafting of this Agreement. In
the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted
jointly by the Parties and no presumption or burden of proof
shall arise favoring or disfavoring any Party by virtue of the
authorship of any of the provisions of this Agreement. Any
reference to any federal, state, local, or foreign statute or
law shall be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise.
The word "including" shall mean including without limitation.
10.13 Incorporation of Exhibits and Schedules.
The Exhibits and Schedules identified in this Agreement are
incorporated herein by reference and made a part hereof.
10.14 Remedy for Disputes. (a) Subject to the
dispute resolution process set out below, Seller and Buyer
agree that, in the event of a default or breach by either
party of the agreements and covenants set out herein, after
the Closing, each party shall have all rights and remedies
available to that party under applicable law. Each party
shall be entitled to 15 days' notice, under the notice
provisions of this Agreement, of any breach alleged by the
other party and an opportunity to cure any curable default or
breach during said 15 day period.
(b) Before a Party resorts to arbitration to
resolve a dispute under this Agreement required to be
submitted to arbitration, a Party shall request in writing and
thereby oblige the other Party to discuss the dispute face-to-
face within fifteen (15) days of such request. The Parties
shall meet at a mutually agreeable time and place within such
fifteen (15) days. The meetings referred to in Section
7.04(e) above shall satisfy the requirements of this Section
10.14(b).
(c) If the discussions referred to above are
unsuccessful in resolving a dispute, such dispute, controversy
or claim arising out of or relating to this Agreement or the
breach, termination or validity thereof, whether at common law
or under statute, shall be settled by final and binding
arbitration in accordance with the Rules for Commercial
Arbitration of the American Arbitration Association ("AAA") in
effect at the time of the execution of this Agreement (the
"Rules"). The arbitration shall be conducted by a sole
arbitrator appointed by the AAA in accordance with Section 14
of the Rules. Absent a contrary agreement of the Parties, the
place of arbitration shall be Philadelphia, Pennsylvania, and
the award shall be issued at the place of arbitration. The
arbitrator may, however, call and conduct hearings and
meetings at such other places as the Parties may agree. The
law applicable to the arbitration procedure shall be
Pennsylvania law, and the arbitrator shall determine the
merits of the matters in dispute in accordance with the laws
of Pennsylvania. The decision (award) of the arbitrator shall
be final and binding on the Parties, and judgment upon the
award may be entered by any court having Jurisdiction thereof
or having jurisdiction over one or more of the Parties or
their assets. Any monetary award shall include interest from
the date of the breach of the agreement giving rise to the
award at a rate not less than the prime commercial lending
rate for responsible and substantial commercial borrowers at
PNC Bank, National Association in Philadelphia, Pennsylvania
on the date of the award, and may include provisions providing
for the payment of attorneys' fees and costs.
(d) Notwithstanding the aforesaid, if a Party
is seeking, in good faith, a temporary restraining order,
injunctive relief, or other equitable relief, alleging a claim
that is not for monetary damages, but requesting relief for
which there is no adequate remedy under applicable law, such
party may proceed in the Montgomery County Court of Common
Pleas (Pennsylvania) or any other court having subject matter
and personal jurisdiction. Whether or not such court grants
such relief, any claim for damages shall not be waived by the
bringing of such equitable action, but shall be determined by
arbitration in a separate action.
***
IN WITNESS WHEREOF, the Parties hereto have executed this
Agreement on the date first above written.
COLORTRAC, INC.
By:
Title: President
SEDONA CORPORATION
By:
Title:
Exhibit 99.1
PRESS RELEASE
SEDONA Sells Its TRC Unit and Signs Letter of Intent
On the Sale of Tangent Imaging Systems
SEDONA accelerates transition to internet/network-based
E-business solutions and business intelligence software
Provider
Limerick, PA - July 16, 1999 - SEDONA Corporation
(Nasdaq: SDNA) announced today that its transition to an
e-business solutions and business intelligence software
provider has been accelerated via the sale of the assets of
its Technology Resource CentersSM TRC) unit and the signing of
a letter of intent relating to the sale of its Tangent
Imaging Systems unit.
Mr. Osterwise said that; "TRC assets have been acquired
by Diversified Information Technologies, Inc. of Scranton, PA,
and Tangent has entered into an acquisition agreement with a
major international imaging and scanner manufacturing company,
the identity of which will be released upon closing of this
transaction in approximately sixty days."
Mr. Osterwise added that; "We at SEDONA are very pleased
that we have made such strong progress toward our goal of
totally focusing all of our executive talent and financial
resources in the direction of building and rapidly growing the
e-business and business intelligence software aspects of the
SEDONA Corporation. This total focus of our resources on our
family of SpatialVision software products and our recently
announced SedonaLink software product, has indeed been
accelerated by the timely sale of the TRC and Tangent units."
Mr. Osterwise concluded by restating a comment made
earlier, that; "We at SEDONA are very excited with the
reception being given our software products in this rapidly
emerging, fast growth industry." He continued; "I believe
that we are positioned for growth in the e-business/business
intelligence software market. Now that we have reduced our
overhead and reduced our burn-rate, we can now totally focus
all of our people and financial resources to grow this Company
in a rapidly growing multi-billion market of opportunity."
~more~
About SEDONA Corporation...
SEDONA Corporation, headquartered in Limerick, Pennsylvania,
develops and markets enterprise scale business geo-
intelligence solutions that focus on ease of use,
interoperability, Internet accessibility and intuitive
visualization of geographic components of enterprise data.
Through strategic industry alliances, SEDONA is uniquely
positioned to address the needs of Oracle database customers.
The vision of the company is to enable business clients to
turn warehoused data into relevant visual information from
which informed decisions are made to swiftly improve bottom-
line results. SEDONA and its operating companies can be found
on the Web at www.sedonacorp.com.
Forward Looking Statements...
Statements made in this news release that relate to future
plans, events or performances are forward-looking statements.
Any statement containing words such as "believes"
"anticipates" "plans" or "expects" and other statements
which are not historical facts contained in this release are
forward-looking, and these statements involve risks and
uncertainties and are based on current expectations.
Consequently, actual results could differ materially from the
expectations expressed in these forward-looking statements.
CONTACT: Vicki Franchetti, 610-495-3003 x214
SEDONA Corporation 649 North Lewis Road, Suite 220
Limerick, PA 19468
610-495-3003 Fax: 610-495-3092 Web: www.sedonacorp.com
Email: [email protected]
SedonaCorp and SEDONA Corporation, and are registered
trademark of SEDONA Corporation SpatialVision, SedonaLink and
Sedona are trademarks of SEDONA Corporation All other product
names are trademarks or registered trademarks of their
respective
Exhibit 99.2
PRESS RELEASE
SEDONA to sell Tangent Imaging Systems to
Colortrac, Inc.
SEDONA accelerates transition to internet/network-based
E-business solutions and business intelligence software
provider
Limerick, PA September 2, 1999 - SEDONA Corporation (Nasdaq:
SDNA) announced today that it is continuing its transition to
an e-business solutions and business intelligence software
provider via the imminent sale of its Tangent Imaging Systems
unit to Colortrac, Inc., the U.S. subsidiary of Colortrac,
Ltd., a U.K.-based scanner manufacturer.
SEDONA Corporation's CEO, Larry Osterwise said that; "SEDONA
entered into a letter of intent with Colortrac, Inc. in mid-
July, and expects to finalize the sale by mid-September. The
decision to sell Tangent is in the best interests of both our
clients and shareholders. The consolidation will improve
Tangent's ability to develop and grow its technology, and
Tangent clients can expect to see improvements in service as
the transition is completed."
Colortrac has also announced the acquisition of ANAtech, a
scanner and software company formerly held by Intergraph
Corporation, and will form a new enterprise, ACTion Imaging
Solutions. Robert "Grif" Griffin, President of Tangent, said
that "Colortrac will be integrating the skills of Colortrac,
ANAtech, and Tangent in a significant consolidation of the
large format scanning industry. Tangent's clients will be
well served as a result."
The sale of Tangent will allow SEDONA to focus all of its
energies and resources on the development of internet-based
business intelligence software with its family of
SpatialVision software products and the recently announced
SedonaLink product, the core growth strategy for the company.
According to Mr. Osterwise, "SEDONA Corporation had several
divisions that were not central to the company's vision. The
sale of Tangent will conclude the divestiture of businesses
that are outside the focus of our plan and outside the
interests of our investors."
-more-
About SEDONA Corporation...
SEDONA Corporation, headquartered in Limerick, Pennsylvania,
develops and markets enterprise scale business geo-
intelligence solutions that focus on ease of use,
interoperability, Internet accessibility and intuitive
visualization of geographic components of enterprise data.
Through strategic industry alliances, SEDONA is uniquely
positioned to address the needs of Oracle database customers.
The vision of the company is to enable business clients to
turn warehoused data into relevant visual information from
which informed decisions are made to swiftly improve bottom-
line results. SEDONA and its operating companies can be found
on the Web at www.sedonacorp.com.
Forward Looking Statements...
Statements made in this news release that relate to future
plans, events or performances are forward-looking statements.
Any statement containing words such as "believes"
"anticipates" "plans" or "expects" and other statements
which are not historical facts contained in this release are
forward-looking, and these statements involve risks and
uncertainties and are based on current expectations.
Consequently, actual results could differ materially from the
expectations expressed in these forward-looking statements.
CONTACT: Vicki Franchetti, 610-495-3003 x214
SEDONA Corporation 649 North Lewis Road, Suite 220
Limerick, PA 19468
610-495-3003 Fax: 610-495-3092 Web: www.sedonacorp.com
Email:[email protected]
SedonaCorp and SEDONA Corporation, and are registered
trademark of SEDONA Corporation Tangent Imaging Systems,
SpatialVision, SedonaLink and Sedona are trademarks of SEDONA
Corporation All other product names are trademarks or
registered trademarks of their respective
Exhibit 99.3
PRESS RELEASE
SEDONA Completes Sale of
Tangent Imaging Systems to Colortrac, Inc.
SEDONA completes important step in its transition to
internet/network-based e-business solutions and business
intelligence software provider
Limerick, PA - September 20, 1999 - SEDONA Corporation
(Nasdaq: SDNA) announced today that it has completed another
major step in its transition to an e-business solutions and
business intelligence software provider via the sale on
September 17, 1999, of its Tangent Imaging Systems unit to
Colortrac, Inc., the U.S. subsidiary of Colortrac, Ltd., a
U.K.-based scanner manufacturer.
SEDONA Corporation's CEO, Marco Emrich said that; "I am
certainly pleased that the sale of Tangent has been completed
on schedule, and we can fully focus all of the energies of
SEDONA on becoming a leading provider of Internet-centric,
spatial visualization software components to the e-business
and business intelligence software markets. I believe we can
bring real value to such applications as customer relationship
management and supply chain applications, and to key
organizations in numerous industries, including financial
services, manufacturing, telecommunications and retail
industries."
About SEDONA Corporation...
SEDONA Corporation, headquartered in Limerick, Pennsylvania,
develops and markets enterprise scale business
geo-intelligence solutions that focus on ease of use,
interoperability, Internet accessibility and intuitive
visualization of geographic components of enterprise data.
Through strategic industry alliances, SEDONA is uniquely
positioned to address the needs of Oracle database customers.
The vision of the company is to enable business clients to
turn warehoused data into relevant visual information from
which informed decisions are made to swiftly improve bottom-
line results. SEDONA and its operating companies can be found
on the Web at www.sedonacorp.com.
Forward Looking Statements...
Statements made in this news release that relate to future
plans, events or performances are forward-looking statements.
Any statement containing words such as "believes"
"anticipates" "plans" or "expects" and other statements
which are not historical facts contained in this release are
forward-looking, and these statements involve risks and
uncertainties and are based on current expectations.
Consequently, actual results could differ materially from the
expectations expressed in these forward-looking statements.
CONTACT: Vicki Franchetti, 610-495-3003 x214
SEDONA Corporation 649 North Lewis Road, Suite 220
Limerick, PA 19468
610-495-3003 Fax: 610-495-3092 Web: www.sedonacorp.com
Email: [email protected]
SedonaCorp and SEDONA Corporation, and are registered
trademark of SEDONA Corporation SpatialVision, SedonaLink and
Sedona are trademarks of SEDONA Corporation All other product
names are trademarks or registered trademarks of their
respective Companies.
