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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 Act of 1934
Date of Report (Date of earliest event reported): October 29, 1996
-------------------------------
DANKA BUSINESS SYSTEMS PLC
--------------------------
(Exact name of registrant as specified in its charter)
UNITED KINGDOM 33-68278 98-0052869
- ---------------------- ---------------- ------------------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
11201 DANKA CIRCLE NORTH
ST. PETERSBURG, FLORIDA 33716
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(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: 813-576-6003
THIS INSTRUMENT CONTAINS ____ PAGES.
THE EXHIBIT INDEX IS LOCATED ON PAGE ____.
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ITEM 5. OTHER EVENTS
On October 29, 1996, the Company issued the Press Release attached
hereto as Exhibit "99" announcing the Company's second quarter financial
results, the agreement with Eastman Kodak Company to acquire the sales,
marketing and equipment service operations of Kodak's Office Imaging Business,
as well as Kodak's facilities management business known as Kodak Imaging
Services (the "Sales and Services Business") and the promotion of David Snell
to Chief Operating Officer.
A copy of the Asset Purchase Agreement between Eastman Kodak Company
and the Company dated as of September 6, 1996 including Exhibit 5.19(a) which
is the form of Amended Supply Agreement, but excluding all other exhibits,
schedules, attachments and appendices is filed with this Report as Exhibit 2.
Completion of the closing of the Asset Purchase Agreement will be reported by
the Company under Item 2 of Form 8-K at the appropriate time.
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS
Certain statements contained in the Press Release, such as statements
concerning the effect of the Kodak transaction on the Company, integration of
the business to be acquired into the Company, future intentions and prospects
arising from the transaction, and other statements contained herein regarding
matters that are not historical facts are forward looking statements as such
term is defined in Section 27A of the Securities Act of 1933 and Section 21E of
the Securities Exchange Act of 1934, and because such statements involve risks
and uncertainties, actual results may differ materially from those expressed or
implied by such forward-looking statements. Factors that could cause actual
results to differ materially include, but are not limited to, the Company's
ability to manage and operate the Sales and Services Business, which is as
large as the Company's current business, (ii) the demands that the Acquisition
and integration of the Sales and Services Business will place, and the effect
that it will have, on the Company's resources, infrastructure and current
operations, (iii) the Company's ability to successfully operate in new
international markets, (iv) the ability of the Company to attract and retain
current management and other employees of the Sales and Services Business
accustomed to different corporate culture, compensation arrangements and
benefits, (v) the Company's ability to handle successfully the increased debt
resulting from the Acquisition,
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(vi) the Company's ability to obtain an alternative acceptable source of high
volume equipment and related parts and supplies upon a future termination of
the Amended Supply Agreement, (vii) increased competition, (viii) fluctuations
in foreign currency, (ix) domestic and foreign political developments and
governmental regulations and policies, (x) technological developments, (xi)
general economic and business conditions, (xii) future performance of the Sales
and Services Business and the Company's core business, (xiii) the ability of
the Company to successfully implement its growth and business strategy, and
(xiv) the ability of the Company to continue to receive acceptable financing as
required in the future.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements.
None.
(b) Pro Forma Financial Information.
None.
(c) Exhibits.
The Exhibits to this Report are listed in the Exhibit Index set forth
elsewhere herein.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
DANKA BUSINESS SYSTEMS PLC
By: /S/ DAVID C. SNELL
-------------------------------
David C. Snell
Its: Chief Operating Officer
Dated: November 14, 1996
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INDEX TO EXHIBITS
EXHIBIT
NUMBER EXHIBIT
------- -------
2.1 Asset Purchase Agreement between Eastman Kodak Company and
Danka Business Systems PLC dated as of September 6, 1996,
including Exhibit 5.19(a) which is the form of Amended and
Restated Supply Agreement by and between Eastman Kodak
Company and ______________________________ dated as of
___________ ___________, 1996.
99 Press Release of the Company dated October 29, 1996.
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EXHIBIT 2.1
================================================================================
ASSET PURCHASE AGREEMENT
between
EASTMAN KODAK COMPANY
and
DANKA BUSINESS SYSTEMS PLC
Dated as of September 6, 1996
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TABLE OF CONTENTS
ARTICLE I
DEFINITIONS AND TERMS
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Section 1.1 Specific Definitions . . . . . . . . . . . . . . . . . . . 2
Section 1.2 Other Terms . . . . . . . . . . . . . . . . . . . . . . . 13
Section 1.3 Other Definitional Provisions . . . . . . . . . . . . . . 13
ARTICLE II
PURCHASE AND SALE OF THE BUSINESS
Section 2.1 Purchase and Sale of Assets . . . . . . . . . . . . . . . 14
Section 2.2 Excluded Assets . . . . . . . . . . . . . . . . . . . . . 16
Section 2.3 Assumption of Liabilities . . . . . . . . . . . . . . . . 17
Section 2.4 Excluded Liabilities . . . . . . . . . . . . . . . . . . . 17
Section 2.5 Purchase Price . . . . . . . . . . . . . . . . . . . . . . 17
Section 2.6 Purchase Price Adjustments . . . . . . . . . . . . . . . . 18
Section 2.7 Closing . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 2.8 Deliveries by Purchaser . . . . . . . . . . . . . . . . . 22
Section 2.9 Deliveries by Kodak . . . . . . . . . . . . . . . . . . . 22
Section 2.10 Nonassignability of Assets . . . . . . . . . . . . . . . . 24
Section 2.11 Additional Acquisitions . . . . . . . . . . . . . . . . . 27
Section 2.12 Staged Closings . . . . . . . . . . . . . . . . . . . . . 28
Section 2.13 Certain Dispositions . . . . . . . . . . . . . . . . . . . 31
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF KODAK
Section 3.1 Organization and Qualification . . . . . . . . . . . . . . 31
Section 3.2 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . 32
Section 3.3 Corporate Authorization . . . . . . . . . . . . . . . . . 33
Section 3.4 Consents and Approvals . . . . . . . . . . . . . . . . . . 34
Section 3.5 Non-Contravention . . . . . . . . . . . . . . . . . . . . 35
Section 3.6 Binding Effect . . . . . . . . . . . . . . . . . . . . . . 36
Section 3.7 Financial Statements . . . . . . . . . . . . . . . . . . . 37
Section 3.8 Litigation and Claims . . . . . . . . . . . . . . . . . . 38
Section 3.9 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 3.10 Employee Benefits . . . . . . . . . . . . . . . . . . . . 39
Section 3.11 Compliance with Laws . . . . . . . . . . . . . . . . . . . 44
Section 3.12 Environmental Matters . . . . . . . . . . . . . . . . . . 45
Section 3.13 Intellectual Property . . . . . . . . . . . . . . . . . . 45
Section 3.14 Union Contracts . . . . . . . . . . . . . . . . . . . . . 49
Section 3.15 Contracts . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 3.16 Territorial Restrictions . . . . . . . . . . . . . . . . . 50
</TABLE>
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Section 3.17 Absence of Certain Business Practices . . . . . . . . . . 51
Section 3.18 Confidentiality . . . . . . . . . . . . . . . . . . . . . 51
Section 3.19 Assets . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 3.20 Title to Property . . . . . . . . . . . . . . . . . . . . 52
Section 3.21 Leased Real Property . . . . . . . . . . . . . . . . . . . 53
Section 3.22 Absence of Changes . . . . . . . . . . . . . . . . . . . . 54
Section 3.23 Operation of the Business . . . . . . . . . . . . . . . . 54
Section 3.24 Finders' Fees . . . . . . . . . . . . . . . . . . . . . . 54
Section 3.25 Warranties . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 3.26 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 3.27 Customers . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 3.28 No Other Representations or Warranties . . . . . . . . . . 55
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Section 4.1 Organization and Qualification . . . . . . . . . . . . . . 56
Section 4.2 Corporate Authorization . . . . . . . . . . . . . . . . . 56
Section 4.3 Consents and Approvals . . . . . . . . . . . . . . . . . . 58
Section 4.4 Non-Contravention . . . . . . . . . . . . . . . . . . . . 58
Section 4.5 Binding Effect . . . . . . . . . . . . . . . . . . . . . . 59
Section 4.6 Finders' Fees . . . . . . . . . . . . . . . . . . . . . . 60
Section 4.7 Litigation and Claims . . . . . . . . . . . . . . . . . . 60
Section 4.8 Financial Capability . . . . . . . . . . . . . . . . . . . 61
Section 4.9 Proxy Statement . . . . . . . . . . . . . . . . . . . . . 61
Section 4.10 No Other Representations or Warranties . . . . . . . . . . 62
ARTICLE V
COVENANTS
Section 5.1 Access and Information . . . . . . . . . . . . . . . . . . 62
Section 5.2 Conduct of Business . . . . . . . . . . . . . . . . . . . 64
Section 5.3 Reasonable Best Efforts . . . . . . . . . . . . . . . . . 66
Section 5.4 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . 66
Section 5.5 Post-Closing Obligations of the Business
to Certain Employees . . . . . . . . . . . . . . . . . 75
Section 5.6 Compliance with WARN, etc. . . . . . . . . . . . . . . . . 86
Section 5.7 Ancillary Agreements . . . . . . . . . . . . . . . . . . . 86
Section 5.8 Real Estate Leases, Subleases and License Agreements;
Other Real Estate Matters . . . . . . . . . . . . . . 86
Section 5.9 EKCC Agreements . . . . . . . . . . . . . . . . . . . . . 87
Section 5.10 Conduct of Environmental Proceedings . . . . . . . . . . . 88
Section 5.11 Insurance Proceeds . . . . . . . . . . . . . . . . . . . . 90
Section 5.12 Independent Service Providers . . . . . . . . . . . . . . 90
</TABLE>
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Section 5.13 Non-Solicitation . . . . . . . . . . . . . . . . . . . . . 91
Section 5.14 Further Assurances . . . . . . . . . . . . . . . . . . . . 91
Section 5.15 No Shop . . . . . . . . . . . . . . . . . . . . . . . . . 92
Section 5.16 Licensed Intellectual Property . . . . . . . . . . . . . . 93
Section 5.17 Proxy Statement . . . . . . . . . . . . . . . . . . . . . 93
Section 5.18 Automobile Lease Agreements . . . . . . . . . . . . . . . 95
Section 5.19 Supply Agreement . . . . . . . . . . . . . . . . . . . . . 96
Section 5.20 Intellectual Property License . . . . . . . . . . . . . . 96
Section 5.21 Audited Balance Sheet . . . . . . . . . . . . . . . . . . 97
Section 5.22 Staged Closings . . . . . . . . . . . . . . . . . . . . . 97
Section 5.23 Supplies and Services . . . . . . . . . . . . . . . . . . 97
Section 5.24 Guarantee . . . . . . . . . . . . . . . . . . . . . . . . 98
Section 5.25 Trade Names . . . . . . . . . . . . . . . . . . . . . . . 98
Section 5.26 Corporate Trademarks . . . . . . . . . . . . . . . . . . . 98
Section 5.27 Payment . . . . . . . . . . . . . . . . . . . . . . . . . 100
ARTICLE VI
CONDITIONS TO CLOSING
Section 6.1 Conditions to the Obligations of Purchaser and Kodak . . . 100
Section 6.2 Conditions to the Obligations of Purchaser . . . . . . . . 101
Section 6.3 Conditions to the Obligations of Kodak . . . . . . . . . . 102
ARTICLE VII
SURVIVAL; INDEMNIFICATION; CERTAIN REMEDIES
Section 7.1 Survival . . . . . . . . . . . . . . . . . . . . . . . . . 103
Section 7.2 Indemnification by Purchaser . . . . . . . . . . . . . . . 104
Section 7.3 Indemnification by Kodak . . . . . . . . . . . . . . . . . 106
Section 7.4 Indemnification Procedures . . . . . . . . . . . . . . . . 107
Section 7.5 Characterization of Indemnification Payments . . . . . . . 110
Section 7.6 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . 110
ARTICLE VIII
TERMINATION
Section 8.1 Termination . . . . . . . . . . . . . . . . . . . . . . . 111
Section 8.2 Effect of Termination . . . . . . . . . . . . . . . . . . 112
ARTICLE IX
MISCELLANEOUS
Section 9.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . 112
Section 9.2 Amendment; Waiver . . . . . . . . . . . . . . . . . . . . 114
</TABLE>
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Section 9.3 No Assignment or Benefit to Third Parties . . . . . . . . 114
Section 9.4 Entire Agreement . . . . . . . . . . . . . . . . . . . . . 115
Section 9.5 Fulfillment of Obligations . . . . . . . . . . . . . . . . 115
Section 9.6 Public Disclosure . . . . . . . . . . . . . . . . . . . . 115
Section 9.7 Return of Information . . . . . . . . . . . . . . . . . . 116
Section 9.8 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 116
Section 9.9 Schedules . . . . . . . . . . . . . . . . . . . . . . . . 116
Section 9.10 Bulk Sales . . . . . . . . . . . . . . . . . . . . . . . . 116
Section 9.11 GOVERNING LAW; SUBMISSION TO JURISDICTION;
SELECTION OF FORUM . . . . . . . . . . . . . . . . . . . . 117
Section 9.12 Counterparts . . . . . . . . . . . . . . . . . . . . . . . 118
Section 9.13 Headings . . . . . . . . . . . . . . . . . . . . . . . . . 118
Section 9.14 Confidentiality . . . . . . . . . . . . . . . . . . . . . 118
Section 9.15 Severability . . . . . . . . . . . . . . . . . . . . . . . 119
</TABLE>
EXHIBITS AND SCHEDULES
EXHIBITS
Exhibit 1.1(a) - Real Estate Leases, Subleases and Licenses
Exhibit 1.1(b) - Transitional Services Supply Agreement
Exhibit 1.1(c) - Purchaser Transitional Services Supply Agreement
Exhibit 1.1(d) - Kodak Imaging Services, Inc. Agreement
Exhibit 1.1(e) - Software License Agreement
Exhibit 1.1(f) - Trade Name Agreement
Exhibit 1.1(g) - Parts Distribution Agreement
Exhibit 1.1(h) - Service MIS Systems Agreement
Exhibit 3.7 - Financial Statements
Exhibit 5.2 - Transitional Advisory Agreement
Exhibit 5.5 - Fully Burdened Cost
Exhibit 5.19(a) - Amended and Restated Supply Agreement
Exhibit 5.19(b) - Emerging Territories Marketing and Promotion
Agreement
SCHEDULES
Schedule 1.1(a) - Assigned Leases
Schedule 1.1(b) - Subleases
Schedule 1.1(d) - Owned Real Property
Schedule 2.1(d) - Transferred Patent Intellectual Property
Schedule 2.2(k) - Excluded Owned or Leased Technology Assets
Schedule 3.2(a) - Transferred Subsidiaries
Schedule 3.2(b) - Subsidiaries
Schedule 3.4(a) - Governmental Consents and Approvals
Schedule 3.4(b) - Other Material Consents and Approvals
Schedule 3.8 - Litigation and Claims
Schedule 3.10(a) - Benefit Plans
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Schedule 3.10(b) - Material Benefit Plan Litigation
Schedule 3.10(h) - Retiree Health and Life Benefits
Schedule 3.10(i) - Retention and Performance Bonuses
Schedule 3.10(j) - Employees
Schedule 3.10(l) - Severance Policies
Schedule 3.11 - Compliance with Laws
Schedule 3.13(a) - Other Intellectual Property Related to the
Business
Schedule 3.13(d) - Licensing Arrangements
Schedule 3.13(e) - Required Intellectual Property Approvals
Schedule 3.13(g) - Unregistered Intellectual Property
Schedule 3.14 - Union Contracts
Schedule 3.15(b) - Contract Defaults and Consents
Schedule 3.15(d) - Out-of-the-Ordinary Course Contracts
Schedule 3.16 - Territorial Restrictions
Schedule 3.27 - Customers
Schedule 4.3 - Consents and Approvals
Schedule 5.5(b) - Benefits Enhancements
</TABLE>
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ASSET PURCHASE AGREEMENT, dated as of September 6, 1996, between
Eastman Kodak Company, a New Jersey corporation ("Kodak"), and Danka Business
Systems PLC, a public limited company incorporated under the laws of England
and Wales ("Purchaser").
W I T N E S S E T H:
WHEREAS, Kodak and certain of the Subsidiaries are engaged worldwide
in the manufacturing, marketing, sales, distribution, support operations and
research and development activities related to electrophotographic systems
(digital and analog) and services for office imaging and reprographics through
its Office Imaging business unit ("OI");
WHEREAS, Kodak and certain of the Subsidiaries are engaged through the
Customer Equipment Services business unit ("CES") in providing service for
OI-manufactured or sold equipment, equipment manufactured by third parties and
non-OI equipment manufactured or sold by Kodak;
WHEREAS, Kodak's subsidiary, Kodak Imaging Services, Inc., operates,
in its own name or in the name of other subsidiaries of Kodak, a multinational
facilities management service that, among other things, provides, on behalf of
its customers, copier/duplicator, administrative, mailroom and/or print on
demand services ("KIS");
WHEREAS, the parties hereto desire that Kodak and the Subsidiaries
sell, transfer, assign, license and lease to Purchaser and the Purchaser Buyers
and that Purchaser and the Purchaser Buyers purchase, license, lease and assume
from Kodak and the Subsidiaries certain assets and liabilities of OI and CES
and the issued and outstanding stock of KIS and its subsidiaries, all as more
specifically provided herein;
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WHEREAS, Kodak and one of Purchaser's subsidiaries are party to a
Master Agreement and Reseller Purchase Agreements for Office Imaging Products,
each dated as of September 5, 1995, the latter of which, with Kodak's consent,
have been assigned to certain other subsidiaries of Purchaser;
WHEREAS, at the Closing, Kodak and one of the Purchaser Buyers will
enter into an Amended and Restated Supply Agreement ("Supply Agreement"), in
the form annexed hereto as Exhibit 5.19(a), which will replace the existing
Master Supply Agreement and Reseller Purchase Agreements and may be
subsequently assigned to certain Purchaser Buyers, pursuant to which, effective
as of the closing of the transactions contemplated by this Agreement, Kodak
will supply electrophotographic systems (digital and analog) for office imaging
and reprographics to Purchaser and the Purchaser Buyers for marketing and
resale by Purchaser and the Purchaser Buyers; and
WHEREAS, at the Closing, Kodak and one of the Purchaser Buyers will
enter into an Emerging Territories Marketing and Promotion Agreement (the
"Promotional Agreement"), in the form annexed hereto as Exhibit 5.19(b).
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and undertakings contained herein, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND TERMS
Section 1.1 Specific Definitions. As used in this Agreement, the
following terms shall have the meanings set forth as referenced below:
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"Accessories" shall mean devices or components for use in or
with electrophotographic output products (digital and analog) for image or
document feeding, positioning, finishing or other image or document handling
functions.
"Accounts Receivable" shall mean all trade accounts and notes
receivable and other miscellaneous receivables of the Business as of the
Closing arising out of the sale or other disposition of goods or services of
the Business, except to the extent included in Excluded Assets.
"Affiliates" shall mean, with respect to any Person, any
Persons directly or indirectly controlling, controlled by, or under common
control with, such other Person at any time during the period for which the
determination of affiliation is being made. For purposes of this definition,
the term "control" (including the correlative meanings of the terms "controlled
by" and "under common control with"), as used with respect to any Person, shall
mean the possession, directly or indirectly, of the power to direct or cause
the direction of management policies of such Person, whether through the
ownership of voting securities or by contract or otherwise.
"Agreement" shall mean this Asset Purchase Agreement, as the
same may be amended or supplemented from time to time in accordance with the
terms hereof.
"Ancillary Agreements" shall mean collectively those
agreements to be entered into at Closing between Purchaser or the Purchaser
Buyers and Kodak or the Subsidiaries which shall provide for the licensing of
certain Intellectual Property and the provision of certain services and
products by and between Purchaser or the Purchaser Buyers and Kodak or the
Subsidiaries after the Closing on substantially the terms as are set forth in
Exhibits 1.1(a)-(h).
"Applicable Employees" shall have the meaning set forth in
Section 5.5(a).
"Assigned Leases" shall refer to those leases and subleases of
Leased Real Property listed on Schedule 1.1(a).
"Assumed Liabilities" shall mean (A) all current and other
liabilities of the Business to the extent set forth, or to the extent reserved
for, on the face of the Closing Date Balance Sheet other than any Tax
liabilities (except payroll taxes on accrued labor costs) for any period prior
to the Closing and any Intracompany Payables, (B) all liabilities and
obligations of the Business under the Contracts and (C) all liabilities and
obligations that Purchaser has expressly assumed or agreed to assume under this
Agreement, including with respect to the Transitional Advisory Agreement and
the Ancillary Agreements and (D) all liabilities and obligations that arise out
of or relate to the Transferred Assets, the Business or the Transferred
Employees to the extent attributable to occurrences and circumstances arising
following the Closing, except that with respect to the Transferred Employees,
Purchaser shall not be responsible for any liabilities or obligations arising
under any Plan unless such liabilities or obligations arise as a result of a
breach of Sections 5.5(a), (b), (e) or (g).
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"Base Net Asset Value" shall mean $802 million.
"Benefit Plans" shall have the meaning set forth in Section
3.10(a).
"Books and Records" shall mean all books, ledgers and files
of, or maintained for, the Business, including price lists, correspondence,
mailing lists, lists of customers, distribution lists, personnel records,
accounting records and sales order files, but excluding any such items to the
extent (i) they are included in or primarily related to any Excluded Assets or
Excluded Liabilities, (ii) any Law prohibits their transfer by Kodak or any
Subsidiary, (iii) any transfer thereof would subject Kodak or any Subsidiary to
any material liability or (iv) they are Proprietary Business Information.
"Business" shall mean (i) OI and CES to the extent primarily
related to the marketing, sale, distribution, maintenance, service and repair
of electrophotographic systems (digital and analog) for office imaging and
reprographics and the marketing, sale or distribution of parts, supplies and
consumables for such electrophotographic systems (digital and analog), except
for OEM Agreements (other than the Kodak OEM Agreements in the event that Kodak
has received either consent to their assignment, as modified by mutual
agreement of the parties, or the OEM Modification, prior to the Closing), and
not related to the research and development or the manufacture or remanufacture
of electrophotographic systems (digital and analog) for office imaging and
reprographics and parts, supplies and consumables for such electrophotographic
systems (digital and analog) and (ii) KIS.
"Business Day" shall mean any day other than a Saturday, a
Sunday or a day on which banks in New York City are authorized or obligated by
Law or executive order to close.
"Capital Assets - Rental Equipment" shall mean all
electrophotographic equipment (digital and analog) and Accessories Related to
the Business owned by Kodak or any Subsidiary and (i) rented to third parties
or (ii) used in the Business.
"Carcasses" shall mean electrophotographic equipment (digital
and analog) and Accessories that have been purchased by or returned to the
Business and are being held for remanufacturing or for salvageable parts, other
than those that are in work-in-process as part of strip and salvage operations.
"CES" shall have the meaning set forth in the Recitals.
"Circular" shall have the meaning set forth in Section 5.17.
"Claim Notice" shall have the meaning set forth in Section 7.4.
"Closing" shall mean the closing of the transactions
contemplated by this Agreement.
"Closing Countries" shall have the meaning set forth in
Section 2.12.
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"Closing Date" shall have the meaning set forth in Section 2.7.
"Closing Date Balance Sheet" shall mean the balance sheet
which sets forth the assets and liabilities of the Business that are the
subject of the Transaction as of the Closing prepared, or caused to be
prepared, by Kodak in accordance with Section 2.6 hereof and, in the event of a
Purchaser's Objection, as adjusted by either the agreement of Purchaser and
Kodak, or by the CPA Firm, acting pursuant to Section 2.6.
"Closing Date Net Asset Value" shall mean (x) the total assets
shown on the Closing Date Balance Sheet minus (y) the total liabilities shown
on the Closing Date Balance Sheet.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Confidentiality Agreement" shall mean the agreement between
Kodak and Purchaser, dated February 6, 1996.
"Consent Certificates" shall mean certificates evidencing
consents of third parties that are required in order to effectuate a legal
transfer of the Assigned Leases.
"Consideration" shall have the meaning set forth in Section
5.4(e).
"Continuation Coverage" shall have the meaning set forth in
Section 5.5(f).
"Contracts" shall mean all agreements, contracts, leases and
subleases, purchase orders, arrangements, commitments and licenses (other than
this Agreement, the Ancillary Agreements, the Supply Agreement, the
Transitional Advisory Agreement, the Promotional Agreement, and those governing
Kodak Leased Property and any leases of real property not included in the
Assigned Leases or Subleases) that are Related to the Business as of the
Closing or to which the Transferred Assets are subject, except in each case to
the extent included in Excluded Assets; it being understood, that in no event
shall Contracts include the EKCC Agreements since the EKCC Agreements are not
Related to the Business.
"Corporate Trademarks" shall have the meaning set forth in
Section 5.26.
"CPA Firm" shall mean such firm of independent certified
public accountants as to which Kodak and Purchaser shall mutually agree.
"EKCC Agreements" shall mean the Amended and Restated
Operating Agreement dated December 31, 1992, as amended, the Outsourcing
Agreement, dated as of November 15, 1993, as amended, and the Cost Per Copy
Lease Servicing Agreement, dated July 1, 1995, each between Kodak and Imaging
Financial Services, Inc., d.b.a. EKCC, and the Acquisition Agreement dated as
of November 22, 1992, as amended, between Kodak and General Electric Capital
Corporation.
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"Employees" shall mean all current employees of the Business,
including those who are on short-term disability as of the Closing, at least
80% of whose respective work hours during the last 12 months (or such shorter
period as they have worked for Kodak or the Subsidiaries so long as such
employees were employed in or dedicated to the Business in the ordinary course
of business) were allocated to the Business and the Full-Time Equivalent
Employees.
"Encumbrances" shall mean liens, charges, encumbrances,
security interests, options or any other restrictions or third party rights.
"Environmental Law" shall mean any applicable Law (including
but not limited to the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Resource Conservation and Recovery Act of 1976 and
analogous state laws) relating to (x) the protection of human health or the
environment (including air, water vapor, surface water, groundwater, drinking
water supply, and surface or subsurface land) or (y) the exposure to, or the
use, storage, recycling, treatment, generation, transportation, processing,
handling, labeling, management, release or disposal of, Hazardous Substances or
any waste material, on-site or at any off-site locations.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"ERISA Affiliate" shall have the meaning set forth in Section
3.10(c).
"EU" shall mean the European Union.
"Excluded Assets" shall have the meaning set forth in Section
2.2.
"Excluded Liabilities" shall mean all liabilities and
obligations of Kodak or any Subsidiary other than the Assumed Liabilities.
"Existing Business" shall mean CES, to the extent primarily
related to OI or electrophotographic systems (digital and analog) for office
imaging and reprographics manufactured by third parties, OI and KIS.
"Financial Statements" shall have the meaning set forth in
Section 3.7.
"Fixtures and Equipment" shall mean all furniture,
furnishings, vehicles, equipment, computers and other tangible personal
property Related to the Business, including any of the foregoing purchased
subject to any conditional sales or title retention agreement in favor of any
other Person, except to the extent included in Excluded Assets and except for
fixtures, including environmental chambers, related to real property not
subject to the Assigned Leases.
"FTE Floor Employees" shall have the meaning set forth in
Section 5.5(a).
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"Full-Time Equivalent Employees" shall mean the full-time
equivalent employees who currently perform Business functions on an other than
full-time basis and are identified by Kodak in writing to Purchaser as soon as
practicable but in no event later than 30 days after the date hereof.
"GAAP" shall mean United States generally accepted accounting
principles.
"Governmental Authorizations" shall mean all licenses,
permits, certificates and other authorizations and approvals required to carry
on the Business as currently conducted under applicable Laws.
"Government Antitrust Entity" shall mean any federal, state or
local court, administrative body or other governmental entity in any country
with jurisdiction over the enforcement of any U.S. Antitrust Law, EU
competition Law or other similar Law.
"Government Contract Approval" means the approval of any
governmental authority or quasi-governmental authority to the assignment or
novation of any Contract pursuant to which such governmental authority or
quasi-governmental authority is a customer of Kodak.
"Hazardous Substances" shall mean any matter or material
containing any substance that is listed, defined, designated or classified as
hazardous or toxic under applicable Laws or is otherwise regulated by a
governmental body.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"Indemnified Parties" shall have the meaning set forth in
Section 7.3(a).
"Indemnifying Party" shall have the meaning set forth in
Section 7.4.
"Independent Service Providers" shall mean companies or
organizations, not related to equipment manufacturers, engaged in the business
of maintaining, servicing or repairing equipment manufactured by others.
"Injunction" shall have the meaning set forth in Section 5.12.
"Intellectual Property" shall mean patents, patent
applications, inventions, invention disclosures, trade secrets, know-how,
registered and unregistered copyrights, works of authorship, computer software
programs, data bases, mask rights, trademarks, service marks, trade names,
trade dress and any similar proprietary rights and any licenses or user rights
related to the foregoing.
"Intracompany Payables" shall mean all account, note or loan
payables recorded on the books of Kodak or any Subsidiary for goods or services
purchased by or
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provided to the Business, or advances (cash or otherwise) or any other
extensions of credit to the Business from Kodak or any Subsidiary, whether
current or non-current.
"Intracompany Receivables" shall mean all account, note or
loan receivables recorded on the books of Kodak or any Subsidiary for goods or
services sold or provided by the Business to Kodak or any Subsidiary or
advances (cash or otherwise) or any other extensions of credit made by the
Business to Kodak or any Subsidiary, whether current or non-current.
"Inventory" shall mean all inventory Related to the Business,
including all finished goods consisting of equipment, accessories, spare parts,
consumables and supplies whether held at any location or facility of Kodak or
any Subsidiary or in transit to Kodak or any Subsidiary, in each case as of the
Closing Date, except to the extent included in Excluded Assets.
"KIS" shall have the meaning set forth in the Recitals.
"Knowledge" or any similar phrase shall mean the collective
actual knowledge of management employees of Kodak and the Subsidiaries or
Purchaser and the Purchaser Buyers, as the case may be.
"Kodak" shall have the meaning set forth in the Preamble.
"Kodak Indemnified Parties" shall have the meaning set forth
in Section 7.2.
"Kodak Leased Property" shall mean those assets or rights, not
included in the Transferred Assets, that are to be leased, licensed or
otherwise provided by Kodak and/or any Subsidiary to Purchaser and its
Affiliates pursuant to this Agreement, any Ancillary Agreement or the Supply
Agreement, including, without limitation, the Kodak Licensed Intellectual
Property but excluding the Leased Real Property.
"Kodak Licensed Intellectual Property" shall mean the
Intellectual Property to be licensed to Purchaser or its Affiliates by Kodak or
any Subsidiary pursuant to any Ancillary Agreement, the Supply Agreement or
this Agreement.
"Kodak OEM Agreement" shall mean an OEM Agreement Related to
the Business in effect as of the Closing under which Kodak or a Subsidiary is
the purchaser.
"Kodak Owned Software" shall mean software that has been
developed, created or otherwise acquired by Kodak or any Subsidiary.
"Kodak Savings Plans" shall have the meaning set forth in
Section 5.5(d).
"Kodak Services" shall mean those services to be provided by
Kodak or any Subsidiary to Purchaser or the Purchaser Buyers pursuant to this
Agreement, the Supply Agreement or any Ancillary Agreement.
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"LAR Amount" shall mean the bonuses payable to Employees under
government mandated change in control provisions in Mexico, Venezuela and
Brazil.
"Laws" shall mean any federal, state or local law, statute,
ordinance, rule, regulation, code, order, judgment, injunction or decree of any
country.
"Leased Real Property" shall mean all real property leased or
subleased pursuant to the Assigned Leases and Subleases.
"LIBOR" shall mean the six-month Interbank Official Rate with
respect to deposits in U.S. Dollars which appears on the Telerate Page 3750 as
of 11:00 a.m., London time, on the day that is two business days in London
preceding the Closing.
"Line Item" shall mean financial statement line item
classifications set forth on the Closing Date Balance Sheet as mutually agreed
upon by Kodak and Purchaser and listed on Exhibit 3.7.
"Listed Countries" shall have the meaning set forth in Section
2.12.
"Listing Rules" shall have the meaning set forth in Section
5.17(a).
"Losses" shall have the meaning set forth in Section 7.2.
"LSE" shall have the meaning set forth in Section 5.17(a).
"Material Adverse Effect" shall mean an effect that
individually or collectively is or is reasonably likely to be materially
adverse to the Transferred Assets taken as a whole or the business, financial
condition or results of operations of the Business.
"Material Contracts" shall have the meaning set forth in
Section 3.15(a).
"New Country" shall have the meaning set forth in Section 2.12.
"Non-Governmental Authorizations" shall mean all licenses,
permits, certificates and other authorizations and approvals other than
Governmental Authorizations that are (i) held by Kodak or any Subsidiary and
(ii) Related to the Business.
"Non-U.S. Plans" shall have the meaning set forth in Section
3.10(k).
"Notice Period" shall have the meaning set forth in Section
7.4.
"OEM Agreements" shall mean agreements to which Kodak is a
party in connection with the Existing Business and whereunder a party purchases
for resale or for incorporation into its products finished goods manufactured
by the selling party.
"OEM Modification" shall mean, with respect to the Kodak OEM
Agreements as to which consent is required for Kodak to either assign the
agreements or to resell
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products thereunder to Purchaser or the Purchaser Buyers, as the case may be,
modifications acceptable to Purchaser and Kodak that would permit Kodak to
resell products purchased by Kodak thereunder to Purchaser or the Purchaser
Buyers, as the case may be.
"OI" shall have the meaning set forth in the Recitals.
"Ordinary Course", "Ordinary Course of Business" or "Business
in the Ordinary Course" shall mean the conduct of the Business in accordance
with Kodak's customs, practices and procedures.
"Other Contracts" shall have the meaning set forth in Section
3.15(c).
"Owned Real Property" shall mean that real property listed on
Schedule 1.1(d) which is owned by Kodak or a Subsidiary as of the Closing and
which Purchaser or the Purchaser Buyers shall lease or license from Kodak or a
Subsidiary pursuant to an Ancillary Agreement.
"Pension Plan" shall have the meaning set forth in Section
3.10(b).
"Permitted Encumbrances" shall have the meaning set forth in
Section 3.20.
"Person" shall mean an individual, a corporation, a
partnership, an association, a trust or other entity or organization.
"Plans" shall have the meaning set forth in Section 3.10(b).
"Prime Leases" shall mean any agreement by which Kodak or a
Subsidiary leases, as tenant, the Leased Real Property listed on Schedule
1.1(b).
"Promotional Agreement" shall have the meaning set forth in
the Recitals.
"Proprietary Business Information" shall mean reports, plans,
records, manuals, advertising matter, catalogues, sales and promotional
materials, records and all other proprietary business information of,
maintained for, or Related to, the Business, but excluding any Intellectual
Property and any such items to the extent (i) they are included in or primarily
related to any Excluded Assets or Excluded Liabilities, (ii) any law prohibits
their transfer by Kodak or any Subsidiary or (iii) any transfer thereof would
subject Kodak or any Subsidiary to any material liability.
"Proxy Statement" shall have the meaning set forth in Section
5.17(a).
"Purchase Price" shall have the meaning set forth in Section
2.5.
"Purchase Price Adjustment Amount" shall have the meaning set
forth in Section 2.6(d).
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"Purchaser" shall have the meaning set forth in the Preamble.
"Purchaser Buyers" shall mean any direct or indirect
wholly-owned (other than qualifying shares required by law) subsidiary of
Purchaser which will be purchasing certain of the Transferred Assets.
"Purchaser Indemnified Parties" shall have the meaning set
forth in Section 7.3(a).
"Purchaser's Objection" shall have the meaning set forth in
Section 2.6(b).
"Related to the Business" shall mean required for, primarily
related to, or used primarily in connection with, the Business as conducted by
Kodak and the Subsidiaries prior to the Closing.
"Required Approvals" shall have the meaning set forth in
Section 3.4.
"Residuals" shall mean the electrophotographic systems
(digital and analog) of the Business owned by Kodak or any Subsidiary that are
the subject of leases that arise out of or result from the finance lease
receivables Related to the Business and have a book value of $3.9 million.
"Retention Bonuses" shall mean the $4.35 million payable
pursuant to those certain letters to individual management Employees, dated
January 26, 1996 in connection with their commitment to stay with the Business
during the repositioning.
"SEC" shall mean the United States Securities and Exchange
Commission.
"Special Meeting" shall have the meaning set forth in Section
5.17(a).
"Subleases" shall refer to subleases or licenses between Kodak
and Purchaser of Leased Real Property listed on Schedule 1.1(b).
"Subsidiary" shall mean (a) any corporation in an unbroken
chain of corporations beginning with Kodak if each of the corporations other
than the last corporation in the unbroken chain then owns stock possessing 50%
or more of the total combined voting power of all classes of stock in one of
the other corporations in such chain, (b) any partnership in which Kodak is a
general partner or (c) any partnership, corporation, limited liability company
or similar entity that Kodak controls, through the ownership of interests or
otherwise.
"Supply Agreement" shall have the meaning set forth in the
Recitals.
"Tax Returns" shall mean all reports and returns required to
be filed with respect to Taxes.
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"Taxes" shall mean all federal, state or local taxes in any
country, including income, gross receipts, windfall profits, value added,
severance, property, production, sales, use, duty, license, excise, franchise,
employment, withholding or similar taxes, together with any interest, additions
or penalties with respect thereto and any interest in respect of such additions
or penalties.
"Trademarks" shall mean all trademarks, trade names, trade
dress and service marks.
"Transaction" shall mean the purchase and sale of the
Transferred Assets and the assumption of the Assumed Liabilities pursuant to
this Agreement.
"Transfer of Undertakings" shall mean EEC Directive 77/187 and
the implementing laws and regulations in the relevant countries.
"Transfer Taxes" shall have the meaning set forth in Section
5.4(c).
"Transfer Time" shall mean, with respect to each relevant
locality, 12:01 a.m. on the date following the Closing Date.
"Transferee Savings Plan" shall have the meaning set forth in
Section 5.5(e).
"Transferred Assets" shall have the meaning set forth in
Section 2.1.
"Transferred Employees" shall have the meaning set forth in
Section 5.5(a).
"Transferred Intellectual Property" shall mean the Transferred
Non-Patent Intellectual Property and the Transferred Patent Intellectual
Property.
"Transferred Non-Patent Intellectual Property" shall mean all
Intellectual Property (other than patents, patent applications, patent and
software licenses, copyrights in service and operator manuals, trademarks,
trade names, trade dress and service marks) Related to the Business.
"Transferred Patent Intellectual Property" shall mean only the
patents, patent applications and patent and software licenses set forth on
Schedule 2.1(d).
"Transferred Subsidiaries" shall mean all Subsidiaries listed
on Schedule 3.2(a).
"Transitional Advisory Agreement" shall mean the Transitional
Advisory Agreement set forth in Exhibit 5.2.
"Unaudited Balance Sheet" shall have the meaning set forth in
Section 3.7.
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"U.S. Antitrust Laws" shall mean and include the Sherman Act,
as amended, the Clayton Act, as amended, the HSR Act, the Federal Trade
Commission Act, as amended, and all other federal and state statutes, rules,
regulations, orders, decrees, administrative and judicial doctrines, and other
Laws that are designed or intended to prohibit, restrict or regulate actions
having the purpose or effect of monopolization or restraint of trade.
"WARN" shall mean the Worker Adjustment and Retraining
Notification Act.
"Welfare Plans" shall have the meaning set forth in Section
5.5(f).
Section 1.2 Other Terms. Other terms may be defined elsewhere in the
text of this Agreement and, unless otherwise indicated, shall have such meaning
throughout this Agreement.
Section 1.3 Other Definitional Provisions.
(a) The words "hereof", "herein", and "hereunder" and words of
similar import, when used in this Agreement, shall refer to this Agreement as a
whole and not to any particular provision of this Agreement.
(b) The terms defined in the singular shall have a comparable
meaning when used in the plural, and vice versa.
(c) The terms "Dollars" and "$" shall mean United States Dollars.
(d) References herein to a specific Section, Subsection or
Schedule shall refer, respectively, to Sections, Subsections or Schedules of
this Agreement, unless the express context otherwise requires.
(e) Wherever the word "include," "includes," or "including" is
used in this Agreement, it shall be deemed to be followed by the words "without
limitation."
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ARTICLE II
PURCHASE AND SALE OF THE BUSINESS
Section 2.1 Purchase and Sale of Assets. On the terms and subject to
the conditions set forth herein, at the Closing, Kodak shall, or shall cause
one or more of the Subsidiaries to, sell, convey, transfer, assign and deliver
to Purchaser or the Purchaser Buyers, as the case may be, and Purchaser or the
Purchaser Buyers, as the case may be, shall purchase from Kodak or any of the
Subsidiaries all of Kodak's or each such Subsidiary's right, title and
interest, as of the Closing, in and to (i) the assets of Kodak or each such
Subsidiary (other than a Transferred Subsidiary) Related to the Business,
whether tangible or intangible, real, personal or mixed, except for the
Excluded Assets and except for any asset or class of assets excluded from the
defined terms set forth in (a)-(s) of this Section 2.1 by virtue of the
limitations expressed or implied therein and (ii) the Carcasses ((i) and (ii)
collectively, the "Transferred Assets"), including all of such right, title and
interest in and to the following:
(a) Accounts Receivable;
(b) Inventory;
(c) Contracts;
(d) Transferred Patent Intellectual Property;
(e) Transferred Non-Patent Intellectual Property;
(f) Books and Records;
(g) Fixtures and Equipment;
(h) Leased Real Property;
(i) Capital Assets - Rental Equipment;
(j) the Residuals;
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(k) causes of action, lawsuits, judgments, claims and
demands of any nature available to or being pursued by Kodak or any
Subsidiary that are Related to the Business, to the extent primarily
related to the Transferred Assets, the Assumed Liabilities or the
ownership, use, function or value of any Transferred Asset, whether
arising by way of counterclaim or otherwise, except to the extent
related to Kodak Licensed Intellectual Property or included in the
Excluded Assets;
(l) all credits, prepaid expenses, deferred charges,
advance payments, security deposits, prepaid items and duties to the
extent related to a Transferred Asset;
(m) all prepaid Taxes (other than Taxes measured by net
income or gains) that are imposed directly with respect to a
Transferred Asset to the extent such Taxes relate to any period
following the Closing and appear on the Closing Date Balance Sheet;
(n) to the extent their transfer is permitted by Law, all
Governmental Authorizations and Non-Governmental Authorizations and
all applications therefor;
(o) all guaranties, warranties, indemnities and similar
rights in favor of Kodak or any Subsidiary to the extent related to
any Transferred Asset;
(p) all goodwill associated with or attributable to the
Business, except to the extent related to assets not included in the
Transferred Assets;
(q) all of the issued and outstanding capital stock of
the Transferred Subsidiaries;
(r) all Proprietary Business Information; and
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(s) subject to Section 5.1, all Tax Returns for each
Transferred Subsidiary.
Section 2.2 Excluded Assets. Notwithstanding anything herein to the
contrary, from and after the Closing, Kodak and each of the Subsidiaries (other
than the Transferred Subsidiaries) shall retain all of their existing right,
title and interest in and to, and there shall be excluded from the sale,
conveyance, assignment or transfer to Purchaser hereunder, and the Transferred
Assets shall not include, the following (collectively, the "Excluded Assets"):
(a) all Tax assets (including duty and tax refunds and
prepayments) except to the extent described in Section 2.1(m);
(b) all Tax Returns of Kodak or any Subsidiary (other
than the Tax Returns delivered pursuant to Section 2.1(s)) and all
books and records (including working papers) related thereto;
(c) the EKCC Agreements;
(d) all credits, prepaid expenses, deferred charges,
advance payments, security deposits, prepaid items and duties to the
extent related to any Excluded Asset;
(e) all finance lease receivables;
(f) all Owned Real Property;
(g) transparencies and other specialty coated
image-receiving media such as that used in or with electrophotographic
systems (digital and analog);
(h) Trademarks;
(i) all Intracompany Receivables;
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(j) all licenses to Kodak or any Subsidiary with respect
to computer software and related databases and all Kodak Owned
Software other than those set forth on Schedule 2.1(d);
(k) all equipment described in Schedule 2.2(k) and all
electrophotographic systems (digital and analog) that are used for
administrative purposes by Kodak or any of the Subsidiaries other than
in the Business; and
(l) all insurance proceeds which Kodak or any of the
Subsidiaries has a right to receive as of the Closing and that relate
to events or occurrences prior to the Closing except to the extent
such insurance proceeds are paid with respect to events or occurrences
that have reduced the value of a Transferred Asset and such reduction
in value is not reflected on the Closing Date Balance Sheet.
Section 2.3 Assumption of Liabilities. On the terms and subject to
the conditions set forth herein, at the Closing, Purchaser agrees to assume and
discharge or perform when due all Assumed Liabilities. Purchaser will not
assume or have any responsibility of any nature with respect to any other
obligation or liability of Kodak or any of the Subsidiaries, whether or not
Related to the Business and whether known or unknown, asserted or unasserted,
absolute or contingent, accrued or unaccrued, liquidated or unliquidated, due
or to become due that is not within the definition of the Assumed Liabilities.
Section 2.4 Excluded Liabilities. Kodak and the Subsidiaries shall
retain and be responsible for all Excluded Liabilities.
Section 2.5 Purchase Price. On the terms and subject to the
conditions set forth herein, Purchaser shall, and shall cause the Purchaser
Buyers to, pay to Kodak and the
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Subsidiaries (other than the Transferred Subsidiaries) in U.S. Dollars a total
cash consideration equal to $684.2 million at the Closing (the "Purchase
Price"), as allocated pursuant to Section 5.4(g) and subject to adjustment to
the extent of the Purchase Price Adjustment Amount as provided in Section
2.6(d).
Section 2.6 Purchase Price Adjustments. (a) As soon as practicable
but in no event more than 90 days following the Closing, Kodak shall prepare,
or cause to be prepared, and deliver to Purchaser the Closing Date Balance
Sheet, which shall set forth the assets and the liabilities of the Business
that are the subject of the Transaction as of the Closing and which shall be
certified by Kodak's independent certified public accountants and be prepared
in accordance with GAAP consistently applied, subject to the same modifications
to principles as are reflected in Exhibit 3.7, in accordance with Kodak's past
accounting methods, policies, practices and procedures and in the same manner,
with consistent classification and estimation methodology, in which the
Unaudited Balance Sheet was prepared. Upon completion of the Closing Date
Balance Sheet, Kodak shall calculate the Closing Date Net Asset Value, as
derived from the Closing Date Balance Sheet, and deliver such calculation and
the Closing Date Balance Sheet to Purchaser.
(b) Purchaser and Purchaser's accountants shall, within 60 days
after the delivery by Kodak of the Closing Date Balance Sheet and Kodak's
calculation of the Closing Date Net Asset Value, complete their review thereof.
In the event that Purchaser and Purchaser's accountants determine that the
Closing Date Balance Sheet has not been prepared on the basis set forth in
Section 2.6(a), Purchaser shall, on or before the last day of such 60 day
period, so inform Kodak in writing (the "Purchaser's Objection"), setting forth
a
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specific description of the basis of Purchaser's determination and the
adjustments to the Closing Date Balance Sheet and the corresponding adjustments
to the Closing Date Net Asset Value that Purchaser believes should be made;
provided, however, that (i) no Line Item of dispute shall be the subject of
Purchaser's Objection unless the amount proposed by Purchaser for such Line
Item differs from the amount of such Line Item for purposes of the preparation
of the Closing Date Balance Sheet delivered pursuant to Section 2.6(a) by more
than $100,000 and (ii) the aggregate amount of Purchaser's adjustments that are
the subject of Purchaser's Objection would cause the Closing Date Net Asset
Value (if accepted in accordance with the succeeding paragraph) to differ from
the Closing Date Net Asset Value delivered pursuant to Section 2.6(a) by more
than $1 million. In connection with, and as a condition to, the resolution of
any Purchaser's Objection, Kodak and Purchaser shall enter into an agreement
setting forth the extent to which such resolution shall foreclose any right to
indemnification pursuant to Section 7.3(a)(i). If no Purchaser's Objection is
received by Kodak on or before the last day of such 60 day period, then the
Closing Date Net Asset Value set forth on the Closing Date Balance Sheet
delivered by Kodak shall be final. Kodak shall have 60 days from its receipt
of Purchaser's Objection to review and respond to Purchaser's Objection.
If Kodak and Purchaser are unable to resolve all of their
disagreements with respect to the proposed adjustments set forth in Purchaser's
Objection within 15 days following the completion of Kodak's review of
Purchaser's Objection, they shall refer any remaining disagreements to the CPA
Firm who, acting as experts and not as arbitrators, shall determine, on the
basis set forth in and in accordance with Section 2.6(a), and only with
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respect to the remaining differences so submitted, whether and to what extent,
if any, the Closing Date Balance Sheet and the Closing Date Net Asset Value
require adjustment. Purchaser and Kodak shall instruct the CPA Firm to deliver
its written determination to Purchaser and Kodak no later than 30 days after
the remaining differences underlying Purchaser's Objection are referred to the
CPA Firm. The CPA Firm's determination shall be conclusive and binding upon
Purchaser and Kodak and their Affiliates. The fees and disbursements of the
CPA Firm shall be borne equally by Purchaser and Kodak. Purchaser and Kodak
shall make readily available to the CPA Firm all relevant books and records and
any work papers (including those of the parties' respective accountants),
relating to the Closing Date Balance Sheet and Purchaser's Objection and all
other items reasonably requested by the CPA Firm in connection therewith.
(c) Purchaser shall provide to Kodak and its accountants full
access to the Books and Records and to any other information, including work
papers of its accountants, and to any employees during regular business hours
and on reasonable advance notice, to the extent necessary for Kodak to prepare
the Closing Date Balance Sheet, to respond to Purchaser's Objection and to
prepare materials for presentation to the CPA Firm in connection with Section
2.6(b). Purchaser and its accountants shall have the opportunity to observe
the taking of inventory of the Business (which may begin prior to the Closing
Date) in connection with the preparation of the Closing Date Balance Sheet and
shall have full access to all information used by Kodak in preparing the
Closing Date Balance Sheet, including the work papers of its accountants.
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(d) The Purchase Price shall be subject to adjustment (the
"Purchase Price Adjustment Amount") by (i) the Base Net Asset Value minus (ii)
the Closing Date Net Asset Value, expressed as a positive, if positive, or as a
negative, if negative. If the Purchase Price Adjustment Amount is a negative
number, then the Purchase Price shall be increased by the Purchase Price
Adjustment Amount and Purchaser shall promptly (and in any event within five
Business Days) after the final determination thereof pay to Kodak the Purchase
Price Adjustment Amount, plus interest from the Closing Date to, but not
including, the date of payment at LIBOR calculated on a 365-day basis, in U.S.
Dollars by wire transfer of immediately available funds to an account
designated by Kodak. If the Purchase Price Adjustment Amount is a positive
number, then the Purchase Price shall be decreased by the Purchase Price
Adjustment Amount and Kodak shall promptly (and in any event within five
Business Days) after the final determination thereof pay to Purchaser the
Purchase Price Adjustment Amount, plus interest from the Closing Date to, but
not including, the date of payment at LIBOR calculated on a 365-day basis, in
U.S. Dollars by wire transfer of immediately available funds to an account
designated by Purchaser.
Section 2.7 Closing. The Closing shall take place at the offices of
Sullivan & Cromwell, 125 Broad Street, New York, New York 10004 at 10:00 A.M.
New York City time, on the fifth Business Day following the date on which the
conditions set forth in Section 6.1 have been satisfied or waived, or at such
other time and place as the parties hereto may mutually agree. The date in the
U.S. on which the Closing occurs is called the "Closing Date".
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Section 2.8 Deliveries by Purchaser. At the Closing, Purchaser shall
and shall cause the Purchaser Buyers to deliver to Kodak and the Subsidiaries
(other than the Transferred Subsidiaries), as appropriate, the following:
(a) $684.2 million in immediately available funds by wire
transfer to an account or accounts which account or accounts shall
have been designated by Kodak or the Subsidiaries (other than the
Transferred Subsidiaries) not less than two Business Days prior to the
Closing Date;
(b) such instruments of assumption and other instruments
or documents, in form and substance reasonably acceptable to Kodak, as
may be necessary to effect Purchaser's assumption of the Assumed
Liabilities;
(c) a duly executed copy of each of the Ancillary
Agreements;
(d) a duly executed copy of the Supply Agreement;
(e) a duly executed copy of the Promotional Agreement;
(f) the certificates and other documents to be delivered
pursuant to Section 6.3 hereof; and
(g) evidence of the obtaining of or the filing with
respect to, the Required Approvals set forth on Schedule 4.3.
Section 2.9 Deliveries by Kodak. At the Closing, Kodak shall and
shall cause the Subsidiaries to deliver, or cause to be delivered, to Purchaser
or the Purchaser Buyers, as the case may be, the following:
(a) contracts/bills of sale or other appropriate
documents of transfer, in form and substance reasonably acceptable to
Purchaser or the Purchaser Buyers, as the case
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may be, and Kodak or the Subsidiaries, as the case may be,
transferring the tangible personal property included in the
Transferred Assets to Purchaser or the Purchaser Buyers, as the case
may be;
(b) assignments, in form and substance reasonably
acceptable to Purchaser or the Purchaser Buyers, as the case may be,
and, if applicable, as required by any governmental agency with which
Kodak's or any Subsidiary's rights to any Transferred Intellectual
Property have been filed, assigning to Purchaser or the Purchaser
Buyers, as the case may be, the Transferred Intellectual Property;
(c) assignments of the Assigned Leases, in form and
substance reasonably acceptable to Purchaser, assigning to Purchaser
or the Purchaser Buyers, as the case may be, the Leased Real Property
to be assigned to Purchaser or the Purchaser Buyers, as the case may
be, as of the Closing;
(d) assignment and assumption agreements, in form and
substance reasonably acceptable to Purchaser or the Purchaser Buyers,
as the case may be, assigning to Purchaser or the Purchaser Buyers, as
the case may be, all rights of Kodak and the Subsidiaries in and to
all of the Contracts;
(e) the Books and Records;
(f) stock certificates representing all of the shares of
stock of the Transferred Subsidiaries duly endorsed or with stock
powers executed in blank or otherwise in form suitable for transfer;
(g) minute books for each of the Transferred
Subsidiaries;
(h) a duly executed copy of each of the Ancillary
Agreements;
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(i) a duly executed copy of the Supply Agreement;
(j) a duly executed copy of the Promotional Agreement;
(k) evidence of the obtaining of, or the filing with
respect to, the Required Approvals set forth on Schedule 3.4(a);
(l) the Consent Certificates;
(m) the certificates and other documents to be delivered
pursuant to Section 6.2 hereof;
(n) a certificate from the Assistant Chief Operating
Officer certifying that at least 90% of the consents required from
third parties to the assignment of the Contracts have been received;
and
(o) the resignations of all officers, as corporate
officers, and directors of the Transferred Subsidiaries.
Section 2.10 Nonassignability of Assets.
(a) Notwithstanding anything to the contrary contained in this
Agreement other than Section 2.12, which shall apply in the event that a
closing cannot occur with respect to a New Country at the Closing, to the
extent that the sale, assignment, sublease, transfer, conveyance or delivery or
attempted sale, sublease, assignment, transfer, conveyance or delivery to
Purchaser or the Purchaser Buyers, as the case may be, of any asset that would
be a Transferred Asset or any claim or right or any benefit arising thereunder
or resulting therefrom is prohibited by any applicable Law or would require any
governmental or third party authorizations, approvals, consents or waivers, and
such authorizations, approvals, consents or waivers shall not have been
obtained prior to the Closing, the Closing shall
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proceed without the sale, assignment, sublease, transfer, conveyance or
delivery of such asset; provided, however, subject to Section 2.12, if such
failure causes a failure of any of the conditions to the Purchaser's
obligations as set forth in Article 6, the Closing shall proceed only if
Purchaser elects, in its sole discretion, to waive such conditions. In the
event that the Closing proceeds without the transfer, sublease or assignment of
any such asset, then (i) such asset shall be regarded as a Transferred Asset
for purposes of the calculations required under Section 2.6 and (ii) following
the Closing, the parties shall use their reasonable best efforts, and cooperate
with each other, to obtain promptly such authorizations, approvals, consents or
waivers; provided, however, that none of Kodak, the Subsidiaries, Purchaser or
any Purchaser Buyer shall be required to pay any consideration therefor other
than filing, recordation or similar fees which shall be paid by the party who
is required by Law or course of dealing to do so. Pending such authorization,
approval, consent or waiver, the parties shall cooperate with each other in any
mutually agreeable, reasonable and lawful arrangements designed to provide to
Purchaser or the Purchaser Buyers, as the case may be, the benefits of use of
such asset and to Kodak or the Subsidiaries the benefits, including any
indemnities, that they would have obtained had the asset been conveyed to
Purchaser or the Purchaser Buyers, as the case may be, at the Closing. Once
authorization, approval, consent or waiver for the sale, assignment, sublease,
transfer, conveyance or delivery of any such asset not sold, assigned,
subleased, transferred, conveyed or delivered at the Closing is obtained, Kodak
shall or shall cause a Subsidiary to, assign, transfer, convey and deliver such
asset to Purchaser or the Purchaser Buyers, as the case may be, at no
additional cost to Purchaser or the Purchaser Buyers. To the extent that
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any such asset cannot be transferred or the full benefits of use of any such
asset cannot be provided to Purchaser or the Purchaser Buyers, as the case may
be, following the Closing pursuant to this Section 2.10(a), then Purchaser and
Kodak shall enter into such arrangements (including subleasing, sublicensing or
subcontracting) to provide to the parties the economic (taking into account Tax
costs and benefits) and operational equivalent, to the extent permitted, of
obtaining such authorization, approval, consent or waiver and the performance
by Purchaser or the Purchaser Buyers, as the case may be, of the obligations
thereunder. Kodak and the Subsidiaries shall hold in trust for and pay to
Purchaser or the Purchaser Buyers, as the case may be, promptly upon receipt
thereof, all income, proceeds and other monies received by Kodak or any
Subsidiary in connection with its use of any asset (net of any Taxes and any
other costs imposed upon Kodak or any Subsidiary) in connection with the
arrangements under this Section 2.10(a).
(b) In the event Kodak is unable to obtain either the OEM
Modification or the required consents to assign to Purchaser the Kodak OEM
Agreements, as modified, after Kodak having used its reasonable best efforts to
do so, and Purchaser having used its reasonable best efforts to do so to the
extent reasonably requested by Kodak, Kodak and Purchaser shall enter into
mutually agreeable arrangements with a Person who develops or manufactures
electrophotographic systems (digital and analog) providing Purchaser with
Kodak-branded electrophotographic systems (digital and analog) and related
parts and supplies comparable in quantity, quality and price to those that,
prior to the Closing, the Business obtained pursuant to the Kodak OEM
Agreements. To the extent that Purchaser incurs any cost or expense as a
result of Kodak's and Purchaser's exercise of the process
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described in this Section 2.10(b), Kodak shall reimburse Purchaser for all
reasonable and necessary out-of-pocket costs and expenses incurred by Purchaser
arising or resulting from the substitution of such electrophotographic systems
and related parts and supplies for those available under the Kodak OEM
Agreements.
Section 2.11 Additional Acquisitions. Notwithstanding anything to
the contrary contained in this Agreement, Purchaser may elect to have any or
all of the Transferred Assets conveyed or transferred to, or any of the Assumed
Liabilities assumed by, one or more of the Purchaser Buyers; provided, that no
such election shall result in any net greater cost (including reasonable
attorneys' fees) or obligation than Kodak or any of the Subsidiaries would
otherwise have had had such assets or liabilities been transferred to a
Purchaser Buyer domiciled in the jurisdiction in which such assets or
liabilities are located or, with respect to assets or liabilities located in
the United Kingdom, been transferred to Purchaser; and provided, further, that
no such election shall relieve Purchaser of any of its obligations to Kodak and
its Affiliates hereunder with respect to the Assumed Liabilities or otherwise.
Any transfer made pursuant to the foregoing shall be effected pursuant to
separate contracts/bills of sale, assignments and other closing documents. The
Purchase Price shall be allocated among those Transferred Assets to be conveyed
to Purchaser and those Transferred Assets to be conveyed to the respective
Purchaser Buyers, but in no event shall the amount of the Purchase Price or any
other items to be paid by Purchaser and the Purchaser Buyers for the
Transferred Assets, the nature of the Assumed Liabilities to be assumed by
Purchaser and the Purchaser Buyers, the obligation to pay Taxes or Transfer
Taxes or the allocation of risk and responsibility between Kodak and the
Subsidiaries, on the
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one hand, and Purchaser and the Purchaser Buyers, on the other hand, be
modified to the net detriment of Kodak and the Subsidiaries as a result of the
delivery of separate contracts/bills of sale, assignments and other closing
documents.
Section 2.12 Staged Closings. Notwithstanding anything to the
contrary contained herein, in the event that the condition to the Closing set
forth in Section 6.1(c) has been satisfied with respect to the United States of
America, Canada, Germany, France, the United Kingdom, Belgium, The Netherlands
and Luxembourg (the "Listed Countries"), but not with respect to all countries
in which Transferred Assets are physically located, and the conditions to the
Closing set forth in Sections 6.1(a), (b) and (d) have been satisfied, (i) the
Closing shall be effected; provided, however, that (A) the evidence to be
delivered pursuant to Sections 2.8(g) and 2.9(k) shall only be required with
respect to Required Approvals relating to the Listed Countries and any other
country with respect to which Section 6.1(c) has been satisfied as of such time
(collectively with the Listed Countries, the "Closing Countries"), (B) Sections
2.9(a), (c), (d), (e), (f), (g), (l), (n) and (o) shall apply only to the
extent related to the Closing Countries, (C) the certificates to be delivered
pursuant to Section 2.8(f) to the extent related to the representations and
warranties contained in Section 4.3 and Section 2.9(m) to the extent related to
the representations and warranties contained in Section 3.4 need only be true
as to the Closing Countries, (ii) subsequent closings shall occur as soon as
practicable following receipt of all of the Required Approvals with respect to
each country (each, a "New Country") for which a Required Approval had not been
obtained as of the Closing and in connection therewith, only the provisions of
Sections 2.8(g) and 2.9(a), (c), (d), (e), (f), (g), (k), (l), (n) and (o)
shall apply to such closing and then only to the
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extent related to such New Country and (iii) pending receipt of the applicable
Required Approvals with respect to any New Country, Kodak or the Subsidiaries
shall, with any necessary cooperation from Purchaser, operate the Business in
trust for the account of Purchaser and the Purchaser Buyers under the
Transitional Advisory Agreement. In connection therewith, (i) Purchaser shall
or shall cause the applicable Purchaser Buyer to reimburse Kodak or the
applicable Subsidiary, as the case may be, on a monthly basis as invoiced (with
appropriate documentation) by Kodak for all cash amounts contributed by Kodak
or the applicable Subsidiary to the Business operated in such New Countries,
(ii) the Employees shall continue to be regarded as employees of Kodak, and any
provisions set forth in Section 5.5 shall be deemed to apply to the Employees
only as of the date the closing is effected in the applicable New Country,
(iii) all the assets that would be Transferred Assets but for the failure to
receive the applicable Required Approvals shall be regarded as Transferred
Assets for purposes of the calculations required under Section 2.6, (iv) the
Assumed Liabilities shall be deemed to have been assumed as of the Closing for
purposes of Section 2.6, and (v) the parties shall use their reasonable best
efforts, and cooperate with each other, to obtain promptly the remaining
Required Approvals. To the extent Purchaser or a Purchaser Buyer must pay cash
consideration for the Transferred Assets located in a New Country at a
subsequent closing, Kodak shall remit to Purchaser or such Purchaser Buyer, in
immediately available funds, the amount of cash consideration allocated to such
New Country in accordance with Section 5.4(g) and Purchaser or such Purchaser
Buyer shall pay such consideration to the appropriate Subsidiary at such
closing.
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In the event that Purchaser so requests, Kodak shall remit to
Purchaser or a Purchaser Buyer, in conjunction with any subsequent closing with
respect to a New Country, in immediately available funds, the amount of
Purchase Price allocated to such New Country in accordance with Section 5.4(g)
against payment of such amount in the local currency by the Purchaser Buyer in
such New Country, the local currency equivalent to such amount; provided,
however, that Purchaser shall only make such a request if the laws of the New
Country prohibit the payment of funds in U.S. Dollars.
In the event a subsequent closing does not occur in any New Country by
June 30, 1998 or such later date as Purchaser may decide, Purchaser may elect,
in its sole discretion and upon 30 days' prior written notice to Kodak, not to
purchase the Transferred Assets and assume the Assumed Liabilities of any New
Country and Kodak shall reimburse Purchaser or the appropriate Purchaser Buyer,
in immediately available funds, the amount of the Purchase Price allocated to
such New Country in accordance with Section 5.4(g) promptly upon the expiration
of such 30 day period. Any actual Tax savings derived by Kodak or the
applicable Subsidiary resulting from losses incurred by the Business in the
period from the Closing to the closing with respect to such New Country shall
promptly following such taxpayer's filing of the relevant Tax return be paid
over to the relevant Purchaser Buyer on a net after tax basis. In determining
whether Kodak or the applicable Subsidiary derived any actual Tax savings with
respect to such Tax return, any current or past (but not future) losses or
credits otherwise available to Kodak or such Subsidiary shall be taken into
account prior to any such losses incurred by the Business.
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Section 2.13 Certain Dispositions. Notwithstanding anything to the
contrary contained herein, (i) at any time prior to the Closing, Kodak may,
upon 10 days' prior written notice to Purchaser, cause any asset of a
Transferred Subsidiary that would not be included in Transferred Assets if the
assets, rather than the stock, of such Transferred Subsidiary were being
conveyed hereunder, to be transferred to Kodak or one or more of the
Subsidiaries that are not Related to the Business; provided, that if any asset
is transferred pursuant to this Section 2.13(i), any liability to the extent
and only to the extent such liability relates to such transferred asset shall
also be so transferred and (ii) prior to the Closing, Kodak shall remove from
the books of each Subsidiary any Intracompany Receivable or Intracompany
Payable, so that at and after the Closing no Subsidiary shall owe, or have the
right to receive from, Kodak or any Subsidiary any amount for goods, services
or cash advances or other extensions of credit provided prior to the Closing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF KODAK
Kodak represents and warrants to Purchaser as follows:
Section 3.1 Organization and Qualification. Kodak is a corporation
duly organized, validly existing and in good standing under the laws of New
Jersey and has all requisite corporate power and authority to own (or lease in
the case of the Leased Real Property) and operate its assets, directly or
indirectly through the Subsidiaries, and to carry on the Business as currently
conducted in the Ordinary Course. Kodak is duly qualified to do business and
is in good standing as a foreign corporation in each jurisdiction where the
ownership or operation of the Transferred Assets or the conduct of the Business
requires such
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qualification, except for failures to be so qualified or in good standing, as
the case may be, that do not have a Material Adverse Effect.
Section 3.2 Subsidiaries.
(a) Schedule 3.2(a) sets forth a list of each Transferred
Subsidiary, together with its jurisdiction of organization and its authorized
and outstanding capital stock or other equity interests as of the date hereof.
Except as set forth on Schedule 3.2(a), each such entity is duly organized,
validly existing, and in good standing under the laws of its jurisdiction of
organization and has all requisite corporate or similar power and authority to
own and operate its properties and assets and to carry on its portion of the
Business as presently conducted and is duly qualified to do business and is in
good standing as a foreign corporation or other entity in each jurisdiction
where the ownership or operation of its properties and assets or the conduct of
its business requires such qualification, except for failures to be so duly
organized, validly existing, qualified or in good standing that do not have a
Material Adverse Effect. Kodak has made available to Purchaser copies of each
such entity's governing documents as in effect as of the date hereof. Except
for qualifying shares required by Law, which shares shall be transferred at the
Closing to such Persons as Purchaser may designate, Kodak owns, directly or
indirectly, all of the outstanding capital stock or other equity interest of
each Transferred Subsidiary. There are no preemptive or other outstanding
rights, options, warrants, conversion rights or agreements or commitments to
issue or sell any shares of capital stock or other equity interest of any such
entity or any securities or obligations convertible into or exchangeable for,
or giving any Person a right to
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subscribe for or acquire, any shares of capital stock or other equity interest
of any such entity, and no securities or obligations evidencing such rights are
outstanding.
(b) Schedule 3.2(b) sets forth a list of each Subsidiary which has
title to any asset reasonably expected to be a Transferred Asset or an
obligation reasonably expected to be an Assumed Liability, together with its
jurisdiction of organization and its authorized and outstanding capital stock
or other equity interests as of the date hereof. Except as set forth on
Schedule 3.2(b), each such entity is duly organized, validly existing, and in
good standing under the laws of its jurisdiction of organization and has all
requisite corporate or similar power and authority to own, lease and operate
its properties and assets and to carry on its portion of the Business as
presently conducted and is duly qualified to do business and is in good
standing as a foreign corporation or other entity in each jurisdiction where
the ownership or operation of its properties and assets or the conduct of its
business requires such qualification, except for failures to be so duly
organized, validly existing, qualified or in good standing that do not have a
Material Adverse Effect. The Subsidiaries listed on Schedules 3.2(a) and (b)
are the only Affiliates of Kodak through which the Business is currently
conducted.
Section 3.3 Corporate Authorization. Kodak has full corporate power
and authority to execute and deliver this Agreement and the Transitional
Advisory Agreement and to perform its obligations hereunder and thereunder.
Prior to the Closing Kodak will have full corporate power and authority to
execute and deliver the Supply Agreement, the Promotional Agreement, each of
the Ancillary Agreements and such other agreements as may be required hereby
and to perform its obligations thereunder. The execution, delivery and
performance
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by Kodak of this Agreement and the Transitional Advisory Agreement have been,
and prior to the Closing the execution, delivery and performance by Kodak of
the Supply Agreement, the Promotional Agreement, each of the Ancillary
Agreements and such other agreements as may be required hereby will have been,
duly and validly authorized and no additional corporate or shareholder
authorization or consent is required in connection with the execution, delivery
and performance by Kodak of this Agreement and the Transitional Advisory
Agreement or will be required in connection with the execution, delivery and
performance by Kodak of the Supply Agreement, the Promotional Agreement, each
of the Ancillary Agreements and such other agreements as may be required
hereby. Each Subsidiary has or prior to the Closing will have full corporate
power and authority to execute and deliver each Ancillary Agreement or closing
document to which it is a party and to perform its obligations thereunder. The
execution, delivery and performance by each Subsidiary of each Ancillary
Agreement or closing document to which it is a party has been or prior to the
Closing will have been duly and validly authorized and no additional corporate
or shareholder authorization or consent is or will be required in connection
with the execution, delivery and performance by any Subsidiary of each of the
Ancillary Agreements or closing documents to which such Subsidiary is a party.
Section 3.4 Consents and Approvals. Set forth on Schedule 3.4(a) is
a list of each consent, approval, waiver and authorization that is material to
the Business and, to the Knowledge of Kodak, required to be obtained by Kodak
or any Subsidiary from, and each notice and filing that is material to the
Business and required to be given by Kodak or any Subsidiary to or made by
Kodak or any Subsidiary with, any federal, state, local or foreign
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governmental authority, in connection with the execution, delivery and
performance by Kodak of this Agreement, the Supply Agreement, the Promotional
Agreement, the Transitional Advisory Agreement and the Ancillary Agreements.
Set forth on Schedule 3.4(b) is a list of each other consent, approval, waiver
and authorization that is material to the Business and, to the Knowledge of
Kodak, required to be obtained by Kodak or any Subsidiary from, and each notice
and filing that is material to the Business and required to be given by Kodak
or any Subsidiary to, any other Person in connection with the execution,
delivery and performance by Kodak of this Agreement, the Supply Agreement, the
Promotional Agreement, the Transitional Advisory Agreement and the Ancillary
Agreements. All such consents, approvals, waivers, authorizations, notices and
filings listed on Schedule 3.4(a) other than those required by any Government
Contract Approval and those listed on Schedule 3.4(a) with a due date following
the Closing as stated thereon or Schedule 4.3 are collectively referred to
herein as the "Required Approvals".
Section 3.5 Non-Contravention. The execution, delivery and
performance by Kodak of this Agreement, the Supply Agreement, the Transitional
Advisory Agreement, the Promotional Agreement and the Ancillary Agreements, and
the consummation of the Transaction, do not and will not (i) violate any
provision of the Articles of Incorporation, Bylaws or other organizational
documents of Kodak or any of the Subsidiaries, (ii) assuming the receipt of all
consents, approvals, waivers and authorizations required to be obtained by
Kodak, any Subsidiary, Purchaser or any Purchaser Buyer and the making of
notices and filings required to be made by Kodak, any Subsidiary or Purchaser
or any Purchaser Buyer, to the Knowledge of Kodak, conflict with, or result in
the breach of, or constitute a default
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under, or result in the termination, cancellation or acceleration (whether
after the filing of notice or the lapse of time or both) of any right or
obligation of Kodak or any of the Subsidiaries under, or a loss of any benefit
to which Kodak or any of the Subsidiaries is entitled under, any Contract or
result in the creation of any Encumbrance upon any of the Transferred Assets,
or (iii) assuming the receipt of all consents, approvals, waivers and
authorizations required to be obtained by Kodak, any Subsidiary, Purchaser or
any Purchaser Buyer and the making of notices and filings required to be made
by Kodak, any Subsidiary or Purchaser or any Purchaser Buyer, to the Knowledge
of Kodak, violate or result in a breach of or constitute a default under any
Law or other restriction of any court or governmental authority to which Kodak
or any Subsidiary is subject, including any Governmental Authorization, other
than, in the case of clause (ii), conflicts, breaches, terminations, defaults,
cancellations, accelerations, losses, violations or Encumbrances that would not
have a Material Adverse Effect or materially impair or delay Kodak's ability to
perform its obligations hereunder.
Section 3.6 Binding Effect. This Agreement and the Transitional
Advisory Agreement, when executed and delivered by Purchaser, and the Supply
Agreement, the Promotional Agreement, and each of the Ancillary Agreements,
when executed and delivered by the other parties thereto, will constitute a
valid and legally binding obligation of Kodak and all Subsidiaries party to
such agreements, enforceable against Kodak and such Subsidiaries in accordance
with their respective terms, subject to bankruptcy, insolvency, reorganization,
moratorium and similar Laws of general applicability relating to or affecting
creditors' rights and to general principles of equity.
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Section 3.7 Financial Statements. Kodak has delivered to Purchaser
(a) audited financial statements (balance sheet, statement of income and
statement of cash flows and in each case, notes thereto) of the Existing
Business as at December 31, 1994 and December 31, 1995 and for the fiscal years
then ended, together with an unqualified report thereon by Kodak's independent
certified public accountants (the "Audited Existing Financial Statements") and
(b) the unaudited balance sheet of the Business to the extent of the
Transaction (i.e. (i) the total assets Related to the Business less any assets
that would be Excluded Assets if the Unaudited Balance Sheet were as of the
Closing and the unamortized value associated with the purchase of the IBM
copier service business minus (ii) the total liabilities of the Business less
any liabilities that would be Excluded Liabilities if the Unaudited Balance
Sheet were as of the Closing and less any tax liabilities (except payroll taxes
on accrued labor costs) as at and for the period ended December 31, 1995 (the
"Unaudited Balance Sheet" and, together with the Audited Existing Financial
Statements, shall be collectively referred to herein as the "Financial
Statements"). The Audited Existing Financial Statements: (i) fairly present in
all material respects the financial condition of the Existing Business as of
the dates thereof or periods then ended, as the case may be, and (ii) have been
prepared in accordance with GAAP consistently applied and in accordance with
Kodak's past accounting policies throughout the period indicated. The
Unaudited Balance Sheet fairly presents in all material respects the financial
condition of the Business at the date thereof and except as may be described in
Exhibit 3.7, was prepared in accordance with GAAP consistently applied and in
accordance with Kodak's past accounting policies throughout the periods
indicated.
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Section 3.8 Litigation and Claims. Except as set forth in Schedule
3.8 or the Unaudited Balance Sheet:
(a) There is no civil, criminal or administrative action, suit,
demand, claim, hearing, proceeding or investigation pending or, to the
Knowledge of Kodak, threatened, against or relating to Kodak or any Subsidiary
in connection with the Transferred Assets, the Business or the Transaction,
other than those that would not have a Material Adverse Effect, or materially
impair or delay Kodak's ability to effect the Closing and, to the Knowledge of
Kodak, there is no basis for the same.
(b) Except for the Injunction, none of the Transferred Assets is
subject to any order, writ, judgment, award, injunction or decree of any court
or governmental or regulatory authority of competent jurisdiction or any
arbitrator or arbitrators, other than those that are not material to the
Business.
Section 3.9 Taxes. Except as set forth in the Financial Statements
or as would not have a Material Adverse Effect, all Tax Returns with respect to
the Business that are required to be filed on or before the date of this
Agreement have been duly filed and all amounts shown to be due and owing
thereon have been duly and timely paid and Kodak Facilities Management Ltd.'s
Tax Returns were complete and correct as of the dates so filed. All Taxes
imposed on Kodak Facilities Management Ltd. with respect to the Business or any
Transferred Assets due to be paid before the date of this Agreement have been
duly and timely paid. Except as set forth in the Financial Statements or as
would not have a Material Adverse Effect, Kodak and each of the Subsidiaries
have withheld from their employees and timely paid to the appropriate
authorities or set aside in an account for such purpose proper
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and accurate amounts for all periods through the date of this Agreement in
compliance with all Tax withholding provisions (including income, social
security and employment Tax withholding for all types of compensation). There
is no lien for Taxes upon any of the Transferred Assets nor, to the Knowledge
of Kodak, is any taxing authority in the process of imposing any lien for Taxes
on any of the Transferred Assets, other than liens for Taxes that are not yet
due and payable or for Taxes the validity or amount of which is being contested
by Kodak or one of its Subsidiaries in good faith by appropriate action or
liens for Taxes which would not have a Material Adverse Effect.
Section 3.10 Employee Benefits.
(a) All benefit plans, contracts or arrangements covering U.S.
Employees, including "employee benefit plans" within the meaning of Section
3(3) of ERISA and plans of deferred compensation (the "Benefit Plans"), are
listed on Schedule 3.10(a). Copies of all Benefit Plans, including any trust
instruments and insurance contracts forming a part of any Benefit Plan, and all
amendments thereto have been provided or made available to Purchaser.
(b) All employee benefit plans covering U.S. Employees (the
"Plans"), to the extent subject to ERISA, are in substantial compliance with
ERISA. Each Plan that is an "employee pension benefit plan" within the meaning
of Section 3(2) of ERISA ("Pension Plan") and that is intended to be qualified
under Section 401(a) of the Code, either has received a favorable determination
letter from the Internal Revenue Service with respect to amendments intended to
comply with changes to the qualification requirements of Section 401(a) of the
Code made by the Tax Reform Act of 1986 or has made a request for such a letter
prior to the end of the "remedial amendment period" within the meaning of
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Section 401(b) of the Code and such request is currently pending. To the
Knowledge of Kodak, there are no circumstances likely to result in revocation
of any such favorable determination letter or the failure of the Internal
Revenue Service to issue any pending determination letter request. There are
no material operational defects or events that could adversely affect the
qualification of any such Plan which have not been fully disclosed to the
Internal Revenue Service in connection with an application for a VCR Compliance
Statement or Closing Agreement with respect to the continued qualification of
such Plan; it being understood, that for purposes of this sentence, any
operational defect that the Internal Revenue Service raises as an issue in any
audit of the Kodak Savings Plans (or any other Plan from which a direct
plan-to-plan transfer is to be made to a plan sponsored by Purchaser) for any
period prior to the Closing which would, absent appropriate corrective action,
cause the disqualification of the Kodak Savings Plans (or any other Plan from
which a direct plan-to-plan transfer is to be made to a plan sponsored by
Purchaser), shall be deemed material. Except as disclosed on Schedule 3.10(b),
there is no material pending or, to the Knowledge of Kodak, threatened
litigation relating to the Plans. Neither Kodak nor any of the Subsidiaries
has engaged in a transaction with respect to any Plan that could subject Kodak
or any Subsidiary to a tax or penalty imposed by either Section 4975 of the
Code or Section 502(i) of ERISA in an amount that would be material.
(c) No Plan maintained by Kodak, other than the Kodak Retirement
Income Plan and the Datatape Retirement Income Plan, is subject to Section 412
of the Code or Section 302 or Title IV of ERISA. No liability under Subtitle C
or D of Title IV of ERISA has been or is expected to be incurred by Kodak or
any of the Subsidiaries with respect to
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any ongoing, frozen or terminated "single-employer plan", within the meaning of
Section 4001(a)(15) of ERISA, currently or formerly maintained by any of them,
or the single-employer plan of any entity that is considered one employer with
Kodak under Section 4001 of ERISA or Section 414 of the Code (an "ERISA
Affiliate").
(d) Kodak and the Subsidiaries have not incurred and do not expect
to incur any withdrawal liability under Subtitle E of Title IV of ERISA with
respect to a "multiemployer plan", within the meaning of Section 4001(a)(3) of
ERISA. Neither Kodak nor any ERISA Affiliate now has any obligation to
contribute to, or has had at any time since 1979 an obligation to contribute
to, any Plan which is a "multiemployer plan" within the meaning of Section
4001(a)(3) of ERISA or is a "multiple employer plan" within the meaning of
Section 4063 or 4064 of ERISA.
(e) No notice of a "reportable event", within the meaning of
Section 4043 of ERISA for which the 30-day reporting requirement has not been
waived, has been required to be filed for any Pension Plan or by any ERISA
Affiliate within the 12-month period ending on the date hereof.
(f) Neither any Pension Plan nor any single-employer plan of an
ERISA Affiliate has an "accumulated funding deficiency" (whether or not waived)
within the meaning of Section 412 of the Code or Section 302 of ERISA and no
ERISA Affiliate has an outstanding funding waiver. Neither Kodak nor any of
the Subsidiaries has provided, or is required to provide, security to any
Pension Plan or to any single-employer plan of an ERISA Affiliate pursuant to
Section 401(a)(29) of the Code.
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(g) All required reports and descriptions (including Form 5500
Annual Reports, Summary Annual Reports, PBGC-1's and Summary Plan Descriptions)
have been filed or distributed appropriately and in a timely manner with
respect to each Plan.
(h) Neither Kodak nor any of the Subsidiaries has any obligations
for retiree health and life benefits under any Benefit Plan covering U.S.
Employees, except as disclosed on Schedule 3.10(h).
(i) Assuming compliance by the Purchaser with Section 5.5(a), the
consummation of the transactions contemplated by this Agreement will not result
in any increase in the amount of compensation or benefits or the acceleration
of the vesting or timing of payment of any compensation or benefits payable to
or in respect of any Transferred Employee that would have the effect of
increasing the amount of any Assumed Liability, except (i) with respect to
retention and performance bonuses (other than Retention Bonuses) payable to
Applicable Employees pursuant to the Contracts listed on Schedule 3.10(i) to
the extent set forth on the face of the Closing Date Balance Sheet, (ii) the
Retention Bonuses and (iii) with respect to the LAR Amount.
(j) Schedule 3.10(j) sets forth a true, correct and complete list
of all Applicable Employees employed by the Business on the date hereof,
identifying as to each a job title, years of service, amount or rate of
compensation and location of employment. As soon as practicable, but no later
than 30 days, following the date of this Agreement, Kodak shall provide to
Purchaser a schedule of Full-Time Equivalent Employees containing the
information listed above; it being understood that for purposes of this Section
3.10(j) as regards certain jurisdictions where so prohibited, names shall not
be listed.
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(k) (1) All benefit plans, contracts or arrangements covering
non-U.S. Employees ("Non-U.S. Plans") comply in all
material respects with applicable Laws, collective
bargaining agreements and other requirements of
authorities having jurisdiction over such Employees.
The Transferred Assets include assets committed to
fund the obligations of Kodak and the Subsidiaries in
respect of all non-U.S. Employees under any Non-U.S.
Plans the liabilities of which are fully assumed by
Purchaser to the extent required to be assumed by
applicable Law; it being understood that this
representation does not address the sufficiency of
any such commitment.
(2) None of the Non-U.S. Plans will be amended or
discontinued prior to Closing without the consent of
Purchaser, such consent not to be unreasonably
withheld.
(3) Kodak has made available to Purchaser accurate copies
of substantially all deeds, rules, agreements,
contracts, declarations and other relevant documents
creating, governing or otherwise relating to the
Non-U.S. Plans.
(4) All benefits payable under each of the Non-U.S. Plans
are provided in accordance with the terms of the
governing provisions of the relevant Non-U.S. Plan.
(5) To the Knowledge of Kodak, Kodak is not aware of any
failure to comply with any applicable law, regulation
or requirement, or any
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other circumstances, which would or might result in
the loss of tax approval or qualification of any
Non-U.S. Plans.
(l) Set forth on Schedule 3.10(l) is a correct and complete list
of all severance policies (however locally denominated) of
Kodak and the Subsidiaries Related to the Business and the
method of calculation of the severance benefits thereunder on
a country by country basis; it being understood that
calculations in certain jurisdictions may be finally
determined by an authority other than Kodak.
Section 3.11 Compliance with Laws. Except as disclosed on Schedule
3.11, the Business has been for the periods described in the Financial
Statements and currently is being conducted in compliance with all applicable
Laws except for failures to comply that would not have a Material Adverse
Effect, neither Kodak nor any Subsidiary has received any notice alleging any
violation under any applicable Law except for violations that would not have a
Material Adverse Effect, and the Business has all Governmental Authorizations
necessary for the conduct of the Business as currently conducted other than
those the absence of which would not have a Material Adverse Effect; it being
understood that nothing in this representation is intended to address any
compliance issue that is the subject of any other representation or warranty
set forth herein.
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Section 3.12 Environmental Matters. Except for matters that relate
to an Excluded Liability:
(a) to the Knowledge of Kodak, the Business, the Owned Real
Property and the Leased Real Property are in compliance with all applicable
Environmental Laws and there are no liabilities under any Environmental Law
with respect to the Business, in each case, other than failures to comply or
liabilities that would not have a Material Adverse Effect;
(b) neither Kodak nor any of the Subsidiaries has received any
notice of any violation or alleged violation of, or any liability under, any
Environmental Law in connection with the Business, the Owned Real Property or
the Leased Real Property during the past three years;
(c) there are no writs, injunctions, decrees, orders or judgments
outstanding, or any actions, suits, proceedings or investigations pending or,
to the Knowledge of Kodak, threatened, relating to compliance with or liability
under any Environmental Law affecting the Business, the Owned Real Property,
the Leased Real Property or the Transferred Assets, other than those that would
not have a Material Adverse Effect; and
(d) Kodak and the Subsidiaries currently maintain all Governmental
Authorizations required by all Environmental Laws necessary for the conduct of
the Business as currently conducted other than those Governmental
Authorizations the absence of which would not have a Material Adverse Effect.
Section 3.13 Intellectual Property.
(a) Schedules 2.1(d) and 3.13(a) together set forth a list of all
Intellectual Property that is owned by Kodak or any Subsidiary and that is
material, Related to the Business and
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either registered or capable of being registered. The Transferred Intellectual
Property, the Proprietary Business Information and the Kodak Licensed
Intellectual Property together constitute all Intellectual Property and
proprietary rights (other than with respect to software not included in the
Transferred Assets or the Kodak Licensed Intellectual Property) Related to the
Business and, immediately after the Closing, necessary for the Purchaser to
conduct and operate the Business as now being conducted by Kodak and the
Subsidiaries. Kodak owns or has the right to use pursuant to license,
sublicense, agreement or permission, the Transferred Intellectual Property, the
Proprietary Business Information and the Kodak Licensed Intellectual Property
and with respect to the Transferred Intellectual Property that Kodak owns,
Kodak has good, valid and marketable title therein and thereto.
(b) Immediately after the Closing, Purchaser or the Purchaser
Buyers will own all of the Transferred Intellectual Property free from any
Encumbrances, except for Permitted Encumbrances and Encumbrances that would not
have a Material Adverse Effect, and the Proprietary Business Information on
terms and conditions the same in all material respects as those in effect
immediately prior to the Closing, except to the extent that any of the
Transferred Intellectual Property is licensed back to Kodak or any of its
Subsidiaries pursuant to this Agreement.
(c) To the Knowledge of Kodak, the conduct of the Business does
not infringe upon, misappropriate or otherwise violate the Intellectual
Property rights of any other Person. To the Knowledge of Kodak, none of the
Transferred Intellectual Property or the Proprietary Business Information is
being infringed upon, misappropriated or otherwise violated in any material
respect by any other Person.
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(d) Schedule 3.13(d) sets forth all material agreements,
arrangements or understandings (i) pursuant to which Kodak or any Subsidiary
has licensed Transferred Intellectual Property material to the Business to, or
the use of Transferred Intellectual Property is otherwise permitted (through
non-assertion, settlement or similar agreements or otherwise) by, any other
Person and (ii) pursuant to which Kodak or any Subsidiary has had Intellectual
Property licensed to it or has otherwise been permitted to use Intellectual
Property (through non-assertion, settlement or similar agreements or otherwise)
material to the Business. Except as set forth on Schedule 3.13(d), all of the
agreements, arrangements and understandings set forth on Schedule 3.13(d) (x)
are in full force and effect in accordance with their terms and no default
exists thereunder by any party thereto that would be material to the Business,
and (y) do not contain any provisions or terms with respect to change in
control or other terms or conditions that would or will become applicable or
inapplicable as a result of the consummation of the Transaction and whose
applicability or inapplicability, as the case may be, would be material to the
Business.
(e) Except as set forth on Schedule 3.13(d), neither Kodak nor any
Subsidiary is a party to, subject to or bound by any agreement, judgment or
decree that would prevent the execution, delivery or performance by Kodak or a
Subsidiary of any assignment or other transfer of rights to the Transferred
Intellectual Property or of any license to Purchaser of the Kodak Licensed
Intellectual Property. Set forth on Schedule 3.13(e) are all material
consents, approvals, permits and authorizations required from any third party
or governmental or regulatory body to enable Kodak or any Subsidiary to assign
or otherwise
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transfer any Transferred Intellectual Property or to license any Kodak Licensed
Intellectual Property to Purchaser or any Purchaser Buyer in connection with
the Transaction.
(f) Neither Kodak nor any of the Subsidiaries has received a
notice of a claim, demand or proceeding that is pending, and to the Knowledge
of Kodak or any Subsidiary, there is no claim, demand or proceeding threatened,
nor to the Knowledge of Kodak is there a reasonable basis therefor, which is
material to the Business and (i) challenges the rights of Kodak or any
Subsidiary in respect of any Transferred Intellectual Property, Proprietary
Business Information or Kodak Licensed Intellectual Property, (ii) asserts that
with respect to the Business, Kodak or any Subsidiary is infringing or
misappropriating any Intellectual Property or Proprietary Business Information
or is, except as set forth in Schedule 3.13(f), required to pay any royalty,
license fee, charge or other amount with regard to, any Intellectual Property,
or (iii) claims that any default exists under any agreement, arrangement or
understanding listed on Schedule 3.13(d). None of the Transferred Intellectual
Property or Kodak Licensed Intellectual Property is subject to any outstanding
order, ruling, decree, judgment or stipulation by or with any court, arbitrator
or administrative agency, or has been the subject of any litigation within the
last five years, whether or not resolved in favor of Kodak or any Subsidiary.
(g) Except as set forth on Schedule 3.13(g), the Intellectual
Property that is owned by Kodak and identified on Schedules 2.1(d) and 3.13(a)
has been duly registered with, filed in or issued by, as the case may be, the
United States Patent and Trademark Office, U.S. Copyright Office or such other
appropriate filing offices, domestic or foreign, as are
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identified on such Schedules and such registrations, filings, issuances and
other actions remain in full force and effect, are current and unexpired.
Section 3.14 Union Contracts. Set forth on Schedule 3.14 are all
material labor agreements, union contracts and collective bargaining agreements
and except as set forth in Schedule 3.14, there is not pending, or to the
Knowledge of Kodak or any Subsidiary threatened, any strike, walkout or other
work stoppage or any union organizing effort by the Employees.
Section 3.15 Contracts. (a) Kodak has made available to Purchaser
copies of all material written contracts, leases, subleases, arrangements,
commitments and licenses Related to the Business and accurate descriptions of
all material terms of all material oral agreements, contracts, leases,
subleases, arrangements, commitments and licenses Related to the Business
(collectively, the "Material Contracts").
(b) To the Knowledge of Kodak, all Material Contracts are in full
force and effect and are enforceable against each party thereto in accordance
with the express terms thereof. To the Knowledge of Kodak, there does not
exist under any Material Contract any event of default or event or condition
that, after notice or lapse of time or both, would constitute a violation,
breach or event of default thereunder on the part of Kodak or any Subsidiary or
any other party thereto except as set forth in Schedule 3.15(b) and except for
such events or conditions that, individually or in the aggregate (i) would not
have a Material Adverse Effect and (ii) have not and will not materially impair
the ability of Kodak, any Subsidiary or
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Purchaser to perform their respective obligations under this Agreement or any
Ancillary Agreement.
(c) To the Knowledge of Kodak, all Contracts that are not Material
Contracts, when considered as a whole (the "Other Contracts"), are (i) in full
force and effect, are enforceable against each party thereto in accordance with
the express terms thereof and (ii) there does not exist under the Other
Contracts any event of default or event or condition that, after notice or
lapse of time or both, would constitute a violation, breach or event of default
thereunder on the part of Kodak or any Subsidiary or any other party thereto
except in each case for such events or conditions that, individually or in the
aggregate, (x) would not have a Material Adverse Effect and (y) have not and
will not materially impair the ability of Kodak, any Subsidiary or Purchaser to
perform their respective obligations under this Agreement or any Ancillary
Agreement.
(d) Except as set forth on Schedule 3.15(d), to the Knowledge of
Kodak, there are no Contracts that have been entered into other than in the
Ordinary Course of Business that involve an annual payment by Kodak or any
Subsidiary of $1 million or more or that have been entered into in the Ordinary
Course of Business but involve an annual payment by Kodak or any Subsidiary
that is out of the Ordinary Course of Business that is greater than $1 million,
in each case, other than Contracts that would be terminable following the
Closing within 90 days without any cost to Purchaser.
(e) There are no outstanding powers of attorney in favor of any
Person relating to the Business.
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Section 3.16 Territorial Restrictions. Except as set forth in the
OEM Agreements and as set forth on Schedule 3.16, neither Kodak nor any of the
Subsidiaries is restricted by any agreement or understanding with any other
Person from (i) carrying on the Business anywhere in the world other than the
Listed Countries, except for such restrictions that, individually and in the
aggregate, would not be material to the Business or (ii) carrying on the
Business in the Listed Countries.
Section 3.17 Absence of Certain Business Practices. To its
Knowledge, neither Kodak nor any Subsidiary nor any of their officers,
employees or agents, or any other person acting on their behalf, has, directly
or indirectly, within the past five years, given or agreed to give any gift or
similar benefit to any customer, supplier, governmental employee or other
person who is or may be in a position to help or hinder the Business (or assist
Kodak or any Subsidiary in connection with any actual or proposed transaction
relating to the Business) (i) which subjected or might have subjected Kodak or
any Subsidiary to any material damage or penalty in any civil, criminal or
governmental litigation or proceeding, (ii) which if not given in the past
might have had a Material Adverse Effect, (iii) which if not continued in the
future might have a Material Adverse Effect or subject Kodak or any Subsidiary
to suit or penalty in any private or governmental litigation or proceeding,
(iv) for any of the purposes described in Section 162(c) of the Code or (v) for
the purpose of establishing or maintaining any concealed fund or concealed bank
account.
Section 3.18 Confidentiality. Kodak and each Subsidiary have taken
all steps reasonably necessary to preserve the confidential nature of all
material confidential
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information (including, without limitation, any trade secrets and other
proprietary information) with respect to the Business.
Section 3.19 Assets.
(a) Other than those services and goods that are a part of the
ordinary course infrastructure not unique to the Business, the Transferred
Assets when taken together with the Kodak Services, the Kodak Leased Property
(other than with respect to software not inclued in the Transferred Assets or
the Kodak Licensed Intellectual Property) and the Leased Real Property
constitute all the assets, properties and rights of Kodak or a Subsidiary
necessary to conduct the Business as currently conducted and, immediately after
the Closing, necessary for Purchaser to continue to operate and conduct the
Business in all material respects as currently conducted.
(b) Except as set forth in the succeeding sentence, Kodak makes no
representations in this Agreement as to the physical condition or suitability
for a particular purpose of the real or tangible personal property included in
the Transferred Assets. All of the Capital Assets -- Other Equipment (as
classified on the face of the Unaudited Balance Sheet) are in satisfactory
condition for use in the Business in the Ordinary Course of Business consistent
with Kodak's past practice and Kodak and the Subsidiaries have performed
regular maintenance on such tangible personal property in accordance with
Kodak's past practice (giving due account to the age and length of use of such
property, ordinary wear and tear excepted).
Section 3.20 Title to Property. Kodak or a Subsidiary, as the case
may be, has and at the Closing will have and will transfer to Purchaser good
title to, or a valid and binding
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leasehold interest in, the real and personal tangible property to be included
in the Transferred Assets, free and clear of all Encumbrances, except (i)
Encumbrances that will constitute Assumed Liabilities, including those
reflected or reserved for on the Closing Date Balance Sheet to the extent so
reflected or reserved, (ii) liens for Taxes, assessments and other governmental
charges not yet due and payable or due but not delinquent or being contested in
good faith by appropriate proceedings and (iii) with respect to real property,
(A) easements, quasi-easements, licenses, covenants, rights-of-way, rights of
re-entry or other similar restrictions, including any other agreements,
conditions or restrictions that would be shown by a current title report or
other similar report or listing, (B) any conditions that may be shown by a
current survey or physical inspection and (C) zoning, building, subdivision or
other similar requirements or restrictions and (D) Encumbrances that would not
be material to the Business (all items included in (i) through (iii) are
referred to collectively herein as the "Permitted Encumbrances").
Section 3.21 Leased Real Property.
(a) Schedules 1.1(a) and 1.1(b) contain a list of Leased Real
Property setting forth the address, square footage and expiration date as of
the date hereof of each Assigned Lease and Sublease. Not less than 60% of each
parcel of Leased Real Property listed on Schedule 1.1(a) is presently used
exclusively in the operation of the Business. Kodak has delivered to Purchaser
correct and complete copies of each of the Assigned Leases. Each Assigned
Lease and Sublease is or will be, as of the Closing, legal, valid, binding,
enforceable and in full force and effect, except as may be limited by
bankruptcy, insolvency, reorganization and similar Laws affecting creditors
generally and by the availability of equitable remedies. To
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the Knowledge of Kodak, neither Kodak nor any other party to any Assigned Lease
and Sublease is or will be, as of the Closing, in default, violation or breach
under any Assigned Lease, Prime Lease and Sublease, and no event has occurred
and is continuing that constitutes or, with notice or the passage of time or
both, would constitute a default, violation or breach under any Assigned Lease,
Prime Lease and Sublease, except in each case defaults, violations or breaches
that would not have a Material Adverse Effect.
(b) The use and operation of the Owned Real Property and the
Leased Real Property in the conduct of the Business do not violate in any
material respect any instrument of record or agreement affecting such property.
Section 3.22 Absence of Changes. Since the date of the Unaudited
Balance Sheet, Kodak and the Subsidiaries have conducted and operated the
Business only in the Ordinary Course and neither the Business nor the
Transferred Assets has suffered any Material Adverse Effect since such date, in
each case taking into account the fact that Kodak announced its intention to
reposition, and is repositioning, the Business.
Section 3.23 Operation of the Business. As of the date hereof, no
part of the Business is currently operated by Kodak through any entity other
than Kodak and the Subsidiaries.
Section 3.24 Finders' Fees. Except for Goldman, Sachs & Co., whose
fees will be paid by Kodak, there is no investment banker, broker, finder or
other intermediary that has been retained by or is authorized to act on behalf
of Kodak or any Subsidiary who might be entitled to any fee or commission from
Kodak or any Subsidiary in connection with the Transaction.
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Section 3.25 Warranties. Except as set forth on Schedule 3.8, there
are no pending, or to the Knowledge of Kodak threatened, claims with respect to
any warranty relating to any product sold or service rendered in connection
with the Business, except as reflected or reserved on the Unaudited Balance
Sheet or the Closing Date Balance Sheet or as would be included in the Excluded
Liabilities.
Section 3.26 Disclosure. The information to be provided by Kodak for
inclusion in the Proxy Statement will not contain any untrue statement of a
material fact or omit to state any material fact required to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
Section 3.27 Customers. Except as set forth on Schedule 3.27, to the
Knowledge of Kodak, as of the date hereof, neither Kodak nor any Subsidiary has
received any written notice that any customer of the Business which purchases
from the Business products, goods or services worth more than $5,000,000
annually, except in the case of any Contracts that will be the subject of a
re-bid as to which no notice that the customer will not receive Kodak's re-bid
has been received, (i) has ceased, or will cease, to purchase the products,
goods or services of or to the Business or (ii) has substantially reduced, or
will substantially reduce, the purchase of products, goods or services of the
Business, including in each case after the consummation of the Transaction.
Section 3.28 No Other Representations or Warranties. Except for the
representations and warranties contained in this Article III, neither Kodak nor
any other Person makes any other express or implied representation or warranty
on behalf of Kodak.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Kodak as follows:
Section 4.1 Organization and Qualification. Purchaser is a public
limited company duly organized, validly existing and in good standing under the
laws of England and Wales. At the Closing, each Purchaser Buyer will be a
legal entity duly organized, validly existing and in good standing under the
laws of its country of domicile. Purchaser has and each Purchaser Buyer will
have, as of the Closing, all requisite power and authority to own and operate
its respective properties and assets and to carry on its respective business,
in the case of Purchaser, as currently conducted. Purchaser is, and the
Purchaser Buyers will be, duly qualified to do business and in good standing in
each jurisdiction where the ownership or operation of its respective properties
and assets or the conduct of its respective business requires such
qualification, except for failures to be so qualified or in good standing that
would not, individually or in the aggregate, materially impair or delay
Purchaser's ability to perform its obligations hereunder.
Section 4.2 Corporate Authorization. (a) Purchaser has full
corporate power and authority to execute and deliver this Agreement and the
Transitional Advisory Agreement and, prior to the Closing, will have full
corporate power and authority to execute and deliver each of the Ancillary
Agreements and such other agreements as may be required hereby and to perform
its obligations hereunder and thereunder. The execution, delivery and
performance by Purchaser of this Agreement and the Transitional Advisory
Agreement have been, and prior to the Closing the execution, delivery and
performance of each of the
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Ancillary Agreements will be, duly and validly authorized and no additional
corporate or shareholder authorization or consent is or will be required in
connection with the execution, delivery and performance by Purchaser of this
Agreement, the Transitional Advisory Agreement and each of the Ancillary
Agreements, other than the approval of the common equity holders of Purchaser.
(b) Each Purchaser Buyer, prior to the Closing, will have full
power and authority to execute and deliver each of the contracts/bills of sale
and the Ancillary Agreements to which it is a party and to perform its
respective obligations thereunder. Prior to the Closing, the execution,
delivery and performance of each of the contracts/bills of sale and the
Ancillary Agreements to which each Purchaser Buyer is a party will be duly and
validly authorized and no additional corporate or shareholder authorization or
consent will be required in connection with the execution, delivery and
performance by any Purchaser Buyer of the contracts/bills of sale and each of
the Ancillary Agreements to which it is a party. Each Purchaser Buyer that
will be a party to the Supply Agreement and the Promotional Agreement will
have, prior to the Closing, full power and authority to execute and deliver the
Supply Agreement and the Promotional Agreement and to perform its obligations
thereunder. Prior to the Closing, the execution, delivery and performance of
the Supply Agreement and the Promotional Agreement by each Purchaser Buyer that
will be a party thereto will be duly and validly authorized and no additional
corporate or shareholder authorization or consent will be required in
connection with the execution, delivery and
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performance by such Purchaser Buyer of the Supply Agreement and the Promotional
Agreement.
(c) Except for qualifying shares required by Law, Purchaser owns
or, as of the Closing, will own, directly or indirectly, all of the outstanding
capital stock or other equity interest of each Purchaser Buyer. There are no
preemptive or other outstanding rights, options, warrants, conversion rights or
agreements or commitments to issue or sell any shares of capital stock or other
equity interest of any such entity or any securities or obligations convertible
into or exchangeable for, or giving any Person a right to subscribe for or
acquire, any shares of capital stock or other equity interest of any such
entity, and no securities or obligations evidencing such rights are outstanding.
Section 4.3 Consents and Approvals. Except as specifically set forth
in Schedule 4.3 and as required by the U.S. Antitrust Laws, EU competition Laws
or similar Laws to which Purchaser or any of the Purchaser Buyers is subject,
no consent, approval, waiver or authorization is required to be obtained by
Purchaser or any of the Purchaser Buyers from, and no notice or filing is
required to be given by Purchaser or any of the Purchaser Buyers to or made by
Purchaser or any of the Purchaser Buyers with, any federal, state, local or
governmental authority or other Person in connection with the execution,
delivery and performance by Purchaser or any of the Purchaser Buyers of this
Agreement, the Supply Agreement, the Promotional Agreement, the Transitional
Advisory Agreement and each of the Ancillary Agreements other than those the
failure of which to obtain, give or make would not, individually or in the
aggregate, materially impair or delay the ability of Purchaser or any of the
Purchaser Buyers to effect the Closing.
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Section 4.4 Non-Contravention. The execution, delivery and
performance by Purchaser of this Agreement, the Transitional Advisory Agreement
and each of the Ancillary Agreements, or by each Purchaser Buyer of the Supply
Agreement, the Promotional Agreement, each contract/bill of sale and each of
the Ancillary Agreements to which it is a party, and the consummation of the
transactions contemplated hereby and thereby, do not and will not (i) violate
any provision of the Memorandum and Articles of Association, as amended, or
other organizational documents of Purchaser or any Purchaser Buyer, or (ii)
assuming the receipt of all consents, approvals, waivers and authorizations
required to be obtained by Kodak, any Subsidiary, Purchaser or any Purchaser
Buyer and the making of notices and filings required to be made by Kodak, any
Subsidiary or Purchaser or any Purchaser Buyer, to the Knowledge of Purchaser
and each Purchaser Buyer, violate or result in a breach of or constitute a
default under any Law, rule, regulation, judgment, injunction, order, decree or
other restriction of any court or governmental authority to which Purchaser or
any Purchaser Buyer is subject, including any Governmental Authorization, other
than, in the case of clause (ii), any breach, default or violation that would
not, individually or in the aggregate, materially impair or delay Purchaser's
or any Purchaser Buyer's ability to perform its respective obligations
hereunder or under such other agreements.
Section 4.5 Binding Effect. (a) This Agreement and the Transitional
Advisory Agreement, when executed and delivered by Kodak, and each of the
Ancillary Agreements, when executed and delivered by the other parties thereto,
will constitute a valid and legally binding obligation of Purchaser enforceable
against it in accordance with their respective terms, subject to bankruptcy,
insolvency, reorganization, moratorium and similar Laws of
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general applicability relating to or affecting creditors' rights and to general
principles of equity.
(b) Each of the Ancillary Agreements, the Supply Agreement and the
Promotional Agreement to which it is a party, when executed and delivered by
the other parties thereto, will constitute a valid and legally binding
obligation of each Purchaser Buyer enforceable against it in accordance with
their respective terms, subject to bankruptcy, insolvency, reorganization,
moratorium and similar Laws of general applicability relating to or affecting
creditors' rights and to general principles of equity.
Section 4.6 Finders' Fees. Except for Salomon Brothers Inc, whose
fees will be paid by Purchaser, there is no investment banker, broker, finder
or other intermediary that has been retained by or is authorized to act on
behalf of Purchaser or any subsidiary or Affiliate of Purchaser, including each
Purchaser Buyer, who might be entitled to any fee or commission from Purchaser
in connection with the transactions contemplated hereby.
Section 4.7 Litigation and Claims. There is no civil, criminal or
administrative action, suit, demand, claim, hearing, proceeding or
investigation pending or, to the Knowledge of Purchaser and each Purchaser
Buyer, threatened against Purchaser or any Purchaser Buyer that, individually
or in the aggregate, would materially impair or delay the ability of Purchaser
or any Purchaser Buyer to effect the Closing. Neither Purchaser nor any
Purchaser Buyer is subject to any order, writ, judgment, award, injunction or
decree of any court or governmental or regulatory authority of competent
jurisdiction or any arbitrator or arbitrators that, individually or in the
aggregate, would materially impair or delay the ability of Purchaser or any
Purchaser Buyer to effect the Closing.
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Section 4.8 Financial Capability. On the Closing Date, Purchaser and
the Purchaser Buyers will have sufficient funds to effect the Closing and all
other transactions contemplated by this Agreement.
Section 4.9 Proxy Statement. Purchaser represents and warrants to
Kodak that when (i) the Proxy Statement is mailed to Purchaser's shareholders
and on the date of the shareholders' meeting, the Proxy Statement shall contain
all information required to be stated therein by the Exchange Act and the rules
and regulations of the SEC thereunder and shall in all material respects
conform to the requirements of the Exchange Act and such rules and regulations,
and the Proxy Statement shall not at the time it is mailed to Purchaser's
shareholders and on the date of the shareholders' meeting contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made, in light of the circumstances under which
they were made, not misleading, except that no representation is made with
respect to information set forth in the Proxy Statement concerning Kodak or any
Subsidiary furnished by Kodak or such Subsidiary in writing for use in the
Proxy Statement and (ii) the Circular is mailed to Purchaser's shareholders and
on the date of the shareholders' meeting, the Circular shall contain all
information required to be stated therein by the Listing Rules and the rules
and regulations of the LSE thereunder and shall in all material respects
conform to the requirements of the Listing Rules and such rules and
regulations, and the Circular shall not at the time it is mailed to Purchaser's
shareholders and on the date of the shareholders' meeting contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made, in light of the circumstances under which
they were made, not misleading, except that
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no representation is made with respect to information set forth in the Circular
concerning Kodak or any Subsidiary furnished by Kodak or such Subsidiary in
writing for use in the Circular.
Section 4.10 No Other Representations or Warranties. Except for the
representations and warranties contained in this Article IV, neither Purchaser
nor any other Person makes any other express or implied representation or
warranty on behalf of Purchaser.
ARTICLE V
COVENANTS
Section 5.1 Access and Information.
(a) From the date hereof until the Closing, in addition to any
rights Purchaser may have under the Transitional Advisory Agreement, Kodak
shall permit Purchaser and its representatives to have access, during regular
business hours and upon reasonable advance notice, to the Employees and the
assets of the Business, subject to reasonable rules and regulations of Kodak
and any applicable Laws. Kodak shall furnish, or cause to be furnished, to
Purchaser any financial and operating data and other information that is
available with respect to the Business as Purchaser shall from time to time
reasonably request (it being understood that in no event shall Purchaser have
access to Kodak's consolidated United States federal, state or local tax
returns or any books, records or working papers related thereto) and shall
instruct its employees, counsel and financial advisors to cooperate with
Purchaser in its investigation of the Business; it being understood that
Purchaser shall reimburse Kodak promptly for reasonable and necessary out of
pocket expenses incurred in complying with any such request by or on behalf of
Purchaser and reasonably documented by
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Kodak. No investigation pursuant to this Section 5.1 shall alter any
representation or warranty given hereunder by Kodak or any Subsidiary.
(b) As soon as practicable, Kodak shall prepare or cause to be
prepared audited financial statements of the Business as at September 30, 1996
as required by the SEC and for the nine month period then ended together with a
report thereon by Kodak's certified public accountants. Such financial
statements shall (i) include a balance sheet, statements of income and retained
earnings and a statement of cash flows, (ii) fairly present in all material
respects the financial condition of the Business as of the date thereof and the
period then ended, and (iii) be prepared in accordance with GAAP consistently
applied and in accordance with Kodak's past accounting policies throughout the
period indicated.
(c) Upon the request of the other party, Kodak or Purchaser shall,
to the extent permitted by Law and confidentiality obligations existing as of
the Closing Date, grant to the other party (with reimbursement of the granting
party's reasonable and necessary out of pocket expenses incurred in complying
with such request and reasonably documented) and its representatives the right,
during normal business hours, to inspect and copy the books, records and other
documents in the granting party's possession pertaining to the operation of the
Business prior to the Closing Date (including books of account, records, files,
invoices, correspondence and memoranda, customer and supplier lists, data,
specifications, insurance policies, operating history information and inventory
records). Kodak and its Affiliates shall (and shall cause their respective
Affiliates to) keep and maintain all their tax books and records pertaining to
the Business relating to any period prior to the Closing Date for a period of
seven (7) years after the Closing Date and thereafter Kodak shall (and shall
cause
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its Affiliates to) offer such information to Purchaser prior to disposal
thereof. The rights granted herein shall be subject to the reasonable security
requirements of Kodak and Purchaser and in no event shall either party have
access to the consolidated federal, state or local tax returns of the other
party.
(d) Purchaser agrees to retain all Books and Records in existence
on the Closing Date and make personnel of Purchaser or the Purchaser Buyers
available to Kodak to the extent such access is reasonably related to any
Excluded Assets or Excluded Liabilities or otherwise necessary for Kodak to
comply with the terms of this Agreement or any applicable Law; it being
understood that Kodak shall reimburse Purchaser promptly for its reasonable and
necessary out of pocket expenses incurred in complying with any such request by
or on behalf of Kodak and reasonably documented by Purchaser.
Section 5.2 Conduct of Business. During the period from the date
hereof to the Closing, except to modify with Purchaser's consent, which shall
not be unreasonably withheld, certain agreements between Kodak and distributors
of Kodak branded electophotographic systems in certain non-U.S. countries to
permit Kodak to protect certain of its interests following assignment of such
agreements to Purchaser and as otherwise contemplated by this Agreement, the
Transitional Advisory Agreement or as Purchaser shall otherwise agree in
writing in advance, in addition to any rights Purchaser may have under the
Transitional Advisory Agreement, Kodak covenants and agrees that Kodak shall
conduct the Business in the Ordinary Course and use its reasonable best efforts
to preserve the Business and Kodak's relationship with its customers, suppliers
and employees intact. During the period from the date hereof to the Closing,
except as otherwise contemplated by
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this Agreement or as Purchaser shall otherwise consent (which consent shall not
be unreasonably withheld), Kodak covenants and agrees that with respect to the
Business it shall not, and shall cause each of the Subsidiaries not to:
(i) intentionally incur, create or assume any
Encumbrance on any of its assets other than a Permitted Encumbrance;
(ii) acquire, sell, lease, license, transfer or
dispose of any assets other than in the Ordinary Course of Business;
(iii) terminate or materially extend or materially
modify any Material Contract;
(iv) enter into any contract, arrangement or
commitment other than in the Ordinary Course of Business;
(v) incur indebtedness for borrowed money;
(vi) issue, grant or sell any shares of capital
stock of any Transferred Subsidiary or any options, warrants or other
rights to purchase any such shares or securities convertible into or
exchangeable for such shares;
(vii) do any other act which would cause any
representation or warranty of Kodak in this Agreement to be or become
untrue in any material respect or intentionally omit to take any
action necessary to prevent any such representation or warranty from
being untrue in any material respect at such time; or
(viii) enter into any agreement or commitment with
respect to any of the foregoing.
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Section 5.3 Reasonable Best Efforts. Kodak and Purchaser will
cooperate and use their respective reasonable best efforts to fulfill the
conditions precedent to the other party's obligations hereunder, including
securing as promptly as practicable all consents, approvals, waivers and
authorizations required in connection with the Transaction; it being understood
that nothing in this Section 5.3 shall require Kodak to obtain consents to the
assignment of the Kodak OEM Agreements, as modified, or the OEM Modification.
Purchaser and Kodak will cooperate fully with each other to promptly file
documentary materials required by or necessary to obtain approval or clearance
under U.S. Antitrust Laws, EU competition Law and any other Laws and promptly
file any additional information requested as soon as practicable after receipt
of such request thereof. To the extent that, as an accommodation to Purchaser
and with Purchaser's prior written consent, Kodak incurs costs that Purchaser
or any of the Purchaser Buyers otherwise would have to incur in order to secure
any authorization, consent, waiver, license or approval, Purchaser shall
promptly reimburse Kodak for any such costs that are invoiced by Kodak to
Purchaser. Without limiting the foregoing, Purchaser and Kodak shall use their
respective best efforts to take or cause to be taken all actions necessary,
proper or advisable to obtain any consent, waiver, approval or authorization
relating to any U.S. Antitrust Law, EU competition Law or any other Law that is
required for the consummation of the Transaction.
Section 5.4 Tax Matters.
(a) Proration of Taxes. To the extent permitted by law or
administrative practice, the taxable years of each corporate or unincorporated
entity that constitutes a Transferred Asset shall be closed at the close of
business on the Closing Date. Whenever it is necessary
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to determine the liability for Taxes for a portion of a taxable year or period
that begins before and ends after the Closing Date, the determination of the
Taxes for the portion of the year or period ending on, and the portion of the
year or period beginning after, the Closing Date shall be determined by
assuming that the taxable year or period ended as of the close of business on
the Closing Date, except that those annual property taxes and exemptions,
allowances or deductions that are calculated on an annual basis shall be
prorated on a time basis.
(b) Indemnification. (i) Kodak's Indemnification of Purchaser.
Kodak shall indemnify and hold harmless Purchaser and the Purchaser Indemnified
Parties from, against and in respect of (A) any Taxes imposed with respect to
the Business or any Transferred Assets or any income or gain derived with
respect thereto, or any Taxes imposed on any of the Transferred Subsidiaries,
for the taxable periods, or portions thereof, ended on or before the Closing
Date, (B) any Transfer Taxes for which Kodak is liable pursuant to Section
5.4(c) hereof, (C) any Taxes imposed with respect to dispositions of assets of
Transferred Subsidiaries as provided for in Section 2.13 and (D) any other
Taxes imposed on Kodak and each of the Subsidiaries (other than the Transferred
Subsidiaries) except to the extent described in Section 5.4(b)(ii).
(ii) Purchaser's Indemnification of Kodak. Purchaser shall
indemnify and hold harmless Kodak and the Kodak Indemnified Parties from,
against and in respect of (A) any Taxes imposed with respect to the Business or
any Transferred Assets or any income or gain derived with respect thereto, or
any Taxes imposed on any of the Transferred Subsidiaries, for any taxable
period, or portion thereof, beginning after the Closing, (B) any
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Transfer Taxes for which Purchaser is liable pursuant to Section 5.4(c) hereof
and (C) any other Taxes imposed on Purchaser or any of its Affiliates except to
the extent described in Section 5.4(b)(i).
(iii) For purposes of this Section 5.4(b), the term Taxes
shall include Losses directly or indirectly relating to or arising out of any
liability for Taxes.
(iv) Purchaser's Claiming, Receiving or Using of Refunds and
Overpayments. If, after the Closing, Purchaser or its affiliates (A) receive
any refund, or (B) utilize the benefit of any overpayment or prepayment of
Taxes (except to the extent reflected in the Closing Date Net Asset Value as a
current asset) which, in either of cases (A) and (B), (x) relate to a Tax paid
by Kodak or any of its affiliates, or (y) is the subject of indemnification by
Kodak hereunder, Purchaser shall promptly transfer, or cause to be transferred,
to Kodak the entire amount of such refund, overpayment or prepayment (including
interest) received or utilized by Purchaser or its affiliates less any net Tax
cost to Purchaser or its Affiliates. Purchaser agrees to notify Kodak promptly
of both the discovery of a right to claim any such refund, overpayment or
prepayment and the receipt of any such refund or utilization of any such
overpayment or prepayment. Purchaser agrees to claim any such refund or to
utilize any such overpayment or prepayment as soon as possible and to furnish
to Kodak all information, records and assistance necessary to verify the amount
of such refund, overpayment or prepayment.
(c) Transfer Taxes. All federal, state, local or foreign or other
excise, sales, use, value added, transfer (including real property transfer or
gains), stamp, documentary, filing, recordation, notarial and other similar
taxes and fees that may be imposed or assessed as a
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result of the Transaction, together with any interest, additions or penalties
with respect thereto and any interest in respect of such additions or penalties
("Transfer Taxes") and the LAR Amount, shall be shared equally by Kodak and
Purchaser, except that Purchaser shall bear any such Transfer Taxes, discounted
at LIBOR from the date actually paid until the date refunded, to the extent
Purchaser or any of its Affiliates may reasonably be expected to receive a
corresponding refund, reimbursement or credit from any governmental authority
or any Person not affiliated with Purchaser. Purchaser shall, within the
period provided under the applicable laws, provide Kodak with properly executed
resale certificates except where not recognized by local Law, or an opinion of
a nationally recognized law firm or an internationally recognized firm of
independent public accountants, reasonably satisfactory to Kodak in form and
substance that sales tax is not due, with respect to the transfer pursuant
hereto of all Inventory and Capital Assets - Rental Equipment. Any Tax Returns
that must be filed in connection with Transfer Taxes shall be prepared by Kodak
and Kodak will use its reasonable best efforts to provide such Tax Returns to
Purchaser at least 10 Business Days prior to the date such Tax Returns are due
to be filed. Such Tax Returns shall be prepared consistent with the allocation
of Consideration pursuant to Section 5.4(d) hereof. Purchaser and Kodak shall
cooperate in the timely completion and filing of all such Tax Returns. Kodak
and Purchaser shall promptly pay all Transfer Taxes. Any such Taxes resulting
from any subsequent increase in Consideration shall be borne in accordance with
the provisions of this Section 5.4(c). Any such Taxes resulting from any
subsequent transfer of the Transferred Assets or Assumed Liabilities or any re-
transfer of property on or subsequent to the Closing shall be borne entirely by
Purchaser or Purchaser Buyer.
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(d) Tax Returns. (i) Kodak shall file or cause to be filed when
due all Tax Returns with respect to the Business due to be filed on or prior to
the Closing Date (or with respect to any portion of the Business transferred on
a subsequent closing date, such subsequent closing date) and all Tax Returns
with respect to the Business for the taxable periods beginning before and
ending on the Closing Date (or with respect to any portion of the Business
transferred on a subsequent closing date, such subsequent closing date). Kodak
shall file or cause to be filed when due all income Tax Returns for taxable
periods beginning before and ending on or after the Closing Date (or with
respect to any portion of the Business transferred on a subsequent closing
date, such subsequent closing date) with respect to any Transferred Subsidiary
that files a Tax Return on a consolidated, combined, affiliated or unitary
basis (which shall include any United Kingdom Subsidiary) with an Affiliate
that is not a Transferred Asset.
(ii) Purchaser shall file or cause to be filed when due all
other Tax Returns with respect to the Transferred Subsidiaries due to be filed
after the Closing Date.
(iii) Except as provided in Section 5.4(c), if either party
shall be liable hereunder for any portion of the Tax shown due on any Tax
Returns required to be filed by the other party, the party preparing such Tax
Return shall deliver a copy of the relevant portions of such Tax Return to the
party so liable for its review and approval not less than 30 days prior to the
date on which such Tax Returns are due to be filed (taking into account any
applicable extensions). All items shall be reflected on any such return in
accordance with prior practice as reasonably determined by Kodak, unless such
returns relate solely to Taxes
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for which Purchaser is liable hereunder, in which case Purchaser shall make the
determination.
(e) Information to be Provided by Purchaser. (i) With respect to
Tax Returns to be filed (or to be caused to be filed) by Kodak pursuant to
Section 5.4(d) hereof for any Transferred Subsidiary, Purchaser shall within
120 days following the end of the taxable year beginning before and ending on
or after the Closing Date (but in no event less than ninety days before the due
date for the relevant Transferred Subsidiary's return) prepare and provide to
Kodak a package of tax information materials (the "Tax Package"), that shall be
completed at Kodak's direction and in accordance with past practice as
reasonably determined by Purchaser, including past practice as to providing the
information, schedules and work papers and as to the method of computation of
separate taxable income or other relevant measures of income of Kodak.
(ii) Foreign Tax Receipts. To the extent not contained in
the Tax Package, Purchaser shall deliver to the tax director of Kodak certified
copies of all receipts in its possession for any foreign Tax with respect to
which Kodak or any of its Affiliates could claim a foreign tax credit, and any
other documentation required in connection with Kodak or any of its Affiliates
claiming or supporting a claim for such foreign tax credits promptly following
either a request by Kodak for such receipts or documentation or payment of any
such foreign Taxes by Purchaser, any Affiliate of Purchaser or any other Person
to whom Purchaser or any Affiliate of Purchaser transfers any portion of the
Transferred Assets. Purchaser shall, and shall cause its Affiliates to, use
its best efforts to obtain any such receipts upon a request by Kodak.
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(f) Contest Provisions. Each of Purchaser and Kodak shall promptly
notify the other in writing upon receipt of notice of any pending or threatened
audits or assessments with respect to Taxes for which such other party (or such
other party's Affiliates) may be liable hereunder. Kodak or Purchaser, as the
case may be, shall be entitled to participate at its expense in the defense of
and, at its option, take control of the complete defense of, any tax audit or
administrative or court proceeding relating to Taxes for which it bears the
greater potential liability, and to employ counsel of its choice at its
expense. Neither party may agree to settle any claim for Taxes for which the
other may be liable without the prior written consent of such other party,
which consent shall not be unreasonably withheld.
(g) Determination and Allocation of Consideration. (i) The
parties to this Agreement agree to determine prior to Closing the amount of and
allocate the total consideration transferred by Purchaser and the Purchaser
Buyers to Kodak or a Subsidiary pursuant to this Agreement (the
"Consideration") in accordance with the fair market value of the assets and
liabilities transferred. Kodak and Purchaser agree to prepare and file an IRS
Form 8594 in a timely fashion in accordance with the rules under Section 1060
of the Code with respect to those Transferred Assets and Assumed Liabilities
required to be reflected on such form. Kodak and Purchaser each agree to
submit to the other a draft copy of any Form 8594 it proposes to file with
respect to this transaction at least 45 days before the proposed filing date
thereof and to jointly discuss and attempt to agree, in good faith, to the
contents thereof. To the extent that the Consideration is adjusted after the
Closing Date, the parties agree to revise and amend the schedule and IRS Form
8594 in the same manner and according to the same procedure. The determination
and allocation of the Consideration
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derived pursuant to this Section 5.4(g) shall be binding on Kodak, Purchaser
and their respective Affiliates for all Tax reporting purposes.
(ii) If Purchaser elects to make a Section 338(h)(10)
election pursuant to Section 5.4(j): With respect to the portion of the
Purchase Price allocated to Kodak Imaging Services, Inc., the "modified
aggregated deemed sales price" as defined in Treas. Regs. Section
1.338(h)(10)-1 (the "MADSP") shall be determined and allocated in accordance
with the requirements of Section 338(h)(10) of the Code and the Treasury
Regulations thereunder and as mutually agreed upon by Kodak and Purchaser.
Prior to Closing, the Purchaser shall prepare, or cause to be prepared, with
the assistance and cooperation of Kodak, an Internal Revenue Service Form
8023-A with all attachments in accordance with the rules under Section 338 of
the Code. Purchaser shall file the Form 8023-A in a timely fashion and shall
deliver an executed original of such form to Kodak at the Closing. To the
extent that the MADSP is adjusted after the Closing Date, the parties agree to
revise and amend the schedule or schedules and the Internal Revenue Service
Form 8023-A in the same manner and according to the same procedure as the
original schedules and form are to be prepared pursuant to this Section 5.4(g).
The determination and allocations derived pursuant to this section shall be
binding on Kodak, Purchaser and their respective Affiliates for all Tax
reporting purposes.
(h) Assistance and Cooperation. After the Closing Date the
parties shall cooperate fully in preparing for any audits of, or disputes with
taxing authorities regarding, any Tax Returns and payments in respect thereof.
Each party shall (i) provide timely notice to the other in writing of any
pending or proposed audits or assessments with respect to Taxes for
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which such other party or any of its Affiliates may have a liability under this
Agreement and (ii) furnish the other with copies of all relevant correspondence
received from any taxing authority in connection with any audit or information
request with respect to any Taxes referred to in (i).
(i) Employee Withholding and Reporting Matters. In the event that
the Closing occurs on or after January 1, 1997, Purchaser shall, in accordance
with and to the extent permitted pursuant to Revenue Procedure 84-77, 1984-2
C.B. 753, assume all responsibility for preparing and filing Form W-2, Wage
and Tax Statement, Form W-3, Transmittal of Income and Tax Statements, Form
941, Employer's Quarterly Federal Tax Return, Form W-4, Employee's Withholding
Allowance Certificate and Form W-5, Earned Income Credit Advance Payment
Certificate with respect to the U.S. Transferred Employees. Kodak and
Purchaser agree to comply with the procedures described in Section 5 of the
Revenue Procedure 84-77.
(j) Section 338 Election. Purchaser shall not make an election
pursuant to Section 338 of the Code or any similar Law of any other country
with respect to the transfer by Kodak or any Subsidiary of the stock or other
equity interests in any Subsidiary other than, at Purchaser's election, a
Section 338(h)(10) election with respect to Kodak Imaging Services, Inc. with
which election Kodak agrees to join, consent and cooperate.
(k) Post-Closing Actions That Affect Kodak's Liability for Taxes.
Except to the extent required by law, Purchaser or its Affiliates shall not,
without the prior written consent of Kodak, amend any Tax Return filed by, or
with respect to, any Subsidiary for any taxable period, or portion thereof,
beginning before the Closing Date.
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(l) Termination of Tax Allocation Agreements. Any agreement or
arrangement with respect to the allocation or sharing of Taxes, whether or not
written, that may have been entered into by Kodak with any entity that
constitutes a Transferred Asset shall be terminated as to Kodak and each such
entity as of the Closing Date, and no payments that are owed by Kodak or such
entity pursuant thereto shall be made thereunder.
Section 5.5 Post-Closing Obligations of the Business to Certain
Employees.
(a) As of the Transfer Time, Purchaser shall cause the Transferred
Subsidiaries to continue to employ all Employees of the Transferred
Subsidiaries. Commencing on October 14, 1996, but in no event later than
November 30, 1996, Purchaser shall offer employment, in comparable positions,
to (i) all Applicable Employees other than Full-Time Equivalent Employees and
(ii) no less than 669 Full-Time Equivalent Employees (the "FTE Floor
Employees"), such employment to commence at the Transfer Time (or, in the case
of Full-Time Equivalent Employees located outside the United States, on such
later date as Purchaser is permitted to employ such Full-Time Equivalent
Employees pursuant to applicable social selection procedures arising outside
the United States under employee welfare Laws or related contractual
arrangements), at such wage or salary levels (excluding wage dividend) as are
comparable to those applicable immediately prior to the Closing; it being
understood that notwithstanding the fact that no offer of employment need be
made with respect to those Applicable Employees who automatically transfer to
Purchaser under the Transfer of Undertakings, Purchaser and Kodak shall
cooperate to send the appropriate confirmation of transfer of employment to
such Applicable Employees no later than November 30, 1996; it being further
understood that Purchaser agrees not to hire any
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Employee who retires under the Kodak Retirement Income Plan on, or within six
months of, the Closing Date. Purchaser's offer of employment shall require any
Applicable Employee or Full-Time Equivalent Employee to whom the offer is made
to accept or reject the offer by no later than two weeks following the date of
such offer of employment (or the period of time required by local law). For
purposes of clause (ii) of this Section 5.5(a), Purchaser shall be obligated to
offer employment to the number of Full-Time Equivalent Employees necessary to
replace any Full-Time Equivalent Employees who reject Purchaser's original
offer of employment or who will not become Transferred Employees by reason of
their death, long-term disability or termination of employment prior to the
Closing Date; it being understood that in the event that more than 50% of the
FTE Floor Employees reject Purchaser's offer of employment, assuming such
offers are made in accordance with Section 5.5(a), Kodak agrees to reevaluate
the appropriateness of the number of FTE Floor Employees required to be hired
hereunder. "Applicable Employees" means all of the following:
(1) All persons who are active Employees on the
Closing Date. Employees on temporary leave for purposes of jury or
annual two-week national service/military duty shall be deemed to be
active Employees;
(2) Employees who on the Closing Date are on
nonmedical leave of absence; provided, however, that no such employee
shall be guaranteed reinstatement to active service if his return to
employment is contrary to the terms of his leave, unless otherwise
required by applicable Law (for purposes of the foregoing, nonmedical
leave of absence shall include maternity or paternity leave, leave
under
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the Family and Medical Leave Act of 1993, educational leave, military
leave with veteran's reemployment rights under federal law, or
personal leave, unless any of such is determined to be a medical
leave); and
(3) (A) U.S. Employees who on the Closing Date are
on disability or medical leave and for whom it has been 180 calendar
days or less since their last day of active employment; provided,
however, that no such Employee shall be guaranteed reinstatement to
active service if he is incapable of working in accordance with the
policies, practices and procedures of Purchaser; and
(B) All Non-U.S. Employees as required by the
Transfer of Undertakings and country and local laws and regulations.
Those Applicable Employees and Full-Time Equivalent Employees who accept such
offers of employment with Purchaser or who transfer under the Transfer of
Undertakings effective as of the Closing Date (and in the case of any
Transferred Subsidiary, all Employees) shall be referred to herein as the
"Transferred Employees"; it being understood that each Employee on short-term
disability (described in Section 5.5(a)(3)(A) above) who has accepted
Purchaser's offer of employment, shall continue to participate in the
applicable short-term disability plan of Kodak or of a Transferred Subsidiary
until such Employee returns from leave, and shall become a Transferred Employee
only upon the termination of his or her leave. Prior to the Closing Kodak
shall provide Purchaser with a schedule of Employees on leave, or expected to
remain on leave, as of the Closing Date. Kodak agrees that it shall notify and
consult with the works councils or similar employee representatives as required
by applicable Law with respect to the transfers contemplated by this Agreement
and, to the
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extent requested by Kodak, Purchaser shall cooperate with Kodak in its
discussions with the works councils or such representatives. Purchaser shall
be responsible for payment of any and all retention, termination, change in
control or other similar compensation or benefit payments which are or may
become payable to any Employee in connection with the consummation of the
Transaction, including the retention and performance bonuses, to the extent
such benefits and benefit payments are set forth on the face of the Closing
Date Balance Sheet and the Retention Bonuses.
(b) Purchaser agrees to, and agrees to cause its subsidiaries to,
provide the Transferred Employees beginning at the Transfer Time with the same
employee benefits, including, without limitation, pension benefits, health,
life insurance and other welfare benefits, provided from time to time by the
Purchaser and its subsidiaries to their similarly situated employees, which
benefits shall include as of the Closing Date the benefit enhancements
summarized on Schedule 5.5(b); provided, however that Purchaser shall have no
obligation to establish or assume any defined benefit pension plan or, except
as contemplated by Section 5.5(e) of this Agreement, any other post-retirement
benefit plan for U.S. Transferred Employees; and provided further, however,
that in the case of non-U.S. Transferred Employees, Purchaser shall provide
such employee welfare benefits as are required by the Transfer of Undertakings
and country and local Laws and regulations and, subject to the legal
requirements in each relevant country, with respect to the maintenance of
employee pension benefits during any period following the Closing, in each
relevant country Purchaser agrees to implement retirement programs typical in
such countries and as are discussed with the employees or their employee
representatives. To the extent Purchaser
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notifies Kodak that it is unable to provide any non-pension employee benefits
to non-U.S. Transferred Employees as of the Transfer Time notwithstanding their
reasonable best efforts to do so, Kodak agrees, to the extent possible under
country or local laws and regulations, to continue to provide such benefits for
a period of up to six months and Purchaser or a Purchaser Buyer shall reimburse
Kodak for all costs incurred by Kodak on the basis of its fully burdened cost
as described in Exhibit 5.5. Except as set forth in Section 5.5(c), Purchaser
shall indemnify, defend and hold harmless the Kodak Indemnified Parties from
and against any Losses imposed on the Kodak Indemnified Parties resulting from
the violation of the Transfer of Undertakings, or local Laws by Purchaser.
Kodak shall indemnify, defend and hold harmless the Purchaser Indemnified
Parties from and against any Losses imposed on the Purchaser Indemnified
Parties resulting from Kodak's or any Kodak Indemnified Party's failure to
properly notify and consult with the works councils or similar employee
representatives.
(c) Purchaser shall provide to Transferred Employees severance
benefits at least equal to those provided to similarly situated Employees under
the Kodak and KIS Termination Allowance Plan or similar plans outside the U.S.
("TAP"), as applicable, for so long as Kodak has any obligation to share with
Purchaser severance payments made to Transferred Employees under this Section
5.5(c). Kodak shall be responsible for the cost of all severance benefits
payable to any Employees who do not become Transferred Employees by reason of
their death, long term disability, termination by Kodak prior to the Transfer
Time or their decision not to accept comparable employment with Purchaser and
their termination of employment by Kodak. Notwithstanding any provision in
this Agreement to
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the contrary, Purchaser shall be wholly responsible for the cost of severance
benefits for Employees (i) who do not become Transferred Employees because such
Employees were not offered comparable employment (as determined under TAP) with
Purchaser in accordance with Section 5.5(a) (other than as a result of their
death, long term disability or termination by Kodak prior to Purchaser's
failure to offer comparable employment), and (ii) whose termination of
employment, whether actual or constructive, is deemed unlawful under the
Transfer of Undertakings. Subject to the foregoing, Kodak and Purchaser shall
share (i) 75%/25%, respectively, the cost of all severance benefits payable to
Transferred Employees with respect to whom, during the 12-month period
beginning with the first date following the Closing that Purchaser is legally
entitled in any given country to seek local approval to dismiss any Transferred
Employee or otherwise has the ability to legally dismiss any Transferred
Employee in such relevant country, Purchaser has either sought local approval
for a dismissal based, where applicable, on an economic, technical or
organizational reason (an "ETO") and has satisfied the formal requirements of
the Transfer of Undertakings for an ETO, or has otherwise dismissed such
Transferred Employee, and (ii) 50%/50%, respectively, the cost of all severance
benefits payable to Transferred Employees with respect to whom, during the
six-month period immediately following the 12-month period discussed in clause
(i) above, Purchaser has sought the applicable local approvals for a dismissal
or otherwise had the ability to legally dismiss any Transferred Employee as
contemplated by clause (i) above; provided, however, that in each case, such
Transferred Employees are actually dismissed, pursuant to the relevant approval
where any approval is required or otherwise; and provided further, however,
that (i) in no event shall Kodak's obligation to pay
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severance pursuant to this paragraph 5.5(c) exceed $75 million, (ii) with
respect to non-U.S. Transferred Employees during any 18-month period in which
Kodak retains any responsibility to pay severance pursuant to this Section
5.5(c), Kodak and Purchaser shall share 75%/25% or 50%/50%, as applicable, the
cost of severance payments that are legally mandated under country or local
laws and regulations, or, if greater, severance payments that are consistent
with current practices of the Subsidiaries operating in the relevant countries,
and (iii) for purposes of determining Kodak's liability under this paragraph
5.5(c), severance payments made with respect to any Transferred Employee shall
not include any compensation to which a Transferred Employee becomes entitled
due to unfair dismissal or breach of employment contract, for which Purchaser
has agreed to indemnify Kodak pursuant to Section 5.5(i). Purchaser shall
provide Kodak with all information reasonably requested by Kodak in order to
determine the appropriateness of any severance payments.
Notwithstanding any provision of this Agreement to the contrary,
Purchaser agrees to reimburse Kodak for any severance payment made by Kodak
pursuant to its obligations under this Section 5.5(c) to the extent that
Purchaser hires any person within any 18-month period in which Kodak retains
any responsibility to pay severance pursuant to this Section 5.5(c) to perform
a substantially similar function to those being performed or that would or
could have been performed by the previously terminated Employees and
Transferred Employees, whether such replacement is made with previously
terminated Employees, Transferred Employees or with new hires, unless such
Employee or Transferred Employee is terminated for cause or for failure to
adequately perform his or her duties to the satisfaction of Purchaser or any
Purchaser Buyer. Notwithstanding the foregoing, Purchaser shall not be
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obligated to reimburse Kodak with respect to any positions filled following a
reasonable period of time after the relevant terminations of employment if the
decision to hire or rehire any employee reflects a bona fide change in the
business needs of Purchaser. Reimbursement to Kodak shall be made promptly,
and in no event later than 30 days, after Purchaser receives a written demand
for reimbursement from Kodak. In connection therewith, Purchaser shall provide
Kodak with all reasonably requested information regarding terminations and
hires during the period in which Kodak retains any responsibility to pay
severance pursuant to this Section 5.5(c), within 20 days of Kodak's request.
(d) Neither the Purchaser nor any of its Affiliates shall have any
liability with respect to any Employee under any Benefit Plan or any claim
thereof or related thereto. From and after the Closing, Kodak shall remain
solely responsible for any and all liabilities in respect of the Employees,
including the Transferred Employees, related to the Benefit Plans, except with
respect to vacation benefits to the extent accrued on the Closing Date Balance
Sheet and severance benefits to the extent provided by Sections 5.5(b) and
5.5(c). Transferred Employees shall be given credit for all service with Kodak
or any Subsidiary, or service credited by Kodak or any Subsidiary, under the
employee benefit plans, programs and policies and fringe benefit arrangements
of the Business or Purchaser in which they become participants for purposes of
eligibility, vesting and, for purposes of (i) U.S. welfare plans and (ii)
pension and other benefit plans outside the U.S. where required under country
or local Law, benefit accrual.
(e) Effective as of the Transfer Time, Purchaser shall establish
one or more defined contribution plans (the "Transferee Savings Plan") for the
benefit of
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U.S. Transferred Employees, including expatriates, who participate in the
Eastman Kodak Employees' Savings and Investment Plan or the Kodak Imaging
Services Saving Plan (the "Kodak Savings Plans") or shall cover the Transferred
Employees under an existing Transferee Savings Plan and, Kodak shall cause to
be transferred from the Kodak Savings Plans to the Transferee Savings Plan the
liability for the account balances of those Transferred Employees who
participate in the Kodak Savings Plans together with cash or, at the mutual
agreement of Purchaser and Kodak, marketable securities the fair market value
of which is equal to such liability, and Purchaser shall cause the Transferee
Savings Plan to accept such transfers; the transfer of assets shall take place
within 180 days after the Closing Date, but in no event prior to the later of
(A) Purchaser furnishing to Kodak a favorable determination letter from the
Internal Revenue Service with respect to the qualification of the Transferee
Savings Plan under Section 401(a) of the Code, as amended to comply with
changes to the qualification requirements of Section 401(a) of the Code made by
the Tax Reform Act of 1986 and other recent legislation and regulations and (B)
Kodak furnishing to Purchaser a favorable determination letter and Closing
Agreement from the Internal Revenue Service with respect to the continued
qualification of the Kodak Savings Plans under Section 401(a) of the Code, as
amended to comply with changes to the qualification requirements of Section
401(a) of the Code made by the Tax Reform Act of 1986 and other recent
legislation and regulations.
Prior to the Closing Date, Kodak shall cause the Kodak Imaging
Services Savings Plan to be amended to provide that participants will be fully
vested in their respective employer matching accounts as of the Closing Date.
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(f) Effective as of the Transfer Time, all Transferred Employees
(and their dependents) who immediately prior to the Transfer Time are
participating in employee welfare benefit plans of Kodak and any of the
Subsidiaries, including plans, programs, policies and arrangements that provide
medical and dental coverage, life and accident insurance, disability coverage,
and vacation and severance pay (collectively, "Welfare Plans"), shall cease to
be covered by such Welfare Plans, except to the extent provided otherwise in
Sections 5.5 (g) and (h) or by the terms of the applicable Welfare Plan. Kodak
shall retain responsibility for providing group health coverage required by
Section 4980B of the Code ("Continuation Coverage") to those Employees who do
not accept employment with Purchaser and who elected to purchase such
Continuation Coverage prior to the Closing Date. Purchaser shall provide
Continuation Coverage to Transferred Employees in the U.S. or their dependents
only with respect to "qualifying events" as defined in Code Section 4980B(f)(3)
which occur on and after the Closing Date, to the extent required by Law.
(g) Purchaser shall establish, or cause the Transferred Employees
and their beneficiaries to be included in Purchaser's medical, dental or health
plans as of the Transfer Time and such plans shall waive any eligibility
periods and preexisting condition limitations and shall honor any deductible
and out of pocket expenses incurred by such Transferred Employees and their
beneficiaries under the medical, dental or health plans of Kodak or any
Subsidiary during the portion of the calendar year preceding the Transfer Time.
Kodak shall retain responsibility for and shall satisfy all Welfare Plan claims
incurred by Transferred Employees prior to the Transfer Time (i) under any
medical, dental or health plans for
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treatment or service rendered or injuries, accidents or conditions occurring or
existing prior to the Transfer Time; (ii) under any life insurance plans with
respect to deaths occurring prior to the Transfer Time; and (iii) any other
payments or benefits owing or relating to employment services provided prior to
the Transfer Time under any other Welfare Plans. For purposes of this
paragraph, a claim shall be deemed to have been incurred on the date on which
medical or other treatment or service was rendered and not the date of the
inception of the related illness or injury, or in the case of death, on the
date of death.
(h) Kodak shall retain exclusive responsibility for and shall
satisfy any retiree medical or life insurance benefits payable under any
Welfare Plan.
(i) Except for Kodak's obligations with respect to Transferred
Employees under Section 5.5(c), Purchaser agrees that it shall indemnify,
defend and hold harmless the Kodak Indemnified Parties from and against any
Losses imposed on the Kodak Indemnified Parties directly or indirectly relating
to or arising out of the termination of employment of, or the wrongful
discharge, including constructive discharge, by Purchaser or any Purchaser
Buyer of any Transferred Employee or the violation of any law, regulation or
agreement (including employee contracts) with respect to any Applicable
Employee or Full-Time Equivalent Employee after the Closing.
(j) No pension liabilities or pension assets of a Plan outside the
U.S. shall be transferred in bulk in any country unless such bulk transfer is
required by country or local law. If the transfer of pension liabilities and
pension assets is so required in any country:
(i) the amount of the pension assets to be
transferred shall be the amount required to be transferred under the
laws or relevant insurance agreements in
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that country; it being understood that Purchaser and Kodak may agree
to increase the amount transferred to equitably reflect the
liabilities assumed by Purchaser, the on-going benefit obligations of
Purchaser and the funding status of the Plan,
(ii) Purchaser and Kodak shall agree to use their
reasonable best efforts to minimize any surrender penalties charged by
the insurer as a result of the transfer, and
(iii) Kodak and Purchaser shall mutually agree upon
the kind of assets to be transferred if there are alternate forms of
assets that may be transferred under country or local law or existing
insurance agreement.
Section 5.6 Compliance with WARN, etc. With respect to the
Transferred Employees, Purchaser shall timely give all notices required to be
given under WARN or other similar statutes or regulations of any jurisdiction
relating to any plant closing or mass layoff or as otherwise required by any
such statute.
Section 5.7 Ancillary Agreements. At the Closing, Purchaser shall,
or shall cause a Purchaser Buyer to, and Kodak shall or shall cause a
Subsidiary to, execute and deliver each of the Ancillary Agreements, the Supply
Agreement, the Promotional Agreement, the contract/bills of sale and any other
closing documents necessary to effect the Closing.
Section 5.8 Real Estate Leases, Subleases and License Agreements;
Other Real Estate Matters.
(a) At the Closing, Purchaser shall, and shall cause the relevant
Purchaser Buyers, and Kodak shall, and shall cause the relevant Subsidiaries,
to execute and deliver (i) one or more assignment agreements under which Kodak
or one of the Subsidiaries shall assign the
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Assigned Leases to Purchaser or one of its Affiliates, (ii) one or more
sublease or license agreements under which Kodak or one of the Subsidiaries
shall sublet or license the real property listed on Schedule 1.1(b) to
Purchaser or one of its Affiliates, (iii) one or more lease or license
agreements under which Kodak or one of the Subsidiaries shall lease or license
the Owned Real Property to Purchaser or one of its Affiliates and (iv) one or
more sublease or license agreements under which Purchaser or one of its
Affiliates shall sublet or license the space identified in Part II of Exhibit
1.1(a) to Kodak or one of the Subsidiaries. Each of the lease, sublease and
license agreements referenced in clauses (ii), (iii) and (iv) of this Section
5.8(a) shall provide, in each instance, for the market rates and other terms
set forth in Exhibit 1.1(a) and on such other terms as are mutually agreeable.
(b) Kodak shall pay all costs incurred in connection with the
acquisition of the completed Consent Certificates and the assignment of the
Assigned Leases or Subleases to be assigned, including, but not limited to, all
attorney's fees, transfer fees and other charges incurred in connection
therewith.
(c) Kodak shall use its reasonable best efforts to obtain prior to
the Closing from each lessor of real property that is the subject of an
Assigned Lease pursuant to which Kodak leases greater than 3000 square feet of
building space a statement of the rent and other occupancy charges required to
be paid under the terms of the Assigned Lease for such building space.
Section 5.9 EKCC Agreements. For the period beginning on the date
hereof and ending as of the Closing, Purchaser and Kodak agree to use their
reasonable best efforts to negotiate and conclude an agreement or agreements
with General Electric Capital
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Corporation ("GECC") furthering the economic interests of both Purchaser and
Kodak. During such time, Purchaser shall provide such assistance as Kodak
reasonably requests in order to effect such an agreement and, except to the
extent that such an agreement is concluded, for a period of 40 months following
the date hereof, Purchaser shall not take any action that would be reasonably
likely to interfere with Kodak's ability to successfully negotiate and conclude
an agreement with GECC with respect to the resolution of Kodak's continuing
obligations under the EKCC Agreements, which prohibition shall preclude
Purchaser's participation in any agreement, arrangement or plan with GECC or
any of its Affiliates relating to the provision by GECC or any such Affiliate
of financing, including any form of rental, lease or installed purchase
financing, with respect to any products to be purchased from Kodak.
Section 5.10 Conduct of Environmental Proceedings.
(a) Kodak shall cooperate with Purchaser and supply to Purchaser
such historical and operational information with respect to the Kodak Leased
Property as requested by Purchaser, any notices, permits or other written
communications pertaining to possible environmental issues, including any
studies or reports prepared by or furnished to Kodak, and shall make available
to Purchaser Persons with knowledge of such matters. Purchaser agrees that it
shall not disclose the environmental assessments or any of the findings or
results thereof to any Person, and that it will maintain such results in strict
confidence.
(b) Notwithstanding anything to the contrary contained in this
Agreement, with respect to any real property included in Kodak Leased Property
or Owned Real Property, Purchaser (i) shall not conduct or cause to be
conducted any environmental testing or
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sampling whatsoever, including any testing or sampling of the soil, surface or
subsurface waters and air quality at, in, on or beneath any real property
included in Kodak Leased Property or Owned Real Property without Kodak's prior
written consent, which consent shall not be unreasonably withheld, and, to the
extent Kodak consents to any environmental testing or sampling, shall allow
Kodak to fully participate in any such testing or sampling and to obtain
promptly any information relating thereto, (ii) shall promptly, taking into
account the circumstances, notify Kodak in writing of any communication to
Purchaser from any third party concerning any matter for which Kodak may be
liable hereunder arising under or relating to Environmental Laws, (iii) shall
not respond to or communicate with any third party concerning any matter for
which Kodak may be liable hereunder arising under or relating to Environmental
Laws without Kodak's prior written consent, which consent shall not be
unreasonably withheld, and, if so consented to, shall permit Kodak to
participate in and control any such communication and (iv) shall afford Kodak
the opportunity and right to control any communication, action, suit,
investigation or proceeding concerning any matter for which Kodak may be liable
hereunder relating to or arising under any Environmental Law, unless Purchaser
provides to Kodak a written undertaking acceptable to Kodak providing that any
such action, suit, investigation or proceeding arising from or relating thereto
and any Losses arising therefrom or from any such other action, suit,
investigation or proceeding shall be the sole responsibility of Purchaser;
provided, that Kodak shall not without Purchaser's prior written consent, which
consent shall not be unreasonably withheld, enter into any settlement with
respect to such matters if such settlement would, pursuant to this Section
5.10, require Purchaser to pay any amounts thereunder.
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Section 5.11 Insurance Proceeds. Kodak shall, or shall cause the
Subsidiaries to, assign, to the extent assignable, to Purchaser any proceeds of
Kodak's or any Subsidiary's third party insurance policies to the extent paid
or payable with respect to events or occurrences prior to the Closing that have
reduced the value of a Transferred Asset and such reduction in value is not
reflected on the Closing Date Balance Sheet. Kodak agrees to use its
reasonable efforts to obtain any necessary consents or approvals of any
insurance company or other third party relating to any such assignment. If
such proceeds are not assignable, Kodak agrees to pay any such proceeds
received by it or any Subsidiary to Purchaser promptly upon the receipt thereof.
Section 5.12 Independent Service Providers. Purchaser agrees to (i)
be bound, immediately following the Closing and for such period as a subject
restraining order or injunction is in force, by any restraining order or
injunction to which Kodak is subject immediately prior to the Closing relating
to the selling of spare parts, to Independent Service Providers or others
(collectively, the "Injunction"), (ii) cooperate with Kodak to assist Kodak in
satisfying its liability relating to Kodak's failure to sell spare parts
relating to office imaging equipment to Independent Service Providers or
customers of equipment manufactured by the Business by means other than the
payment of money, (iii) use reasonable efforts to assist Kodak with its appeal
of the Injunction and the conduct of any other litigation relating to Kodak's
sale or other disposition of spare parts Related to the Business, including
maintaining records, making available Transferred Employees and assisting in
discovery and in the defense thereof and (iv) if requested by Kodak, use
reasonable efforts to assist Kodak in obtaining its release from the
Injunction, including filing
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motions for such release with the applicable court. Kodak shall reimburse
Purchaser for 50% of all costs Purchaser incurs in performing its obligations
under this Section 5.12, including reimbursement for time spent on such matters
by Purchaser's employees, attorneys and advisors.
Section 5.13 Non-Solicitation.
(a) Kodak agrees that it will not directly or indirectly for the
period commencing from the date hereof and expiring on the second anniversary
of the Closing Date (i) induce, encourage or solicit any (A) Applicable
Employee or Full-Time Equivalent Employee to reject Purchaser's offer of
employment, (B) Transferred Employee to leave such employment or (C)
Transferred Employee to accept any other position or employment or (ii) assist
any other entity in hiring any Transferred Employee.
(b) Purchaser agrees that, other than with respect to the
Applicable Employees and Full-Time Equivalent Employees, for a period
commencing on the date hereof and expiring on the second anniversary of the
Closing Date, it will not directly or indirectly (i) induce, encourage or
solicit any employee of Kodak or its Subsidiaries to leave such employment or
to accept any other position or employment with the Purchaser or (ii) assist
any Purchaser Buyer in hiring such employee.
Section 5.14 Further Assurances. From time to time after the Closing
Date, Kodak shall, and shall cause its Subsidiaries to, promptly execute,
acknowledge and deliver any other assurances or documents reasonably requested
by Purchaser and necessary for Purchaser to satisfy its obligations hereunder
or to obtain the benefits of the Transaction at no additional cost to Purchaser
or any Purchaser Buyer.
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Section 5.15 No Shop.
(a) Until the earlier of the termination of this Agreement and the
Closing, Kodak and each of the Subsidiaries will not and shall cause their
respective officers, directors, employees, agents and representatives not to,
directly or indirectly, in any way initiate or solicit any inquiries or
proposals or enter into or conduct any discussions, negotiations,
understandings, arrangements or agreements relating to the direct or indirect
disposition of any of the Transferred Assets to any Person other than Purchaser
or its Affiliates or provide any information to any Person in connection with
any inquiry or proposal relating to a transaction involving all or
substantially all the Transferred Assets. Kodak shall, immediately upon the
receipt of a solicited or unsolicited inquiry, proposal or offer for such a
transaction, provide Purchaser with notice thereof, which notice may, in
Kodak's sole discretion, include the identity of the prospective purchaser or
soliciting party.
(b) The parties acknowledge that there may be no adequate remedy
at law for a breach of Section 5.15(a) and that money damages may not be an
appropriate remedy for breach of such Section. Therefore, the parties agree
that Purchaser shall have the right to injunctive relief and specific
performance of Section 5.15(a) in the event of any breach of such Section in
addition to any rights it may have for damages, which shall include out of
pocket expenses, loss of business opportunities and any other damages, direct
and indirect, consequential, punitive or otherwise. The remedies set forth in
this Section 5.15(b) are cumulative and shall in no way limit any other remedy
any party hereto has at law, in equity or pursuant hereto.
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Section 5.16 Licensed Intellectual Property. Notwithstanding
anything to the contrary contained herein or in any Ancillary Agreement, Kodak
shall have the sole and exclusive right to prosecute, defend, settle or
otherwise control any proceeding, claim or action relating to the Kodak
Licensed Intellectual Property, except to the extent such claim is exclusively
one between the parties hereto and their Subsidiaries or Affiliates, and Kodak
shall indemnify, defend and hold harmless the Purchaser Indemnified Parties
from and against any Losses imposed on the Purchaser Indemnified Parties
directly or indirectly relating to or arising from any proceeding, claim or
action relating to the Kodak Licensed Intellectual Property, except to the
extent that any such Losses are caused by or result from any activity, action
or failure to take action by any Purchaser Indemnified Party or from any
activity, action or failure to take any action by any Kodak Indemnified Party
if such action or inaction is taken at and in accordance with the direction of
a Purchaser Indemnified Party.
Section 5.17 Proxy Statement. (a) Purchaser shall cause the prompt
preparation of a proxy statement and a circular to be provided by Purchaser
under U.S. law, the rules of the London Stock Exchange ("LSE") and U.K. law,
respectively, to its shareholders for use in connection with the special
meeting of its shareholders called to approve or reject the Transaction (the
"Special Meeting"). As promptly as practicable, Purchaser shall (i) file such
proxy statement in preliminary form with the SEC, and Purchaser shall use its
best efforts to obtain and respond to any comments thereon of the SEC or its
staff (such proxy statement, in its definitive form, together with any and all
amendments and supplements thereto and all information incorporated by
reference therein being hereafter referred to as the "Proxy Statement") and
(ii) to the extent required by the rules of the LSE, submit such
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circular to the LSE for approval in accordance with the LSE's Listing Rules
(the "Listing Rules") (such circular, in its definitive form, together with any
and all amendments and supplements thereto being hereafter referred to as the
"Circular"). In connection with the Special Meeting, Purchaser shall (i) cause
the Proxy Statement to be mailed to the shareholders of the Purchaser that the
Purchaser is required to send the Proxy Statement to under U.S. Law as soon as
practicable in accordance with applicable federal and state Law and (ii) cause
the Circular to be mailed to the shareholders of the Purchaser that the
Purchaser is required to send the Circular to under the Listing Rules.
Purchaser shall notify Kodak at least 24 hours prior to the mailing of the
Proxy Statement or the Circular to Purchaser's shareholders.
(b) Purchaser shall promptly advise Kodak in writing if at any
time prior to the Closing Date it shall obtain knowledge of any facts that
might make it necessary or appropriate to amend or supplement the Proxy
Statement or the Circular in order to make the statements contained or
incorporated by reference in the Proxy Statement or the Circular not misleading
or to comply with applicable law or the rules of any stock exchange. Kodak
shall promptly advise Purchaser in writing if any time prior to the Closing
Date it shall obtain knowledge of any facts that might make it necessary or
appropriate to amend or supplement the Proxy Statement or the Circular in order
to make the information contained therein concerning Kodak or any Subsidiary
not misleading. Purchaser shall promptly transmit any amendment or supplement
to the Proxy Statement or the Circular, as the case may be, as promptly as
practicable to Purchaser's shareholders and, in the case of the Proxy
Statement, the SEC and, in the case of the Circular, the LSE.
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(c) Kodak agrees to promptly provide such information concerning
its business and affairs as, in the reasonable judgment of Kodak or its
counsel, may be required or appropriate for inclusion in the Proxy Statement or
the Circular, or in any amendments or supplements to the Proxy Statement or
Circular, and to cause its counsel to cooperate with Purchaser's counsel in the
preparation of the Proxy Statement and the Circular. Purchaser shall
incorporate any information relating to Kodak's business and affairs into the
Proxy Statement or Circular exactly in the form and as expressed by Kodak,
unless Kodak consents to another form or expression.
(d) Purchaser shall afford Kodak and its counsel a reasonable
opportunity to comment on (i) the proxy statement in preliminary form prior to
its being filed with the SEC, (ii) any responses to any comments from the SEC
with respect to such proxy statement in preliminary form, (iii) the Proxy
Statement prior to its being filed with the SEC, (iv) the circular in
preliminary form prior to its being filed with the LSE and (v) any responses to
any comments from the LSE with respect to such circular or preliminary form and
(vi) the Circular prior to its being filed with the LSE.
Section 5.18 Automobile Lease Agreements. Purchaser agrees to use
its reasonable best efforts to negotiate and conclude agreements effective as
of the Closing with each of the Persons (other than Kodak) who are parties to
vehicle leases for vehicles Related to the Business, pursuant to which
Purchaser shall relieve Kodak of its obligations under each vehicle lease, so
that Kodak's obligations under such leases upon the execution of such
agreements would not be material to the Business assuming Kodak were to retain
the Business; provided, that to the extent that Purchaser is unable to conclude
such agreements
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and Kodak, in its sole discretion, waives its rights under Section 6.3(d),
Purchaser shall indemnify and hold the Kodak Indemnified Parties harmless for
all liabilities and Losses arising or resulting therefrom.
Section 5.19 Supply Agreement. Kodak hereby agrees to the assignment
of the existing Master Agreement to a Purchaser Buyer, if desired by Purchaser.
It is understood that Purchaser and Kodak shall consider revisions to the
amendments contemplated by the form of Supply Agreement, including the
segregation from such form of a separate agreement between Kodak and a separate
Purchaser Buyer with respect to the agreements relating to research and
development and a separate form of agreement that would be entered into,
severally, between Kodak and a Purchaser Buyer domiciled in each jurisdiction
in which products under the Supply Agreement would be resold; provided, that
the parties contemplate that such separate agreements would be utilized if
requested by Purchaser and only if such utilization would not impair the
substantive rights, or negatively affect the economic benefits to, Kodak under
the Supply Agreement or cause or create any administrative burdens for Kodak
that would not have been imposed under the form of Supply Agreement that are
not ameliorated by Purchaser.
Prior to the Closing or, if required by the SEC or LSE, prior to the
mailing of the Proxy Statement and Circular, Purchaser and Kodak shall agree
upon all necessary exhibits and attachments to the Supply Agreement.
Section 5.20 Intellectual Property License. Subject to the
provisions of the Supply Agreement, Purchaser shall or shall cause the
Purchaser Buyers to grant Kodak, effective at the Closing, a worldwide,
royalty-free, nonexclusive personal license to use any of the
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Transferred Intellectual Property to make, have made, use, sell or otherwise
dispose of products other than black and white, accent color
electrophotographic systems (digital and analog) except as contemplated by the
Supply Agreement; provided, that Kodak takes adequate measures to protect any
trade secrets included in such Transferred Intellectual Property.
Section 5.21 Audited Balance Sheet. If necessary for purposes of the
Proxy Statement or the Circular, Kodak shall deliver to Purchaser as soon as
practicable audited financial statements of the Business as at December 31,
1994 and December 31, 1995 and for the fiscal years then ended, together with
an unqualified report thereon by Kodak's independent certified public
accountants.
Section 5.22 Staged Closings. Kodak and the Subsidiaries, on the one
hand, and Purchaser and the Purchaser Buyers, on the other hand, shall take all
steps necessary to cause the closings with respect to every New Country to
conclude as soon as practicable after the Closing.
Section 5.23 Supplies and Services. Following the Closing, if the
Transferred Assets include assets historically used to produce goods used by
Kodak or any Subsidiary in any business other than the Business, Purchaser
shall supply Kodak and the Subsidiaries with such goods as Kodak and such
Subsidiaries reasonably request from time to time on such terms as set forth in
the Ancillary Agreements. For at least three years from the Closing Date,
Kodak agrees that Purchaser shall be (i) the exclusive provider of Kodak's and
the Subsidiaries' needs for electrophotographic systems (digital and analog)
for office imaging and reprographics and related parts, service and supplies
sold, serviced or distributed by
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Purchaser and (ii) a preferred provider of Kodak's and the Subsidiaries' needs
for automated office equipment other than electrophotographic systems (digital
and analog) for office imaging and reprographics and related parts, service and
supplies sold, serviced or distributed by Purchaser; it being understood that
the specific terms and conditions of such agreements shall be mutually agreed
to prior to the Closing.
Section 5.24 Guarantee. Purchaser fully and unconditionally
guarantees the due and punctual performance and observance of each and every
agreement, covenant and obligation of each Purchaser Buyer under the Supply
Agreement, the Promotional Agreement and the Ancillary Agreements to which such
Purchaser Buyer is a party, irrespective of any circumstance, including any
statute of limitations, that might otherwise constitute a defense available to,
a Purchaser Buyer as obligor or Purchaser as guarantor, or a discharge of, any
such agreement, covenant or obligation.
Section 5.25 Trade Names. No later than 60 days prior to the
Closing, Purchaser shall provide Kodak with a name for each of the Transferred
Subsidiaries, each of which shall not include the term "Kodak". Kodak shall
thereafter, but in all cases prior to the Closing, take all necessary steps to
change the names of each of the Transferred Subsidiaries to the respective
names provided by Purchaser pursuant to this Section 5.25. Purchaser and Kodak
shall share equally all fees, expenses, Taxes and Kodak's out-of-pocket
expenses arising out of, or resulting from, any change in a name of a
Transferred Subsidiary effected pursuant to this Section 5.25.
Section 5.26 Corporate Trademarks. (a) Except as set forth in a
separate agreement, or as set forth in this Section Purchaser and the Purchaser
Buyers shall not have
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any rights hereunder to use the following names and symbols: KODAK, the Kodak
Corporate Symbol, the Kodak Service logo and the trade names of Kodak or its
subsidiaries ("Corporate Trademarks").
(b) Purchaser and the Purchaser Buyers may use in connection with
their operation of the Business (i) for up to three months, inventory of
preprinted business forms bearing the Corporate Trademarks that existed on the
Closing Date, (ii) for up to three months, signs bearing the Corporate
Trademarks and (iii) for up to six months, inventory of sales and promotional
material bearing the Corporate Trademarks that existed on the Closing Date, or
reprints thereof; provided that on any materials that are the subject of (i)
and (iii), Purchaser and the Purchaser Buyers include a notice that specifies
who now markets the Products or to whom payment should be made, and provides a
phone number and address for questions; and provided, further, that in the case
of each of (i), (ii) and (iii), Purchaser and the Purchaser Buyers shall use
their best efforts to replace existing materials bearing the Corporate
Trademarks with materials bearing their own corporate identity as soon as
practicable after the Closing. If any business forms require a signature,
Purchaser and Purchaser Buyers shall sign such forms in their own name, and not
as Eastman Kodak Company or the Subsidiaries.
(c) Kodak warrants that the Corporate Trademarks do not violate
the rights of any third party and that it has full power to grant the rights as
provided herein. Kodak agrees to defend and indemnify Purchaser and the
Purchaser Buyers against any claims (and to pay any damages and attorneys' fees
awarded) based on allegations that, if true, would constitute a breach of the
foregoing express warranty. Purchaser and Purchaser Buyers agree to notify
Kodak of any such claim and tender to Kodak the defense of such claim.
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Section 5.27 Payment. In the event that the Closing does not occur
as a result of a breach by Purchaser of this Agreement, Purchaser shall pay
Kodak an amount equal to $20 million, and in the event that the Closing does
not occur as a result of occurrences or events beyond the control of either
Purchaser or Kodak, Purchaser shall pay Kodak an amount equal to $10 million.
ARTICLE VI
CONDITIONS TO CLOSING
Section 6.1 Conditions to the Obligations of Purchaser and Kodak.
The obligations of the parties hereto to effect the Closing are subject to the
satisfaction (or waiver) prior to the Closing of the following conditions:
(a) HSR and Other Laws. All filings under U.S. Antitrust Laws, EU
competition Laws and other similar Laws which are necessary or appropriate in
any jurisdiction with respect to the Transaction shall have been made and any
required waiting period under such Laws applicable to the Transaction shall
have expired or been earlier terminated and any Government Antitrust Entity or
other governmental office that has power under or authority to enforce such
Laws shall have approved, cleared or decided not to intervene in respect of the
Transaction.
(b) No Injunctions. No court or governmental authority of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, or non-appealable judgment, decree,
injunction or other order that is in effect on the Closing Date and prohibits
the consummation of the Transaction.
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(c) Consents and Approvals. All Required Approvals shall have been
obtained.
(d) Shareholder Approval. The shareholders of Purchaser shall
have approved the Transaction.
Section 6.2 Conditions to the Obligations of Purchaser. The
obligation of Purchaser to effect the Closing is subject to the satisfaction
(or waiver) prior to the Closing of the following conditions:
(a) Representations and Warranties. The representations and
warranties of Kodak contained herein, (i) with respect to any representation or
warranty qualified by Material Adverse Effect, shall have been true and correct
in all respects when made and shall be true and correct in all respects as of
the Closing, as if made as of the Closing (except that representations and
warranties that are made as of a specific date need be true in all respects
only as of such date) and (ii) with respect to all other representations and
warranties, shall have been true and correct in all respects when made and
shall be true and correct in all respects as of the Closing, as if made as of
the Closing without regard to all materiality qualifiers (except that
representations and warranties that are made as of a specific date need be true
in all respects only as of such date and except that this clause (ii) shall be
deemed satisfied so long as the failure of all such representations and
warranties to be true and correct does not have a Material Adverse Effect), and
Purchaser shall have received a certificate to such effect dated the Closing
Date and executed by a duly authorized officer of Kodak.
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(b) Covenants. The covenants and agreements of Kodak to be
performed on or prior to the Closing shall have been duly performed in all
material respects, and Purchaser shall have received certificates to such
effect dated the Closing Date and executed by a duly authorized officer of
Kodak.
(c) Ancillary Agreements. Kodak and the Subsidiaries shall have
executed and delivered the Ancillary Agreements to which they are a party.
(d) OEM Agreements. Unless Kodak and Purchaser have entered into
the arrangements set forth in Section 2.10(b), Kodak shall have received
consents to the assignment of all rights under the Kodak OEM Agreements, as
modified, or the OEM Modification.
(e) Supply Agreement. Kodak shall have executed and delivered the
Supply Agreement.
(f) Promotional Agreement. Kodak shall have executed and
delivered the Promotional Agreement.
Section 6.3 Conditions to the Obligations of Kodak. The obligation
of Kodak to effect the Closing is subject to the satisfaction (or waiver) prior
to the Closing of the following conditions:
(a) Representations and Warranties. The representations and
warranties of Purchaser contained herein, taken together, shall have been true
and correct in all material respects when made and shall be true and correct in
all material respects as of the Closing, as if made as of the Closing (except
representations and warranties that are made as of a
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specific date need be true only as of such date) and Kodak shall have received
a certificate to such effect dated the Closing Date and executed by a duly
authorized officer of Purchaser.
(b) Covenants. The covenants and agreements of Purchaser to be
performed on or prior to the Closing shall have been duly performed in all
material respects, and Kodak shall have received a certificate to such effect
dated the Closing Date and executed by a duly authorized officer of Purchaser.
(c) Ancillary Agreements. Purchaser shall have executed and
delivered the Ancillary Agreements.
(d) New Agreements. Purchaser shall have executed an agreement
with each Person other than Kodak to vehicle leases for vehicles Related to the
Business, pursuant to which Purchaser shall be obligated with respect to each
vehicle lease for such vehicles, so that Kodak's obligations under such leases
upon execution of such agreements would not be material to the Business
assuming Kodak were to retain the Business.
(e) Supply Agreement. One or more Purchaser Buyers shall have
executed and delivered the Supply Agreement.
(f) Promotional Agreement. A Purchaser Buyer shall have executed
and delivered the Promotional Agreement.
ARTICLE VII
SURVIVAL; INDEMNIFICATION; CERTAIN REMEDIES
Section 7.1 Survival. The representations and warranties of Kodak
and Purchaser shall survive the Closing for the period set forth in this
Section 7.1. All representations and warranties contained in this Agreement
and all claims with respect thereto shall terminate upon the expiration of 18
months after the Closing Date, except that the representations and
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warranties contained in Sections 3.1, 3.2, 3.3, 3.6, 3.20, 3.24, 4.1, 4.2, 4.5
and 4.6 shall survive forever, the representations and warranties contained in
Section 3.12 shall terminate upon the Closing and the representations and
warranties contained in Sections 3.8 and 3.9 and the third sentence of Section
3.10(b) shall survive for the period of the applicable statute of limitations;
provided, however, that in the event notice of any claim for indemnification
under Section 7.2(a) or Section 7.3(a) hereof shall have been given (within the
meaning of Section 9.1) within the applicable survival period, the
representations and warranties that are the subject of such indemnification
claim shall survive with respect to such claim until such time as such claim is
finally resolved.
Section 7.2 Indemnification by Purchaser. (a) Purchaser hereby
agrees that it shall indemnify, defend and hold harmless Kodak, its Affiliates,
and their respective directors, officers, shareholders, partners, attorneys,
accountants, agents and employees and their heirs, successors and assigns (the
"Kodak Indemnified Parties") from, against and in respect of any damages,
claims, losses, charges, actions, suits, proceedings, deficiencies, taxes,
interest, penalties, and reasonable costs and expenses (including reasonable
attorneys' fees, removal costs, remediation costs, closure costs, fines,
penalties and expenses of investigation and ongoing monitoring) (collectively,
the "Losses") imposed on, sustained, incurred or suffered by or asserted
against any of the Kodak Indemnified Parties, directly or indirectly relating
to, arising out of or resulting from, (i) subject to Section 7.2(b) any breach
of any representation or warranty made by Purchaser contained in this Agreement
for the period such representation or warranty survives, disregarding all
qualifications and exceptions contained in such representation or warranty
relating to materiality or Material Adverse Effect, (ii) any
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of the Assumed Liabilities (including liabilities relating to (A)
investigation, removal, remediation, containment, cleanup or abatement of the
presence, release or threatened release of any Hazardous Substance from any
Leased Real Property or Owned Real Property, whether on-site or off-site, to
the extent related to any activity, action or failure to take action by any of
the Purchaser Indemnified Parties or their respective agents, representatives
and invitees following the Closing with respect to the Owned Real Property or
Leased Real Property other than any activity, action or failure to take action
required to be taken under any lease of the Owned Real Property or Sublease
with respect to Leased Real Property by a Kodak Indemnified Party or any other
Person not described above and (B) any claim by any third party, including tort
suits for personal or bodily injury, property damage or injunctive relief),
(iii) the breach of any covenant or agreement of Purchaser contained in this
Agreement and (iv) any and all Taxes and Transfer Taxes for which Purchaser is
responsible in accordance with Section 5.4.
(b) Purchaser shall not be liable to the Kodak Indemnified Parties
for any Losses with respect to the matters contained in Section 7.2(a)(i)
unless the Losses therefrom exceed an aggregate amount equal to $250,000, and
then only for Losses in excess of that amount and up to an aggregate amount
equal to 50% of the Purchase Price; it being understood that each individual
occurrence, event, circumstance, act or omission that alone causes a
representation or warranty to be untrue shall not be the subject of a claim
hereunder unless the existence or fact of such individual occurrence, event,
circumstance, act or omission involves a Loss to the Kodak Indemnified Parties
of at least $10,000.
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Section 7.3 Indemnification by Kodak.
(a) Kodak hereby agrees that it shall indemnify, defend and hold
harmless Purchaser, its Affiliates, and their respective directors, officers,
shareholders, partners, attorneys, accountants, agents and employees (other
than the Transferred Employees) and their heirs, successors and assigns (the
"Purchaser Indemnified Parties" collectively with the Kodak Indemnified
Parties, the "Indemnified Parties") from, against and in respect of any Losses
imposed on, sustained, incurred or suffered by or asserted against any of the
Purchaser Indemnified Parties, directly or indirectly relating to or arising
out of (i) subject to Section 7.3(b), any breach of any representation or
warranty made by Kodak contained in this Agreement for the period such
representation or warranty survives, disregarding all qualifications and
exceptions contained in such representation or warranty relating to materiality
or Material Adverse Effect, except for those that (A) are contained in Sections
3.7, 3.15(a), 3.15(c) with respect to the full force and effect of the Other
Contracts, 3.16, 3.18, 3.22 and 3.26 or (B) are used to modify an affirmative
obligation to schedule matters in circumstances where the schedule is necessary
to give the sentence its intended meaning, (ii) any breach of any covenant or
agreement of Kodak contained in this Agreement, (iii) any of the Excluded
Liabilities, (iv) any and all Taxes and Transfer Taxes for which Kodak is
responsible in accordance with Section 5.4, (v) any and all obligations with
respect to the Employees not expressly assumed by Purchaser pursuant to
Sections 2.3, 5.4 and 5.5 of this Agreement, and (vi) any liabilities relating
to the violation of any Environmental Law or the investigation, removal,
remediation, containment, cleanup or abatement of the presence, release or
threatened release of any Hazardous Substance,
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whether on-site or off-site, to the extent, and only to the extent, (A) related
to any activity, action or failure to take action by any Person prior to the
Closing with respect to any Owned Real Property or Leased Real Property, (B)
any condition existing on the Closing Date at any Owned Real Property or Leased
Real Property or (C) related to any activity, action or failure to take action
required to be taken under any lease of the Leased Real Property or Sublease
with respect to Leased Real Property by a Kodak Indemnified Party after the
Closing.
(b) Kodak shall not be liable to the Purchaser Indemnified Parties
for any Losses with respect to the matters contained in Section 7.3(a)(i)
unless the Losses therefrom exceed an aggregate amount equal to $20.5 million,
and then only for Losses in excess of that amount and up to an aggregate amount
equal to 50% of the Purchase Price; it being understood that each individual
occurrence, event, circumstance, act or omission that alone causes a
representation or warranty to be untrue shall not be the subject of a claim
hereunder unless the existence or fact of such individual occurrence, event,
circumstance, act or omission involves a Loss to the Purchaser Indemnified
Parties of at least $1 million, and that with respect to Section 3.15(c) no
breach shall be the subject of a claim thereunder unless such breach involves a
Loss to the Purchaser Indemnified Parties of at least $5 million and then only
for any excess over $5 million.
Section 7.4 Indemnification Procedures. With respect to third party
claims, other than those relating to Taxes (which are the subject of Section
5.4) all claims for indemnification by any Indemnified Party hereunder shall be
asserted and resolved as set forth in this Section 7.4. In the event that any
written claim or demand for which an indemnifying party (an "Indemnifying
Party") would be liable to any Indemnified Party
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hereunder is asserted against or sought to be collected from any Indemnified
Party by a third party, such Indemnified Party shall promptly, but in no event
more than 15 days following such Indemnified Party's receipt of such claim or
demand, notify the Indemnifying Party of such claim or demand and the amount or
the estimated amount thereof to the extent then feasible (which estimate shall
not be conclusive of the final amount of such claim and demand) (the "Claim
Notice"); provided, however, that a failure to timely give a Claim Notice shall
affect the rights of an Indemnified Party only to the extent that such failure
has had a prejudicial effect on the defenses or other rights available to the
Indemnifying Party with respect to such claim or demand. The Indemnifying
Party shall have 60 days from the personal delivery or mailing of the Claim
Notice (the "Notice Period") to notify the Indemnified Party as to (a) whether
or not the Indemnifying Party disputes the liability of the Indemnifying Party
to the Indemnified Party hereunder with respect to such claim or demand and (b)
whether or not it desires to defend the Indemnified Party against such claim or
demand. All costs and expenses incurred by the Indemnifying Party in defending
such claim or demand shall be a liability of, and shall be paid by, the
Indemnifying Party; provided, however, that the amount of such costs and
expenses shall be a liability of the Indemnifying Party hereunder subject to
the limitations set forth in Sections 7.2(b) and 7.3(b). Except as hereinafter
provided, in the event that the Indemnifying Party notifies the Indemnified
Party within the Notice Period that it desires to defend the Indemnified Party
against such claim or demand, the Indemnifying Party shall have the right to
defend the Indemnified Party by appropriate proceedings and shall have the sole
power to direct and control such defense. If any Indemnified Party desires to
participate in any such defense it may do so at its sole cost
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and expense. The Indemnified Party shall not settle a claim or demand without
the consent of the Indemnifying Party, which consent shall not be unreasonably
withheld. The Indemnifying Party shall not, without the prior written consent
of the Indemnified Party, settle, compromise or offer to settle or compromise
any such claim or demand on a basis that would result in (i) the imposition of
a consent order, injunction or decree that would restrict the future activity
or conduct or with respect to the matters discussed by the parties of the
Indemnified Party or any subsidiary or affiliate thereof, or (ii) except to the
extent within the basket set forth in Sections 7.2(b) and 7.3(b), any monetary
liability of the Indemnified Party that will not be paid or reimbursed by the
Indemnifying Party. If the Indemnifying Party elects not to defend the
Indemnified Party against such claim or demand, whether by not giving the
Indemnified Party timely notice as provided above or otherwise, then the
portion of any such claim or demand as to which the defense by the Indemnified
Party is unsuccessful (and the reasonable costs and expenses pertaining to the
Indemnified Party's defense, whether or not successful) shall be the liability
of the Indemnifying Party hereunder; subject to the limitations set forth in
Sections 7.2(b) and 7.3(b). The Indemnified Party shall use its reasonable
best efforts in the defense of all claims that it defends. To the extent the
Indemnifying Party shall direct, control or participate in the defense or
settlement of any third party claim or demand, the Indemnified Party shall give
the Indemnifying Party and its counsel access to, during normal business hours,
the relevant business records and other documents, and shall permit them to
consult with the employees and counsel of the Indemnified Party.
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If the Indemnifying Party assumes the defense with respect to any
third party claim, the Indemnified Party shall have the right to participate in
the defense thereof and to employ counsel reasonably acceptable to the
Indemnifying Party, at the Indemnifying Party's expense, separate from the
counsel employed by the Indemnifying Party, if such claim involves potential
conflicts of interest between or substantially different defenses for the
Indemnified Party and the Indemnifying Party; provided, however, that in the
event the claim relates to any Kodak Licensed Intellectual Property, no
Purchaser Indemnified Party shall have any right to participate in, or employ
counsel with respect to, the defense of such claim.
Section 7.5 Characterization of Indemnification Payments. All
payments made by an Indemnifying Party to an Indemnified Party in respect of
any claim pursuant to Section 5.4, 7.2 or 7.3 hereof shall be treated as
adjustments to the Purchase Price for Tax purposes.
Section 7.6 Remedies. Purchaser acknowledges and agrees that any
breach of Section 5.12 would give rise to irreparable harm for which monetary
damages would not be an adequate remedy. Purchaser accordingly agrees that, in
addition, to other remedies, Kodak shall be entitled to enforce the terms of
Section 5.12 by decree of specific performance without the necessity of proving
the inadequacy of monetary damages as a remedy and to obtain injunctive relief
against any breach or threatened breach of Section 5.12. The remedies
expressly provided in this Agreement shall constitute the sole and exclusive
basis for and means of recourse between the parties with respect to the subject
matter hereof and Purchaser and Kodak each expressly waives any and all other
rights or
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causes of action it or its Affiliates may have against the other party or its
Affiliates now or in the future under any Law with respect to the subject
matter hereof.
ARTICLE VIII
TERMINATION
Section 8.1 Termination. This Agreement may be terminated at any
time prior to the Closing:
(a) by mutual agreement of Purchaser and Kodak;
(b) by either Purchaser or Kodak, by giving written notice of such
termination to the other party, if the Closing shall not have occurred on or
prior to February 28, 1997; provided that the terminating party is not in
material breach of its obligations under this Agreement; and provided, further,
that Purchaser may not terminate this Agreement if any of the necessary
consents from any Government Antitrust Entity have not been received, unless
(i) Kodak has breached its obligations under this Agreement and such breach
would reasonably be expected to constitute a Material Adverse Effect or would
materially impair or delay the ability of Kodak to effect the Closing or (ii)
any of the necessary consents from a Government Antitrust Entity in a Listed
Country has not been received by June 30, 1997;
(c) by either Purchaser or Kodak if there shall be in effect any
Law that prohibits the Closing or if the Closing would violate any
non-appealable final order, decree or judgment of any court or governmental
body having competent jurisdiction;
(d) by either party if the Closing shall not have occurred on or
prior to 10 Business Days following the satisfaction of all the conditions to
Closing set forth in Sections 6.1, 6.2 (solely in the case of Purchaser) and
6.3 (solely in the case of Kodak) hereof as a result of any action or inaction
by the other party.
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Section 8.2 Effect of Termination. In the event of the termination
of this Agreement in accordance with Section 8.1, this Agreement shall
thereafter become void and have no effect, and no party hereto shall have any
liability to the other party hereto or their respective Affiliates, directors,
officers or employees, except for the obligations of the parties hereto
contained in this Section 8.2 and in Sections 9.1, 9.4, 9.6, 9.7, 9.8, 9.9,
9.11 and 9.14 hereof (and any related definitional provisions set forth in
Article I), and except that nothing in this Section 8.2 shall relieve any party
from liability for any breach of this Agreement that arose prior to such
termination, for which liability the provisions of Article VII shall remain in
effect in accordance with the provisions and limitations of such Article.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Notices. All notices or other communications under this
Agreement shall be in writing and shall be deemed duly given, effective (i)
three Business Days later, if sent by registered or certified mail, return
receipt requested, postage prepaid, (ii) when sent if sent by telecopier or
fax, provided that the telecopy or fax is promptly confirmed by telephone
confirmation thereof, (iii) when served, if delivered personally to the
intended recipient, and (iv) one Business Day later, if sent by overnight
delivery via a national courier service, and in each case, addressed to the
intended recipient at the address set forth in the preamble hereof. Any party
may change the address to which notices or other communications hereunder are
to be delivered by giving the other party notice in the manner herein set forth.
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To Purchaser:
DANKA BUSINESS SYSTEMS PLC
Masters House
107 Hammersmith Road
London W14 OQH
England
Telephone: 44171-603-1515
Telecopy: 44171-603-8448
Attn: Paul G. Dumond
Company Secretary
With a copy to:
SHUMAKER, LOOP & KENDRICK
Suite 2800 - Barnett Plaza
101 East Kennedy Boulevard
Tampa, Florida 33602-5151
Telephone: (813) 229-7600
Telecopy: (813) 229-1660
Attn: W. Thompson Thorn, III
and to:
CLEARY GOTTLIEB STEEN & HAMILTON
One Liberty Plaza
New York, New York 10006
Telephone: (212) 225-2000
Telecopy: (212) 225-3999
Attn: William A. Groll
To Kodak:
EASTMAN KODAK COMPANY
343 State Street
Rochester, New York 14650
Telephone: (716) 724-4332
Telecopy: (716) 724-9448
Attn: General Counsel
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With a copy to:
SULLIVAN & CROMWELL
125 Broad Street
New York, New York 10004
Telephone: (212) 558-4000
Telecopy: (212) 558-3588
Attn: Alexandra D. Korry
Section 9.2 Amendment; Waiver. Any provision of this Agreement may
be amended or waived if, and only if, such amendment or waiver is in writing
and signed, in the case of an amendment, by Purchaser and Kodak, or in the case
of a waiver, by the party against whom the waiver is to be effective. No
failure or delay by any party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative.
Section 9.3 No Assignment or Benefit to Third Parties. Subject to
the provisions of Section 2.11 and the right of Purchaser to assign any and all
of its rights under this Agreement or any Ancillary Agreement to one or more of
its Affiliates (it being understood that no such assignment or substitution
shall in any way affect the obligations of Purchaser to Kodak and the Kodak
Indemnified Parties hereunder), no party to this Agreement may assign any of
its rights or delegate any of its obligations under this Agreement, by
operation of Law or otherwise, without the prior written consent of the other
party hereto. Nothing in this Agreement, express or implied, is intended to
confer upon any Person other than Purchaser, the Purchaser Buyers, Kodak, the
Indemnified Parties or their respective successors or permitted assigns, any
rights or remedies under or by reason of this Agreement.
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Section 9.4 Entire Agreement. This Agreement (including all
Schedules and Exhibits hereto), the Supply Agreement, the Promotional
Agreement, the Transitional Advisory Agreement and the Ancillary Agreements
contains the entire agreement between the parties hereto with respect to the
subject matter hereof and supersedes all prior agreements and understandings,
oral or written, with respect to such matters, except for the Confidentiality
Agreement, which will remain in full force and effect and this Agreement
controls in the event of a conflict between this Agreement and any
contract/bill of sale between any Purchaser Buyer and Kodak or any of the
Subsidiaries.
Section 9.5 Fulfillment of Obligations. Any obligation of any party
to any other party under this Agreement, the Supply Agreement, or any of the
Ancillary Agreements, which obligation is performed, satisfied or fulfilled by
an Affiliate of such party, shall be deemed to have been performed, satisfied
or fulfilled by such party.
Section 9.6 Public Disclosure. Notwithstanding anything herein to
the contrary, each of the parties to this Agreement hereby agrees with the
other party hereto that, except as may be required to comply with the
requirements of any applicable Law, and the rules and regulations of any stock
exchange upon which the securities of one of the parties is listed, no press
release or similar public announcement or communication shall ever, whether
prior to or subsequent to the Closing, be made or caused to be made concerning
the execution or performance of this Agreement unless specifically approved in
advance by both parties hereto.
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Section 9.7 Return of Information. If for any reason whatsoever the
transactions contemplated by this Agreement are not consummated, Purchaser
shall promptly return to Kodak all Books and Records furnished by Kodak, the
Business or any of their respective agents, employees, or representatives
(including all copies, if any, thereof), and shall not use or disclose the
information contained in such Books and Records for any purpose or make such
information available to any other entity or person.
Section 9.8 Expenses. Except as otherwise expressly provided in this
Agreement, whether or not the transactions contemplated by this Agreement are
consummated, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be borne by the party incurring
such expenses.
Section 9.9 Schedules. The disclosure of any matter in any Schedule
to this Agreement shall be deemed to be a disclosure for all purposes of this
Agreement to which such matter could reasonably be expected to be pertinent,
but shall expressly not be deemed to constitute an admission by Kodak or
Purchaser or to otherwise imply that any such matter is material for the
purposes of this Agreement.
Section 9.10 Bulk Sales. Kodak and Purchaser agree to waive
compliance with Article 6 of the Uniform Commercial Code as adopted in each of
the jurisdictions in which any of the Transferred Assets are located to the
extent, if any, that such Article is applicable to the transactions
contemplated hereby.
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SECTION 9.11 GOVERNING LAW; SUBMISSION TO JURISDICTION; SELECTION OF
FORUM. THE AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH PARTY HERETO AGREES
THAT IT SHALL BRING ANY ACTION OR PROCEEDING IN RESPECT OF ANY CLAIM ARISING
OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTAINED IN OR
CONTEMPLATED BY THIS AGREEMENT AND THE ANCILLARY AGREEMENTS, EXCLUSIVELY IN THE
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK OR THE
SUPREME COURT OF THE STATE OF NEW YORK FOR NEW YORK COUNTY (THE "CHOSEN
COURTS") AND SOLELY IN CONNECTION WITH CLAIMS ARISING UNDER THIS AGREEMENT OR
THE TRANSACTIONS CONTAINED IN OR CONTEMPLATED BY THIS AGREEMENT, THE SUPPLY
AGREEMENT AND THE ANCILLARY AGREEMENTS (i) IRREVOCABLY SUBMITS TO THE EXCLUSIVE
JURISDICTION OF THE CHOSEN COURTS, (ii) WAIVES ANY OBJECTION TO LAYING VENUE IN
ANY SUCH ACTION OR PROCEEDING IN THE CHOSEN COURTS, (iii) WAIVES ANY OBJECTION
THAT THE CHOSEN COURTS ARE AN INCONVENIENT FORUM OR DO NOT HAVE JURISDICTION
OVER ANY PARTY HERETO AND (iv) AGREES THAT SERVICE OF PROCESS UPON SUCH PARTY
IN ANY SUCH ACTION OR PROCEEDING SHALL BE EFFECTIVE IF NOTICE IS GIVEN IN
ACCORDANCE WITH SECTION 9.1 OF THIS AGREEMENT. KODAK AND PURCHASER IRREVOCABLY
DESIGNATE C.T. CORPORATION AS THEIR AGENT AND ATTORNEY-IN-FACT FOR THE
ACCEPTANCE OF SERVICE OF PROCESS AND MAKING AN APPEARANCE ON THEIR BEHALF IN
ANY SUCH CLAIM OR PROCEEDING AND FOR THE TAKING OF ALL SUCH ACTS AS MAY BE
NECESSARY OR APPROPRIATE IN ORDER TO CONFER JURISDICTION OVER THEM BEFORE THE
CHOSEN COURTS AND KODAK AND PURCHASER STIPULATE THAT SUCH CONSENT AND
APPOINTMENT IS IRREVOCABLE AND COUPLED WITH AN INTEREST.
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Section 9.12 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, and all of which
shall constitute one and the same Agreement.
Section 9.13 Headings. The heading references herein and the table
of contents hereto are for convenience purposes only, do not constitute a part
of this Agreement and shall not be deemed to limit or affect any of the
provisions hereof.
Section 9.14 Confidentiality.
(a) Kodak shall treat as confidential and shall safeguard any and
all information, knowledge and data included in the Transferred Assets or the
Kodak Leased Property, in each case by using the same degree of care, but no
less than a reasonable standard of care, to prevent the unauthorized use,
dissemination or disclosure of such information, knowledge and data as Kodak
used with respect thereto prior to the execution of this Agreement; provided,
however, that nothing in this Section 9.14(a) shall prevent any disclosure with
respect to the Kodak Leased Property to any Person other than a Person engaged
in the marketing, sales and distribution of electrophotographic systems
(digital and analog) and services for office imaging and reprographics.
(b) Purchaser shall treat as confidential and shall safeguard any
and all information, knowledge or data included in (i) the Kodak Leased
Property, and (ii) any information relating to the business of Kodak and the
Subsidiaries other than the Business
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that becomes known to Purchaser as a result of the transactions contemplated by
this Agreement, the Supply Agreement, the Transitional Advisory Agreement, the
Promotional Agreement and the Ancillary Agreements, except as otherwise agreed
to by Kodak in writing; provided, however, that nothing in this Section 9.14(b)
shall prevent the disclosure of any such information, knowledge or data to any
directors, officers or employees of Purchaser to whom such disclosure is
necessary or desirable in the conduct of the Business if such Persons are
informed by Purchaser of the confidential nature of such information and are
directed by Purchaser to comply with the provisions of this Section 9.14(b).
Section 9.15 Severability. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof. If
any provision of this Agreement, or the
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application thereof to any person or entity or any circumstance, is invalid or
unenforceable, (a) a suitable and equitable provision shall be substituted
therefor in order to carry out, so far as may be valid and enforceable, the
intent and purpose of such invalid or unenforceable provision and (b) the
remainder of this Agreement and the application of such provision to other
persons, entities or circumstances shall not be affected by such invalidity or
unenforceability, nor shall such invalidity or unenforceability affect the
validity or enforceability of such provision, or the application thereof, in
any other jurisdiction.
IN WITNESS WHEREOF, the parties have executed or caused this Agreement
to be executed as of the date first written above.
EASTMAN KODAK COMPANY
By: /s/ Wilbur J. Prezzano
------------------------------------
Name: Wilbur J. Prezzano
Title: Vice Chairman
DANKA BUSINESS SYSTEMS PLC
By: /s/ Mark A. Vaughan-Lee
------------------------------------
Name: Mark A. Vaughan-Lee
Title: Chairman
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AMENDED AND RESTATED
SUPPLY AGREEMENT
by and between
EASTMAN KODAK COMPANY
and
__________________________
Dated as of __________, 1996
<PAGE> 128
This Amended and Restated Supply Agreement, dated as of
__________, 1996, by and between Eastman Kodak Company, a New Jersey
corporation ("Kodak"), and [NAME OF PURCHASER], a company incorporated under
the laws of _______________ ("Purchaser").
W I T N E S S E T H:
WHEREAS, Kodak and Danka Business Systems PLC, a public
limited company incorporated under the laws of England and Wales ("Danka"),
have entered into an Asset Purchase Agreement, dated as of September 6, 1996
(the "Purchase Agreement"), pursuant to which Danka has agreed to purchase,
license, lease and assume from Kodak, and Kodak has agreed to sell, transfer,
assign, license and lease certain of the assets and liabilities of Kodak's
Office Imaging business unit ("OI"), the Customer Equipment Services business
unit ("CES") and Kodak's wholly owned subsidiaries comprising Kodak Imaging
Services, Inc. ("KIS"); and
WHEREAS, immediately following the sale contemplated by the
Purchase Agreement, Kodak shall continue to be engaged in the research,
development, manufacture and remanufacture of electrophotographic systems
(digital and analog) for office imaging and reprographics and related parts and
supplies and in the sale of certain of such electrophotographic systems and
such related parts, and supplies through its office imaging business unit
(collectively, "Kodak's Manufacturing Business"); and
WHEREAS, Kodak and Systems Resources, Ltd. ("SRL"), a limited
liability company and an indirect wholly owned subsidiary of Danka, have
entered into a Master Agreement, dated as of September 5, 1995 (the "Master
Agreement") relating to the sale, lease, rent, license and service of certain
OI products;
WHEREAS, it is a condition to Danka's obligation to consummate
the transactions contemplated by the Purchase Agreement that the Master
Agreement be amended and restated as set forth herein; and
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements contained herein and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
<PAGE> 129
ARTICLE I
DEFINITIONS
Section 1.1 Specific Definitions. As used in this Agreement,
the following terms have the meanings set forth or referenced below:
"Accessories" means devices or components for use in or with
Equipment for image or document feeding, positioning, finishing or other image
or document handling functions.
"Advisory Committee" has the meaning set forth in Section 9.3.
"Affiliates" means, with respect to any Person, any Persons
directly or indirectly controlling, controlled by, or under common control
with, such other Person at any time during the period for which the
determination of affiliation is being made; it being understood that none of
Purchaser, Kodak or any of their respective Affiliates shall be considered
Affiliates under this Agreement by virtue only of this Agreement. For purposes
of this definition, the term "control" (including the correlative meanings of
the terms "controlled by" and "under common control with"), as used with
respect to any Person, shall mean the possession, directly or indirectly, of
the power to direct or cause the direction of management policies of such
Person, whether through the ownership of voting securities or by contract or
otherwise.
"Agreement" means this Amended and Restated Supply Agreement,
as the same may be amended or supplemented from time to time in accordance with
the terms hereof.
"Business" means (i) OI and CES to the extent primarily
related to the marketing, sale, distribution, maintenance, service and repair
of electrophotographic systems (digital and analog) for office imaging and
reprographics and the marketing, sale or distribution of parts and supplies for
such electrophotographic systems, except for OEM-Out Agreements and OEM-In
Agreements (other than the OEM-In Agreements in the event that Kodak received,
prior to the Effective Date, either consent to their assignment or
modifications thereto that would permit Kodak to resell products thereunder to
Purchaser), and not related to the research and development or the manufacture
or remanufacture of electrophotographic systems (digital and analog) for office
imaging and reprographics and parts and supplies for such electrophotographic
systems and (ii) KIS.
"Business Day" means any day other than a Saturday, a Sunday
or a day on which banks in New York City are authorized or obligated by law or
executive order to close.
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"Calculated Base Amount Coverage" means, with respect to any
reference period, the sum of the results obtained by multiplying (i) the number
of units purchased by Purchaser hereunder (or for which Purchaser is given
credit as described on Exhibit I) during such reference period of each type of
Equipment referenced on Exhibit H and each type of Equipment that is a New
Product and an extension of, part of the same platform as, and substitutable
for, a Current Product, by (ii) the Unit Base Amount, determined by Factory,
with respect to such type of Equipment.
"Calculated Gross Amount" means, with respect to any reference
period, the sum of (A) the sum of the results obtained by multiplying (i) the
number of units purchased by Purchaser hereunder (or for which Purchaser is
given credit as described on Exhibit I) during such reference period of each
type of Equipment, Accessory or Software that is a Current Product and each
type of Equipment that is a New Product and an extension of, part of the same
platform as, and substitutable for, a Current Product by (ii) the Unit Gross
Amount with respect to such type of Equipment, Accessory or Software, plus (B)
the positive difference, if any, obtained by subtracting the Targeted Base
Amount Coverage for such reference period from the Calculated Base Amount
Coverage for such period.
"Carcasses" means used Equipment and Accessories.
"Certain Defined Applications" has the meaning set forth in
Section 6.3.
"Chosen Courts" has the meaning set forth in Section 12.8.
"Confidential Information" means all information that is
either disclosed in tangible form clearly marked as confidential or, if
initially disclosed in any other form, identified as confidential at the time
of disclosure and summarized in a written document that is marked confidential
and delivered to the other party within thirty (30) calendar days after the
date of initial disclosure. Confidential Information may include models,
samples, prototypes, drawings, specifications, test reports, sketches,
blueprints, procedures, techniques, processes, research reports, production
planning and scheduling information, market data, and cost and pricing data.
Confidential Information shall not include information that:
(i) was in the receiving party's possession before receipt
hereunder from the party requesting confidentiality and is not
otherwise known by the receiving party to be the subject of an
obligation of confidentiality;
(ii) is or becomes a matter of public knowledge other than as
a result of any action or inaction of the receiving party;
(iii) is rightfully received by the receiving party from a
third party not under any duty of confidentiality with respect
thereto;
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(iv) is independently developed by or on behalf of the
receiving party; or
(v) is required by law or order of a court of competent
jurisdiction to be disclosed; provided that the party from whom
disclosure is sought shall cooperate with the other party to the
extent the latter may seek to limit such disclosure.
"Current Product" means any Equipment, Software, Supply,
Accessory or Spare Part manufactured, remanufactured or used for salvage by
Kodak as of the Effective Date, and any New Product following the third
anniversary of the Initial Announcement with respect thereto, in each case as
modified from time to time by any Enhancements thereto, but excluding any OEM
Supplies and OEM Products.
"Current Product Actual Quantity" means (i) for 1997 and 1998,
the aggregate number of units of Equipment for each platform listed on Exhibit
I actually purchased by Purchaser in 1997 and 1998 and (ii) for 1999, the
number of units of Equipment for each platform listed on Exhibit I scheduled in
the Fixed Zone and Firm Zone of the Rolling Horizon Estimate required to be
provided by Purchaser in January of 1999.
"Current Product Targeted Quantity" means (i) for 1997 and
1998, the aggregate number of units of Equipment set forth on Exhibit I for
each platform listed on Exhibit I for 1997 and 1998 and (ii) for 1999, the
number of units of Equipment set forth on Exhibit I for each platform listed on
Exhibit I for 1999.
"Danka" has the meaning set forth in the Recitals.
"Dealer" means a Person who regularly sells goods or services
at wholesale, retail or discount prices.
"Default Notice" has the meaning set forth in Section 10.1.
"Defaulting Party" has the meaning set forth in Section 10.1.
"Direct Funding Amount" means the amounts set forth on Exhibit
T.
"Documentation" means any information, written or fixed in
another tangible form, that Kodak possesses, including logic diagrams, manuals,
lists, drawings, maintenance information, pricing and product information.
"Effective Date" means the date and time the initial closing
under the Purchase Agreement occurs.
"Election Notice" has the meaning set forth in Section 12.3.
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"Enhancements" means any modification to any Equipment,
Software, Supply, Accessory or Spare Part that is developed pursuant to
Sections 9.4 or 9.5 and not pursuant to a New Product Plan.
"Equipment" means electrophotographic equipment for office
imaging and office reprographics.
"Exclusivity Right" means the exclusive distribution rights
and the right of first refusal described in Section 6.1 as limited therein.
"Exclusivity Termination Date" has the meaning set forth in
Section 6.2.
"Factory" means each of Kodak's Rochester, Kirkby, Muehlhausen
and Tijuana plants.
"Firm Zone" means, with respect to Equipment and Accessories,
the five months of the 18-month rolling period referred to in Section 4.3 that
immediately follow the Fixed Zone and, with respect to Supplies, the three
months of such 18-month rolling period that immediately follow the Fixed Zone.
"First Year Quantity Minimum" has the meaning set forth in
Section 4.2.
"Fixed Zone" means, with respect to Equipment and Accessories,
the first four months of the 18-month rolling period referred to in Section 4.3
and, with respect to Supplies, the first two months of such 18-month rolling
period.
"Force Majeure" has the meaning set forth in Section 12.14.
"Initial Announcement" means, with respect to any Equipment,
Software, Supply, Accessory or Spare Part, the Business Day on which Kodak
announces publicly to third parties generally or to Purchaser that such product
is available for sale.
"Injunction" has the meaning set forth in the Purchase
Agreement.
"Installed Base" means all Equipment and Accessories
manufactured or remanufactured by Kodak and sold or otherwise placed by
Purchaser or Kodak or their respective Affiliates or Dealers.
"Intellectual Property" means patents, patent applications,
Inventions, invention disclosures, trade secrets, know-how, registered and
unregistered copyrights, works of authorship, computer software programs, data
bases, mask rights, trademarks, service marks, trade names, trade dress and any
similar proprietary rights and any licenses or user rights related to the
foregoing.
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"Invention" means any new device, computer program, article,
method, process or improvement thereon, whether or not patentable,
copyrightable, protectable under any applicable mask works law, protectable as
a trade secret or protectable under any similar law.
"KIS" has the meaning set forth in the Recitals.
"Kodak" has the meaning set forth in the Recitals.
"Kodak's Designated Point of Delivery" means, with respect to
any Current Product, the location listed on Exhibit R and, with respect to any
New Product (or any Current Product that was a New Product), the location
listed in the New Product Plan relating thereto.
"Kodak Indemnified Parties" has the meaning set forth in
Section 12.16.
"Kodak's Manufacturing Business" has the meaning set forth in
the Recitals.
"Losses" has the meaning set forth in Section 12.16.
"Manufacturing Process" refers to the Carcass type or new
build configuration, referenced on Exhibit A, used as the foundation for the
manufacture of a particular unit of Equipment or Accessories.
"Master Agreement" has the meaning set forth in the Recitals.
"New Product" means any Proposed New Product that Purchaser
elects to exclusively distribute worldwide pursuant to Section 6.1.
"New Product Plan" has the meaning set forth in Section
9.6(b).
"OEM-In Agreements" means those agreements listed on Exhibit G
as amended by any amendments or modifications thereto.
"OEM-Out Agreement" means any agreement to which Kodak is a
party, at any time, whereunder the other party thereto purchases for resale or
for incorporation into its products any Equipment not bearing the Kodak name,
Supply, Accessory or Spare Part manufactured by Kodak.
"OEM Products" means Equipment, Software, Accessories,
Supplies and Spare Parts that are manufactured by Kodak and sold to a third
party pursuant to an OEM-Out Agreement listed on Exhibit N or any renewal or
extension of such an agreement that does not change the products specified
therein.
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"OEM Supplies" means Accessories, Supplies and Spare Parts
sold by Kodak for use in conjunction with Equipment or Accessories that (i) are
not developed or manufactured by Kodak or (ii) are scheduled on Exhibit K.
"Offer Period" has the meaning set forth in Section 12.3.
"Offering Notice" has the meaning set forth in Section 12.3.
"Other Product" means any electrophotographic equipment
capable of producing full color images, other than equipment referred to in
(ii) through (vi) of the definition of "Specified Sales", and any related
Software, Supplies, Accessories or Spare Parts, developed (in part or in whole)
and manufactured by Kodak other than Current Products, New Products, OEM
Products and OEM Supplies.
"Partnered Product" means any Equipment, other than Equipment
for use in photofinishing, capable of producing full color images or a related
Supply, Accessory or Spare Part developed (in part or in whole) by Kodak and
manufactured by a Person other than Kodak.
"Person" means an individual, a corporation, a partnership, an
association, a trust or other entity or organization.
"Planning Zone" means, with respect to Equipment and
Accessories, the last nine months of the 18-month rolling period referred to in
Section 4.3 and, with respect to Supplies, the last 13 months of such 18-month
rolling period.
"Process R&D" means funding used to investigate changes in the
manufacturing process for Supplies.
"Products" means Current Products, New Products and Other
Products.
"Proposed New Product" has the meaning set forth in Section
9.6(b).
"Purchase Agreement" has the meaning set forth in the
Recitals.
"Purchase Order" means a written purchase order substantially
in the form approved by Kodak.
"Purchaser" has the meaning set forth in the Preamble.
"Purchaser Indemnified Parties" has the meaning set forth in
Section 12.7.
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"Purchaser Affiliates" means the entities listed on Exhibit M,
100% of each of which is owned and controlled directly or indirectly by Danka,
except for qualifying shares required by law.
"R&D Budget" has the meaning set forth in Section 9.2(a).
"Right of First Offer" has the meaning set forth in Section
12.3.
"Rolling Horizon Estimate" means Purchaser's reasonable
estimate of the number of units or volume, as the case may be, of Purchaser's
purchases from Kodak of a particular Product for each calendar month for the
succeeding 18 calendar months.
"Software" means software platforms, products, and
capabilities that include object and source codes and that enable print on
demand, variable data printing, image capture, document assembly, replication
and distribution for electrophotographic systems, including software families
such as Lionheart.
"Spare Part" means any assembly, subassembly or part for use
in the service or maintenance of Equipment or Accessories and any image loops.
"Specified Sales" means sales of (i) Other Products, (ii)
electrophotographic equipment for use as microfilm/microimaging output devices,
(iii) electrophotographic equipment for use as photo finishing devices, (iv)
electrophotographic equipment used in connection with health, biological or
industrial diagnostic imaging devices, (v) electrophotographic equipment for
use in color proofing, (vi) electrophotographic equipment for use in making
printing plates or color separation media, (vii) OEM Products and (viii) OEM
Supplies.
"SRL" shall have the meaning set forth in the Recitals.
"Subsidiary" means (a) any corporation in an unbroken chain of
corporations beginning with Kodak if each of the corporations other than the
last corporation in the unbroken chain then owns stock possessing 50% or more
of the total combined voting power of all classes of stock in one of the other
corporations in such chain, (b) any partnership in which Kodak is a general
partner or (c) any partnership, corporation, limited liability company or
similar entity that Kodak controls, through the ownership of interests or
otherwise.
"Supplies" means developer, toner, fuser oil and other sundry
products (except for receiver products) intended for use in the reprographic
process.
"Targeted Base Amount Coverage" means, with respect to any
reference period, the sum of the results obtained by multiplying (i) the number
of each type of
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Equipment targeted for purchase by Purchaser during such reference period, as
set forth in Exhibit S by (ii) the Unit Base Amount with respect to such type
of Equipment, determined by Factory.
"Targeted Gross Amount" means, with respect to any reference
period, the sum of the results obtained by multiplying (i) the number of each
type of Equipment, Accessory or Software targeted for purchase by Purchaser
during such reference period, as set forth in Exhibit S, by (ii) the Unit Gross
Amount with respect to such type of Equipment, Accessory or Software.
"Third-Party Remanufactured Equipment and Accessories" means
any Equipment or Accessories remanufactured by Kodak using Carcasses
manufactured by a Person other than Kodak.
"Three Year Quantity Minimum" has the meaning set forth in
Section 4.2.
"Unit Base Amount" means (i) for any item of Equipment that is
a Current Product, the amount set forth on Exhibit H, determined by Factory,
with respect thereto, and (ii) for any item of Equipment that is a New Product,
the amount of Unit Base Amount, determined by Factory, set forth in the New
Product Plan relating thereto; provided, however, that with respect to any
Equipment purchased by Purchaser during 1999, Kodak shall be entitled (but not
required) to establish with Purchaser's consent, which shall not be
unreasonably withheld, prior to December 31, 1998, an adjusted Unit Base
Amount, based on (x) the projected amount of Kodak's fixed costs by Factory for
1999 and (y) the number of units of Equipment scheduled in the Rolling Horizon
Estimate required to be provided by Purchaser in August 1998 and (z)
methodology that is consistent with that used to determine the Unit Base Amount
set forth on [Attachment E]; and, provided, further, that for purpose of any
calculation pursuant to Section 5.5, Kodak shall be entitled (but not
required), for any reference period in which the Calculated Base Amount
Coverage would exceed the Targeted Base Amount Coverage, to establish with
Purchaser's written consent, which shall not be unreasonably withheld, an
adjusted Unit Base Amount to reflect actual Equipment volumes and fixed costs
by Factory, using methodology that is consistent with that used to determine
the Unit Base Amount set forth on [Attachment E].
"Unit Gross Amount" shall mean (i) for any item of Equipment,
Accessory or Software that is a Current Product, the amount set forth on
Exhibit S with respect thereto, and (ii) for any item of Equipment, Accessory
or Software that is a New Product, the amount of Unit Gross Amount set forth in
the New Product Plan relating thereto.
Section 1.2 Other Terms. Other terms may be defined
elsewhere in the text of this Agreement and, unless otherwise indicated, shall
have such meaning throughout this Agreement.
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Section 1.3 Other Definitional Provisions.
(a) The words "hereof", "herein", and "hereunder" and
words of similar import, when used in this Agreement, shall refer to this
Agreement as a whole and not to any particular provision of this Agreement.
(b) The terms defined in the singular shall have a
comparable meaning when used in the plural, and vice versa.
(c) The terms "Dollars" and "$" shall mean United States
Dollars.
(d) References herein to a specific Section, Subsection
or Schedule shall refer, respectively, to Sections, Subsections or Schedules of
this Agreement, unless the express context otherwise requires.
(e) Wherever the word "include," "includes," or
"including" is used in this Agreement, it shall be deemed to be followed by the
words "without limitation."
ARTICLE II
TERM OF AGREEMENT
Section 2.1 Term of Agreement. Subject to Section 2.2, this
Agreement shall commence on the Effective Date and, unless earlier terminated
pursuant to Article X, shall be in effect for ten years.
Section 2.2 Renewal. No later than one year prior to the
then-scheduled expiration of this Agreement, Kodak and Purchaser may agree in
writing to extend this Agreement for an additional three-year period.
ARTICLE III
SUPPLY OF PRODUCTS
Section 3.1 Supply of Products. On the terms and subject to
the conditions set forth in this Agreement, Kodak agrees to sell to Purchaser
and Purchaser agrees to buy from Kodak those Products that Purchaser orders
from Kodak in accordance with the terms of this Agreement.
Section 3.2 Discontinuation of Products. (a) Notwithstanding
anything to the contrary contained herein, in the event that the actual volume
or number of units, as the case
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may be, ordered of any Current Product or New Product in any 12-month period
decreases to less than 50% of the actual volume or number of units, as the case
may be, ordered of such Product in the immediately preceding 12-month period,
Kodak may discontinue the supply of such Product to Purchaser upon six months'
prior written notice. Notwithstanding anything to the contrary contained
herein, Kodak may discontinue, subject to the provisions of Section 3.3, the
supply of any Other Product to Purchaser upon six months' prior written notice.
(b) Purchaser shall provide Kodak with written notice no
less than 12 months prior to such time as Purchaser plans or expects to (i)
cease ordering in a six-month period at least 50% of the actual volume or
number of units of any Product that Purchaser ordered in the preceding
six-month period or (ii) terminate entirely its purchasing or marketing of a
Product.
Section 3.3 Further Availability of Supplies and Spare Parts.
(a) Unless this Agreement is terminated by Kodak pursuant to Section
10.1(a)(ii), or Section 10.1(a)(iii), Kodak shall, subject to the exercise of
its rights under Section 3.2, for a period of no less than five years after the
date on which Kodak makes the last delivery of any model of Equipment or
Accessory to Purchaser under this Agreement, make Supplies and Spare Parts
relating to such model of Equipment or Accessory available for purchase by
Purchaser on reasonable terms and conditions; provided, however, that if Kodak
intends to cease to be a supplier of such Supplies or Spare Parts on or after
the termination of such five-year period it will provide Purchaser with six
months' written notice prior to such cessation. Purchaser may place orders for
Supplies and Spare Parts in that six-month period provided such Supplies or
Spare Parts are for delivery to Purchaser by Kodak not later than the last
Business Day of such six-month period.
(b) If this Agreement is terminated by Kodak pursuant to
Section 10.1(a)(ii) or Section 10.1(a)(iii), Kodak shall make available to
Purchaser, until the earlier of (i) five years from the date of such
termination and (ii) the date on which Kodak ceases to be a supplier of such
Supplies or Spare Parts, on a basis substantially similar to that available to
the general market, the ability to purchase Supplies and Spare Parts relating
to Equipment and Accessories distributed by Purchaser pursuant to this
Agreement prior to such termination.
(c) The continued sale of Supplies and Spare Parts to
Purchaser during the periods referenced in Sections 3.3(a) and 3.3(b) is
contingent, in each case, upon Purchaser's compliance with commercially
reasonable standards for quality and service.
Section 3.4 Resale of Products by Purchaser. (a) Purchaser
may resell any Current Product or New Product purchased hereunder (subject, in
the case of Software, to the terms of the license accompanying and governing
the use of such Software) to (a) end-users of such Product and (b) any Dealer
of such Product; provided, however, that Purchaser
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may not resell any Product purchased hereunder to a Dealer (i) unless Purchaser
provides Kodak with the name and address of such Dealer within 10 Business Days
following the first sale of a Product to such Dealer, (ii) unless, prior to
such resale, such Dealer agrees in writing to be bound by the provisions set
forth in Sections 7.2, 8.1(a), 8.1(c), 11.2 and 11.3 and acknowledges in
writing that Kodak has not provided any warranty with respect to such Product
and shall have no liability to such Dealer, its Affiliates or any other Person
with respect to any such Product provided by Purchaser to such Dealer, and
(iii) if the Exclusivity Termination Date with respect to such Product has
occurred. Purchaser may resell Other Products purchased hereunder solely to
end-users.
(b) Purchaser shall resell Current Products and New Products
pursuant to the terms of the distribution agreements listed on Schedule U, as
the same may be amended from time to time in accordance with their terms.
ARTICLE IV
QUANTITY MINIMUMS AND ORDERS
Section 4.1 Current Products. For the term of this
Agreement, Purchaser shall order for purchase and shall purchase from Kodak (i)
Purchaser's requirements, from time to time, for Equipment manufactured or
remanufactured by Kodak; provided, that during the 1997 calendar year,
Purchaser shall purchase no fewer than the aggregate number of units of
Equipment per platform set forth on Exhibit I, (ii) all of Purchaser's
requirements for Accessories and Spare Parts for Current Products (other than
Third-Party Remanufactured Equipment and Accessories), New Products and the
Installed Base (other than Third-Party Remanufactured Equipment and
Accessories), except for those Spare Parts that, prior to the Effective Date,
CES regularly purchased from Persons other than Kodak (which Purchaser and the
Purchaser Affiliates may continue to purchase directly from such Persons),
(iii) all of Purchaser's requirements for Supplies for Current Products (other
than Third-Party Remanufactured Equipment and Accessories), New Products and
the Installed Base (other than Third-Party Remanufactured Equipment and
Accessories), (iv) all of Purchaser's requirements for the types of toners set
forth on Exhibit J and (v) all of Purchaser's requirements for "Kodak" branded
Third-Party Remanufactured Equipment and Accessories. If Purchaser receives a
bid from an alternate supplier to provide any unit of vendor sourced, low
technology parts that constitute Spare Parts for Current Products of equal or
better quality (as mutually agreed to by the parties) and at a price at least
fifteen percent (15%) below the price for such unit listed on Exhibit B, then
Purchaser will notify Kodak which unit of Spare Parts is at issue and the
alternative price at which the unit of Spare Parts can be obtained, and Kodak
will examine with Purchaser and, if commercially reasonable pursue, the
purchase of such Spare Parts and share in any resulting gains.
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Section 4.2 New Products. Subject to the provisions of
Section 3.1, Purchaser shall order for purchase and shall purchase no less than
(i) during the three years immediately following the Initial Announcement with
respect to each New Product, the minimum aggregate number of units of such New
Product (the "Three Year Quantity Minimum") specified to be purchased in the
New Product Plan relating thereto and (ii) during the 12-month period
immediately following the Initial Announcement with respect to each New
Product, the minimum number of units specified to be purchased in the New
Product Plan relating thereto (the "First Year Quantity Minimum").
Section 4.3 Equipment and Accessories Orders and Rolling
Horizon Estimates. (a) The parties hereto shall operate under MRP principles
utilizing a formal sales and operating planning process. On or before the
fifth day of each calendar month, Purchaser shall provide to Kodak (i) a
Rolling Horizon Estimate of Equipment and Accessories, which estimate shall be
divided into a Fixed Zone, Firm Zone and Planning Zone and (ii) a Purchase
Order for Equipment and Accessories to be delivered in the fourth calendar
month thereafter. Each Rolling Horizon Estimate of Equipment and Accessories
and each Purchase Order also shall set forth a schedule of the Manufacturing
Processes that Purchaser wishes Kodak to use in manufacturing the units of
Equipment to be provided in each month; provided, however, that Kodak shall
only have an obligation to use the Manufacturing Processes scheduled by
Purchaser if Purchaser delivers to Kodak such Carcasses, if any, as may be
necessary to effect such Manufacturing Processes; and provided, further that
Kodak shall be entitled to substitute in any one month Equipment or Accessories
of the type requested by Purchaser, but manufactured using a Manufacturing
Process other than that requested by Purchaser, so long as Kodak uses its
reasonable efforts to provide Purchaser during the next succeeding two months
with an aggregate amount of Equipment or Accessories, as the case may be, of
such type so that, in the aggregate, Purchaser will have received the amount
of, and mix of Manufacturing Processes for, such type of Equipment or
Accessories, as the case may be, that it has requested for such three-month
period. Each Rolling Horizon Estimate of Equipment and Accessories also shall
set forth a schedule of the Carcasses expected to be delivered by Purchaser to
Kodak for warehousing. If Kodak reasonably expects that it will be unable to
supply the quantity of Equipment or Accessories projected by Purchaser in a
Rolling Horizon Estimate, Kodak will notify Purchaser within 30 days after
receipt of the Rolling Horizon Estimate and the parties shall engage in good
faith negotiations to agree on an alternative supply schedule.
(b) The numbers of units of each type of Equipment and
Accessories scheduled for each month of the Fixed Zone included within a
Rolling Horizon Estimate for Equipment and Accessories, and the mix of
Manufacturing Processes to be used by Kodak in their manufacture, may not be
modified by Purchaser and all such units must be purchased by Purchaser prior
to the end of the month in which they are scheduled for delivery. The number
of units, categorized by Manufacturing Process, to be used of each type of
Equipment and Accessories scheduled in any Rolling Horizon Estimate for each
month of the
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Firm Zone may not be increased or decreased by more than 20% in the next
succeeding Rolling Horizon Estimate of Equipment and Accessories.
Section 4.4 Supply Orders and Rolling Horizon Estimates. (a)
On or before the fifth day of each calendar month, Purchaser shall provide to
Kodak a Purchase Order for Supplies to be delivered in the second calendar
month after the calendar month in which the Purchase Order is issued and a
Rolling Horizon Estimate for Supplies, which estimate shall be divided into a
Fixed Zone, Firm Zone and Planning Zone.
(b) The numbers of units or the volume, as the case may
be, of each type of Supply scheduled for each month of the Fixed Zone may not
be modified by Purchaser and all such units or volume must be purchased by
Purchaser prior to the end of the month in which they are scheduled for
delivery. The number of units or the volume, as the case may be, of each type
of Supply scheduled in any Rolling Horizon Estimate for each month of the Firm
Zone may not be increased or decreased by more than 20% in the next succeeding
Rolling Horizon Estimate of Supplies.
Section 4.5 Spare Parts Orders and Rolling Horizon Estimates.
On or before the fifth day of each calendar month, Purchaser shall provide to
Kodak its Rolling Horizon Estimate of Spare Parts (which shall be nonbinding
and for planning purposes only); it being understood, that for purposes of
Section 4.4 and this Section 4.5, image loops, pressure rollers and fuser
rollers shall be treated as Supplies. Purchaser will purchase Spare Parts, and
Kodak agrees to make delivery thereof to Purchaser, pursuant to Purchase Orders
setting forth the quantities of Spare Parts to be delivered within 120 days
following Kodak's receipt of the applicable Purchase Order; provided, that such
quantities shall be generally consistent with the minimum and maximum order
quantity and lead-time variance practices followed by the Business prior to the
Effective Date.
Section 4.6 Software Sales. Purchaser shall deliver to Kodak
a purchase order for any separately ordered Software purchase at least 30 days
prior to the proposed delivery date.
Section 4.7 Carcasses. (a) Purchaser shall provide Kodak
with Carcasses sufficient to permit Kodak to deliver to Purchaser on a timely
basis Equipment and Accessories produced using the Manufacturing Processes
requested by Purchaser pursuant to Section 4.3(a). All transportation costs
and related expenses associated with the delivery of Carcasses to Kodak under
this Agreement shall be borne by Purchaser. In addition, Purchaser shall
reimburse Kodak for all transportation costs and related expenses associated
with the transport by Kodak to its Tijuana Factory of Carcasses delivered in
the United States to Kodak by Purchaser under this Agreement; provided,
however, that Purchaser and Kodak agree to meet and review this arrangement on
or after the first anniversary of the Effective Date for the purpose of
identifying mutually beneficial alternatives. Title to, and risk of loss
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of, Carcasses provided to Kodak pursuant to this Section 4.7(a) and stored by
Kodak pursuant to Section 4.7(f) shall remain with Purchaser at all times.
(b) Kodak shall only have an obligation to use the
Manufacturing Processes scheduled by Purchaser pursuant to Section 4.3 if
Purchaser delivers to Kodak Carcasses of a quality and completeness suitable
for use in the Manufacturing Process requested by Purchaser; it being
understood that Purchaser shall provide Kodak with a similar distribution of
usable Carcasses as Kodak generally obtained prior to the Closing.
(c) Purchaser and Kodak shall meet on no less than a
quarterly basis to discuss their requirements for Carcasses and mutually agree
on the number of Carcasses to be retained or disposed of by Purchaser under
this Section 4.7(c). In the event that Purchaser owns or purchases Carcasses
in excess of those required for it to satisfy its obligations under Section
4.7(a) and wishes to dispose of such excess, Purchaser shall provide Kodak a
right exercisable within 30 days after notice from Purchaser to purchase any or
all of such excess Carcasses at a price (i) in the case of Carcasses to be used
for strip and salvage, equal to the fair market value of the Spare Parts "as
is" salvageable from such Carcass, and (ii) in the case of Carcasses to be used
as the foundation for Equipment to be manufactured by Kodak and sold under an
OEM-Out Agreement, the value of such Carcass used in the preparation of the
prices set forth in Exhibit A. In the event that Kodak declines to exercise
its right of first refusal, Purchaser may sell such Carcasses to any other
Person.
(d) In no event may Purchaser strip and salvage any
Carcass for Spare Parts or purchase from any Person other than Kodak any Spare
Part salvaged from a Carcass.
(e) Nothing in this Agreement shall preclude Kodak from
purchasing Carcasses from Persons other than Purchaser.
(f) Kodak shall invoice Purchaser on a monthly basis at
fair market rates for the warehousing of Carcasses held by Kodak on behalf of
Purchaser. Purchaser shall have responsibility for and shall receive all
benefits or losses resulting from disposal of any unused warehoused Carcasses
that are not required under Section 4.7(a) and that Kodak has stated in writing
that it does not want.
Section 4.8 Emergency Spare Parts. From time to time
Purchaser may request Kodak to deliver Spare Parts on an emergency basis within
one Business Day of Purchaser's request. Kodak agrees to make every reasonable
effort to deliver such emergency Spare Parts, or notify Purchaser when such
delivery shall be made, within one Business Day. Kodak agrees to accord such
emergency requests priority over any other Purchaser requirements for
Equipment, Accessories or Spare Parts and to use reasonable efforts to accord
such requests priority over any other non-emergency deliveries to any party.
Should emergency delivery of Spare Parts affect Kodak's ability to deliver
Equipment,
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Accessories or Spare Parts to Purchaser, Kodak shall so notify Purchaser prior
to the emergency delivery and obtain Purchaser's agreement to proceed; it being
understood that, if Purchaser agrees to have Kodak proceed with the emergency
delivery and there is a delay in the delivery of Equipment, Accessories or
Spare Parts directly caused by delivery of such emergency Spare Parts, Kodak
shall not be penalized. The price for emergency Spare Parts shall be the
then-current price; provided, that the total number of line items of emergency
Spare Parts in any one month does not exceed 20 per Factory. Line items for
emergency Spare Parts in excess of the foregoing number shall be filled at a
price determined by Kodak up to twice the then-current price if, in Kodak's
reasonable business judgment, Purchaser has abused the emergency Spare Parts
ordering process; provided, however, that the price for emergency Spare Parts
necessitated by Kodak's failure to timely fill Purchaser's Spare Parts orders,
except to the extent such failure is caused by Purchaser, shall be the
then-current price regardless of the total number of emergency Spare Parts
ordered in any one month.
Section 4.9 Access to Purchaser's Records. (a) At Kodak's
reasonable request, Purchaser shall (i) furnish, or cause to be furnished, to
Kodak and its representatives any operating, sales or other data and
information existing and within its possession to the extent that such data or
information relates to Purchaser's past or present requirements or estimated
future requirements of any Product as to which Purchaser has an obligation to
purchase under Section 4.1(i), (ii), (iii) or (v) and (ii) instruct its
employees and representatives to cooperate with Kodak in its determination or
verification of such requirements; it being understood that Kodak shall
reimburse Purchaser promptly for any reasonable out-of-pocket expenses it
incurs in complying with any such request by or on behalf of Kodak.
(b) As soon as practicable following receipt thereof by
Purchaser, Purchaser shall gather, on generally the same basis as that followed
by the Business prior to the Effective Date, and provide Kodak with all field
data gathered by Purchaser, including customer comments and data relating to
field reliability of Products and abnormal installations, all service and
troubleshooting information known to its service organization and all other
information, including information from CES-Star software, necessary or
desirable to ensure the maintenance of high quality service, substantially
equivalent to that which Kodak, through the Business, provided to its customers
prior to the Effective Date. Purchaser and Kodak shall each designate in
writing two representatives to serve on a committee that shall meet monthly to
evaluate the data gathered by Purchaser.
Section 4.10 Repurchase of Parts. Upon Kodak's request,
Purchaser shall sell to Kodak Spare Parts in Purchaser's inventory that Kodak
may require. The purchase price for such Spare Parts shall be equal to
Purchaser's cost plus a markup equivalent to Purchaser's reasonable expenses
for cost of capital, storage, handling and related items.
Section 4.11 Recycled (Exchanged) Spare Parts. From time to
time, Purchaser will provide to Kodak certain Spare Parts identified by Kodak
for remanufacture,
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refurbishment or recycling. Kodak and Purchaser have agreed upon, as shown on
Exhibit D, the Spare Parts that may be remanufactured, refurbished or recycled
by Kodak and the associated exchange credits.
Section 4.12 Software Customization. At the request of
Purchaser, Kodak shall cooperate with Purchaser in making modifications
(customizations) to Software to meet specific customer needs to the extent that
such modifications (i) are not modifications that field service engineers or
systems engineers are capable of implementing (absent re-engineering) or (ii)
involve source code. In the event Purchaser requests such cooperation,
Purchaser shall be responsible for submitting a customization request,
installing customized software at its customer's site, and paying Kodak's fees
for implementing, testing and delivering the requested customization, which
fees shall be as set forth in a written estimate prepared by Kodak promptly
upon its receipt of Purchaser's request set forth in the preceding sentence.
Kodak shall respond to customization requests by supplying cost and time
estimates to implement, test, and deliver the requested customization and, if
such estimates are accepted by Purchaser, shall do so as described in such
response.
ARTICLE V
PRICING
Section 5.1 Pricing.
(a) Prices for Current Products. (i) Subject to Section
5.1(e), the purchase price for each item of Equipment, Accessory and Software,
by Manufacturing Process, that is a Current Product as of the date hereof is
listed on Exhibit A. The purchase price for each Spare Part that is a Current
Product as of the date hereof is listed on Exhibit B. The purchase price for
each unit of Supplies that is a Current Product as of the date hereof is listed
on Exhibit C. Such prices are applicable and valid for Products supplied prior
to the third anniversary of the Effective Date. The listed prices are FOB
Kodak's Designated Point of Delivery.
(ii) The purchase price for each unit of Equipment listed on
Exhibit A includes a starter kit which is configured specifically for each such
unit and contains supplies necessary for the initial operation of the unit.
Each starter kit will be packaged with each unit of Equipment.
(iii) The prices on Exhibits A, B, C and D do not, and all
other prices to be determined in accordance with this Section 5.1 will not,
include any sales or use taxes, each of which, if required, shall be added as a
single line item to each invoice. [PRICES ON EXHIBITS A, B AND C SHALL BE
GOVERNED BY THE PRINCIPLES SET FORTH ON ATTACHMENTS A, B AND C, RESPECTIVELY.]
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(b) Other Pricing Information. No later than nine months
prior to the expiration of the applicability of the then-current prices,
Purchaser and Kodak shall begin negotiating the prices to be charged for a
succeeding defined period (as determined at such time), which prices shall (i)
be based on the principles outlined on Exhibit F, including requirements that
minimum quantities, exclusivity termination provisions and R&D funding
provisions be agreed to in the future negotiations and (ii) be agreed to no
less than six months prior to the expiration of the applicability of the
then-current prices.
(c) Prices for New Products. The purchase price for each
New Product shall be set forth in the New Product Plan for such New Product.
(d) Prices for Other Products. The purchase price for
each Other Product shall be determined in accordance with Section 6.2.
(e) Enhancements. The purchase price for any Product
that has been modified by an Enhancement shall be agreed upon pursuant to
Section 9.4.
Section 5.2 Price Increases. Notwithstanding anything to the
contrary contained in this Agreement, if Kodak determines in good faith that
extraordinary economic conditions or that the occurrence of events would impose
economic hardships of a severity not generally experienced by business from
normal conditions, then the parties agree to negotiate in good faith an
appropriate price adjustment effective as of the date of such change.
Extraordinary events or conditions could include, but are not limited to, an
oil embargo which substantially affects the cost of manufacture or delivery of
any Product and a substantial increase in prices for raw materials or
subassemblies, material changes in prevailing conference freight rates and
other import/export costs, or significant regulations or actions of governments
that materially affect the cost of any Product.
Section 5.3 Payments. Purchaser shall be invoiced upon
shipment in the currency set forth on Exhibit R for the type of Products listed
thereon; or if not listed thereon, in U.S. Dollars for all Products for which
Purchaser takes delivery in the United States, United Kingdom or Mexico and in
Deutschemarks for all Products for which Purchaser takes delivery in Germany or
the Czech Republic. Payments shall be made in the currency in which the
invoice is denominated. Credit terms shall be net 30 days from the date of
invoice, plus a two percent penalty for late payment (not to exceed the maximum
amount permitted by law). In the case of disputed invoices, if Purchaser
promptly provides Kodak with a written explanation of the dispute, Purchaser
shall not be obligated to pay that portion of the invoice which is reasonably
in dispute until the dispute is resolved, and the two percent penalty referred
to in the preceding sentence shall be imposed 30 days after the date of such
resolution if payment shall not have been received by Kodak.
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Section 5.4 Taxes. Purchaser shall pay any applicable sales
or use taxes imposed under the authority of a federal, state, provincial or
local taxing jurisdiction, unless Purchaser furnishes Kodak with the
appropriate exemption certificates in advance of shipment.
Section 5.5 Gross Amount Collar. (a) No later than February
28, 1999, Purchaser shall pay to Kodak an amount equal to the sum of (i) the
positive difference, if any, obtained by subtracting the Calculated Gross
Amount for the calendar years 1997 and 1998 from ____% of the Targeted Gross
Amount for such period, plus (ii) the positive difference, if any, obtained by
subtracting the Calculated Base Amount Coverage for such period from the
Targeted Base Amount Coverage for such period.
(b) In the event that the Calculated Gross Amount for
1997 and 1998 combined is greater than ____% of Targeted Gross Amount for such
period, Kodak shall pay to Purchaser, no later than February 28, 1999, ____% of
the difference between such Calculated Gross Amount and ____% of such Targeted
Gross Amount.
(c) No later than February 28, 2000, Purchaser shall pay
to Kodak an amount equal to the sum of (i) the positive difference, if any,
obtained by subtracting the Calculated Gross Amount for 1999 from ____% of the
Targeted Gross Amount for 1999, plus (ii) the positive difference, if any,
obtained by subtracting the Calculated Base Amount Coverage for such period
from the Targeted Base Amount Coverage for such period; provided, that if the
Calculated Gross Amount for 1997 and 1998 combined exceeded ____% of the
Targeted Gross Amount for 1997 and 1998 combined, the lesser of (x) such excess
amount and (y) ____% of such Targeted Gross Amount for 1997 and 1998 combined
shall be added to the amount of Calculated Gross Amount for 1999 for purposes
of determining the amount owed by Purchaser to Kodak under this Section 5.5(c).
(d) In the event that the Calculated Gross Amount for
1999 is greater than _____% of the Targeted Gross Amount for 1999, no later
than February 28, 2000, Kodak shall pay to Purchaser _____% of the difference
between such Calculated Gross Amount and ____% of such Targeted Gross Amount.
Section 5.6 Construction. The amendment and restatement of
the Master Agreement effected hereby shall have no effect on the obligation of
SRL to pay any amount to Kodak, or on the obligation of Kodak to pay any amount
to SRL, for the period through the date hereof (on an annualized basis) under
the terms of the Master Agreement without, for purposes hereof, giving effect
to the amendment and restatement thereof effected hereby. Any such amount will
be paid within thirty days hereof.
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ARTICLE VI
DISTRIBUTION AND DELIVERIES
Section 6.1 Exclusivity. (a) Subject to Section 6.1(c),
Purchaser shall have the exclusive right to distribute worldwide all Current
Products, except (i) with respect to Certain Defined Applications and Specified
Sales, which are the subjects of Sections 6.3(a) and (b), respectively, and
(ii) to the extent that Kodak, in its good faith judgment, reasonably believes
that such a right would violate, or otherwise subject Kodak or any of its
Affiliates to liability under, the Injunction.
(b) Subject to Section 6.1(d), Purchaser shall have a
right of first refusal to exclusively distribute worldwide each Proposed New
Product, on the terms set forth in the New Product Plan relating to such
Proposed New Product, as such New Product Plan exists as of the Gate 2 stage of
the commercialization process referred to in Section 9.5, except (i) with
respect to Certain Defined Applications and Specified Sales, which are the
subjects of Section 6.3(a) and (b), respectively, and (ii) to the extent that
Kodak, in its good faith judgment, reasonably believes that such a right would
violate, or otherwise subject Kodak or any of its Affiliates to liability
under, the Injunction. Such right shall be exercised by Purchaser delivering
to Kodak written notice no later than the 15th Business Day after the Gate 2
review meeting with respect to such Proposed New Product or, in the case of
Products that have passed Gate 2, no later than 90 days after the Effective
Date. If Purchaser fails to deliver such written notice prior to such 15th
Business Day (i) Purchaser's right to exclusively distribute worldwide such New
Product shall lapse, (ii) such New Product shall cease to be a Product for all
purposes of this Agreement, and (iii) Kodak, in its discretion, may proceed
with the development, manufacture and distribution of such Product in any
manner of its choosing, including through the license or transfer of its rights
thereto, to third parties.
(c) Kodak shall have the right to terminate the
Exclusivity Right with respect to all Current Products, if (i) Purchaser fails
to pay within 15 days of when due any amount in respect of the Direct Funding
Amount, or (ii)(A) the Current Product Actual Quantity for 1997 and 1998 was
less than ____% of the Current Product Targeted Quantity for 1997 and 1998, or
(B) based upon the Rolling Horizon Estimate required to be provided by
Purchaser in January 1999, the aggregate Current Product Actual Quantity for
1999 would be less than ____% of the Current Product Targeted Quantity for
1999; provided, however, that Kodak shall be required to give Purchaser 90
days' written notice of its intention to terminate the Exclusivity Right
pursuant to this Clause (ii) and, if prior to the end of such 90-day period
Purchaser increases the number of units of Equipment scheduled in the Fixed
Zone and Firm Zone of its then current Rolling Horizon Estimate such that the
number of units of Equipment to be purchased by Purchaser in 1999 would equal
or exceed ____% of the Current Product Targeted Quantity for 1999, Kodak's
right to terminate the Exclusivity Right
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pursuant to this Clause (ii) of this Section 6.1(c) shall be suspended unless
and until Purchaser fails to effect such purchases or evidences its intent not
to effect such purchases.
(d) Subject to the provision of Section 6.1(e), Kodak
shall have the right to terminate immediately the Exclusivity Right with
respect to any New Product if Purchaser fails to (x) satisfy the First Year
Quantity Minimum or the Three Year Quantity Minimum with respect to such New
Product; provided, however, that Kodak shall not have a right of termination
under this Clause (x) if Purchaser's failure to satisfy such First Year
Quantity Minimum or Three Year Quantity Minimum is primarily caused by Kodak's
failure to provide to Purchaser such New Product in sufficient quantities and
substantially in compliance with the product specifications set forth in the
New Product Plan relating thereto, (y) pay within 15 days of when due any
payment in respect of the Direct Funding Amount, or (z) provide Kodak within 15
days after notice from Kodak, with the deliverables described under the caption
"Commercialization Process" in Exhibit P hereto at the Gate 3, Gate 4, Gate 5
or Gate 6 review contemplated by such Exhibit. If Kodak elects to exercise
such termination right, it shall notify Purchaser of such election in writing
and, immediately thereupon, Purchaser's Exclusivity Right with respect to such
New Product shall lapse for all purposes of this Agreement, including when such
New Product becomes a Current Product. In addition, Purchaser shall reimburse
Kodak for fifty percent of its tooling and inventory writeoffs reasonably
incurred by Kodak in light of such failure.
(e) Notwithstanding the provisions of Section 6.1(d), if,
prior to the Gate 6 stage of the commercialization process, the projected unit
manufacturing costs associated with a New Product increase to more than ___ __
times the projected unit manufacturing costs set forth in the New Product Plan
as it was approved at the Gate 2 stage of the commercialization process, Kodak
shall promptly notify Purchaser of such increase and, thereupon, Purchaser may
elect to terminate its participation in such Product Development Plan, by
notifying Kodak in writing no later than 30 days after Kodak's notice referred
to above. Such termination shall be effective immediately upon Purchaser's
giving of such notice and, thereupon, (i) the provisions of Section 6.1(d),
insofar as they relate to Purchaser's obligations with respect to such New
Product, shall cease to apply, (ii) Purchaser's right to exclusively distribute
worldwide such New Product shall lapse, (iii) such New Product shall cease to
be a Product for all purposes of this Agreement, and (iv) Kodak, in its
discretion, may proceed with the development, manufacture and distribution of
such Product in any manner of its choosing, including through the license or
transfer of its rights thereto, to third parties.
Section 6.2 Other Products and Partnered Products. (a) Until
the earlier of (i) the 90th day following Kodak's notice to Purchaser that
Kodak is terminating Purchaser's Exclusivity Right with respect to Current
Products pursuant to Section 6.1(c) (the "Exclusivity Termination Date") and
(ii) the fifth anniversary of the Effective Date, Kodak shall grant to
Purchaser a nonexclusive right to distribute each Other Product following the
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Initial Announcement with respect thereto. Other Products shall be sold to
Purchaser on reasonable terms and conditions.
(b) Until the earlier of the Exclusivity Termination Date
and the fifth anniversary of the Effective Date, Kodak shall use its best
efforts to obtain for Purchaser a right to distribute each Partnered Product on
a nonexclusive basis following the Initial Announcement with respect thereto.
Section 6.3 Kodak's Right to Distribute. (a) From time to
time, Kodak may request in writing that Purchaser distribute Current Products
or New Products for applications, market segments or geographic areas in which
Purchaser is not then distributing, which request shall set forth an estimated
minimum quantity (by category, class or Product) Kodak believes could be sold
over the succeeding three years with respect to such application, market
segment or geographic area and the estimated price at which such sales could be
effected. If Purchaser shall not have committed in writing within 90 days of
such a request to actively distribute Current Products or New Products, as the
case may be, for such applications, market segments or geographic areas, Kodak
shall have the exclusive right to distribute, by any means of its choosing,
Current Products or New Products, as the case may be, solely for such
applications, market segments or geographic areas ("Certain Defined
Applications") at a price no less than that set forth in Kodak's request
related thereto.
(b) Without limiting the foregoing or any of Kodak's
other rights hereunder, Kodak shall have the right to (i) market, sell and
distribute any product that Purchaser does not explicitly have an exclusive
right to distribute hereunder or that Purchaser does not elect to have an
exclusive right to distribute hereunder, (ii) distribute on an exclusive basis
Current Products or New Products for Certain Defined Applications, and (iii)
make any Specified Sale on an exclusive basis; it being understood that, so
long as Purchaser has the right to distribute Other Products hereunder, Kodak
shall only have a nonexclusive right to distribute Other Products.
Section 6.4 Title and Risk of Loss. Each Product ordered
hereunder shall be shipped FOB Kodak's Designated Point of Delivery. Purchaser
shall select the carrier and prepay, or make arrangements with the carrier for
payment of, the transportation charges to the warehouse destination designated
by Purchaser, along with any transportation charges, insurance, handling and
other costs, and any customs, import, export and similar duties, associated
with the conveyance of Products. In addition, Purchaser shall reimburse Kodak
for all transportation costs and related expenses associated with the transport
of Products to be purchased under this Agreement from Kodak's Tijuana Factory
to Kodak's regional distribution centers in the United States and Mexico that
are the Kodak Designated Point of Delivery for such Products.
Section 6.5 Shipping Frequency and Quantity. Kodak shall not
be required to deliver Products more than once a day to Purchaser. Purchaser
shall be required to accept
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delivery as frequently as reasonably requested by Kodak but not more often than
once a day without Purchaser's approval. Delivery of quantities of Products
constituting partial orders shall be accepted by Purchaser; provided, that
Purchaser shall only be invoiced for the quantity actually delivered. Any order
shortfall shall be delivered as soon as commercially reasonable. The parties
shall cooperate to ensure that shipments are made in a cost-effective manner.
Section 6.6 Calls to CIC by Kodak Customers. If Purchaser
receives calls to its Customer Information Center from customers seeking to
purchase goods supplied by Kodak other than Current Products, New Products, or
Other Products, Purchaser shall attempt to obtain such customer's name,
telephone number and address, which it shall promptly provide to a
representative of Kodak designated from time to time for that purpose, and
Purchaser shall provide such customer with the contact telephone number at
Kodak provided by Kodak to Purchaser from time to time for purpose of such
inquiries. Kodak shall promptly reimburse Purchaser for its reasonable and
reasonably documented expenses incurred in connection with its performance of
its obligations under this Section.
ARTICLE VII
WARRANTY, INSPECTION AND QUALITY ASSURANCE
Section 7.1 Inspection and Warranty. Prior to their
delivery, Products to be sold hereunder shall be inspected (and, where
applicable, tested) by Kodak in accordance with Kodak's Functional Total
Quality Plan or such other procedures as are mutually agreed upon by the
parties hereto in order to assure conformance of Products to Kodak's product
specifications. Purchaser also shall have the right to conduct its own
inspection test in accordance with such procedures no later than the earlier of
(i) 90 days after the date of delivery of any Products to Purchaser and (ii)
the installation of such Product. If Purchaser determines that any item does
not substantially conform to Kodak's product specifications it shall, within 15
days after completion of the inspection, notify Kodak and request it to
institute a consulting inspection. Kodak may designate other companies to
perform a consulting inspection. If the consulting inspection reveals a
non-conformity that does not reasonably appear to have resulted from, or
occurred during, shipping of the inspected item, Kodak or a company designated
by Kodak shall be responsible for causing the non-conforming item to achieve,
by means of Kodak's choosing, substantial compliance with its product
specifications at Kodak's expense. Upon delivery, the Products shall be paid
for within the time frame provided in this Agreement even if non-conformance is
found under the circumstances set forth herein. In the case of Spare Parts and
Supplies, Kodak, at its option, shall replace those non-conforming items or
give credit to Purchaser for such non-conforming items, which shall be applied
against subsequent purchases of those items.
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Section 7.2 Quality Assurance. (a) Purchaser shall (x)
provide Kodak with such installation and service data and (y) perform or permit
Kodak to perform such quality checks, as Kodak requires to maintain the quality
of Equipment, Software, Spare Parts Supplies and Accessories that are Products,
and OEM Products. If the rate of field reliability of any Product is lower
than expected by Purchaser or Kodak, Kodak may in its discretion or upon the
request of Purchaser monitor installation and servicing of such items at
Purchaser's customer locations, and Purchaser shall facilitate such monitoring.
If Kodak determines that Purchaser's installation or servicing procedures are a
cause of the reliability problem, Purchaser shall make such revisions to its
procedures as Kodak reasonably requests.
(b) Immediately upon Kodak's request, Purchaser shall
cease ordering any and all products under any of the OEM-In Agreements if
Kodak, in good faith, determines that the supplier thereunder or any of its
subsidiaries has breached, or reasonably may be expected to breach, any of its
obligations under any OEM-In Agreement with respect to any right that Kodak
retains in such agreement or if Kodak is not satisfied with the quality of such
Products.
(c) Kodak shall notify Purchaser if Kodak initiates or
causes any changes to electrophotographic products supplied to Purchaser under
the OEM-In Agreements that Kodak determines in good faith may have an adverse
effect on Purchaser.
(d) Kodak shall require and perform audits of Purchaser's
service operations, as outlined on Exhibit Q, in order to ensure the
maintenance of high quality service substantially equivalent to that which
Kodak, through the Business, provided to its customers prior to the Effective
Date. If Kodak determines that Purchaser's service operations fail to meet
such standard, Purchaser shall make such revisions to its service procedures as
Kodak requests.
Section 7.3 Equipment Warranty. WITH RESPECT TO EQUIPMENT,
ACCESSORIES, SOFTWARE AND SPARE PARTS, KODAK WARRANTS SUCH EQUIPMENT, SOFTWARE,
ACCESSORIES AND SPARE PARTS SHALL BE FREE FROM LIENS OR OTHER DEFECTS IN TITLE.
KODAK MAKES NO OTHER WARRANTIES. THE EQUIPMENT, SOFTWARE, ACCESSORIES AND
SPARE PARTS ARE SOLD "AS IS" WITHOUT ANY WARRANTIES, EXPRESS OR IMPLIED,
INCLUDING ANY IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE, OTHER THAN THOSE SET FORTH IN SECTION 7.1 AND THE FIRST
SENTENCE OF THIS SECTION 7.3. KODAK AND THE SUBSIDIARIES SHALL NOT BE LIABLE
FOR PROPERTY DAMAGES (UNLESS CAUSED PRIMARILY BY KODAK'S NEGLIGENCE), LOSS OF
PROFITS OR OTHER INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF
THE USE OF OR INABILITY TO USE THE EQUIPMENT, ACCESSORIES AND SPARE PARTS,
WHETHER ON ACCOUNT OF NEGLIGENCE OR OTHERWISE.
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Section 7.4 Supplies Warranty. WITH RESPECT TO SUPPLIES,
KODAK WARRANTS THAT ALL UNITS OF SUCH SUPPLIES SHALL BE FREE FROM LIENS OR
OTHER DEFECTS IN TITLE. KODAK FURTHER WARRANTS THAT SUPPLIES FURNISHED TO
PURCHASER UNDER THIS AGREEMENT SHALL BE FREE OF DEFECTS IN MATERIAL AND
WORKMANSHIP FOR A PERIOD OF 12 MONTHS FROM THE DATE OF SHIPMENT TO PURCHASER OR
AN AFFILIATE OF PURCHASER.
AS KODAK'S SOLE OBLIGATION UNDER THIS WARRANTY, KODAK SHALL AT
NO COST TO PURCHASER OR AN AFFILIATE OF PURCHASER REPLACE OR ISSUE TO PURCHASER
A CREDIT EQUAL TO THE PRICE OF ANY SUPPLY RETURNED TO KODAK WHICH PROVES
DEFECTIVE WITHIN THE APPLICABLE WARRANTY PERIOD PROVIDED IN THIS SECTION 7.4.
PURCHASER SHALL NOT BE OBLIGATED TO, AND SHALL NOT, RETURN ANY SUCH ITEMS IN
LOTS CONTAINING AN AGGREGATE ORIGINAL PURCHASE PRICE OF LESS THAN FIVE HUNDRED
DOLLARS ($500.00). KODAK, AT ITS OPTION, MAY WAIVE THE RIGHT TO HAVE ANY SUCH
DEFECTIVE ITEMS RETURNED, BUT SHALL STILL BE OBLIGATED TO ISSUE THE APPLICABLE
CREDIT.
Section 7.5 Service for Kodak Products. Purchaser will be
responsible for providing adequate service at its own risk and expense for
Equipment, Accessories and Software purchased pursuant to this Agreement.
ARTICLE VIII
TECHNICAL INFORMATION: HAZARDS AND PRECAUTIONARY PROCEDURES
Section 8.1 Technical Information. (a) Any technical
information or assistance provided by Kodak or a Subsidiary to Purchaser shall
not be deemed a warranty or a specification. Purchaser shall familiarize
itself with all hazards and precautionary procedures with respect to the
handling, transportation or use of the Products, and the containers in which
the Products are shipped, and shall manage the Products and containers
accordingly. If Kodak provides to Purchaser any product safety information
concerning any Product, Purchaser shall forward such information to its
employees, all others who handle the Products and Purchaser's customers.
(b) Kodak shall provide to Purchaser at no charge English
language technical operations and service materials and related technical
information necessary to service and operate all Products purchased under this
Agreement. Purchaser may reproduce and publish whole or portions of said
materials solely for incorporation in its own operation training and
maintenance manuals for Equipment. Purchaser shall not attempt to transfer any
rights therein to third parties. Purchaser shall not reproduce, without
Kodak's permission,
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any other materials made available by Kodak or use, prepare or publish its own
operator and service publications for a particular Product, in each case
without the prior written consent of Kodak.
(c) Purchaser acknowledges that the aforementioned
technical operations and service materials contain technical information and
know-how which Kodak considers to be valuable, proprietary and Confidential
Information. Purchaser shall use efforts comparable to those it uses in
relation to its own valuable, proprietary and Confidential Information to
restrict use and distribution of such materials to Purchaser's personnel and
Dealer personnel for use solely in operating and servicing Products purchased
under this Agreement.
(d) Kodak upon Purchaser's request shall provide to
Purchaser a technical training program conducted in Rochester, New York for
each Current Product, New Product and Other Product sold hereunder. Kodak
operator and service materials shall be used during the training. Purchaser
shall be billed at the daily rate in effect at the time of the request.
Section 8.2 Technical Aid. During the term of this
Agreement, Kodak's service engineering group shall provide, at Purchaser's
request on an "as available" basis, consultation and/or service engineering
support at Purchaser's customer sites or Purchaser's service headquarters, with
respect to Current Products, New Products and Other Products. For each
request, Purchaser shall pay Kodak's reasonable travel expenses and Purchaser
shall be billed at the daily rate in effect at the time of the request. Kodak
shall credit back to Purchaser the cost of on-site support if it subsequently
is determined that on-site support was required because a particular product
did not comply with the applicable inspection test procedures for such product.
A Kodak manufacturing engineering contact shall be available on reasonable
terms to address Purchaser's Equipment and Accessory service questions that are
not related to the immediate resolution of an inoperative equipment condition.
The nature and scope of the assistance required pursuant to the preceding
sentence shall determine whether a price and if so, what price, shall be
charged for such assistance; provided, that Kodak shall provide a reasonable
amount of such assistance free of charge; and provided, further, that prior to
providing assistance for which Kodak will charge a fee, Kodak shall provide
Purchaser reasonable notice of Kodak's intent to do so and the amount of such
fee.
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ARTICLE IX
RESEARCH AND DEVELOPMENT
Section 9.1 Research and Development. Kodak shall conduct
research and technological development activities relating to Proposed New
Products (the "R&D Activities") for the term of this Agreement. Kodak shall
supply all capital equipment facilities necessary to conduct the R&D Services.
In addition, Kodak shall select certain of its qualified employees to manage
products relating to the development of Proposed New Products and Enhancements.
Kodak shall have sole responsibility for the compensation of such employees,
including all salaries and benefits of such employees.
Section 9.2 Budgets. (a) At least six weeks prior to the end
of each fiscal year, Kodak's Advisory Committee members shall present to the
Purchaser's Advisory Committee members (i) the estimated budget of Kodak's
Manufacturing Business for research and development spending for Proposed New
Products and technology development leading to New Products for the ensuing
year (as amended from time to time, the "R&D Budget"), excluding the budgets
for Process R&D, research and development related to material substitution and
research and development relating to OEM Supplies, and (ii) a written
description of its expected research and development projects relating to
Equipment and related Software, Accessories, Supplies and Spare Parts for the
ensuing year. Purchaser's Advisory Committee members shall have 30 days to
review the proposed R&D Budget and description for the expected research and
development projects. In the event that Purchaser objects to any item of an
R&D budget or any term of a proposed development project, the Purchaser
Advisory Committee members shall inform the Kodak Advisory Committee members of
such objection in writing and Kodak, acting in good faith, shall take such
objections into consideration in determining whether to amend the R&D budget or
any project description. If requested by Purchaser, the Advisory Committee
shall meet to discuss the objections of Purchaser and the members of the
Advisory Committee. The R&D Budgets for 1997, 1998 and 1999 shall be
consistent in scope and magnitude with the intentions of the parties with
respect thereto as of the date hereof.
(b) Unless this Agreement shall have been earlier
terminated, Kodak shall invoice Purchaser on a monthly basis for an amount
equal to one-twelfth of the Direct Funding Amount for the then-current year,
which amount shall be payable within ten Business Days of the date of such
invoice.
(c) At Purchaser's request, Kodak shall (i) furnish to
Purchaser and its representatives any financial or other data and information
to the extent that such data or information relates to the R&D Budget
expenditures for purposes of tax returns and tax audits and (ii) instruct its
employees and representatives to cooperate with Purchaser in its determination
or verification of such expenditures; it being understood that Purchaser shall
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reimburse Kodak promptly for any reasonable expenses it incurs in complying
with any such request by or on behalf of Purchaser.
Section 9.3 Advisory Committee. Kodak and Purchaser shall
each select and maintain for the term of this Agreement three of their
respective employees to serve as members of an advisory committee (the
"Advisory Committee") that shall meet no less than once every three months to
discuss overall research and development progress, revisions to New Product
Plans and Enhancements.
Section 9.4 Enhancements. Subject to the provisions of
Section 9.5, Kodak shall notify Purchaser in writing each time Kodak proposes
to develop an Enhancement to any Equipment, Software, Supply, Accessory or
Spare Part and Purchaser shall notify Kodak in writing each time Purchaser or
one of its Affiliates wishes to have Kodak develop an Enhancement. Such
notification shall contain a description, to the extent known, of the
anticipated enhanced features and/or service improvement, the anticipated cost
of such development and of retooling to manufacture a Product incorporating
such Enhancement and the proposed purchase price adjustment to such Product
occasioned thereby. Promptly following the giving of such notice, Purchaser
and Kodak shall negotiate in good faith to determine, on an economically
equitable basis taking into account the anticipated cost of developing the
Enhancement and manufacturing the Product that incorporates such Enhancement,
on the one hand, and the anticipated market price of such Product, on the other
hand, whether to proceed with the development of such Enhancement and, if the
parties determine to proceed, the terms of Purchaser's participation in such
development, including any advance funding or reimbursement obligations to be
incurred by Purchaser, the purchase price to Purchaser of such Product and any
minimum purchase quantity obligations to be incurred by Purchaser.
Section 9.5 Mandatory Enhancements. Kodak may, from time to
time in its sole discretion, implement field service modifications to Products
that improve safety or are required for regulatory compliance of Products.
Following Kodak's written request, Purchaser shall implement the required
modifications at its expense, using its best efforts to do so in a timely
manner. Kodak shall make available to Purchaser, at Kodak's expense, any
necessary kits, Spare Parts and technical Documentation required for the
installation of required field service modifications.
Section 9.6 Platform and Product Line Planning. (a) Kodak
and Purchaser, acting through the Advisory Committee, shall update and revise
on a quarterly basis the overall platform plans, pursuant to the principles and
procedures set forth in Appendix P.
(b) Prior to Kodak beginning the development of any
product or Accessory primarily related to electrophotographic systems, other
than a Product that, if developed, would be an Other Product or a related
Supply, Accessory or Spare Part (a "Proposed New Product"), Kodak and Purchaser
shall attempt to jointly develop a written plan on the basis
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of the principles, and including the substantive content, described under the
caption "Commercialization" in Exhibit P hereto (as in existence at the
relevant time, the "New Product Plan"). Each New Product Plan relating to a
Proposed New Product at the Gate 2 or later stage of the commercialization
process shall contain, with respect to such product, among other things, a
description of the anticipated costs for the various stages of development, the
degree of participation of Purchaser in the development process, the estimated
Unit Base Amount (by Factory), the Unit Gross Amount, the estimated purchase
price, the Designated Point of Delivery, the First Year Quantity Minimum, the
Three Year Quantity Minimum, commitments with regard to record-keeping and
reporting and a mechanism for updating the initial written plan.
(c) If Kodak provides Purchaser with the deliverables
described under the caption "Commercialization Processes" in Exhibit P hereto
at the Gate 0, Gate 1 or Gate 2 review contemplated by such Exhibit with
respect to a Proposed New Product and, within 45 days of any such review,
Purchaser and Kodak fail to agree on a New Product Plan (in the case of a Gate
0 review) or an amended New Product Plan (in the case of a Gate 1 or Gate 2
review) (i) Kodak, in its sole discretion, may proceed with the development,
manufacture and distribution of such Product in any manner of its choosing,
including through the license or transfer of its rights thereto, to third
parties, (ii) such product shall be deemed not to be a Product for any purpose
of this Agreement, and (iii) Purchaser shall no longer have any obligations
under this Agreement with respect to such product.
Section 9.7 Research and Development Exclusivity. Until this
Agreement expires or earlier terminates in accordance with Article X, Purchaser
shall not employ, contract with or enter into any joint ventures with any
Person other than Kodak to have such Person or any other Person research,
design or develop any high volume mainframes generally similar to any Current
Product or New Product to be sold by Purchaser or any of Purchaser's
Affiliates.
Section 9.8 Ownership of Intellectual Property. (a)
Notwithstanding any other provision of this Agreement or the termination
hereof, Kodak shall own all rights and interests in and to all Intellectual
Property (including, all patented and unpatented technology and Inventions)
developed by Kodak in connection with this Agreement. Except as explicitly
provided in Sections 11.1 and 11.4, this Agreement does not transfer, assign,
lease, license or otherwise provide Purchaser with any rights or interests in
any Intellectual Property used, developed or owned by Kodak.
(b) Procurement and maintenance of any patent, copyright
or maskwork relating to any technology, including any Invention, developed
pursuant to this Agreement shall be pursued at the discretion and expense of
Kodak.
Section 9.9 Confidential Information. To the extent that any
Confidential Information primarily relating to any research, design or
development conducted, being
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conducted, to be conducted or contemplated by Kodak is disclosed by either
party to this Agreement to the other party hereto, the receiving party shall
not disclose such Confidential Information to any other party (other than the
receiving party's employees, agents, consultants and advisors and the
employees, agents, consultants and advisors of its Affiliates (it being
understood that such employees, agents, consultants and advisors shall be
informed of the confidential nature of such information and shall be directed
to treat such information confidentially)), shall, for a period of five years
from the date of each disclosure, use such Confidential Information solely for
the purposes for which it was disclosed, except as described in Section 9.10,
and shall use the same degree of care, but no less than a reasonable degree of
care, to prevent the unauthorized use, dissemination or disclosure of the
Confidential Information as that party uses to protect its own confidential
information of a like nature.
Section 9.10 Purchaser's Intellectual Property. Without
altering Kodak's other rights and obligations hereunder, Kodak shall have a
nonexclusive, royalty-free license to use and sublicense Intellectual Property
that Purchaser makes known to Kodak subject to existing license agreements and
solely to make, have made, use, sell or otherwise dispose of Products.
ARTICLE X
TERMINATION
Section 10.1 Termination. (a) This Agreement may be
terminated at any time:
(i) by mutual agreement of Purchaser and Kodak;
(ii) by either Purchaser or Kodak, after a material breach by
the other party (the "Defaulting Party"), upon written notice to the Defaulting
Party (hereinafter, the "Default Notice") specifying the default, unless the
Defaulting Party cures the default within 60 days after receipt of the Default
Notice, or such longer period as may be reasonably necessary to cure such
default; it being understood that, for purposes of this Agreement, each of (x)
Purchaser's loss three times during the term of this Agreement of its
Exclusivity Right with respect to Current Products or any New Product (other
than pursuant to Section 6.1(e) and (y) any breach by Purchaser of the
provisions of Section 8.1(b) or Section 11.3(b), shall constitute a material
breach that may not be cured;
(iii) by Kodak, upon 60 days prior written notice to
Purchaser, in the event that Purchaser fails to pay any undisputed invoice on
the due date unless Purchaser pays the invoice within such 60-day period; and
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(iv) by Purchaser, upon 60 days' prior written notice to
Kodak, in the event that Kodak fails to pay any undisputed amount when due
unless Kodak pays such amount within such 60-day period.
(b) In lieu of terminating this Agreement, a party possessing
the right to terminate under Section 10.1(a)(ii), (iii) or (iv) may elect to
suspend performance of its obligations until, in the case of clause (ii), such
time as the material breach is cured and, in the case of clauses (iii) and
(iv), such time as the disputed amount is paid.
Section 10.2 Kodak Election. Notwithstanding anything to the
contrary in this Agreement, if at any time following the third anniversary of
this Agreement, Kodak determines that Kodak's Manufacturing Business has failed
to achieve adequate profitability, Kodak, in its sole discretion, may by
written notice to Purchaser elect to begin a 24-month winding down, at the end
of which period Kodak's Manufacturing Business will be shut down and this
Agreement shall be terminated. In the event Kodak makes such determination, at
Purchaser's request it shall engage in good-faith negotiations with Purchaser
regarding the sale of all or part of Kodak's Manufacturing Business to
Purchaser on mutually agreeable terms, subject to any contractual or other
legal restrictions on Kodak's transfer thereof.
Section 10.3 Effect of Termination. In the event of the
termination of this Agreement in accordance with Section 10.1 or 10.2, (a) this
Agreement shall thereafter become void and have no effect, and no party hereto
shall have any liability to the other party hereto or their respective
Affiliates, directors, officers or employees; provided, however, that neither
the expiration of this Agreement under Section 2.1 nor the termination of this
Agreement pursuant to this Article X shall (i) affect the liability of a party
for breach of this Agreement, (ii) discharge any of either party's obligations
to pay any amount owing and payable on the date of termination or (iii) affect
Sections 3.3, 7.3, 7.4, 8.1(a), (b) and (c), 9.6, 9.7, 11.2, 11.3, 12.1,
12.3(b), 12.4, 12.5, 12.6, 12.7, 12.8, 12.9, 12.10, 12.11, 12.12, 12.13, 12.14,
12.15, 12.16, 12.17 and 12.18 hereof (and any related definitional provisions
set forth in Article I), which shall survive, and except that nothing in this
Section 10.3 shall relieve any party from liability for any breach of this
Agreement that arose prior to such termination, and (b) Purchaser shall cease
to purchase products bearing the Kodak name and corporate symbol, or such other
trademarks as Kodak then uses, under the OEM-In Agreements.
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ARTICLE XI
TRADEMARKS AND OTHER INTELLECTUAL PROPERTY
Section 11.1 Brand Name. For the first five years following
the Effective Date, or for such longer period as Purchaser and Kodak mutually
agree, Kodak shall supply all Products, other than Other Products, with the
"Kodak" name and corporate symbol and such other trademarks as Kodak currently
uses on Products or adopts for use on New Products or Other Products. In no
event shall Kodak be required to use the "Kodak" name and corporate symbol or
such other trademarks on Current Products or New Products sold hereunder
following the fifth anniversary of the Effective Date unless Kodak otherwise
agrees in writing. Kodak's obligation to supply Products with the Kodak name
and corporate symbol and such other trademarks as Kodak currently uses, is
contingent on Purchaser's compliance with Sections 7.2(a) and 9.5.
Notwithstanding the foregoing, after the third anniversary of the Effective
Date, Kodak shall be entitled to utilize the "Kodak" name jointly with a name
designated by Purchaser in a program designed, to the mutual satisfaction of
the parties, to implement an orderly phase-out of Purchaser's use of the
"Kodak" name.
Section 11.2 Product Identification. Subject to Section
11.1, each unit of Equipment and Accessory shipped to Purchaser shall bear an
appropriate tag or plate, permanently affixed to it, showing its model number,
date of manufacture and serial number. Purchaser shall not remove or alter
tags or plates that display serial number or agency approval information for
any reason unless required to do so by law. Purchaser shall inform Kodak of
any removal or alteration of the tags or plates required by law and shall give
Kodak the opportunity to approve the form and content of the change, which
approval shall not be unreasonably withheld. Any removal or alteration, unless
required by law and with the knowledge of Kodak, shall, at Kodak's option, void
any applicable warranty as set forth in this Agreement.
Section 11.3 Purchaser's Use of Trademarks, and Proprietary
Markings. (a) During the term of this Agreement, Purchaser may use, without
undue prominence, the product name trademarks of Products in advertising that
promotes Products and the servicing thereof and other product-related marketing
materials, provided that Purchaser agrees to comply with, and require its
customers to comply with, such advertising guidelines that Kodak may issue from
time to time and correct, at Purchaser's own expense, such material that Kodak
determines to be objectionable or misleading.
(b) Except as provided in the Purchase Agreement and
Trade Name Agreement, Purchaser may not use the Kodak corporate symbol, Kodak
trade names, or the Kodak Service logo.
(c) Purchaser may use the Logo set forth in Exhibit L so
long as it abides by the quality criteria set forth in Exhibit L and cooperates
with the audit described in
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Exhibit Q. Purchaser may use the Logo on advertising and promotional materials
for its equipment service, and on letterhead paper and invoices for equipment
service. Purchaser agrees to comply with such Logo use guidelines as Kodak may
issue from time to time. Upon Kodak's request, Purchaser will give Kodak
access to its equipment service facilities and permit Kodak to accompany
Purchaser on service calls to observe Purchaser's operations. If Purchaser
receives notice from Kodak that Purchaser has not complied with Kodak's quality
criteria or audit and review procedures or is not using the Logo correctly,
Purchaser shall work with Kodak to correct the deficiencies in a manner and
time frame that is reasonably acceptable to Kodak and, if such corrections do
not occur in a manner and time frame that is reasonably acceptable to Kodak,
Purchaser shall, at Kodak's option, cease using the Logo and surrender to Kodak
or destroy all materials bearing the Logo.
(d) Except as provided expressly in Sections 8.1(b) and
11.3(a), Purchaser acknowledges that Kodak owns, and Purchaser has no right,
interest, ownership or privilege of use of, any trade dress, trade name,
trademark or logo that appears on Products or related material, except for
names designated by Purchaser and used in the manner and for the purpose
contemplated by the last sentence of Section 11.1. Purchaser agrees that all
of the foregoing are the sole property of Kodak. Purchaser further agrees not
to contest, both during the term of this Agreement and after termination, any
Kodak trade dress, trade name, trademark or service mark related in any way to
Products pursuant to this Agreement or the servicing of such Products, and
Purchaser agrees, both during the terms of this Agreement and after
termination, not to use or attempt to register any trade dress, trade name,
trademark or service mark confusingly similar to any Kodak trade dress, trade
name, trademark or service mark. Purchaser may not represent that it provides
"Kodak service", but may represent that it is authorized to service Kodak
branded copiers. Purchaser acknowledges that any breach of the preceding
sentence would constitute a material breach for which Kodak could terminate
this Agreement pursuant to Section 10.1(a)(ii).
(e) Without limiting Purchaser's obligations and
covenants under Section 11.2, Purchaser shall not remove, alter, conceal or
destroy any Kodak nameplates, logos or dataplates on Products, enclosures or
cabinets or proprietary markings or legends placed by Kodak upon or within such
Products, supporting Documentation or other materials that are the subject of
this Agreement.
Section 11.4 Software. Kodak shall not be obligated
hereunder to provide Purchaser with access to the source code for any Software.
If Purchaser develops a modification, addition or customization of any Software
for one of its customers, Purchaser shall be prohibited from representing to
its customers that such modification, addition or customization constitutes a
Software Product of Kodak and shall instead prominently display on such
Software or the Equipment to which it relates the phrase "Independently
Modified by Danka for [such Company]." Kodak shall not be obligated to assure
that subsequent versions of its Software products are compatible with any
modification, addition, or customization that has been developed by the
Purchaser. If, however, Purchaser determines that such
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modification, addition or customization would be desirable or useful to other
of Purchaser's customers or potential customers, Purchaser promptly shall
notify Kodak and provide Kodak the right to produce a product that incorporates
such modifications, additions or customization before Purchaser makes such
modifications or additions for any additional customers. If Kodak exercises
such right by notifying Purchaser in writing within sixty days that Kodak
intends to make such a product, Purchaser shall not make any further
modifications, additions or customizations without Kodak's consent.
ARTICLE XII
MISCELLANEOUS
Section 12.1 Notices. All notices or other communications
under this Agreement shall be in writing and shall be deemed duly given,
effective (i) three Business Days later, if sent by registered or certified
mail, return receipt requested, postage prepaid, (ii) when sent, if sent by
telecopier or fax, provided that the telecopy or fax is promptly confirmed by
telephone confirmation thereof, (iii) when served, if delivered personally to
the intended recipient, and (iv) one Business Day later, if sent by overnight
delivery via a national courier service, in each case (i) through (iv),
addressed to the intended recipient at the address set forth below. Any party
may change the address to which notices or other communications hereunder are
to be delivered by giving the other party notice in the manner herein set
forth.
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To Purchaser:
[NAME OF SUBSIDIARY]
c/o DANKA BUSINESS SYSTEMS PLC
Masters House
107 Hammersmith Road
London W14 OQH
England
Telephone: 44171-603-1515
Telecopy: 44171-603-8448
Attn: Paul G. Dumond
Company Secretary
With a copy to:
SHUMAKER, LOOP & KENDRICK
Suite 2800 - Barnett Plaza
101 East Kennedy Boulevard
Tampa, Florida 33602-5151
Telephone: (813) 229-7600
Telecopy: (813) 229-1660
Attn: W. Thompson Thorn, III
To Kodak:
EASTMAN KODAK COMPANY
343 State Street
Rochester, New York 14650
Telephone: (716) 724-4332
Telecopy: (716) 724-9448
Attn: Ken Hoffman, Vice President
With a copy to:
EASTMAN KODAK COMPANY
343 State Street
Rochester, New York 14650
Telephone: (716) 724-4332
Telecopy: (716) 724-9448
Attn: General Counsel
Section 12.2 Amendment; Waiver. Any provision of this
Agreement may be amended or waived if, and only if, such amendment or waiver is
in writing and signed, in the case of an amendment, by Purchaser and Kodak, or
in the case of a waiver, by the party against whom the waiver is to be
effective. Except as otherwise provided herein, the rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
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Section 12.3 Assignment. (a) Kodak may not assign any of its
rights or delegate any of its obligations under this Agreement or sell or
otherwise transfer Kodak's Manufacturing Business, by operation of law or
otherwise, to any Person for a period commencing on the Effective Date and
expiring thirty months following the Effective Date. In the event that any
time thereafter, Kodak desires to sell or otherwise transfer Kodak's
Manufacturing Business, Kodak shall notify Purchaser in writing (an "Offering
Notice") of the rights and obligations proposed to be transferred, the proposed
sale price and other material terms and conditions of such proposed sale.
Purchaser shall have the right, for a period of 90 Business Days after the
giving of the Offering Notice (the "Offer Period"), to elect to purchase
Kodak's Manufacturing Business at the price and on the material terms set forth
in the Offering Notice (the "Right of First Offer"). At Purchaser's request,
Kodak shall provide such information as Purchaser reasonably requests to
evaluate Kodak's Manufacturing Business. If Purchaser elects to exercise its
Right of First Offer, (i) it shall give written notice of such election (an
"Election Notice") to Kodak within the Offer Period, which Election Notice
shall specify a closing date not more than 120 Business Days after the giving
thereof, and, on the date so specified (or such other date as the parties shall
mutually agree), Kodak shall transfer and Purchaser shall purchase, Kodak's
Manufacturing Business at the price set forth in the Offering Notice and (ii)
Purchaser shall receive a two year (or such longer period specified in the
Offering Notice) transitional license to use those Kodak trademarks that, at
that time, Kodak uses in connection with Kodak's Manufacturing Business (other
than the "Kodak" trade name and the corporate symbol), subject in each case to
such additional terms and conditions as Kodak shall determine are necessary to
protect its trademarks. If Purchaser does not elect to exercise its Right of
First Offer within the Offer Period, Kodak may transfer Kodak's Manufacturing
Business to any party at a price no lower and material terms no less favorable
than those offered to Purchaser in the Offering Notice at any time within 180
Business Days after the date of the Offering Notice. Any such sale to such
party shall be subject to the remaining terms of this Agreement.
(b) Subject to Section 12.17 Purchaser may not assign any
of its rights or delegate any of its obligations under this Agreement, by
operation of law or otherwise, except to a Purchaser Affiliate so long as Danka
executes and delivers to Kodak a guarantee of such Purchaser Affiliate's
performance of the obligations of Purchaser hereunder, substantially in the
form set forth on the signature page hereto and; provided further, that in the
event Danka sells all or substantially all of its entire business, Purchaser
may assign all of its rights and delegate all of its obligations under this
Agreement to the purchaser of such business with Kodak's consent, which consent
shall not be unreasonably withheld.
Section 12.4 Entire Agreement. This Agreement (including all
Exhibits and Attachments hereto) contains the entire agreement between the
parties hereto with respect to the subject matter hereof and supersedes all
prior agreements and understandings, oral or written, with respect to such
matters.
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Section 12.5 Fulfillment of Obligations. Any obligation of
any party to any other party under this Agreement, which obligation is
performed, satisfied or fulfilled by an Affiliate of such party, shall be
deemed to have been performed, satisfied or fulfilled by such party.
Section 12.6 Parties in Interest; No Additional Third-Party
Beneficiaries. This Agreement shall inure to the benefit of and be binding
upon the parties hereto, the Kodak Indemnified Parties, the Purchaser
Indemnified Parties and their respective successors and permitted assigns.
Nothing in this Agreement, express or implied, is intended to confer upon any
other Person, any rights or remedies under or by reason of this Agreement.
Section 12.7 Patent and Copyright Indemnification. (a) Kodak
hereby agrees to indemnify Purchaser and its Affiliates, and, if applicable,
their respective directors, officers, shareholders, partners, attorneys,
accountants, agents and employees and their heirs, successors and assigns
(collectively, the "Purchaser Indemnified Parties") from, against and in
respect of any claim that any Product as delivered by Kodak infringes,
misappropriates or otherwise violates any third party's patent or copyright.
Kodak's obligation to indemnify the Purchaser Indemnified Parties is subject to
the following terms and conditions:
(b) The obligation shall arise only if Purchaser gives
Kodak prompt notice of the infringement claim and grants Kodak, in writing,
exclusive control over its defense and settlement; provided, however, that a
failure to give prompt notice shall affect the rights of Purchaser only to the
extent that such failure has a prejudicial effect on the defenses or other
rights available to Kodak with respect to such claim.
(c) The obligation shall cover only the Product as
delivered by Kodak to Purchaser, and not any correction, modification or
addition made by anyone other than Kodak, without Kodak's written
authorization.
(d) The obligation shall not cover (A) any claim based on
the use of any Products to practice a process other than that for which the
Product is normally intended, (B) the furnishing of any information, service,
or technical support or (C) any claim that any Product infringes any third
party's rights as used in combination with any product(s) not supplied by
Kodak, if that claim could have been avoided but for the use of the Product in
combination with other products except to the extent such combined use is
authorized or approved in writing by Kodak.
(e) If any infringement claim is asserted, or if Kodak
believes one likely, Kodak shall have the right, at its expense, to (A) procure
a license from the Person claiming or likely to claim infringement, (B) modify
the Product as appropriate to avoid the claim of infringement, as long as
modification for this purpose does not materially impair the operation thereof
or (C) cease further sale of the Product subject to, or likely to be subject
to, the claim and accept return of the Products sold and refund to Purchaser
the pro rata
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price paid for the returned Product(s) using five year straight-line
depreciation reflecting any quantity or other discounts granted to Purchaser.
(f) Kodak's indemnification is limited to the payment of
damages awarded against any Purchaser Indemnified Party and the payment of
reasonable attorneys' fees and expenses for the period prior to the time Kodak
assumed exclusive control of the defense. In no event shall Kodak reimburse
any Purchaser Indemnified Party for attorneys' fees and expenses incurred by a
Purchaser Indemnified Party after Kodak assumed the defense of a claim.
Notwithstanding the foregoing, Purchaser shall have the right to consult in the
defense of a claim and to employ counsel, at Purchaser's expense, separate from
the counsel employed by Kodak to the extent such claim involves potential
conflicts of interest between or different defenses for Purchaser and Kodak and
Purchaser reasonably determines that separate representation would be
appropriate.
(g) Subsections 12.7(a) through (f) state Kodak's
exclusive obligation with respect to claims by Purchaser Indemnified Parties
with respect to a Product's infringement of proprietary rights of any kind.
Section 12.8 GOVERNING LAW; SUBMISSION TO JURISDICTION;
SELECTION OF FORUM. THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE
OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH PARTY
HERETO AGREES THAT IT SHALL BRING ANY ACTION OR PROCEEDING IN RESPECT OF ANY
CLAIM ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTAINED
IN OR CONTEMPLATED BY THIS AGREEMENT, WHETHER IN TORT OR CONTRACT OR AT LAW OR
IN EQUITY, EXCLUSIVELY IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK OR THE SUPREME COURT OF THE STATE OF NEW YORK FOR NEW YORK
COUNTY (THE "CHOSEN COURTS") AND SOLELY IN CONNECTION WITH CLAIMS ARISING UNDER
THIS AGREEMENT OR THE TRANSACTIONS CONTAINED IN OR CONTEMPLATED BY THIS
AGREEMENT (I) IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE CHOSEN
COURTS, (II) WAIVES ANY OBJECTION TO LAYING VENUE IN ANY SUCH ACTION OR
PROCEEDING IN THE CHOSEN COURTS, (III) WAIVES ANY OBJECTION THAT THE CHOSEN
COURTS ARE AN INCONVENIENT FORUM OR DO NOT HAVE JURISDICTION OVER ANY PARTY
HERETO AND (IV) AGREES THAT SERVICE OF PROCESS UPON SUCH PARTY IN ANY SUCH
ACTION OR PROCEEDING SHALL BE EFFECTIVE IF NOTICE IS GIVEN IN ACCORDANCE WITH
SECTION 12.1 OF THIS AGREEMENT. EACH OF KODAK AND PURCHASER IRREVOCABLY
DESIGNATES C.T. CORPORATION AS ITS AGENT AND ATTORNEY IN FACT FOR THE
ACCEPTANCE OF SERVICE OF PROCESS AND MAKING AN APPEARANCE ON ITS BEHALF IN ANY
SUCH CLAIM OR PROCEEDING AND FOR THE TAKING OF ALL SUCH ACTS AS MAY BE
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NECESSARY OR APPROPRIATE IN ORDER TO CONFER JURISDICTION OVER IT BEFORE THE
CHOSEN COURTS AND PURCHASER STIPULATES THAT SUCH CONSENT AND APPOINTMENT IS
IRREVOCABLE AND COUPLED WITH AN INTEREST.
Section 12.9 Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original, and all of
which shall constitute one and the same Agreement.
Section 12.10 Headings. The heading references herein are
for convenience purposes only, do not constitute a part of this Agreement and
shall not be deemed to limit or affect any of the provisions hereof.
Section 12.11 Confidentiality. Confidential Information
provided or exchanged pursuant to this Agreement, except with respect to
information which is the subject of Section 9.8, shall be provided or exchanged
under a standard nondisclosure agreement in substantially the form set forth in
Exhibit O.
Section 12.12 Severability. The provisions of this Agreement
shall be deemed severable and the invalidity or unenforceability of any
provision shall not affect the validity or enforceability of the other
provisions hereof. If any provision of this Agreement, or the application
thereof to any Person or any circumstance, is invalid or unenforceable, (a) a
suitable and equitable provision shall be substituted therefor in order to
carry out, so far as may be valid and enforceable, the intent and purpose of
such invalid or unenforceable provision and (b) the remainder of this Agreement
and the application of such provision to other persons, entities or
circumstances shall not be affect by such invalidity or unenforceability, nor
shall such invalidity or unenforceability affect the validity or enforceability
of such provision, or the application thereof, in any other jurisdiction.
Section 12.13 Relationship of Parties. Each party in
performing its obligations and duties hereunder shall be conclusively deemed to
be an independent contractor and not under the control and supervision of the
other party hereto. No agency, employment, franchise, partnership or joint
venture and no trust or other fiduciary relationship is created or implied by
the terms of this Agreement, and neither of the parties is nor shall hold
itself out as agent, legal representative, partner, subsidiary, joint venturer
or employee of the other party. Neither party shall have the right or power
to, nor shall, bind or obligate the other party in any way or manner, nor
represent that such party has the right to do so. Neither party has the
authority to make any commitment on behalf of the other party. The sole
relationship between Purchaser and Kodak is a commercial, arms' length business
relationship.
Section 12.14 Force Majeure. Kodak shall not be held
responsible for failure of or delay in delivery, nor shall Purchaser be held
responsible for failure or delay in
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accepting, Products hereunder, if such failure or delay is due to act of God or
public enemy, war, government acts or regulations, fire, flood, embargo,
quarantine, epidemic, labor strike, inability to acquire raw materials,
accident, unusually severe weather or other cause similar or dissimilar to the
foregoing, beyond their control (each such event, a "Force Majeure"). In the
event of failure of or delay in delivery or acceptance due to a Force Majeure,
the quantity provided for in the Purchase Order so affected may be reduced
accordingly by written notice by either party to the other.
If the performance of this Agreement by either party or any
obligation hereunder is prevented, restricted or interfered with by reason of a
Force Majeure event, the party whose performance is so affected, upon giving
prompt notice to the other party, shall be excused from such performance to the
extent of such Force Majeure event; provided, however, that the party so
affected shall take all reasonable steps to avoid or remove such causes of
nonperformance and shall continue performance hereunder with dispatch whenever
such causes are removed.
Section 12.15 Conflict. To the extent that any provision of
the Purchase Agreement, or any other document or other agreement executed in
connection with the Purchase Agreement, is in conflict with any term or
provision of this Agreement or any Annex to this Agreement with respect to any
Product expressly described in an Annex, this Agreement shall take precedence.
To the extent this Agreement is in conflict with any Exhibit, this Agreement
shall take precedence.
Section 12.16 Purchaser's Indemnity. (a) Purchaser hereby
agrees that it shall indemnify, defend and hold harmless Kodak, its Affiliates,
and, if applicable, their respective directors, officers, shareholders,
partners, attorneys, accountants, agents and employees and their heirs,
successors and assigns (collectively, the "Kodak Indemnified Parties") from,
against and in respect of, any damages, claims, losses, charges, actions,
suits, proceedings, deficiencies, taxes, interest, penalties and reasonable
costs and expenses (including reasonable attorneys' fees, removal costs,
remediation costs, closure costs, fines, penalties and expenses of
investigation and ongoing monitoring) (collectively, the "Losses") imposed on,
sustained, incurred or suffered by or asserted against any of the Kodak
Indemnified Parties, directly or indirectly, relating to or arising from (i)
Purchaser's storage, transportation, use, modification, sale or other means of
disposition or disposal of any Product, except to the extent such Losses are
caused by Kodak's willful misconduct or negligence (which shall not be deemed
to exist if such action or inaction is taken at, and in accordance with,
Purchaser's direction or by Purchaser's employees), (ii) Purchaser's
performance claims regarding Products in promotional or advertising materials,
(iii) any alleged infringement arising out of or resulting from compliance with
Purchaser's requests, instructions or specifications, or from any modification
of said Products not authorized by Kodak or (iii) Purchaser's breach of Section
8.1.
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(b) Kodak shall have the right to consult in the defense of a
claim and to employ counsel, at Kodak's expense, separate from the counsel
employed by Purchaser to the extent such claim involves potential conflicts of
interest between or different defenses for Purchaser and Kodak and Kodak
reasonably determines that separate representation would be appropriate.
(c) Failure by Kodak to give prompt notice of a claim
under this Section 12.16 shall affect the rights of Kodak hereunder only to the
extent that such failure has a prejudicial effect on the defenses on or other
rights available to Purchaser with respect to such claim.
Section 12.17 Subsidiaries. Each Subsidiary may exercise any
of Kodak's rights hereunder or perform any of Kodak's agreements, covenants and
obligations hereunder; provided, that Kodak fully and unconditionally
guarantees the due and punctual performance and observance of each and every
such agreement, covenant and obligation, irrespective of any circumstance,
including any statute of limitations, that might otherwise constitute a defense
available to, or a discharge of, any such agreement, covenant or obligation.
ARTICLE XIII
NON-COMPETE
Kodak agrees that, until the Exclusivity Termination Date, it
shall not, except as otherwise expressly permitted by this Agreement, directly
(or indirectly through a controlling interest), anywhere in the world,
participate or engage in the marketing, sale, distribution, maintenance,
service or repair of Equipment that is a Current Product or a New Product;
provided, however, that if Kodak acquires control of an entity that is so
engaged, it will offer Purchaser the opportunity to purchase, on reasonable
terms and conditions, such entity or the portion of such entity so engaged.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered by their duly authorized officers as of
the date first above written.
EASTMAN KODAK COMPANY
By:____________________________
[NAME OF PURCHASER]
By:____________________________
UNCONDITIONAL GUARANTEE
DANKA BUSINESS SYSTEMS PLC, a public limited company incorporated under the
laws of England and Wales, hereby irrevocably and unconditionally guarantees
the due and punctual performance and observance of each and every agreement,
covenant and obligation of [PURCHASER] under this Agreement, irrespective of
any circumstance, including any statute of limitations, that might otherwise
constitute a defense available to, or a discharge of, any such agreement,
covenant or obligation.
DANKA BUSINESS SYSTEMS PLC
By:____________________________
Name:
Title:
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EXHIBIT O
DISCLOSURE AGREEMENT
This Agreement, having an effective date of __________, 1996, is
entered into between Eastman Kodak Company, having a principal place of
business at 343 State Street, Rochester, New York 14650 (hereinafter "Kodak")
and Purchaser, having an office at _________________________ (hereinafter
"Purchaser").
The parties mutually agree that:
1. For purposes of this Agreement, confidential information shall include
only information that meets the following three conditions:
a. it directly relates to business and technical aspects of the
Products as defined in the Supply Agreement;
b. it is disclosed after the effective date of this Agreement and
before the termination of the Supply Agreement; and
c. it is disclosed in tangible form clearly labeled as
confidential or, if disclosed initially in any other form,
identified in writing and confirmed as confidential within 30
days after initial disclosure.
2. For a period of three years from the date of each disclosure under
this Agreement, each party shall safeguard confidential information
received hereunder by using the same degree of care, but no less than
a reasonable degree of care, to prevent the unauthorized use,
dissemination or disclosure of the confidential information as that
party uses to protect its own confidential information of a like
nature and shall reveal such information only to its employees having
a need to know.
3. Obligation regarding confidential information received hereunder shall
not apply to any such information that:
a. was in the receiving party's possession before receipt
hereunder from the party requesting confidentiality and is not
otherwise known by the receiving party to be the subject of an
obligation of confidentiality;
b. is or becomes a matter of public knowledge other than as a
result of any action or inaction of the receiving party;
<PAGE> 171
c. is rightfully received by the receiving party from a third
party not under any duty of confidentiality with respect
thereto;
d. is independently developed by or on behalf of the receiving
party; or
e. is required by law or order of a court of competent
jurisdiction to be disclosed; provided that the party from
whom disclosure is sought shall cooperate with the other party
to the extent the latter may seek to limit such disclosure.
4. The extent of any disclosure made under this Agreement shall be at the
sole discretion of the disclosing party.
5. No license or any other rights are granted by this Agreement or by any
disclosure made under this Agreement.
6. No obligation of any kind is assumed by or implied against either
party except for those stated herein.
7. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF NEW YORK WITHOUT REFERENCE TO CHOICE OF LAW PRINCIPLES
THEREOF.
EASTMAN KODAK COMPANY [NAME OF PURCHASER]
By: _________________________ By:___________________________
Title: ______________________ Title:__________________________
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TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
PAGE
ARTICLE I
DEFINITIONS
Section 1.1 Specific Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.2 Other Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 1.3 Other Definitional Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE II
TERM OF AGREEMENT
Section 2.1 Term of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 2.2 Renewal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE III
SUPPLY OF PRODUCTS
Section 3.1 Supply of Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.2 Discontinuation of Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.3 Further Availability of Supplies and Spare Parts . . . . . . . . . . . . . . . . . . . . 11
Section 3.4 Resale of Products by Purchaser. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE IV
QUANTITY MINIMUMS AND ORDERS
Section 4.1 Current Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 4.2 New Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 4.3 Equipment and Accessories Orders and Rolling
Horizon Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 4.4 Supply Orders and Rolling Horizon Estimates . . . . . . . . . . . . . . . . . . . . . . 14
Section 4.5 Spare Parts Orders and Rolling Horizon Estimates . . . . . . . . . . . . . . . . . . . . 14
Section 4.6 Software Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 4.7 Carcasses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
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<TABLE>
<S> <C> <C>
Section 4.8 Emergency Spare Parts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 4.9 Access to Purchaser's Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 4.10 Repurchase of Parts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 4.11 Recycled (Exchanged) Spare Parts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 4.12 Software Customization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE V
PRICING
Section 5.1 Pricing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 5.2 Price Increases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 5.3 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 5.4 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.5 Gross Amount Collar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.6 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE VI
DISTRIBUTION AND DELIVERIES
Section 6.1 Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 6.2 Other Products and Partnered Products . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 6.3 Kodak's Right to Distribute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 6.4 Title and Risk of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 6.5 Shipping Frequency and Quantity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 6.6 Calls to CIC by Kodak Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE VI-A
NON-COMPETE
ARTICLE VII
WARRANTY, INSPECTION AND QUALITY ASSURANCE
Section 7.1 Inspection and Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 7.2 Quality Assurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 7.3 Equipment Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
-ii-
<PAGE> 174
<TABLE>
<S> <C> <C>
Section 7.4 Supplies Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 7.5 Service for Kodak Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE VIII
TECHNICAL INFORMATION: HAZARDS AND PRECAUTIONARY PROCEDURES
Section 8.1 Technical Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 8.2 Technical Aid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE IX
RESEARCH AND DEVELOPMENT
Section 9.1 Research and Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 9.2 Budgets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 9.3 Advisory Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 9.4 Enhancements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 9.5 Mandatory Enhancements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 9.6 Platform and Product Line Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 9.7 Research and Development Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 9.8 Ownership of Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 9.9 Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 9.10 Purchaser's Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE X
TERMINATION
Section 10.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 10.2 Kodak Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 10.3 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE XI
TRADEMARKS AND OTHER INTELLECTUAL PROPERTY
Section 11.1 Brand Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 11.2 Product Identification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
</TABLE>
-iii-
<PAGE> 175
<TABLE>
<S> <C>
Section 11.3 Purchaser's Use of Trademarks, and Proprietary Markings . . . . . . . . . . . . . . . . 32
Section 11.4 Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE XII
MISCELLANEOUS
Section 12.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 12.2 Amendment; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 12.3 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 12.4 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 12.5 Fulfillment of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 12.6 Parties in Interest; No Additional Third-Party Beneficiaries . . . . . . . . . . . . . . 37
Section 12.7 Patent and Copyright Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 12.8 GOVERNING LAW; SUBMISSION TO JURISDICTION;
SELECTION OF FORUM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 12.9 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 12.10 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 12.11 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 12.12 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 12.13 Relationship of Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 12.14 Force Majeure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 12.15 Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 12.16 Purchaser's Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 12.17 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE XIII
NON-COMPETE
EXHIBITS
Exhibit A Equipment, Accessories and Software Prices
Exhibit B Spare Parts Prices
Exhibit C Supplies Prices
Exhibit D Exchange Parts and Prices
Exhibit E [RESERVED]
Exhibit F Future Pricing Principles
Exhibit G OEM-In Agreements
</TABLE>
-iv-
<PAGE> 176
Exhibit H Base Amount Per Factory Calculations
Exhibit I Targeted Equipment Quantity Minimums Per Platform
Exhibit J Other Types of Toner
Exhibit K Kodak Developed or Manufactured Equipment that uses OEM
Supplies
Exhibit L Logo and Quality Criteria
Exhibit M Purchaser's Affiliates
Exhibit N OEM-Out Agreements
Exhibit O Disclosure Agreement
Exhibit P Critical Development Gates
Exhibit Q Audits of Purchaser's Service Operations
Exhibit R Kodak's Designated Point of Delivery
Exhibit S Unit Gross Amounts and Targeted Number of Units
Exhibit T Direct Funding Amounts
Exhibit U Existing Distribution Agreements
ATTACHMENTS
Attachment A Exhibit A Pricing Principles
Attachment B Exhibit B Pricing Principles
Attachment C Exhibit C Pricing Principles
Attachment D Other Types of Toner Pricing Principles
Attachment E Unit Base Amount Recovery Principles
-v-
<PAGE> 1
Exhibit 99
DANKA PRESS RELEASE
WORLD-CLASS PRODUCTS. WORLD-CLASS SERVICE.
FOR IMMEDIATE RELEASE WILLIAM T. FREEMAN
813-576-6003
OCTOBER 29, 1996 PAUL G. DUMOND
011-44-171-603-1515
DANKA BUSINESS SYSTEMS PLC: (DANKY)
DANKA REPORTS RECORD SECOND QUARTER REVENUE
SECOND QUARTER HIGHLIGHTS:
o Revenue increases 54% to a record $420 million
o Danka enters Australasian market through two acquisitions positioning the
Company with a 10% market share
o Agreement to acquire sales, service and facilities management operations of
Kodak's Office Imaging business, adding $1.8 billion in worldwide revenues
QUARTER ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
Three Months % Increase Six Months % Increase
------------ ---------- ---------- ----------
(in thousands, except per ADS amounts)
<S> <C> <C> <C> <C>
Revenue $ 420,528 54% $ 822,483 57%
Earnings from Operations 30,036 24% 58,200 29%
Net Earnings 14,397 16% 28,728 23%
Earnings per ADS $ 0.25 0.50
</TABLE>
DAN DOYLE, CHIEF EXECUTIVE, COMMENTED ON THE SECOND QUARTER, "THIS QUARTER HAS
BEEN AN EXCITING ONE FOR DANKA. IN JULY WE ENTERED THE AUSTRALASIAN MARKET,
AND IN SEPTEMBER, WE ANNOUNCED THAT DANKA WILL JOIN FORCES WITH EASTMAN KODAK
COMPANY TO CREATE A WORLDWIDE OFFICE IMAGING POWERHOUSE."
Page 1 of 7
<PAGE> 2
DANKA PRESS RELEASE
WORLD-CLASS PRODUCTS. WORLD-CLASS SERVICE.
FOR IMMEDIATE RELEASE OCTOBER 29, 1996
DANKA REPORTS RECORD SECOND QUARTER REVENUE
Danka Business Systems PLC (NASDAQ: DANKY) today announced results for its
second quarter ended September 30, 1996. Revenue increased 54% to a record
$420.5 million, while earnings from operations grew 24% to $30.0 million. Net
earnings rose 16% to $14.4 million, or $0.25 per American Depositary Share
("ADS") compared to $12.4 million or $0.25 per ADS last year. For the six
months, revenue increased 57% to $822.5 million, while earnings from operations
grew 29% to $58.2 million. Net earnings for the six months rose 23% to $28.7
million, or $0.50 per ADS compared to $0.47 per ADS last year.
Dan Doyle, Chief Executive, commented on the second quarter, "This quarter has
been an exciting one for Danka. In July we entered the Australasian market,
and in September, we announced that Danka will join forces with Eastman Kodak
Company to create a worldwide office imaging powerhouse."
As previously announced, Danka entered into an agreement with Eastman Kodak
Company on September 6, 1996, to acquire the sales, marketing, and equipment
service operations of Kodak's Office Imaging business, as well as Kodak's
facilities management business known as Kodak Imaging Services. Kodak will
retain its manufacturing and research and development functions supporting the
Office Imaging business. In connection with a related supply agreement, Danka
and Kodak will enter into a strategic alliance whereby Kodak will provide high
volume copiers and printers to the Company, making Danka the principal
distributor of Kodak branded office copiers and printers.
Danka will pay $684.2 million in cash at closing to acquire the net assets of
the sales, marketing, and equipment service functions of Kodak's Office Imaging
and facilities management business. The consideration paid by the Company is
subject to adjustments following the closing of the acquisition to the extent
that the net book value of Kodak's Office Imaging business as of the closing
date differs from the December 31, 1995 value of $802.0 million. The
transaction will be funded exclusively with bank debt under a six-year, $1.2
billion fully underwritten credit agreement. Upon closing, the new credit
agreement will also be utilized to refinance the existing bank indebtedness of
the Company and for working capital and general corporate purposes. As
previously announced, Danka expects to take a one-time restructuring charge of
$25.0 to $35.0 million in its third fiscal quarter related to the integration
of the acquired Kodak operations with Danka's existing service and sales
network. In addition, Danka expects to record an extraordinary charge of
approximately $1.0 million in the third quarter related to the write-off of
deferred costs associated with the Company's existing $400.00 million credit
facility which will be replaced by the new $1.2 billion facility. The Company
expects the acquisition to be accretive to earnings in the first twelve months
of operations.
Page 2 of 7
<PAGE> 3
Completion of the acquisition is subject to approval by Danka shareholders as
well as certain regulatory consents. The transaction, which is expected to
close by the end of this calendar year, will provide Danka with global coverage
in more than 700 offices in 31 countries around the world. Approximately 90%
of Kodak's Office Imaging revenue is generated in the countries where Danka
currently operates.
Dan Doyle commented, "The alliance between Kodak and Danka will enable us to
become the single-source solution for office imaging needs - offering equipment
from small copiers to high volume duplicators, fax machines and digital copiers
and printers. The acquisition of Kodak's sales, service and facilities
management business will bring together the mutual expertise and track records
of our fine organizations."
Also during the quarter, Danka acquired companies with annual revenues of
$105.0 million, including the businesses of Tower Australia Pty Limited and
Alcatel Datakey Pty Limited which marked Danka's entrance into the Australasian
market. These acquisitions provided Danka with an estimated 10% share of the
Australian market and a base for further expansion in the region.
The Company has continued to experience higher selling, general and
administrative expenses. These expenses increased during the first and second
quarters of this fiscal year due to the expansion of the Company's salesforce,
support personnel and infrastructure in North America, as well as additional
costs incurred to regionally centralize certain management and administrative
functions ("Market Based Approach"). Management believes that this Market
Based Approach should ultimately result in a higher quality of customer
support, increased productivity and reduced administrative costs.
"The Company has continued to make progress this quarter towards reducing
duplicative administrative costs and boosting the productivity of its expanded
sales force in North America," commented Dan Doyle. "Additionally, our
European operations continue to perform ahead of our expectations."
David Snell, who joined Danka in 1978 and was appointed Chief Financial Officer
and a member of the Board of Directors in 1988, was promoted to Chief Operating
Officer of the Company, effective October 1, 1996.
As a result of Danka's performance, the Board of Directors is declaring a net
interim dividend of 1.30 pence per Ordinary share (approximately $0.08 per
ADS). This represents the ninth consecutive year that the Company has
increased its dividend. The dividend will be paid on January 22, 1997 to ADS
holders of record as of December 17, 1996.
Special Note Regarding Forward-Looking Statements - Statements in this release
looking forward in time involve known and unknown risks and uncertainties,
which may cause the Company's actual results in future periods to be materially
different from any future performance suggested in this release. Such factors
may include, but may not be necessarily limited to: (i) the Company's ability
to manage and operate Kodak's Office Imaging business, (ii) the demands that
the acquisition and integration of Kodak's Office Imaging business will place,
and the effect that such demands will have, on the Company's resources,
infrastructure and current operations, (iii) the Company's ability to
successfully operate in new international markets, (iv) the ability of the
Company to attract and retain current management and other employees of Kodak's
Office Imaging business accustomed to different corporate culture, compensation
arrangements and benefits, (v) the Company's ability to achieve the minimum
equipment purchase commitments under
Page 3 of 7
<PAGE> 4
the related supply agreement, (vii) the Company's ability to obtain an
alternative and acceptable source of high volume equipment and related parts and
supplies in the event the related supply agreement is not renegotiated or Kodak
equipment is not competitive in the marketplace, (viii) increased competition,
(ix) fluctuations in foreign currency, (x) domestic and foreign political
developments and governmental regulations and policies, (xi) technological
developments, (xii) general economic and business conditions, (xiii) future
performance of Kodak's Office Imaging business and the Company's current
business, (xiv) the ability of the Company to successfully implement its growth
and business strategy, and (xv) the ability of the Company to continue to
receive acceptable financing as required in the future. Further, the Company
operates in an industry sector where the values of securities are highly
volatile and may be influenced by economic and other factors beyond the
Company's control. Also, in the context of forward-looking information provided
in this release, reference is made to the discussion of risk factors detailed in
the Company's filings with the Securities and Exchange Commission during the
past 12 months.
Danka Business Systems PLC, headquartered in St. Petersburg, Florida, is one of
the largest independent suppliers of photocopiers, facsimiles and other
automated office equipment in North American, Europe and Australia.
11201 Danka Circle North 107 Hammersmith Road
St. Petersburg, FL 33716 London, England W14 OQh
Page 4 of 7
<PAGE> 5
DANKA BUSINESS SYSTEMS PLC
CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT PER AMERICAN DEPOSITARY SHARE ("ADS") AMOUNTS)
<TABLE>
<CAPTION>
For the three months ended
----------------------------------------
September 30, September 30,
1996 1995
------------- ----------------
(Unaudited) (Unaudited)
<S> <C> <C>
Revenue:
Retail equipment sales $ 155,325 $ 107,676
Retail service, supplies and rentals 210,321 135,293
Wholesale 54,882 30,844
------------ --------------
Total revenue 420,528 273,813
------------ --------------
Costs and operating expenses:
Cost of retail equipment sales 95,208 64,459
Retail service, supplies and rental costs 112,010 71,467
Wholesale costs of revenue 45,272 25,689
Selling, general and administrative expenses 133,120 85,118
Amortization of intangible assets 4,882 2,782
------------ --------------
Total costs and operating expenses 390,492 249,515
------------ --------------
Earnings from operations 30,036 24,298
Interest expense and other, net 6,832 4,256
------------ --------------
Earnings before income taxes 23,204 20,042
Provision for income taxes 8,807 7,595
------------ --------------
Net earnings 14,397 12,447
============ ==============
Net earnings per ADS 0.25 0.25
============ ==============
Weighted average ADSs 57,583 50,560
</TABLE>
Page 5 of 7
<PAGE> 6
DANKA BUSINESS SYSTEMS PLC
CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT PER AMERICAN DEPOSITARY SHARE ("ADS") AMOUNTS)
<TABLE>
<CAPTION>
For the six months ended
--------------------------------------
September 30, September 30,
1996 1995
--------------------------------------
(Unaudited) (Unaudited)
<S> <C> <C>
Revenue:
Retail equipment sales $ 305,242 206,146
Retail service, supplies and rentals 405,273 256,014
Wholesale 111,968 60,667
----------- ------------
Total revenue 822,483 522,827
----------- ------------
Costs and operating expenses:
Cost of retail equipment sales 187,972 125,498
Retail service, supplies and rental costs 215,232 134,946
Wholesale costs of revenue 92,162 50,367
Selling, general and administrative expenses 259,616 161,745
Amortization of intangible assets 9,301 5,138
----------- ------------
Total costs and operating expenses 764,283 477,694
----------- ------------
Earnings from operations 58,200 45,133
Interest expense and other, net 11,865 7,534
----------- ------------
Earnings before income taxes 46,335 37,599
Provision for income taxes 17,607 14,295
----------- ------------
Net earnings $ 28,728 $ 23,304
=========== ============
Net earnings per ADS 0.50 0.47
=========== ============
Weighted average ADSs 57,664 49,892
</TABLE>
Page 6 of 7
<PAGE> 7
DANKA BUSINESS SYSTEMS PLC
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
September 30, March 31, 1996
1996
------------- --------------
(Unaudited) (Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 21,842 $ 38,217
Accounts receivable, net 285,863 247,479
Inventories 277,417 214,519
Prepaid expenses and other current assets 11,127 9,534
------------- -------------
Total current assets 596,249 509,749
Equipment on operating leases, net 87,165 73,303
Property and equipment, net 52,411 42,795
Intangible assets, net 473,665 435,844
Other assets 34,973 29,865
------------- -------------
Total assets $ 1,244,463 $ 1,091,556
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt and notes payable $ 24,233 30,414
Accounts payable and accrued expenses 206,097 197,438
Deferred revenue 74,467 64,223
------------- -------------
Total current liabilities 304,797 292,075
Convertible subordinated notes 200,000 200,000
Other long-term debt 220,730 118,262
Deferred income taxes and long-term liabilities 45,109 39,376
------------- -------------
Total liabilities 770,636 649,713
------------- -------------
Shareholders' equity:
Ordinary shares, 1.25 pence stated value 4,721 4,585
Additional paid-in capital 299,646 297,378
Retained earnings 178,197 148,501
Currency translation adjustment (8,737) (8,621)
------------- -------------
Total shareholders' equity 473,827 441,843
------------- -------------
Total liabilities and shareholders' equity $ 1,244,463 $ 1,091,556
============= =============
</TABLE>
Page 7 of 7
