<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) June 1, 1999
TAB PRODUCTS CO.
(Exact name of registrant as specified in its charter)
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Delaware 001-07736 94-1190862
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(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
1400 PAGE MILL ROAD
PALO ALTO, CALIFORNIA 94304
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (415) 852-2400
Not applicable.
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(Former name or former address, if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Pursuant to the Agreement for Purchase and Sale of Assets (the
"Agreement"), dated as of May 20, 1999, by and between TAB Products Co. (the
"Company") and Bell & Howell Document Management Products Company, a
wholly-owned subsidiary of Bell & Howell Company ("Bell & Howell"), the Company
has sold its Field Services Group to Bell & Howell. The Company's Field Service
Group consists of assets that includes existing service contracts and certain
related tangible and intangible assets, and certain liabilities. The price of
the Purchased Assets, as defined in the Agreement, consists of an initial cash
payment from Bell & Howell to the Company of $11,200,000.00, the assumption of
liabilities and obligations of the Company valued at an estimated $4,300,000 and
up to an additional $3,500,000 payable to the Company subject to certain
adjustments for changes in certain accounts attributable to the Field Service
Group.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial information.
Not Applicable.
(b) Pro forma financial information giving effect to the sale of
the Field Service Group. The pro forma statement of earnings reflects the
effects of the transaction as if the transaction had occurred at the
beginning of the nine month period ended February 28, 1999 and the pro forma
balance sheet reflects the effects of the transaction as of February 28, 1999.
<PAGE>
TAB PRODUCTS CO.
PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
FEBRUARY 28, 1999
($000's omitted)
<TABLE>
<CAPTION>
TAB PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS BALANCE
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<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 5,710 $ 5,710
Short-term investments 2,977 $ 4,575 7,552
Restricted cash 6,625 6,625
Accounts receivable 28,320 28,320
Due from Buyer 3,500 3,500
Inventories 9,422 (3,780) 5,642
Prepaid income taxes and other expenses 5,725 (175) 5,550
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TOTAL CURRENT ASSETS 52,154 10,745 62,899
Property, plant and equipment, net 19,464 (100) 19,364
Goodwill, net 3,175 3,175
Other assets 958 (36) 922
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TOTAL ASSETS $ 75,751 $ 10,609 $ 86,360
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 3,438 $ 3,438
Accounts payable 6,915 6,915
Compensation payable 1,759 1,759
Other accrued liabilities 10,296 (4,468) 5,828
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TOTAL CURRENT LIABILITIES 22,408 (4,468) 17,940
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Long-term debt 6,531 6,531
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Deferred taxes and other noncurrent liabilities 3,337 6,207 9,544
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STOCKHOLDERS' EQUITY:
Common stock 76 76
Additional paid-in capital 15,244 15,244
Retained earnings 63,485 8,870 72,355
Treasury stock (32,320) (32,320)
Accumulated other comprehensive income (3,010) (3,010)
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TOTAL STOCKHOLDERS' EQUITY 43,475 8,870 52,345
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 75,751 $ 10,609 $ 86,360
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</TABLE>
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TAB PRODUCTS CO.
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF EARNINGS
NINE MONTHS ENDED FEBRUARY 28, 1999
($000's omitted except share data)
<TABLE>
<CAPTION>
TAB PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS RESULTS
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<S> <C> <C> <C>
REVENUES $ 117,975 $ 10,887 $ 107,088
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COSTS AND EXPENSES:
Cost of revenues 72,788 9,859 62,929
Selling, general and administrative 43,145 43,145
Research and development 719 719
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TOTAL COSTS AND EXPENSES 116,652 9,859 106,793
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OPERATING INCOME 1,323 1,028 295
Interest, net and other (559) (559)
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Earnings before income taxes 764 1,028 (264)
Provision of income taxes 400 538 (138)
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NET EARNINGS $ 364 $ 490 $ (126)
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Basic net earnings per share $ 0.07 $ (0.03)
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Shares used in computing basic
net earnings per share 5,111,000 5,111,000
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Diluted net earnings per share $ 0.07 $ 0.07
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Shares used in computing diluted
net earnings per share 5,158,000 5,158,000
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</TABLE>
<PAGE>
TAB PRODUCTS CO.
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF EARNINGS
YEAR ENDED MAY 31, 1998
($000's omitted except share data)
<TABLE>
<CAPTION>
TAB PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS RESULTS
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<S> <C> <C> <C>
REVENUES $ 165,943 $ 12,512 $ 153,431
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COSTS AND EXPENSES:
Cost of revenues 98,913 10,739 88,174
Selling, general and administrative 60,912 60,912
Research and development 889 889
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TOTAL COSTS AND EXPENSES 160,714 10,739 149,975
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OPERATING INCOME 5,229 1,773 3,456
Interest, net and other (639) (639)
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Earnings before income taxes 4,590 1,773 2,817
Provision of income taxes 2,155 832 1,323
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NET EARNINGS $ 2,435 $ 941 $ 1,494
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Basic net earnings per share $ 0.48 $ 0.29
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Shares used in computing basic
net earnings per share 5,102,000 5,102,000
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Diluted net earnings per share $ 0.46 $ 0.28
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Shares used in computing diluted
net earnings per share 5,286,000 5,286,000
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</TABLE>
<PAGE>
TAB PRODUCTS CO.
INCOME STATEMENT PRO FORMA ADJUSTMENTS:
Revenues and Expenses for the Field Service Group for the nine month period
ending February 28, 1999, are shown as the Pro forma Adjustments to the
Consolidated Condensed Statement of Earnings for TAB Products Co. The TAB
fiscal year is June 1 to May 31. All of the costs related to the Field
Service Group have historically been reported as Cost of revenues in the TAB
Consolidated Statement of Earnings. Taxes have been computed at the TAB
consolidated estimated effective tax rate (52.4%) for fiscal year 1999.
BALANCE SHEET PRO FORMA ADJUSTMENTS:
Assets sold and liabilities assumed in the disposition of the Field Service
Group do not include Accounts Receivable and Accounts Payable as of the sale
closing. The presented Pro forma Consolidated Condensed Balance Sheet
reflects the adjustments for the assets to be sold and liabilities to be
assumed based on the terms of the Definitive Sale Agreement. In order for TAB
to obtain consent for the sale from one of its lenders TAB chose to place a
portion of the cash payment received from Bell & Howell in a restricted bank
account and pledge the funds as collateral for the existing loan. In exchange
for the pledge of collateral the lendor modified the covenants of the loan
and approved the sale transaction. TAB now has the flexibility to use the
funds to pay off the existing loan at any time or can negotiate new covenants
for the existing loan acceptable to both TAB and the lendor in order to gain
full access to the cash collateral. TAB will receive the interest income from
the pledged account.
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(c) Exhibits.
<TABLE>
<CAPTION>
Exhibit No. Description
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<S> <C>
2.1 Agreement for Purchase and Sale of Assets, dated as of May 20,
1999, by and between TAB Products Co., a Delaware corporation,
and Bell & Howell Document Management Products Company, a
Delaware corporation.
99.1 Company press release dated May 21, 1999.
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
TAB PRODUCTS CO.
Date: June 15, 1999 By: /s/ David J. Davis
-----------------------
David J. Davis
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
2.1 Agreement for Purchase and Sale of Assets, dated as of May 20,
1999, by and between TAB Products Co., a Delaware corporation,
and Bell & Howell Document Management Products Company, a
Delaware corporation.
99.1 Company press release dated May 21, 1999.
</TABLE>
<PAGE>
Exhibit 2.1
<PAGE>
AGREEMENT
FOR
PURCHASE AND SALE OF ASSETS
THIS AGREEMENT is made and entered into this 20th day of May, 1999, by
and between Bell & Howell Document Management Products Company, a Delaware
corporation ("BUYER"), and TAB Products Co., a Delaware corporation
("SELLER").
WHEREAS, Seller is engaged in the business of (i) providing support and
maintenance services for users, distributors and manufacturers of imaging
systems, which systems include both software and tangible equipment, used to
capture and store documents or information, (ii) providing support and
maintenance services for users, distributors and manufacturers of
forms-handling equipment, (iii) providing support and maintenance services
for users, distributors and manufacturers of products related to those
described in (i) and (ii), and (iv) selling spare parts and supplies related
to the services described in clauses (i) through (iii) (collectively, the
"BUSINESS");
WHEREAS, Buyer desires to purchase from Seller and Seller desires to
sell to Buyer certain of the assets, properties, rights and claims of the
Business on the terms and conditions set forth herein;
WHEREAS, Seller is agreeing to assume certain limited contractual
obligations of the Business;
WHEREAS, as a material inducement to Buyer to enter into this
transaction, Seller is agreeing not to compete in certain businesses and to
take or refrain from taking certain other actions, all as hereinafter set
forth;
NOW, THEREFORE, in consideration of the premises and promises herein
contained, the parties agree as follows:
ARTICLE I
THE TRANSACTION
I.1. PURCHASE AND SALE OF ASSETS. At the Closing, Seller shall sell,
transfer, assign and deliver to Buyer, and Buyer shall purchase, accept,
assume and receive, all right, title and interest in and to the Purchased
Assets (as hereinafter defined).
I.2. PURCHASED ASSETS. The "PURCHASED ASSETS" are all of the assets,
properties, rights and claims owned or primarily employed or held for use in
the conduct of the Business, including the following, but excluding the
"EXCLUDED ASSETS" (as defined below):
(a) All inventories, including supplies, consumables, parts
(including retainable parts), materials, spares, and training and
testing units, whether located at or in transit to or from, Seller's
facilities, in service vehicles or at customer
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locations, or otherwise, including the items described on Schedule 4.8
("INVENTORY");
(b) All equipment and other fixed assets, including all computer
hardware, service tools, aids, manuals, schematics, diagnostics,
machinery, test benches, associated diagnostic and repair equipment,
equipment located within or supporting the facilities, and office
furnishings including the vehicle and the other items described on
Schedule 1.2(b);
(c) All rights and claims in, to and under all agreements
(including service agreements), contracts, sales orders, other
non-contractual customer and vendor arrangements, partnership
agreements, goodwill, and other similar benefits in favor of the
Business, including those described on Schedule 1.2(c);
(d) All documents and records relating to the Purchased Assets
or the operations of the Business, including all customer and vendor
records, service and repair records, all data of any type related to
the Business on any computer used in the Business, and all lists of
leads and the employment and personnel records for all employees of
the Business hired by Buyer, whether in electronic media or otherwise;
(e) All prepaid expenses, advances, deposits, and rights to
volume and other rebates due from suppliers, as well as performance
bonds, including those described on Schedule 1.2(e);
(f) All permits, licenses, consents, franchises, product
registrations, filings, authorizations, approvals and indicia of
authority (and pending applications for any thereof), excluding
general business licenses and permits;
(g) All computer software programs (including rights under
license agreements), including the PDSC Super Dispatch system (which
includes the IAS accounting system), diagnostic software, and the
software described on Schedule 1.2(g), source codes, object codes,
information systems, software interfaces, the intranet systems used in
the Business, program specifications and related material and
documentation and all licenses and other rights thereto;
(h) All drawings, designs, blueprints, schematics and parts
listings;
(i) The telephone numbers and fax numbers set forth on Schedule
1.2(i);
(j) All operating and training procedures, training materials,
and sales and promotional materials;
(k) All rights under agreements with employees hired by Buyer
concerning confidentiality, noncompetition and the assignment of
inventions, but excluding any obligations pursuant thereto;
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(l) Rights under the Real Property Leases (as defined herein)
listed on Schedule 1.4(c) attached hereto; and
(m) All goodwill associated with the Purchased Assets and the
Business.
I.3. EXCLUDED ASSETS. The following assets (the "EXCLUDED ASSETS")
shall not be sold or transferred to Buyer:
(a) Cash and accounts receivable;
(b) Real estate and leasehold interests in real estate listed on
Schedule 1.3 as being excluded, including Seller's facility at
Turlock, California;
(c) The JD Edwards software and all software listed on schedule
1.3 as being excluded; and
(d) The names "TAB," "TAB Products" and any derivative thereof,
subject to Section 11.2 hereof.
I.4. ASSUMED LIABILITIES AND OBLIGATIONS. At Closing, Buyer shall
assume and discharge the following liabilities and obligations, in each case
to the extent related to the Business and not related to a breach prior to
Closing (the "ASSUMED LIABILITIES AND OBLIGATIONS"):
(a) Service obligations to customers under the agreements listed
on Schedule 1.4(a) and those entered into after the date hereof in the
ordinary course of business and at prices and on terms consistent with
past practice;
(b) Obligations under the Personal Property Leases listed on
Schedule 1.4(b);
(c) Obligations under the Real Property Leases listed on
Schedule 1.4(c); provided, however, that Buyer shall not assume,
discharge, or be liable for any expenses related to obtaining consents
to assign the Real Property Leases to Buyer;
(d) Obligations under certain agreements to procure consigned
inventory and consigned spare parts listed on Schedule 1.4(d).
(e) Software license obligations under the agreements listed on
Schedule 1.4(e); and
(f) Royalty obligations under certain agreements with customers
listed on Schedule 1.4(f).
Buyer shall pay, discharge, or perform, as appropriate, all Assumed Liabilities
as and when they become due, and Buyer shall forever defend, indemnify and hold
harmless Seller, its officers,
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directors, agents, representatives, subsidiaries, affiliates, successors and
assigns from and against any and all liabilities, obligations, losses,
claims, damages (including incidental and consequential damages), costs and
expenses (including court costs and attorneys' fees) resulting from Buyer's
failure to discharge any and all Assumed Liabilities and Obligations.
I.5. BUYER NOT SUCCESSOR TO SELLER; EXCLUDED LIABILITIES. Buyer shall
not be the successor to Seller and, except as expressly set forth in Section
1.4, Buyer shall not assume and shall not be liable or responsible for any
debt, obligation or liability of or related to the Purchased Assets, the
Business (including any employee-related liabilities), the facilities from
which the Business is conducted (including any environmental liabilities),
Seller or any Affiliate (as hereinafter defined) of Seller, or any claim
against any of the foregoing, of any kind, whether known or unknown,
contingent, absolute, or otherwise, all of which are retained by Seller (the
"EXCLUDED LIABILITIES"). Seller shall pay, discharge, or perform, as
appropriate, all Excluded Liabilities as and when they become due.
Specifically included as an Excluded Liability is any payable with respect to
items constituting Inventory at Closing. Seller shall forever defend,
indemnify and hold harmless Buyer, its officers, directors, agents,
representatives, subsidiaries, affiliates, successors and assigns from and
against any and all liabilities, obligations, losses, claims, damages
(including incidental and consequential damages), costs and expenses
(including court costs and attorneys' fees) related to or arising from any
and all Excluded Liabilities or related to or arising from the conduct of the
Business prior to the Closing Date or related to or arising from any
noncompliance of Buyer or Seller with applicable bulk transfer laws.
ARTICLE II
CONSIDERATION
II.1. PURCHASE PRICE. The aggregate consideration for the Business and
the Purchased Assets shall be $11,200,000 (the "INITIAL PURCHASE PRICE"),
subject to adjustment as provided herein, as well as assumption of the
Assumed Liabilities and Obligations.
II.2. PAYMENT OF PURCHASE PRICE. At Closing, Buyer shall deliver and
Seller shall accept the Initial Purchase Price in immediately available funds.
II.3. POST-CLOSING ADJUSTMENTS TO PURCHASE PRICE.
(a) CLOSING STATEMENT. On or before July 15, 1999, Seller shall
prepare and deliver to Buyer a statement (and supporting schedules)
(collectively, the "STATEMENT") setting forth, in detail, calculation of
the Audited Annual Revenues, Contract Revenues, Deferred Revenues, and Net
Inventory Value (all as defined in Section 2.3(b) below), which shall be
(i) certified by the Chief Financial Officer of Seller as being prepared in
accordance with the definitions thereof and the accounting principles set
forth on Schedule 2.3(a), and to the extent a relevant principle is not set
forth on Schedule 2.3(a), then in accordance with those generally accepted
accounting principles consistently applied with prior practice for earlier
periods (collectively, the "TAB ACCOUNTING
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PRINCIPLES"), (ii) audited by Deloitte & Touche in connection with Seller's
annual audit, and (iii) accompanied by a report of Deloitte & Touche to the
same effect as described in (i). For purposes of preparation of the
Statement, all calculations shall be made with precision and lack of
materiality shall not be a defense to the requirement of precise and
proper determinations. Buyer and its auditors or other representatives
shall be provided an opportunity to participate in the procedures performed
in connection with preparation of the Statement. Immediately following
delivery of the Statement, Seller shall make available, and shall cause
Deloitte & Touche to make available, all records, work papers and
employees at Seller's expense reasonably requested by Buyer in connection
with its review of the Statement.
The Statement, subject to any adjustments agreed to by Buyer
and Seller, shall be used for determining any post-Closing
adjustments to the Purchase Price, unless Buyer provides Seller
with a notice of dispute (a "DISPUTE NOTICE") within thirty (30)
days of receipt of the Statement. If a Dispute Notice is given,
Buyer and Seller shall promptly meet in good faith to attempt to
resolve any issues, and if any issues are unresolved within fifteen
(15) days of the Dispute Notice, the unresolved issues shall be
submitted to an Independent Auditor. The Independent Auditor shall
be a "Big Five" auditing firm with no material existing
relationship to Buyer or Seller and if Buyer and Seller are unable
to agree on its identity, it shall be designated by agreement of
the parties' current auditors. The Independent Auditor shall be
directed to issue a final and binding decision as to the matters in
dispute within thirty (30) days of its engagement. The fees and
expenses of the Independent Auditor shall be divided equally
between the parties.
The Statement in the form accepted by Buyer, or determined by
the Independent Auditor, shall be used to adjust the Purchase Price
in the manner set forth in Section 2.3(c) of this Agreement. Any
payments provided for in Section 2.3(c) shall be made within five
business days of Buyer's acceptance of the Statement or the
Independent Auditor's decision. The full force and effect of the
representations and warranties contained herein shall not be
diminished by the Statement, the acceptance thereof by Buyer or the
decision of the Independent Auditor.
(b) DEFINITIONS.
"AUDITED ANNUAL REVENUES" means revenues for the Business for the
twelve-month period ending May 31, 1999, as audited by Deloitte &
Touche.
"CONTRACT REVENUES" means fixed fee contract revenue, regardless
of the length of the contract, from customers of the Business for the
twelve-month period ending May 31, 1999; provided that Contract
Revenue excludes billable time and material revenues, parts and
supplies revenues, and part repair or refurbishment revenues.
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"DEFERRED REVENUES" means billings (whether collected or not) to
customers of the Business in advance of services performed, as of the
Closing Date;
"NET INVENTORY VALUE" means the value of the Inventory for the
Business (net of reserves and accumulated depreciation) on the Closing
Date and excluding consigned Inventory supplied to Seller by vendors.
All of the above shall be computed in accordance with the first sentence of
Section 2.3(a) and shall be subject to the further provisions of Schedule 2.3.
(c) PURCHASE PRICE ADJUSTMENT.
(i) ADDITIONAL PURCHASE PRICE RELATED TO REVENUE. For each
dollar of Audited Annual Revenues in excess of $14,000,000, Buyer
shall pay Seller an additional $5 as additional Purchase Price (the
"ADDITIONAL PURCHASE PRICE"); provided, however, that the Additional
Purchase Price shall not exceed $3,500,000; and provided further that
if Contract Revenues are less than 80% of Audited Annual Revenues,
then for the purpose of calculating the Additional Purchase Price the
Audited Annual Revenues shall be reduced so that they are equal to the
Contract Revenues divided by 80%.
(ii) DEFERRED REVENUES. If Deferred Revenues are less than
$4,300,000, then Buyer shall pay Seller an amount equal to the
difference. If Deferred Revenues are greater than $4,300,000, then
Seller shall pay Buyer an amount equal to the difference.
(iii) NET INVENTORY VALUE. If the Net Inventory Value is less
than $3,800,000, Seller shall pay Buyer an amount equal to the
difference. If the Net Inventory Value is greater than $3,800,000,
Buyer shall pay Seller an amount equal to the difference.
If both Buyer and Seller are required to make payments as
set forth above, the payments shall be netted so that only one payment
of the net balance shall be made.
II.4. ALLOCATION OF PURCHASE PRICE. Seller and Buyer shall cooperate
in the preparation of a joint schedule (the "ALLOCATION SCHEDULE") allocating
the purchase price (including the Assumed Liabilities and Obligations) among
the Purchased Assets. If Seller and Buyer are able to agree upon the
Allocation Schedule within 30 days following agreement of the parties on the
Statement, each of Seller and Buyer shall file IRS Form 8594 and all federal,
state, local and foreign tax returns, in accordance with the Allocation
Schedule. If Buyer and Seller are unable to complete the Allocation Schedule
within 30 days following the Closing Date, each of Seller and Buyer may file
IRS Form 8594 and any federal tax, state, local and foreign tax returns,
allocating the purchase price (including the Assumed Liabilities and
Obligations) among the Purchased Assets in the manner it believes
appropriate, provided such allocation is reasonable
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and in accordance with Section 1060 of the Internal Revenue Code of 1986, as
amended, and the regulations thereunder (the "CODE").
ARTICLE III
THE CLOSING AND TRANSFER OF ASSETS
III.1. CLOSING. The transfer of assets contemplated by this Agreement
(the "CLOSING") shall occur at the offices of McDermott, Will & Emery, 227
West Monroe Street, Chicago, Illinois, at 10:00 A.M. on (i) the day that is
one business day after the fulfillment of the condition set forth in Sections
7.6 and 8.3 of this Agreement or (ii) June 1, 1999, whichever day is later,
or at such other time or at such place as may be mutually agreed upon by the
parties (the "CLOSING DATE"). Upon consummation, the Closing shall be deemed
to take place as of the opening of business on the Closing Date.
III.2. DELIVERIES BY BUYER. At the Closing, Buyer shall deliver the
following:
(a) By wire transfer, the Initial Purchase Price;
(b) A resale certificate with respect to the Inventory in a form
reasonably acceptable to Seller;
(c) A certificate of a duly authorized officer of Buyer
confirming the satisfaction of the conditions provided in Sections 8.1
and 8.2; and
(d) Such other instruments or documents as may be necessary or
appropriate to carry out the transactions contemplated hereby.
III.3. DELIVERIES BY SELLER. At the Closing, Seller shall deliver the
following:
(a) Assignments (with consents thereto if required under the
terms of the agreement being assigned) of all agreements referred to
in Sections 1.2 and 1.4;
(b) Consents and release letters from creditors of Seller
together with UCC-3 termination statements with respect to financing
statements filed against the Business or any of the Purchased Assets,
and estoppel certificates from the landlord of each Real Property
Lease;
(c) Opinion of counsel to Seller in the form of Annex A;
(d) A certificate of a duly authorized officer of Seller
confirming the satisfaction of the conditions provided in Sections
7.1, 7.2, 7.3 and 7.5; and
(e) Such other endorsements, instruments or documents as may be
necessary or appropriate to carry out the transactions contemplated
hereby.
At the Closing, Seller shall take all steps necessary to place Buyer in
actual possession and operating control of the Business and the Purchased
Assets. If for any reason the deliveries
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required by Section 3.3(b) are not made, Seller shall reimburse Buyer for any
out-of-pocket expenses in connection with this Agreement and the transactions
contemplated hereby.
III.4. CLOSING AGREEMENTS. At the Closing, the parties shall execute,
acknowledge and deliver the following:
(a) General Assignment, Bill of Sale and Assumption of Assumed
Liabilities and Obligations in the form of Annex B; and
(b) Such other instruments or documents as may be necessary or
appropriate to carry out the transactions contemplated by this
Agreement and to comply with the terms hereof.
III.5. NONASSIGNABLE CONTRACTS.
To the extent that the assignment by Seller of any agreement included in
the Purchased Assets is not permitted without the consent of the other party
to the agreement, this Agreement shall not be deemed to constitute an
assignment or an attempted assignment of the same or an assumption or an
attempted assumption of the same, if such assignment or attempted assignment
or assumption or attempted assumption would constitute a breach thereof.
However, unless otherwise agreed as to any particular agreement Seller shall
use reasonably commercial efforts to obtain any and all such consents. If
any consent to the transfer of a customer contract or other agreement
material to the Business is requested but not obtained, Seller shall
cooperate with Buyer in any reasonable arrangement designed to provide Buyer
with all of the benefits under such agreement as if such consent had been
obtained. If any consent to the assignment of a Real Property Lease is not
obtained, Seller can provide Buyer ten business days' notice to vacate the
premises, in which case Seller shall retain all liability with respect to the
Lease.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as expressly disclosed on the specific section of the Disclosure
Schedule of Seller, dated as of the date hereof (the "SELLER DISCLOSURE
SCHEDULE"), Seller represents and warrants to Buyer as of the date hereof,
and as of the Closing Date, as follows:
IV.1. AUTHORITY. Seller has full legal right, power and authority,
without the consent of any other person, to execute and deliver this
Agreement and to carry out the transactions contemplated hereby. All
corporate and other acts or proceedings required to be taken by Seller to
authorize the execution, delivery and performance of this Agreement and all
transactions contemplated hereby have been duly and properly taken.
IV.2. VALIDITY. This Agreement has been, and the documents to be
delivered at Closing by Seller will be, duly executed and delivered and
constitute lawful, valid and binding obligations of Seller, enforceable in
accordance with their respective terms. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby will
not result in the creation of any lien, charge or encumbrance of any kind or
the termination or acceleration of any indebtedness or other obligation of
the Business, and are not prohibited by,
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do not violate or conflict with any provision of, and do not constitute a
default under or a breach of (a) the charter or bylaws of Seller, (b) any
note, bond, indenture, contract, agreement, permit, license or other
instrument to which Seller is a party or by which any of its respective
assets, including the Purchased Assets, is bound, (c) any order, writ,
injunction, decree or judgment of any court or governmental agency, or (d)
any federal or state law, rule, regulation, statute, code, ordinance or
requirement (collectively, "LAWS") applicable to Seller. Except for any
filings by Seller required by the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and the regulations promulgated thereunder (the "HSR
ACT"), no approval, authorization, registration, consent, order or other
action of or filing with any person, including any court, administrative
agency or other governmental authority, is required for the execution and
delivery by Seller of this Agreement or the consummation by Seller of the
transactions contemplated hereby.
IV.3. DUE ORGANIZATION. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware, and has full power and authority and all requisite rights,
licenses, permits and franchises to own, lease and operate its assets and to
carry on the Business. Seller is duly licensed and qualified to do business
as a foreign corporation and is in good standing in all jurisdictions where
required except in those jurisdictions in the aggregate where the failure to
qualify would not have a material adverse effect on the Business. Seller has
delivered to Buyer an accurate, correct and complete copy of its charter and
by-laws.
IV.4. SUBSIDIARIES. Seller does not own stock or have an equity
investment or other interest in, any corporation, association, partnership,
joint venture or other entity involved in the Business.
IV.5. TRANSACTIONS WITH AFFILIATES. No Affiliate:
(a) owns, directly or indirectly, any debt, equity or other
interest or investment in any person or entity which is a competitor,
lessor, lessee, customer or supplier of the Business;
(b) has any cause of action or other claim against or owes any
amount to, or is owed any amount by, the Business;
(c) has any interest in or owns any property or right used in
the conduct of the Business;
(d) is a party to any material contract, lease, agreement,
arrangement or commitment of which Seller is a party and which relates
to the conduct of the Business; or
(e) received from or furnished to the Business any material
goods or services.
The term "AFFILIATE" shall mean any officer, director or controlling
stockholder of Seller, any direct or indirect subsidiary of Seller, any
division or other business unit of Seller, any manager of the Business, any
member of the immediate family (including spouse, sibling, descendant,
ancestor or in-law) of such person, or any entity in which Seller or any of the
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foregoing persons is a director, officer, partner or trustee or has an equity
interest in excess of five percent (5%). The term Affiliate shall also
include any entity which controls or is controlled by, or is under common
control with any of the individuals or entities described in the preceding
sentence, including Seller.
IV.6. FINANCIAL STATEMENTS. The financial statements and other
financial information of the Business attached as part of, or described on
Schedule 4.6 (the "FINANCIAL STATEMENTS") (a) have been prepared in
accordance with TAB Accounting Principles; (b) are accurate, correct and
complete; (c) fairly present the financial condition and results of
operations of the Business as of the dates and for the periods indicated and
are a fair presentation of any other subject matter thereof; and (d) are in
accordance with the books of account and records of Seller. The books of
account and other records (financial and otherwise) of Seller are in all
material respects complete and correct and are maintained in accordance with
good business practices and are accurately reflected in the Financial
Statements.
IV.7. INTERIM CHANGE. Except as set forth on Schedule 4.7, since May
31, 1998, Seller has operated the Business only in the ordinary course,
consistent with past practices, and there has not been:
(a) any material adverse change in the financial condition,
assets, liabilities, personnel, prospects or business affairs of the
Business or in its relationships with suppliers, vendors, customers,
lessors, employees or others (in each case, as a group or class) nor
has there been the occurrence of any event or condition which could
reasonably be expected to have such an effect;
(b) any waiver of any material rights of Seller as to the
Business;
(c) any material disposition of assets of the Business, other
than sales of Inventory in the ordinary course of business on terms
consistent with past practice;
(d) any change in accounting practices or procedures affecting
the Business or the Financial Statements;
(e) any change in material business policies relating to the
Business;
(f) any assumption of any debt or obligation of any third party
relating to the Business;
(g) any increase in the compensation or benefits payable or to
become payable to any Available Employee (as defined herein);
(h) any change in pricing policies or announcements thereof, or
credit practices with customers of the Business; or
(i) any incurrence of any security interest, lien, charge,
encumbrance or claim on, or any material damage or loss to, the
Business or any of the Purchased Assets.
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Except as set forth on Schedule 4.7, since May 31, 1998, there has not been
any agreement, commitment or understanding by Seller to do any of the
foregoing. Seller has also complied with the covenants contained in Sections
6.1(i) through 6.1(l) since March 31, 1999.
IV.8. INVENTORY. All Inventories (including those reflected on the
Financial Statements) are (a) properly valued at the lower of cost or market
value in accordance with TAB Accounting Principles and include reserves for
slow moving and obsolete inventory, as well as other reserves, required by
generally accepted accounting principles; and (b) of good and merchantable
quality and salable or usable for the purposes intended in the ordinary
course of the Business at prices consistent with past practice and meeting
the current standards and specifications of the Business (which are
consistent with those in effect during the prior twelve months). All
Inventories of the Business disposed of subsequent to February 28, 1999 have
been disposed of only in the ordinary course of business and at prices and
under terms that are normal and consistent with past practices. Schedule 4.8
contains an accurate, correct and complete list of Inventory as of the most
recent practicable date (i) segregated by location, (ii) identified by part
number, (iii) stating the value thereof based on weighted average cost as of
April 30, 1999 and (iv) indicating whether it is on consignment (in which
case it is not reflected on the Financial Statements).
IV.9. LICENSES AND PERMITS. Except for licenses and permits as are
required of all entities to conduct business in the various jurisdictions in
which Seller is in business (collectively, the "LICENSES AND PERMITS"), there
are no licenses, permits, certificates, approvals, exemptions, franchises,
registrations, variances, accreditations or authorizations issued to Seller
and used in the Business. The Licenses and Permits are valid and in full
force and effect and there are not pending, or, to the knowledge of Seller,
threatened, any proceedings which could result in the termination,
revocation, limitation or impairment of any License or Permit. The Licenses
and Permits, together with the licenses and permits required of all entities
to conduct business in the various jurisdictions, are all of the licenses,
permits, certificates, approvals, franchises, registrations, accreditations
and other authorizations as are necessary or appropriate in order to enable
Seller to own and conduct the Business and to own, occupy and lease its real
property, except for licenses and permits whose failure to be possessed by
Seller, in the aggregate, would not result in a material adverse effect on
the Business. No violations have been recorded in respect of any Licenses
and Permits, and Seller knows of no basis therefor.
IV.10. PURCHASED ASSETS; SUFFICIENCY. Seller is the sole and exclusive
legal and equitable owner of all right, title and interest in and has good
and marketable title to all of the Purchased Assets. None of the Purchased
Assets, is, or at Closing will be, subject to (a) any title defect or
objection; (b) any contract of lease, license or sale; (c) any security
interest, mortgage, pledge, lien, charge or encumbrance of any kind or
character, direct or indirect, whether accrued, absolute, contingent or
otherwise (other than liens securing debt which will be released at Closing,
and liens arising by operation of law which will not continue with respect to
the Purchased Assets upon their acquisition by Buyer ("PERMITTED LIENS"); (d)
any royalty or commission arrangement; or (e) any claim, covenant or
restriction. All of the Purchased Assets are in good operating condition and
repair (reasonable wear and tear excepted) and are suitable for the purposes
for which they are presently being used. The Purchased Assets will furnish
Buyer with all of the assets, capacity and rights presently employed by Buyer
in conducting the Business, except with respect to the Excluded Assets.
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IV.11. PERSONAL PROPERTY LEASES. Schedule 4.11 sets forth an accurate,
correct and complete list of all leases of personal property used in the
Business, whether Seller acts as lessor or lessee (the "PERSONAL PROPERTY
LEASES"). Seller has delivered to Buyer an accurate, correct and complete
copy of each Personal Property Lease. All Personal Property Leases are in
full force and effect and are valid, binding and enforceable in accordance
with their respective terms. Neither Seller nor any other party to any
Personal Property Lease is in breach of any provision of, in violation of, or
in default in any material respect under the terms of any Personal Property
Lease. No event has occurred which with notice or passage of time or both
would result in a breach of any provision of, or default under, the terms of
any Personal Property Lease. Except as indicated on Schedule 4.11, each
Personal Property Lease is freely assignable to Buyer by Seller without the
consent of any other party.
IV.12. INTELLECTUAL PROPERTY. Except for the Software described on
Schedule 4.14, Schedule 4.12 sets forth an accurate, correct and complete
list and summary description of all patents, registered trademarks, trade
names, product designations, service marks, registered copyrights and
applications for any of the foregoing primarily employed in or material to
the conduct of the Business (the "INTELLECTUAL PROPERTY"). Except as listed
on Schedule 4.12, there are no licenses or other agreements relating to any
Intellectual Property. None of the Intellectual Property is subject to any
extensions, renewals, taxes or fees due within 90 days after Closing. Except
as set forth on Schedule 4.12, with respect to the Intellectual Property, (a)
Seller has the sole and exclusive right to use the Intellectual Property free
of rights or claims of others; (b) no action, suit, proceeding or
investigation involving Seller is pending or, to Seller's knowledge,
threatened; (c) to Seller's knowledge, none of the Intellectual Property is
being interfered with or infringed upon by others, and none is subject to any
outstanding order, decree, judgment, stipulation or charge; (d) there are no
royalty, commission or similar arrangements, and no licenses, sublicenses or
agreements, pertaining to any of the Intellectual Property; (e) none of the
Intellectual Property, the use thereof by Seller, or the activities of the
Business infringe upon, conflict with or violate any intellectual property
rights of others; and (f) Seller has not agreed to indemnify any person for
or against any infringement of or by the Intellectual Property.
IV.13. SOFTWARE AND INFORMATION SYSTEMS. For purposes of this Section,
the term "SOFTWARE" means all computer software programs and related program
specifications, charts, procedures, source codes (including annotations),
object codes, input data, diagnostic and other routines, data bases and
report layouts and formats, record file layouts, diagrams, functional
specifications and narrative descriptions and flow charts employed in the
Business and material to the conduct of the Business other than Excluded
Assets. For purposes of this Section, the term "computer software programs"
includes any set of arithmetic and/or logical instructions meant to run on,
or to control the operation of, any computer (i) whether those instructions
are a complete program, a collection of programs making up a subsystem or
system, or are merely subroutines or meant to operate in conjunction with
other software, and (ii) whether such instructions must be run through
another computer program before being useable on a computer, whether such
instructions can be used at execution time only in conjunction with another
computer program (i.e., an "interpreter") or whether such instructions are in
a form that can be run on a computer "as is," except for any necessary
interfaces with the computer's microcode, operating system or
reference-resolving routines.
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Schedule 4.13 sets forth an accurate, correct and complete list and
summary description of all Software products and identifies specifically (i)
Software as to which the source code is owned by Seller ("OWNED SOFTWARE");
(ii) Software products which are licensed to Seller by third parties and as
to which Seller is in possession of the source code; (iii) Software products
which are licensed to Seller by third parties but as to which Seller does not
have possession of the source code; (iv) Software in which the Seller has any
use, possessory or proprietary rights other than as set forth in (i) through
(iii) above (Software described in the foregoing subsections (ii) through
(iv) being referred to collectively as the "THIRD PARTY SOFTWARE"); (v) any
other Software products employed in the Business which is not Owned Software
or Third Party Software; and (vi) all pending Software development projects
between Seller and persons other than "employees" (within the meaning of such
term as used in the Copyright Act of 1976, 17 U.S.C. Section 101), together
with an identification of the persons undertaking such projects. Schedule
4.13 also identifies all licenses, contracts and other arrangements with
respect to the Third Party Software (collectively the "THIRD PARTY
LICENSES"). With respect to the Software:
(a) Seller is the sole and exclusive owner of, and has the sole
and exclusive right to use the Owned Software and to the modifications
it has made or caused to be made to the Third Party Software, free and
clear of any claims of others;
(b) except as provided on Schedule 4.13, the source code with
respect to the Owned Software is not in the possession of any party
other than Seller and has been maintained as confidential by Seller;
(c) The Owned Software and the licensing or sublicensing thereof
does not and, to Seller's knowledge, the other Third Party Software
and the licensing or sublicensing thereof does not violate or infringe
any trade secret rights, copyrights, mask copyrights, patents or other
rights of others and, to Seller's knowledge, no assertion to the
contrary has been made by any third party;
(d) Seller has not copied or used any of the Software in
violation of the applicable license or otherwise violated any of its
agreements or the intellectual property rights of others with respect
thereto;
(e) all of the rights of the persons referred to in paragraph
(vi) of this Section to the Software initially resided in or have been
assigned exclusively to the Company free of any remaining royalties or
other rights; and
(f) except as provided on Schedule 4.13, all Software is used by
Seller exclusively with respect to the Business and not with respect
to other businesses.
Except as provided on Schedule 4.13, Seller has (a) undertaken a
reasonably complete review and assessment of the Software with respect to the
"YEAR 2000 PROBLEM" (that is, the risk that computed and other technological
applications used by Seller may be unable to recognize and perform properly
date-sensitive functions involving certain dates prior to and any date after
December 31, 1999); (b) developed a plan and timeline for addressing the Year
2000 Problem on a timely basis (which is attached hereto on Schedule 4.13)
and (c) to date,
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implemented that plan in accordance with the timeline. The plan sets forth
the reasonably anticipated costs in connection with activities associated
with the plan. Seller anticipates that all Software and all computer and
other technological applications that are material to the Business will on a
timely basis, and in any event prior to November 30, 1999, be able to perform
properly date-sensitive functions for all dates before and after January 1,
2000. Seller is not aware of any anticipated disruption of critical supplies
or services with respect to the Business.
IV.14. MATERIAL CONTRACTS. All agreements, commitments, instruments
and leases related to the Business to which Seller is a party or bound with
respect to the Purchased Assets or the Business (the "MATERIAL CONTRACTS")
are listed on Schedules 4.14 or Schedules 1.2 or 1.4. All Material Contracts
were entered into on prices and terms consistent with past practice. True
and correct copies of each written Material Contract, and a complete written
description of each oral Material Contract, have been delivered to Buyer.
All Material Contracts are valid, binding and enforceable in accordance with
their respective terms and are in full force and effect. Each party has
complied in all material respects with all material commitments to be
performed or observed under each Material Contract. Neither Seller, nor to
its knowledge any other party to any Material Contract, is in breach of any
material provision of, in violation of, or in default under any material
terms of any Material Contract and to Seller's knowledge no such breach (even
if unfounded) is being asserted. No event has occurred which with notice or
passage of time or both would result in a breach by Seller of any provision
of, or default under, the material terms of any Material Contract. Except as
indicated on Schedules 4.14 or 1.2(c)(i) or (ii), each Material Contract is
freely assignable to Buyer by Seller without the consent of any other party.
IV.15. LIABILITIES. Except (i) with respect to the Assumed Liabilities
and Obligations and (ii) to the extent reflected on the Financial Statements,
Seller, with respect to the Business, has no liabilities or obligations of
any nature whether absolute, accrued, contingent or otherwise, whether
matured or unmatured, except those which have arisen in the ordinary course
consistent with past practice and those which, in the aggregate, would not
have a material adverse effect on the Business or the transactions
contemplated hereby.
IV.16. EMPLOYEES.
(a) CONTRACTS. Schedule 4.16 sets forth an accurate, correct and
complete list and summary description of all agreements, arrangements or
understandings, written or oral, with Available Employees (as hereinafter
defined) regarding services to be rendered, terms and conditions of
employment, and compensation (the "EMPLOYMENT CONTRACTS").
(b) COMPENSATION. Schedule 4.16 sets forth an accurate, correct and
complete list of all employees of Seller that are engaged in the Business on
a full-time basis (the "AVAILABLE EMPLOYEES"). Schedule 4.16 also lists
title or position, location, the present annual compensation (including
bonuses, commissions and deferred compensation), all bonuses paid in the past
year, adjustments (or proposed adjustments) thereto since November 30, 1998,
the date of most recent adjustment, years of service and any interests in any
incentive compensation plan. Except as provided on Schedule 4.16, Seller has
not (i) paid, or made any accrual or arrangement for the payment of, bonuses
or special compensation of any kind, including any severance or termination
pay, to any Available Employee, (ii) made any general wage or salary
increases other than in the ordinary course and consistent with past practice
since May 31, 1998 or (iii)
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altered any other benefits provided to any Available Employee. Buyer shall
not incur any obligations to employees of Seller other than for services
rendered to Buyer after the Closing Date by employees to whom Buyer
voluntarily offers employment and subsequently employs.
(c) LABOR RELATIONS. Seller is not a party to any collective
bargaining agreement governing Available Employees. There are no
controversies or charges pending or, to the knowledge of Seller, threatened
involving any employee of the Business or group of employees, and no such
controversies existed or were resolved in any way since November 30, 1998.
Seller has not suffered or sustained any work stoppage and no such work
stoppage is threatened. No union organizing or election activities involving
any nonunion employees of Seller are in progress or threatened or were in
progress or threatened since January 1, 1996. Seller is not aware of any
reason why any employee of the Business would not accept employment with
Buyer.
IV.17. EMPLOYEE BENEFIT PLANS. Except as provided on Schedule 4.17,
neither Seller nor any other organization which is a member of a controlled
group of organizations (within the meaning of Sections 414(b), (c), (m) or
(o) of the Code) which includes Seller has, maintains or contributes to any
"welfare benefit plans" (as defined in Section 3(1) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), "employee
pension benefits plans" (as defined in Section 3(2) of ERISA), bonus, profit
sharing, deferred compensation, incentive or other compensation plans or
arrangements, qualified or unqualified (all of the foregoing being herein
called "BENEFIT PLANS") for the benefit of Seller's employees of the
Business. All of the Benefit Plans and the operation thereof substantially
conform and have substantially conformed with all applicable Laws.
IV.18. TAXES. All federal, state, county, local and other tax returns,
reports and declarations required to be filed by or on behalf of Seller
relating to the Business and Available Employees in whole or in part have
been filed and such returns are complete and accurate and disclose all taxes
required to be paid for the periods covered thereby. No extensions of time
in which to file any such returns and reports are in effect. All taxes,
including estimated taxes and all deficiency assessments, penalties and
interest relating to any period prior to the date hereof have been paid and
relating to any period prior to Closing will have been paid as of the
Closing, if due. All taxes required by Law to be withheld or collected for
payment have been duly withheld and collected, and have been paid to the
proper governmental entity or are being held by Seller for such payment, if
not yet due.
IV.19. PRODUCT WARRANTY. Schedule 4.19 sets forth an accurate, correct
and complete statement of all warranties and warranty policies of the
Business. Except as set forth on Schedule 4.19, no products of the Business
heretofore sold or leased or services rendered by Seller are now subject to
any guarantee, warranty, claim for product liability, or patent or other
indemnity, other than those set forth on Schedule 4.19. All warranties are
in conformity with the requirements of all applicable Laws.
IV.20. LITIGATION; CLAIMS. Except as set forth on Schedule 4.20,
Seller is not engaged in or a party to or, to Seller's knowledge threatened
with any suit, action, proceeding, complaint, charge, hearing or
investigation or legal, administrative, arbitration or other method of
settling disputes or disagreements relating to or in any way affecting, the
Purchased Assets or the
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Business, and Seller does not know, anticipate or have notice of any basis
for any such action. Seller has not received notice of any investigation
whether pending, threatened or contemplated by any federal, state or local
government or regulatory authority, including those involving the Business'
employment practices or policies, or compliance with environmental
regulations. Neither the Business nor Seller nor any of the Purchased Assets
is subject to any order, writ, injunction, stipulation, decree or judgment of
any court or governmental agency or any arbitrator.
IV.21. COMPLIANCE. Seller has complied in all material respects with
all Laws applicable to the Business or its operations, including those
relating to employment, Benefit Plans, environmental matters, warranties and
marketing; and there is not and will not be any liability to Buyer arising
from or related to any violations thereof, even if such violations are not
material. No payment or gift (in cash or in kind), whether or not illegal,
has been made to, on behalf of or at the direction of any vendor, supplier or
customer of the Business (or person associated therewith) as an inducement to
do business with Seller, other than customary business entertainment in
conformance with Law.
IV.22. CUSTOMERS AND SUPPLIERS. All agreements with customers,
manufacturers and suppliers of the Business were entered into by or on behalf
of Seller in the ordinary course of business at usual and normal prices and
terms. Seller does not know of any fact, condition or event which could
adversely affect its relationship with any customer, manufacturer or supplier
of the Business. There are no material disputes with any material customers,
manufacturers or suppliers. Seller has not received notice, nor has any
reason to believe, that any customer, manufacturer or supplier will cease to
do (or decrease the amount of) business with the Business after, or as a
result of the consummation of any transactions contemplated hereby or that
any material customer, manufacturer or supplier is threatened with bankruptcy
or insolvency. Attached hereto as Schedule 4.22 is a list of the top twenty
customers of the Business measured by revenue from June 1, 1998 through April
30, 1999.
IV.23. INSURANCE. Seller maintains policies of insurance, insurance
programs and fidelity bonds ("INSURANCE") with respect to the Facilities, the
Business and the Purchased Assets as described on Schedule 4.23. Schedule
4.23 sets forth a summary of the claims experience of the Business since
January 1, 1997. No notice of cancellation or nonrenewal with respect to, or
material increase of premium for, any Insurance with respect to the Business
has been received by Seller.
IV.24. BROKERS. Seller has not retained any broker or finder or
incurred any liability or obligation for any brokerage fees, commissions or
finder's fees with respect to this Agreement or the transactions contemplated
hereby.
IV.25. REAL PROPERTY LEASES. Schedule 1.4(c) sets forth an accurate,
correct and complete list of all real property leased or subleased by Seller
that is used in the Business, whether Seller acts as lessor or lessee (the
"REAL PROPERTY LEASES"). Seller has delivered to Buyer an accurate, correct
and complete copy of each Real Property Lease, and has delivered to Buyer
copies of existing title insurance policies, title repots, surveys,
environmental audits, and similar reports, if any, in the possession of
Seller for the real property subject to the Real Property Leases. All Real
Property Leases are in full force and effect and are valid, binding and
enforceable in accordance with their respective terms. Seller is in
peaceable possession of the
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premises covered by each Real Property Lease. Neither Seller nor any other
party to any Real Property Lease is in breach of any provision of, in
violation of, or in default in any material respect under the terms of any
Real Property Lease. No event has occurred which with notice or passage of
time or both would result in a breach of any provision of, or default under,
the terms of any Real Property Lease. Except as indicated on Schedule
1.4(c), each Real Property Lease is freely assignable to Buyer by Seller
without the consent of any other party. At the Closing, Seller shall deliver
to Buyer the consents or approvals of any parties required in connection with
the assignment of the Real Property Leases to Buyer.
Seller has complied with all Laws relating to pollution, hazardous
materials or protection of the environment in connection with Seller's past
or present ownership, use or operation of the Real Property, and has not
engaged in any activity that has constituted or could constitute a violation
of such Laws. Seller does not know of any pending or threatened lawsuits or
administrative proceedings against Seller that may affect Seller regarding
environmental compliance, control or liability relating to the Real Property.
IV.26. DISCLOSURE. To Seller's knowledge, neither this Agreement nor
any attachment, schedule, certificate or other statement delivered pursuant
to this Agreement omits to state a material fact necessary in order to make
the statements and information contained herein or therein, in light of the
circumstances in which they were made, not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as of the date hereof,
and as of the Closing, as follows:
V.1. AUTHORITY. Buyer has full legal right, power and authority,
without the consent of any other person, to execute and deliver this
Agreement and the documents to be delivered at Closing and to carry out the
transactions contemplated hereby and thereby. All corporate and other
actions required to be taken by Buyer to authorize the execution, delivery
and performance of this Agreement and all transactions contemplated hereby
have been duly and properly taken.
V.2. VALIDITY. This Agreement has been, and the documents to be
delivered at Closing by Buyer will be duly executed and delivered and
constitute lawful, valid and binding obligations of Buyer, enforceable in
accordance with their respective terms. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby will
not result in the creation of any lien, charge or encumbrance of any kind, do
not violate or conflict with any provision of, and do not result in a default
under or a breach of (a) the charter or bylaws of Buyer, (b) any contract,
agreement or other instrument to which Buyer is a party, (c) any order, writ,
injunction, decree or judgment of any court or governmental agency or (d) any
Law applicable to Buyer. No approval, authorization, registration, consent,
order or other action of or filing with any person, including any court,
administrative agency or other governmental authority, is required for the
execution and delivery by Buyer of this Agreement or the consummation by
Buyer of the transactions contemplated hereby.
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V.3. DUE ORGANIZATION. Buyer is a corporation organized and validly
existing and in good standing under the laws of the State of Delaware and has
full power and authority and all requisite licenses, permits and franchises
to own, lease and operate its assets and to carry on the business in which it
is engaged.
V.4. BROKERS. Buyer has not retained any broker or finder or incurred
any liability or obligation for any brokerage fees, commissions or finder's
fees with respect to this Agreement or the transactions contemplated hereby.
ARTICLE VI
COVENANTS OF SELLER
Seller hereby agrees to keep, perform and fully discharge the following
covenants and agreements.
VI.1. INTERIM CONDUCT OF BUSINESS. From the date hereof until the
Closing, Seller shall preserve, protect and maintain the Business and the
Purchased Assets, and shall operate the Business consistent with prior
practice and in the ordinary course of business. Without limiting the
generality of the foregoing, from the date hereof until the Closing, except
for transactions expressly approved in writing by Buyer, Seller shall:
(a) not dispose of Inventories of the Business, except for sales
or use in the ordinary course of business on prices and terms
consistent with past practice and shall maintain the properties of the
Business and Purchased Assets in good repair, order and condition,
reasonable wear and tear excepted;
(b) maintain and keep in full force and effect all insurance on
the Purchased Assets and properties of the Business or insurance for
the benefit of employees of the Business, all liability and other
casualty insurance, and all bonds on personnel, presently carried;
(c) preserve intact the organization and reputation of the
Business and keep available the services of substantially all of the
Available Employees and agents of the Business and preserve the good
will of suppliers, customers and others having business relationships
with the Business;
(d) maintain its books, accounts and records in the usual,
regular and ordinary manner on a basis consistent with prior years;
(e) not enter into, amend or terminate any employment, bonus,
severance or retirement contract or arrangement, nor increase any
salary or other form of compensation payable or to become payable to
any Available Employees of the Business, except for (i) increases for
employees eligible for annual compensation increases between the date
hereof and the Closing Date in the ordinary course and consistent with
past practice; and (ii) as set forth on Schedule 4.17;
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(f) not enter into, amend or terminate, or agree to enter into,
amend or terminate, any Material Contract, other than entering into
maintenance agreements on prices and terms consistent with past
practice;
(g) not sell, lease or otherwise dispose of or agree to sell,
lease or otherwise dispose of, any assets, properties, rights or
claims of the Business, except Inventory in the ordinary course of
business on a basis consistent with past practice;
(h) not permit any liens, encumbrances or security interest,
except Permitted Liens, to be placed on the Purchased Assets;
(i) not impose obligations for the services to be provided by
the Business more onerous than prior customer agreements;
(j) not increase the costs of performance in excess of those
generally required by prior customer agreements;
(k) not offer services to customers of the Business at prices
less than those generally offered prior to March 31, 1999;
(l) not accelerate, decelerate or change in any other way its
billing and collection practices to customers of the Business,
including with respect to deferred revenue, or shorten or lengthen any
customer contracts, or;
(m) not take any action or fail to take any action which could
reasonably be expected to cause any representation or warranty
contained in Article IV to become untrue.
From the date hereof through the Closing, Seller shall confer on a regular
and frequent basis with one or more designated representatives of Buyer to
report material operational matters and the general status of on-going
operations of the Business. Seller shall promptly notify Buyer of any
material change in the financial condition, results of operations,
properties, business or prospects of the Business and shall keep Buyer fully
informed of such events and permit Buyer's representatives to participate in
discussions relating thereto.
VI.2. ACCESS. From the date hereof through the Closing Date, Seller
shall give Buyer and its representatives full access (at reasonable times and
on reasonable terms) to all properties, facilities, personnel and employees,
books, contracts, leases, commitments and records of the Business, and during
this period Seller shall furnish Buyer with all other information as to the
Business and its assets, properties, rights and claims, as Buyer may from
time to time request. Seller agrees to cooperate fully with Buyer in the
conduct of Buyer's due diligence investigations.
VI.3. CONTINUED ASSISTANCE. Following the Closing, Seller shall refer
to Buyer as promptly as practicable any telephone calls, letters, orders,
notices, requests, inquiries and other communications relating to the
Business or the Purchased Assets, including any cancellations of service
agreements. Seller shall cooperate in an orderly transfer of the Business
and the
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continuation thereof by Buyer. From time to time, at Buyer's request and
without further consideration, Seller shall execute, acknowledge and deliver
such documents, instruments or assurances and take such other action as Buyer
may reasonably request to more effectively assign, convey and transfer any of
the Purchased Assets and will assist Buyer in the vesting, collection or
reduction to possession of such assets, properties, rights and claims.
Seller shall promptly forward to Buyer any Purchased Assets or other assets
of Buyer (including payments of Buyer's invoices) which come into Seller's
possession after Closing.
VI.4. RECORDS AND DOCUMENTS. For five years following Closing, Seller
shall retain and grant to Buyer and its representatives, at Buyer's request,
access to and the rights to make copies of those records and documents
related to the Business, possession of which is retained by Seller, as may be
necessary or useful in connection with Buyer's conduct of the Business after
Closing. If after such period Seller elects to dispose of such records,
Seller shall first give Buyer ninety (90) days' written notice, during which
period Buyer shall have the right to obtain possession of such records.
Similarly, for five years following Closing, Buyer shall retain and grant to
Seller and its representatives, at Seller's request, access to and the rights
to make copies of those records and documents related to the Business,
possession of which is transferred to Buyer, as may be necessary or useful in
connection with Seller's reporting obligations after the Closing. If after
such period Buyer elects to dispose of such records, Buyer will first give
Seller ninety (90) days' written notice, during which period Seller will have
the right to obtain possession of such records.
VI.5. CERTAIN PAYMENTS. Any payments which Seller receives after
Closing which are the property of the Buyer shall be property transmitted to
Buyer. Promptly following Closing, Seller shall pay and fully discharge all
accrued wages, sick leave, vacation and all other amounts owed to Available
Employees, all taxes or amounts withheld from employees, all sales taxes
collected in the conduct of the Business, and all liabilities and obligations
to suppliers and other creditors of the Business as and when due, and shall
otherwise pay, discharge or make adequate provision for all other liabilities
and obligations of the Business.
VI.6. CONSUMMATION. Each of Buyer and Seller shall use all reasonable
commercial efforts to consummate the transactions contemplated by this
Agreement and shall not take any other action inconsistent with its
obligations hereunder or which could hinder or delay the consummation of the
transactions contemplated hereby. From the date hereof through the Closing
Date, each of Buyer and Seller shall use all reasonable commercial efforts to
fulfill the conditions of its obligations hereunder and to cause its
representations and warranties to remain true and correct in all material
respects as of the Closing Date.
VI.7. INVENTORY. With respect to those items which constitute
Inventory on the Statement which at Closing are either (i) being repaired or
refurbished or (ii) in need of repair or refurbishment, Seller will, at
Buyer's election, either pay for such repair or refurbishment or reimburse
Buyer for such expenses.
VI.8. EXCLUSIVITY. Between the date hereof and the Closing, unless
this Agreement is earlier terminated, neither Seller nor anyone on its behalf
will directly or indirectly solicit, have discussions, negotiate or accept
any proposals with respect to a transfer of any portion of the
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Business or the Purchased Assets (except for sales of Inventory permitted by
the terms of this Agreement) or provide any information to any person in
connection therewith.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
Each of the obligations of Buyer to consummate the transactions
contemplated by this Agreement is subject to fulfillment prior to or at the
Closing of the following conditions (each of which may be waived by Buyer in
its sole discretion):
VII.1. ACCURACY OF WARRANTIES AND PERFORMANCE OF COVENANTS. The
representations and warranties of Seller contained herein shall be accurate
when made and as if made on and as of the Closing Date. Seller shall have
performed all of the obligations and complied with each and all of the
covenants, agreements and conditions required to be performed or complied
with on or prior to the Closing, except for such immaterial failures as could
not have a material adverse effect in the aggregate on the Business or Buyer.
VII.2. NO PENDING ACTION. No action, suit, proceeding or investigation
before any court, administrative agency or other governmental authority shall
be pending or threatened wherein an unfavorable judgment, decree or order
would prevent the carrying out of this Agreement or any of the transactions
contemplated hereby, declare unlawful the transactions contemplated hereby,
cause such transactions to be rescinded, or which might materially adversely
affect the right of Buyer to own, operate, control or benefit from the
Business or the Purchased Assets.
VII.3. CONSENTS. All consents by third parties that are required for
the transfer of the Business or the Purchased Assets or are required for the
consummation of the transactions contemplated hereby, or that are required in
order to prevent a breach of or a default under or a termination of any
agreement to be transferred to Buyer hereunder shall have been obtained or
provided for including the consent of any creditors from whom Seller has
obtained credit if approval of the transactions contemplated by this
Agreement must be obtained pursuant to an agreement with any such creditor.
VII.4. EMPLOYEES. A sufficient number of Available Employees (as
defined herein) as determined by Buyer in its reasonable judgment after
consultation with Seller shall have agreed to become employees of Buyer so
that Buyer can continue to operate the Business consistent with past
practices.
VII.5. CONDITION OF BUSINESS AND ASSETS. The Business and the
Purchased Assets shall not have been materially adversely affected in any way
by any act of God, fire, flood, accident, war, labor disturbance, legislation
(proposed or enacted), or other event or occurrence, whether or not covered
by insurance, and there shall have been no change in the Purchased Assets or
the Business, its financial condition or prospects, which could reasonably be
expected to have a material adverse effect thereon.
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VII.6. HSR ACT. Any applicable waiting period under the HSR Act shall
have expired or been earlier terminated without action by the Antitrust
Division of the Department of Justice or the Bureau of Competition of the
Federal Trade Commission.
VII.7. ESTOPPEL CERTIFICATES. Seller shall have obtained an estoppel
certificate from the landlord of each item of Real Property set out on
Schedule 1.2(c).
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
Each and all of the obligations of Seller to consummate the transactions
contemplated by this Agreement are subject to fulfillment prior to or at the
Closing of the following conditions (any of which may be waived in the sole
discretion of Seller):
VIII.1. ACCURACY OF WARRANTIES AND PERFORMANCE OF COVENANTS. The
representations and warranties of Buyer contained herein shall be accurate
when made and as if made on and as of the Closing Date. Buyer shall have
performed all of the obligations and complied with each and all of the
covenants, agreements and conditions required to be performed or complied
with on or prior to the Closing, except for such immaterial failures as could
not have a material adverse effect on Seller.
VIII.2. NO PENDING ACTION. No action, suit, proceeding or
investigation before any court, administrative agency or other governmental
authority shall be pending or threatened wherein an unfavorable judgment,
decree or order would prevent the carrying out of this Agreement or any of
the transactions contemplated hereby, declare unlawful the transactions
contemplated hereby or cause such transactions to be rescinded.
VIII.3. HSR ACT. Any applicable waiting period under the HSR Act shall
have expired or been earlier terminated without action by the Antitrust
Division of the Department of Justice or the Bureau of Competition of the
Federal Trade Commission.
ARTICLE IX
EMPLOYEES
IX.1. CONTINUED ASSOCIATION WITH THE BUSINESS.
(a) Prior to Closing, Buyer shall offer employment effective at
Closing to all full-time Available Employees, at initially the same location
as at Closing with any relocation to be discussed after Closing, on terms
substantially similar in overall value as to cash compensation to the cash
compensation currently received by such employees and listed on Schedule
4.16, excluding special bonuses listed on Schedule 4.16(b). At Closing,
Seller will terminate the Available Employees. Seller shall make the
Available Employees available for employment by
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Buyer and shall use its reasonable commercial efforts to assist Buyer in
employing the Available Employees, including permitting interviews prior to
Closing.
(b) If an Available Employee accepts employment with Buyer,
neither Seller nor any of its Affiliates shall offer employment to, employ
such Available Employee, or knowingly induce such employee to leave the
employ of Buyer, in each case within three (3) years after the Closing Date.
Notwithstanding the foregoing sentence, if Buyer terminates the employment of
any Available Employee, Seller may then rehire any such employees with the
consent of Buyer, which shall not be unreasonably withheld.
(c) Seller further agrees that for a period of nine months from
the Closing Date, neither Seller nor any of its Affiliates will offer to
those Available Employees who have not accepted employment with Buyer other
employment opportunities with Seller or its Affiliates. Buyer may, in its
sole discretion, agree to waive the above nine-month prohibition on an
case-by-case basis if specifically requested by Seller to do so. No employee
of the Business shall be deemed to be a third-party beneficiary of any
portion of this Agreement.
IX.2. COBRA; NOTICE. Seller shall fulfill all of its obligations under
the Consolidated Omnibus Budget Reconciliation Act of 1985 with respect to
Available Employees. Seller shall provide notice, if any, required under the
Workers Adjustment and Retraining Notification Act and any state law notice
requirements.
IX.3. EMPLOYEE BENEFIT PLANS. Buyer shall not assume or be responsible
for any Benefit Plans or any liabilities related thereto.
ARTICLE X
COVENANT AGAINST COMPETITION
X.1. NONCOMPETITION. In order to protect the value of the Business and
the Purchased Assets, Seller agrees not to, directly or indirectly, including
through Affiliates, whether as an owner, advisor, participant or otherwise,
engage in any business activity that competes with the Business within the
United States for a period of three years from the Closing Date, or attempt
in any way to obtain for itself or others or divert from Buyer, any rights or
benefits arising out of or in connection with the Purchased Assets or the
Business, provided that notwithstanding the foregoing, (i) Seller may own as
a passive investment, shares of capital stock of a corporation engaged in the
Business if the shares owned by Seller represent less than 5% of the total
number of shares of capital stock outstanding and (ii) Seller may engage in
the sale of imaging, records management and electronic document management
software and provide software maintenance support contracts for such software.
X.2. NONDISCLOSURE. The Seller and its Affiliates will not disclose,
or use directly or indirectly to, or for the benefit of any person or entity
other than Buyer, any confidential or proprietary information, data or
materials (including customer lists) related to the Business.
X.3. INJUNCTION. If a party violates the provisions of this Article,
the non-violating party (the "NON-VIOLATING PARTY") shall be entitled to
injunctive relief in addition to, and not in
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limitation of, any relief or rights to which the Non-Violating Party may be
entitled. Any party prevailing in an action to enforce this Article shall be
entitled to recover all costs and expenses, including attorneys fees, from
the violating party.
X.4. BLUE PENCIL. The necessity of the restrictions set forth above
and the nature and scope of such restrictions have been carefully considered
and agreed to by the parties hereto. The parties hereby agree and
acknowledge that the duration, scope and geographic area applicable to the
restrictions set forth in this Article are fair, reasonable and necessary.
The consideration provided for in this Agreement is sufficient and adequate
to compensate the parties for agreeing to the restrictions contained in this
Article. If, however, any court determines that the foregoing restrictions
are not enforceable, such restrictions shall be modified, rewritten or
interpreted to include as much of their nature and scope as possible as will
render them enforceable. Each of the covenants contained herein shall be
deemed a separate and severable covenant. It is the desire of the parties
that this Article X be enforced to the fullest extent permissible.
ARTICLE XI
TRANSITION PERIOD
XI.1. TRANSITION OF BUSINESS. To the extent reasonably requested by
Buyer, Seller shall provide Buyer with certain transition services, including
without limitation management and financial accounting system support, use of
current leased and owned facilities, and assistance in the transition to
Buyer of the Purchased Assets and the Business, for a period not to exceed
ninety days from the Closing Date, and specifically including, but not
limited to, such other services as are described on Schedule 11.1. Use of
the Turlock facility will be at a market rental rate, as set forth on
Schedule 11.1. The charges for other services will reflect direct
incremental costs of such services.
XI.2. USE OF NAME. For a period not to exceed one hundred twenty (120)
days from the Closing Date, Buyer shall have the right to use the "TAB" name
as it exists on existing marketing, collateral and stationery on site at the
Business, and on supplies for internal use. Buyer shall not use the "TAB"
name or any derivative thereof for any other purpose.
XI.3. ACCOUNTS RECEIVABLE. Buyer will collect accounts receivable open
as of the date of the Closing and remit the cash collections to Seller for a
period of 180 days after the Closing Date. As compensation for these
services Seller will pay to Buyer an administrative fee of 5% of money
collected by Buyer (or by Seller, if any) from the Closing Date to 180 days
after the Closing Date. With respect to collections by Buyer, the weekly
collections net of the administrative fee will be forwarded to Seller each
Monday for the prior week's collections; with respect to such collections by
Seller, Seller shall pay to Buyer the administrative fee of 5% each Monday
for the prior week's collections. At the end of the 180-day period, Seller
will assume responsibility for collection of any remaining uncollected
accounts receivable and will have the ability to utilize a collection agent
to secure final collections of outstanding receivables. Buyer will cooperate
with Seller to allow Seller to collect open accounts receivable after the
180-day period.
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ARTICLE XII
SURVIVAL AND INDEMNIFICATION
XII.1. SURVIVAL. All representations, warranties, covenants and
agreements contained in this Agreement or in any document delivered pursuant
hereto or thereto shall be deemed to be material and to have been relied upon
by the parties hereto, and shall survive the Closing and shall continue to be
fully effective and enforceable. Any claim for indemnification for breach of
a representation or warranty must be asserted in writing within thirty (30)
months of the Closing Date, and thereafter shall survive until resolved or
judicially determined, except for the representations and warranties
contained in Sections 4.1, 4.2, 4.3, 4.10(a) (first sentence only), 5.1, 5.2
and 5.3, which shall survive indefinitely, and the representations and
warranties contained in Section 4.18, which shall survive for the applicable
statute of limitations plus one month. The representations and warranties
contained in this Agreement shall not be affected by any investigation,
verification or examination by any party hereto or by anyone on behalf of any
such party.
XII.2. INDEMNIFICATION.
(a) Each party shall defend, indemnify and hold harmless the
other from and against any and all losses, damages, expenses (including court
costs, amounts paid in settlement, judgments, and attorneys' fees and other
expenses for investigating and defending), suits, actions, claims,
deficiencies, liabilities or obligations, net of actual recoveries from
non-affiliated third parties, after all costs of recoveries (collectively,
"LOSSES") related to, caused by or arising from any misrepresentation, breach
of warranty or failure to fulfill any covenant or agreement contained herein
or in any other agreement, instrument or other document delivered pursuant
hereto, and any and all claims made based upon facts alleged that, if true,
would have constituted any such misrepresentation, breach or failure,
together with interest at 7% per annum from the date of incurrence of an
out-of-pocket loss to the date of payment. Further, Seller shall defend,
indemnify and hold harmless Buyer from and against any Losses related to,
caused by, or arising from any failure to obtain assignments to the PDSC
Modifications referred to on Schedule 4.13. All rights herein are cumulative
and are in addition to all other rights and remedies which are otherwise
available.
(b) Neither party shall be required to indemnify the other
party for any Losses for breach of representations and warranties under
Section 12.2(a) unless the aggregate amount of all Losses for breach of
representations and warranties under all individual Indemnification Claims
(as defined below) exceeds seventy-five thousand dollars ($75,000), whereupon
Indemnitee shall be entitled to be paid the entire amount of such Losses,
including the initial $75,000. The parties hereto agree that the
Indemnification obligations of each party under this Article XII for breach
of representations and warranties, including the initial $75,000, shall be
limited to the sum of the Initial Purchase Price and any Additional Purchase
Price actually paid (the "CAP").
Indemnitee's sole and exclusive remedy against Indemnitor for
any Losses for breaches of representations and warranties shall be
indemnification under this Article XII; provided, however, that (i) nothing
contained in this Article XII shall limit in any manner any remedy at law
or in equity to which Indemnitee shall be entitled against
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Indemnitor as a result of willful fraud or intentional misrepresentation
by Indemnitor, or any of its representatives or agents and (ii) the
provisions of Section 12.2(b) above shall not limit, in any manner,
Indemnitor's obligation to indemnify Indemnitee for any breach of any
covenant or agreement of Indemnitor to be performed by Indemnitor
following the Closing Date, including, without limitation, Seller's
obligation to perform and discharge all Excluded Liabilities and
Seller's obligations arising out of the covenant against competition set
forth in Article X hereof.
XII.3. PROCEDURES FOR INDEMNIFICATION.
(a) As used in this Article XII, the term "INDEMNITOR" means the
party against whom indemnification hereunder is sought, and term "INDEMNITEE"
means the party seeking indemnification hereunder.
(b) A claim for indemnification hereunder (an "INDEMNIFICATION
CLAIM") shall be made by Indemnitee by delivery of a written notice to
Indemnitor requesting indemnification and summarizing the basis on which
indemnification is sought based on information known to Indemnitee, the amount
of the asserted Losses, and, in the case of a Third Party Claim (as defined
herein), containing (by attachment or otherwise) such other information believed
by Indemnitee to be material concerning such Third Party Claim.
(c) If the Indemnification Claim involves a Third Party Claim, then
the procedures set forth in Section 12.4 hereof shall be observed by Indemnitee
and Indemnitor.
(d) If the Indemnification Claim involves a matter other than a Third
Party Claim (as defined below), Indemnitor shall have thirty (30) days to object
to such Indemnification Claim by delivery of a written notice of such objection
to Indemnitee specifying in reasonable detail the basis for such objection.
Failure to timely so object shall constitute a final and binding acceptance of
the Indemnification Claim by Indemnitor, and the Indemnification Claim shall
thereafter be paid by Indemnitor in accordance with Section 12.3(e) hereof. If
an objection is timely delivered by Indemnitor and the dispute is not resolved
within twenty (20) business days from the delivery of such objection (the
"NEGOTIATION PERIOD"), the dispute shall be resolved in such manner as the
parties agree upon, including, if elected by a party, litigation.
(e) Subject to Section 12.2, upon determination of the amount of an
Indemnification Claim, whether by (i) an agreement between Indemnitor and
Indemnitee, (ii) a final arbitration award or (iii) a final judgment (after
expiration of all periods for appeal of such judgment) or other final
nonappealable order, Indemnitor shall pay the amount of such Indemnification
Claim by check within ten (10) days of the date such amount is determined.
Following the determination of the amount of an Indemnification Claim pursuant
to any of the procedures set forth in the immediately preceding sentence,
without limiting any other rights it may have, each party may, at its sole
option, by notice to the other party setoff any amount to which it is entitled
under this Article against amounts otherwise payable under the Agreement to the
Indemnitor.
XII.4. DEFENSE OF THIRD PARTY CLAIMS. Should any claim be made, or suit
or proceeding (including, without limitation, a binding arbitration or an audit
by any taxing authority) be
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instituted against Indemnitee which, if prosecuted successfully, would be a
matter for which Indemnitee is entitled to indemnification under this
Agreement (a "THIRD PARTY CLAIM"), the obligations and liabilities of the
parties hereunder with respect to such Third Party Claim shall be subject to
the following terms and conditions.
(a) Indemnitee shall give Indemnitor written notice of any such
claim promptly after receipt by Indemnitee of notice thereof; provided that,
any delay or failure in giving notice hereunder shall not affect Indemnitee's
rights to Indemnification hereunder, except to the extent Indemnitor is
materially prejudiced. Indemnitor may, at its option, (i) if the damages
sought are only money damages, at its sole cost and expense, undertake
control of the defense thereof by counsel of its own choosing reasonably
acceptable to Indemnitee, or (ii) decline to assume control of but
participate in the defense thereof provided that such participation by
Indemnitor shall be at its own expense. If Indemnitor elects the option
stated in clause (i) of the immediately preceding sentence, Indemnitee may
participate in the defense through its own counsel at its own expense. The
assumption of the defense of any Third Party Claim by Indemnitor shall be an
acknowledgment by Indemnitor (x) that such Third Party Claim is subject to
indemnification under the provisions of Article XII and (y) that such
provisions are binding on Indemnitor without regard to the Cap. If, however,
Indemnitor fails or refuses to undertake the defense of such Third Party
Claim within ten (10) days after written notice of such claim has been
delivered to Indemnitor by Indemnitee (or not later than five business days
prior to any court filing, if earlier), Indemnitee shall have the right to
undertake the defense, compromise and, subject to Section 12.5, settlement of
such Third Party claim with counsel of its own choosing. In the
circumstances described in the preceding sentence, Indemnitee shall, promptly
upon its assumption of the defense of such Third Party claim, make an
Indemnification Claim as specified in Section 12.3(b) which shall be deemed
an Indemnification Claim that is not a Third Party Claim for the purposes of
the procedures set forth herein.
(b) Indemnitee and Indemnitor shall cooperate with each other in
all reasonable respects in connection with the defense of any Third Party
Claim, including making available records relating to such claim and
furnishing employees of Indemnitee as may be reasonably necessary for the
preparation of the defense of any such Third Party Claim or for testimony as
witness in any proceeding relating to such claim, with Indemnitee being
reimbursed for the costs thereof.
XII.5. SETTLEMENT OF THIRD PARTY CLAIMS. Unless Indemnitor has failed
to assume the defense of a Third Party Claim under this Article XII, no
settlement by Indemnitee of a Third Party Claim shall be made without the
prior written consent by or on behalf of Indemnitor. If Indemnitor has
assumed the defense of a Third Party Claim as contemplated by Section
12.4(a), no settlement of such Third Party Claim may be made by Indemnitor
without the prior consent of Indemnitee, which consent shall not be
unreasonably withheld or delayed.
ARTICLE XIII
GENERAL PROVISIONS
XIII.1. AMENDMENTS AND WAIVER. No amendment, waiver or consent with
respect to any provision of this Agreement shall in any event be effective,
unless the same shall be in writing
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and signed by the parties hereto, and then such amendment, waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.
XIII.2. NOTICES. All notices, requests, demands and other
communications hereunder shall be in writing and shall be delivered in
person, or by overnight courier, fees prepaid or by telecopy (with written
confirmation of receipt) as follows:
(a) If to Seller:
TAB Products Co.
1400 Page Mill Road
Palo Alto, California 94304
Telecopy No. (650) 852-2563
Attention: President and Chief Executive Officer
With a copy to:
Gray Cary Ware & Freidenrich LLP
400 Hamilton Avenue
Palo Alto, California 94301
Telecopy No. (650) 327-3699
Attention: Diane Holt Frankle
(b) If to Buyer:
Bell & Howell Company
5215 Old Orchard Road
Skokie, Illinois 60077-1076
Telecopy No. (847) 470-9425
Attention: General Counsel
With a copy to:
Bell & Howell Document Management Products Company
6800 McCormick Road
Chicago, Illinois 60645
Telecopy No. (847) 675-9271
Attention: President and CEO
and
McDermott, Will & Emery
227 West Monroe Street
Chicago, Illinois 60606-5096
Telecopy No. (312) 984-3669
Attention: Grant A. Bagan
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Any party may change its address for receiving notice by written notice given
to the others named above.
XIII.3. EXPENSES AND TAXES. Except as otherwise expressly provided
herein, each party to this Agreement shall pay its own costs and expenses in
connection with the transactions contemplated hereby, including its own legal
fees and accounting expenses. Any sales, use, transfer or other taxes or
fees applicable to the conveyance and transfer from Seller to Buyer of the
Purchased Assets shall be borne equally between Buyer and Seller. The
provisions of this Section shall survive any termination of this Agreement.
XIII.4. COUNTERPARTS. This Agreement may be executed simultaneously in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
XIII.5. SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to
the benefit of the parties named herein and their respective successors and
assigns. Buyer shall be entitled to assign its rights under this Agreement
without the consent of Seller, provided that Buyer shall remain liable
hereunder.
XIII.6. ENTIRE TRANSACTION. This Agreement and the documents referred
to herein contain the entire understanding among the parties with respect to
the transactions contemplated hereby and supersede all other agreements,
understandings and undertakings among the parties with respect to the subject
matter hereof, including, without limitation, that certain letter of intent,
dated March 31, 1999, between the parties.
XIII.7. APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Illinois applicable to
contracts made and to be performed wholly within the state.
XIII.8. OTHER RULES OF CONSTRUCTION. References in this Agreement to
sections, schedules and exhibits are to sections of, and schedules and
exhibits to, this Agreement unless otherwise indicated. Words in the
singular include the plural and in the plural include the singular. The word
"OR" is not exclusive. The word "INCLUDING" shall mean including, without
limitation. The section and other headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. The terms "contracts" and "agreements"
each include the other and include obligations of all types, whether written
or oral, fixed or contingent. The terms "vendors" and "suppliers" each
include the other. As used in this Agreement, any reference to any state of
facts, event, change or effect being "material" with respect to any entity
means a state of facts that is material to the current or expected condition
(financial or otherwise), properties, assets, liabilities, business,
operations or prospects of such entity. Whenever the term "enforceable in
accordance with its terms" or like expression is used in this Agreement, it
is understood that excepted therefrom are any limitations on enforceability
under applicable bankruptcy, insolvency, reorganization, moratorium or other
laws of general application affecting the enforcement of creditor's rights.
-31-
<PAGE>
XIII.9. PARTIAL INVALIDITY. In the event that any provision of this
Agreement shall be held invalid or unenforceable by any court of competent
jurisdiction, such holding shall not invalidate or render unenforceable any
other provision hereof.
-32-
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by a duly authorized officer all as of the date first
written above.
TAB PRODUCTS CO. BELL & HOWELL DOCUMENT MANAGEMENT
PRODUCTS COMPANY
/s/ Philip C. Kantz /s/ Laura L. Collins
---------------------------- ----------------------------
By: Philip C. Kantz By: Laura L. Collins
---------------------------- ----------------------------
Its: President & CEO Its: Vice President
---------------------------- ----------------------------
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<PAGE>
ANNEX A
FORM OF OPINION OF SELLER'S COUNSEL
(a) Seller is a corporation validly existing and in good standing
under the laws of the State of Delaware, and has full power and authority
(corporate and otherwise) to own, operate and lease its properties and assets
and to carry on its business as now conducted;
(b) Except as set forth on Seller's Disclosure Schedule, Seller is
duly qualified and licensed to do business as a foreign corporation and is in
good standing in all jurisdictions where, by the nature of its business or
the character and location of its property and personnel, failure to be so
licensed or qualified would have a material adverse effect upon its business
or assets or would affect the ability of Seller to enforce any of its
material rights;
(c) Seller has full, right, power and authority, without the
consent of any other person, to execute and deliver the Agreement for
Purchase and Sale of Assets (the "Agreement"), dated as of even date
herewith, by and between Buyer and Seller and to carry out the transactions
contemplated thereby, and Seller has duly and properly taken all corporate
and other actions required to authorize the execution, delivery and
performance of the Agreement and all transactions contemplated thereby;
(d) The Agreement and all documents required to be delivered by
Seller have been duly executed and delivered and constitute legal, valid and
binding obligations of Seller, enforceable in accordance with their
respective terms, except as the same may be limited by bankruptcy,
insolvency, reorganization or other laws affecting creditors' rights
generally and subject to the availability of equitable remedies; and
(e) Except as set forth on Seller's Disclosure Schedule, neither
the execution, delivery or performance of the Agreement nor consummation of
the transactions contemplated thereby will result in the creation of any
lien, charge or encumbrance of any kind or the acceleration of any
indebtedness or other obligation of Seller or is prohibited by, violates or
conflicts with any provision of, or results in a default under or a breach
of, (i) the Certificate of Incorporation or Bylaws of Seller, (ii) to our
knowledge, any order, writ, injunction, decree, judgment, license or permit
of any court or governmental instrumentality, or (iii) to our knowledge, any
law or regulation applicable to Seller.
<PAGE>
ANNEX B
GENERAL ASSIGNMENT, BILL OF SALE AND ASSUMPTION OF
ASSUMED LIABILITIES AND OBLIGATIONS
THIS INSTRUMENT is made and entered into this ____ day of June, 1999, by
and between TAB Products Co., a Delaware corporation ("ASSIGNOR"), and Bell &
Howell Document Management Products Company, a Delaware corporation
("ASSIGNEE").
WHEREAS, Assignor and Assignee are parties to an Agreement for Purchase
and Sale of Assets, dated May 20, 1999 (the "PURCHASE AGREEMENT"), governing
the purchase and sale of the assets, properties, rights and claims of
Assignor, and the assumption of certain liabilities and obligations related
to the Business (the "PURCHASED ASSETS");
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged:
Assignor hereby sells, transfers, conveys, assigns and delivers to
Assignee the Purchased Assets, TO HAVE AND TO HOLD the same, with the
appurtenances thereof, unto the Assignee, its successors and assigns,
forever, to its own proper use and behalf.
Assignor hereby represents and warrants to Assignee that Assignor is the
sole owner of and has good and marketable title to all of the aforementioned
assets, properties, rights and claims and conveys them to Assignee free and
clear of any mortgage, lien, claim, right, security interest, encumbrance,
covenant, easement or restriction of any kind or nature, except as may be
included in the Assumed Liabilities. Assignor hereby covenants and agrees to
defend, indemnify and hold harmless Assignee, its successors and assigns from
any cost, expense, claim, suit, demand, liability or damage arising out of
any claims asserted by others challenging or adverse to the right, title or
interest of Assignee, its successors and assigns in and to the Business or
the Purchased Assets.
Assignor hereby irrevocably constitutes and appoints Assignee, its
successors and assigns, the true and lawful attorneys of Assignor with full
power of substitution, in the name of Assignor or otherwise, and on behalf
and for the benefit of Assignee, its successors and assigns, to demand and
receive from time to time any and all property of Assignor hereby conveyed,
transferred, assigned and delivered or intended so to be; to give receipts,
releases and acquittances for or in respect of the same or any part thereof;
to institute and prosecute in the name of Assignor or otherwise any and all
proceedings at law, in equity or otherwise, which Assignee, its successors
and assigns, may deem proper to collect, assert or enforce any claim, title,
right, debt or account hereby transferred and assigned or intended so to be;
and to defend and compromise any and all actions, suits or proceedings in
respect of any of the properties hereby assigned and transferred or intended
so to be, that Assignee, its successors or assigns, shall deem desirable.
Assignor hereby declares that the foregoing powers are coupled with an
interest and shall be irrevocable in any manner or for any reason.
<PAGE>
Assignee hereby assumes and agrees to pay, satisfy, perform and fully
discharge the Assumed Liabilities and Obligations. Assignee assumes no other
liabilities or obligations of Assignor not expressly stated in the preceding
sentence.
All capitalized terms used but not defined herein shall have the meaning
attributed to them in the Purchase Agreement.
Assignor shall at any time and from time to time, execute and deliver to
Assignee all other and further agreements, assignments, conveyances, deeds
and other instruments necessary or desirable to vest in Assignee full right,
title and interest in or to any of the property or interests in property
which this instrument purports to transfer to Assignee. It is understood
that Assignor contemporaneously with the execution and delivery of this
General Assignment and Bill of Sale and Assumption of Assumed Liabilities and
Obligations is further executing and delivering to Assignee certain
assignments and other instruments of transfer which cover certain of the
Purchased Assets, the purpose of which is to supplement, facilitate and
otherwise implement the transfer intended hereby.
IN WITNESS WHEREOF, each of the undersigned has caused this instrument
to be signed and sealed on its behalf by a duly authorized officer as of the
date first written above.
ASSIGNOR: ASSIGNEE:
TAB PRODUCTS CO. BELL & HOWELL DOCUMENT
MANAGEMENT PRODUCTS COMPANY
By:_______________________________ By:_______________________________
Name:___________________________ Name: __________________________
Its:____________________________ Its: ___________________________
<PAGE>
Exhibit 99.1
<PAGE>
TAB ANNOUNCES SALE OF THE FIELD SERVICES GROUP TO INDUSTRY LEADER IN PROVIDING
WORLDWIDE SERVICES
Palo Alto, CA, May 21, 1999 -- TAB Products Co. (AMEX:TBP), the experts in
document management, today announced an agreement to sell its Field Services
Group to Bell & Howell Company (NYSE:BHW), a leader in the delivery of
information solutions and services. This transaction enables TAB to re-deploy
its capital to support the company's strategic business model, to offer
high-level document management solutions in the Fortune 1000 and Russell 2000
customer base. It is expected the transaction will close at the beginning of
June 1999.
The Field Services Group has provided warranty support and maintenance and
repair services for optical storage systems for 15 years. They have developed a
strong reputation for quality service that will enhance the Bell & Howell
offering. The Field Services Group's clients are expected to benefit even more
from the investment that Bell & Howell has already made in this marketplace.
"This is a great strategic fit for the Field Services Group," said Philip C.
Kantz, President and CEO of TAB. "With the strong leadership of Marty H. Evans,
general manager, Field Services Group, the business has grown and maintained its
reputation for quality. At the same time it is requiring a greater proportion of
capital to maintain this growth. Bell & Howell already has a significant
investment and presence in this marketplace giving the combined operations
important scale."
This transaction serves to better direct TAB's energy towards the core of the
business, addressing the opportunity presented by the convergence of paper,
image and digital information. TAB will more aggressively invest in solutions
for its clients' document management requirements that include professional
services, imaging services technology and Internet-enabled support.
"The sale of the Field Services Group permits TAB to deploy the proceeds to
enhance its effectiveness in delivering value added document management
solutions. TAB is no longer just an office products company," said Mr. Kantz.
"The recent announcement of our partnership with ImageMax, new releases of
TABQUIK and FileTracker software and the growth in our professional services
projects defines our role in the convergence of paper, image and digital
document management solutions," he added.
Even though there will be financial effects to the top line revenue and earnings
as a result of this sale, TAB will gain in the long term by permitting
management to focus on the suite of products and services supporting its
strategic plan and the implementation of the strategy through expanding channels
of distribution.
TAB Products Co. (AMEX:TBP), a leading document management company, provides
efficient solutions that enable its customers to organize, control and find
their critical documents. TAB leverages its knowledge of paper-based systems
with expertise in emerging digital document management technologies.
Headquartered in Palo Alto, California, TAB employs over 1,200 people with
offices in the United States, Canada, Europe and Australia. With over 50 years
of experience in document management, TAB serves customers in a variety of
industries including Finance, Healthcare, Government and Insurance. Additional
information can be found at www.tab.com.
