ASSET PURCHASE AGREEMENT
THIS AGREEMENT is entered into effective as of the day of 3rd day of
February 1998, by and between KAO INFOSYSTEMS COMPANY, a Delaware Corporation
(hereinafter referred to as "KIC"); and ZOMAX OPTICAL MEDIA, INC., a Minnesota
corporation (hereinafter referred to as "Zomax').
RECITALS
A. KIC is engaged in the business of, among other things,
providing software duplication, CD and DVD replication and fulfillment services,
and bulk sales of magnetic media to the computer industry.
B. KIC currently conducts business operations from facilities
located at 1640 Berryessa Road, San Jose, California, held under a sublease with
Novell, Inc. (hereinafter referred to as the "Facility") from which KIC conducts
complex service manufacturing, warehouse and distribution activities for certain
customers (hereinafter referred to as the "Business').
C. KIC is desirous of transferring certain tangible and
intangible assets associated with the operation of the Business, including,
those associated with the business operations conducted at the Facility, to
Zomax, and Zomax is desirous of acquiring such assets from KIC, in accordance
with the terms and conditions hereinafter set forth.
D. KIC is a party to a Representative Agreement dated July 1,
1995 (hereinafter referred to as the "Rep Agreement"), with Primary Marketing
Group (hereinafter referred to as "PMG") to provide sales and marketing
assistance with respect to the sale of floppy disks, CD replication, software
duplication. turnkey and fulfillment services. PMG has responsibility for the
Novell, Inc. (hereinafter referred to as "Novell), and other accounts of KIC,
and is involved in the business and activities of the Facility. Concurrently
with the Closing of this transaction, KIC and PMG will terminate the Rep
Agreement.
E. Zomax intends to cause a merger of a wholly owned
subsidiary of Zomax with PMG and Next Generation Services LLC (hereinafter
referred to as "NGS") pursuant to the terms of which such subsidiary of Zomax is
the surviving entity.
NOW THEREFORE, in consideration of the mutual promises in this
Agreement and for other good and valuable consideration as set forth herein, the
adequacy and receipt of which are hereby acknowledged. the parties hereto.
intending to be bound, agree as follows:
1. SALE OF BUSINESS ASSETS: KIC shall transfer, sell, and deliver to
Zomax. free and clear of all liens and encumbrances, unless otherwise noted
(subject, however, to the terms and conditions of the contracts listed on
Schedule "1-C-2") and Zomax shall acquire from KIC, the following assets used in
the operation of the Business (hereinafter referred to as the "Business
Assets"), as follows:
A. All equipment, machinery, tools and other tangible assets,
wherever located, described in the attached Schedule "l-A" free and clear of all
liabilities, claims, liens and encumbrances (subject, however, to the terms and
conditions of the contracts listed on Schedule "1-C-2."
B. A royalty free, non-exclusive right and license to use
KIC's rights, title and interest, if any, and to the extent transferable by KIC,
in all patents, copyrights, trademarks, service marks, trade secrets,
information, inventions, computer programs (in any form), non-proprietary policy
and procedure manuals, and non-proprietary processes described in Schedule "1-B"
(collectively the "Intellectual Property Rights");
C. KIC's rights and interest, subject to all duties, if any,
in and to the contracts listed on Schedule "l-C" to the extent KIC has the
lawful right to assign such rights and interests (hereinafter referred to as the
"Assigned Contracts"); and to the extent assigned in the Assignment and
Assumption Agreements attached hereto as Schedule "1-C-1," KIC's rights and
interests, if any, in and to the contracts listed on Schedule "1-C-2" to the
extent KIC has the lawful right to assign such rights and interests (hereinafter
referred to s the "Partially Assigned Contracts").
D. The Inventory (hereinafter defined) as provided in
Paragraph 12, below and the Other Inventory acquired in accordance with
provisions herein.
1.1 It is specifically agreed that the contracts and
customers listed on Schedule "1.1" shall be retained by KIC and will not be
assigned to Zomax pursuant to this Agreement. It is specifically agreed that no
portion of the Business Assets shall include and the assignment of the Assigned
Contracts or Partially Assigned Contracts shall not assign assets associated
with (i) products or services supplied by KIC or its affiliates from outside of
North America (the "Foreign Work") or (ii) Fulfillment Services; as used herein
"Fulfillment Services" means call center activities; or pick pack and ship
distribution tied to or associated with orders taken in the KIC call center
and/or managed by a KIC call center in a database system such as a subscription
program.
2. PURCHASE PRICE. The parties acknowledge and agree that the Purchase
Price (as hereinafter defined) for the Business Assets has been negotiated to
reflect their current condition and existence, and that Zomax and PMG have had
ample opportunity to diligently examine and investigate to its satisfaction the
condition and status of the assets and their existence. Zomax contemplates its
merger with PMG prior to the Closing, and agrees that the knowledge of PMG
concerning the Business, the Facility, the Business Assets, and other facts
relevant to this Agreement and the transactions contemplated thereby shall, for
purposes of this Agreement, be considered the knowledge of Zomax, to which KIC's
representations and warranties and the transactions contemplated hereby are
subject. The Business Assets are being transferred without any warranty being
given by KIC, except as expressly set forth in Paragraph 6. Zomax will at the
Closing acquire the Business Assets in their current and AS IS condition,
without warranty as to condition or any other warranty. KIC DISCLAIMS AND ZOMAX
AGREES THAT KIC IS NOT BOUND BY NOR LIABLE FOR ANY AND ALL OTHER WARRANTIES,
GUARANTIES, STATEMENTS, REPRESENTATIONS OR INFORMATION PERTAINING TO THE
BUSINESS ASSETS, WHETHER EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO ANY
WARRANTY OF MERCHANTABILITY, FITNESS FOR USE, OR FITNESS FOR A PARTICULAR
PURPOSE, OR ANY WARRANTY OF QUALITY, DESIGN, CONDITION, CAPACITY, SUITABILITY,
NON-INFRINGEMENT OR PERFORMANCE, WHETHER MADE BY KIC OR AN AGENT OR OTHER
REPRESENTATIVE OF KIC. Without limiting the effect of the foregoing disclaimers,
in no event shall KIC be liable for any incidental, consequential, indirect or
reliance damages, including, without limitation, damages for loss of business
profits, business interruption, loss of business information or other pecuniary
loss arising from, out of or in connection with the Business Assets.
In consideration for the transfer of the Business Assets by KIC to
Zomax, Zomax shall pay to KIC the following amounts (hereinafter referred to as
the "Purchase Price"):
A. An amount equal to the sum of Two Hundred Forty Thousand
Dollars ($240,000.00) (hereinafter referred to as the "Other Consideration");
plus
B. An amount equal to the sum of Thirty-Three Thousand Two
Hundred and Sixty Dollars and Eighty-Seven Cents ($33,260.87), being the book
value as appearing on the financial records of KIC as of January 1, 1998 of the
tangible personal property which was acquired by KIC under the Asset Purchase
Agreement between Novell and KIC dated November 1, 1997 the ("Novell APA"), more
particularly described in Schedule "2-B" (the "Novell Property"); less the
amount of Ninety Thousand Dollars ($90,000.00) being the amount of Service
Credits under the Novell Asset Purchase Agreement, the obligation for the
payment of such Service Credits being assumed by Zomax hereunder.
C. An amount equal to the sum of Seventy-Five Thousand Four
Hundred and Twenty-Eight Dollars and Ninety-Nine Cents ($75,428.99) which is (i)
the book value as appearing on the financial records of KIC of the tangible
personal property listed on Schedule "1-A" other than the Novell Property as of
January 1, 1998, or (ii) such other value as may be agreed upon by KIC and
Zomax; provided, however, that Zomax shall not be required to purchase such
property having a value in excess of Two Hundred Fifty Thousand Dollars
($250,000.00); plus
D. The amount equal to the sum of $775,655.82 which is the
lesser of: (i) the aggregate KIC inventory value, as provided on Schedule "12-A"
or (ii) the aggregate fair market value, as provided on Schedule "12-A", of the
Inventory to be acquired at Closing by Zomax pursuant to Paragraph 12, below.
3. PAYMENT - ALLOCATION OF PURCHASE PRICE: That portion of the Purchase
Price allocable to inventory (Paragraph 2.D) shall be paid by Zomax to KIC on or
before the ninetieth (90th) day after the Closing Date (hereinafter defined).
The balance of the Purchase Price shall be paid by Zomax to KIC as follows:
fifty percent (50%) on or before the ninetieth (90th) day after the Closing Date
and fifty percent (50%) on or before the One Hundred Eightieth (180th) day after
the Closing Date. The Purchase Price shall be represented by promissory notes
containing all of the terms and conditions of the promissory notes attached
hereto as Exhibits "A-1," "A-2," and "A-3". The promissory note attached as
Exhibit "A-2" given with respect to the Novell Property and the tangible
personal property listed in Schedule "1-A" shall be secured by a pledge of the
Novell Property and the tangible personal property listed in Schedule "1-A"
pursuant to a security agreement containing all of the terms and conditions of
the security agreement attached hereto as Exhibit "A-4," together with a
financing statement filed with the California Secretary of State in the form
attached hereto as Exhibit "A-5." The promissory note attached as Exhibit "A-3"
given with respect to the Inventory (as hereinafter defined) shall be secured by
a pledge of the Inventory pursuant to a security agreement containing all of the
terms and conditions of the security agreement attached hereto as Exhibit "A-6,"
together with a financing statement filed with the California Secretary of State
in the form attached hereto as Exhibit "A-7." All such notes, security
agreements and financing statements shall be executed and delivered by Zomax at
the Closing.
Zomax and KIC agree that the Purchase Price shall be allocated in
accordance with the allocation set forth in Schedule "3", attached hereto. The
parties further agree to report this transaction for California State and
Federal tax purposes in accordance with such allocation.
4. ASSUMPTION OF LIABILITIES: Effective as of the Closing Date, Zomax
shall assume those liabilities of KIC as set forth below (hereinafter referred
to as the "Assumed Liabilities");
(a) all liabilities and obligations of KIC arising under the
Equipment Leases listed on Schedule "4(a)" to the extent relating to performance
after the Closing Date: and
(b) all liabilities and obligations of KIC under the contracts
listed on Schedule 1-C to the extent relating to performance after the Closing
Date; and
(c) the liabilities and obligations of KIC assigned to and
assumed by Zomax through the Assignment and Assumption Agreements provided in
Schedule "1-C-1" under the contracts listed in Schedule "1-C-2" including,
without limitation, the Service Credits under the Asset Purchase Agreement
between KIC and Novell entered into as of November 1, 1997 (attached hereto as
Schedule "4(c)") that accrue on or after January 1, 1998.
(d) the liabilities and obligations of KIC under the Standard
Form Sublease between Novell and KIC which commenced November 1, 1997 (the
"Sublease") of the Premises, other than liabilities and obligations of KIC
thereunder arising prior to the Closing, regardless of whether the Sublease is
assigned to Zomax.
A. Zomax does not assume and shall not be liable for any
obligations or liabilities of KIC of any kind or nature, however arising,
whether contingent, matured or otherwise, known or unknown, except for those
obligations expressly assumed by Zomax pursuant to this Agreement. Without
limiting the generality of the foregoing, except as specifically provided in
Paragraph 8.C., Zomax specifically disclaims and does not assume herein any
obligation or liability with respect to employees of KIC, including obligations
and liabilities of KIC under any collective bargaining agreements or under the
Workers' Adjustment and Retraining Notification Act (29 USC ss. 2101, et seq.),
or any other obligation to hire, continue in employment, or pay benefits to such
employees. All such obligations shall be and remain the sole and exclusive
obligations of KIC.
B. KIC specifically disclaims and does not assume hereby any
obligation or liability arising after Closing with respect to employees of KIC
hired by Zomax including, without limitation, obligations or liabilities of
Zomax under any collective bargaining agreement on under the Worker's Adjustment
and Retraining Modification Act (29 U.S.C. ss. 2101, et seq.) or any other
obligation to hire, continue in employment or pay benefits to such employees.
All such obligations shall be and remain the sole and exclusive obligations of
Zomax.
5. SALES AND PROPERTY TAXES: KIC acknowledges that it will be
responsible for all taxes it incurs related to the sale of the Business Assets,
including but not limited to, personal property, sales, transfer, use
documentary transfer, stamp or excise taxes or other similar taxes of any type
imposed or levied on it by reason of this Agreement and the transactions
contemplated hereby. KIC shall prepare or cause to be prepared and file, all
required tax returns and other documents required to be filed in connection
therewith. Anything to the contrary herein notwithstanding, KIC and Zomax
acknowledge and agree that KIC shall be responsible and shall pay all sales
taxes associated with the Business Asset transferred hereunder, other than
Inventory, and Zomax shall pay all sales taxes associated with Inventory
transferred hereunder. KIC and Zomax shall provide each other with their
respective employer identification number for federal income tax purposes, and
the parties shall file Internal Revenue Service form 8594 containing allocations
as provided in Schedule "3."
6. REPRESENTATIONS: KIC represents and warrants to Zomax as follows:
A. Authority: KIC has the right, power, legal capacity and
authority to enter into and perform its obligations under this Agreement, and
except as set forth in Schedule "6-A" no approvals or consents with regard to
KIC are necessary in connection therewith.
B. Broker: KIC has retained no finder or broker in connection
with this Agreement or the consummation of the transactions contemplated
hereunder.
C. Title To Assets Listed on Schedule A: The assets listed on
Schedule "1-A", Schedule "2-B" and Inventory Schedule are property of KIC and
will be conveyed and transferred to Zomax free and clear of liens, pledges,
charges, encumbrances or equities of any persons or entities, subject, however,
to the terms of the Assigned Contracts and Partially Assigned Contracts.
D. No Breach of Violation: To KIC's knowledge, there is no
default or breach of any lease or license or other agreement, instrument or
arrangement to which KIC is a party or by which KIC is bound which will prevent
the consummation of the transaction contemplated by this Agreement or the
transfer of the Business Assets. The consummation of the transactions
contemplated by this Agreement will not result in or constitute the creation or
imposition of any lien, charge, or encumbrance on any of the Business Assets,
other than the security interest granted by Zomax to KIC as provided herein. The
representations contained in the foregoing two sentences assume that all
conditions precedent to KIC's performance hereunder have been satisfied.
E. Litigation: To KIC's actual knowledge, there is no pending
or threatened action, suit, proceeding or investigation in which KIC is a party
in any court or by or before any federal, state local or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, or before any arbitrator of any kind, which, individually or in the
aggregate, does or could materially and adversely affect the value of the
Business Assets or interfere with Zomax's ownership or use of the Business
Assets after the Closing Date. All references in this Agreement to the knowledge
or the actual knowledge or awareness (or similar terms) of KIC shall mean actual
knowledge or constructive knowledge of the officers of KIC if a reasonably
prudent person in a like position would have known or should have known the fact
and is exclusive of any knowledge which Zomax or PMG principals have and of any
imputed or constructive knowledge of Zomax or PMG principals.
F. Inventory: The Inventory and Other Inventory sold hereunder
consists of items that are in good and saleable condition; Zomax's sole and
exclusive remedy for any breach of such representation or warranty regarding
Inventory or Other Inventory shall be that KIC, at its option, shall either
replace and/or repair defective Inventory or Other Inventory within ten (10)
days after Zomax provides notice of the defect or provide Zomax with a refund
for the amount paid for same. No item included in the Inventory or Other
Inventory is subject to any security interests, has been pledged as collateral
or is held on consignment from others.
G. Contracts. To KIC's actual knowledge, the Assigned
Contracts and Partially Assigned Contracts are in full force and effect, and no
party to any such contract is in material default of its obligations thereunder,
nor does there exist any facts or circumstances which, with the passage of time
and\or the giving of an appropriate notice, would result in the material breach
by any party thereunder.
H. Assurances: None of the representations or warranties made
by KIC in this Agreement or the Exhibits or Schedules hereto, and no certificate
furnished or to be furnished by KIC in connection with the transactions
contemplated by this Agreement contains or will contain to KIC's actual
knowledge any untrue statement of a material fact.
7. ZOMAX'S REPRESENTATIONS: Zomax represents and warrants to KIC as
follows:
A. Authority for Agreement: Zomax has the requisite power and
authority to enter into this Agreement and to carry out the transactions
contemplated hereby and perform its obligations hereunder, and except as set
forth on Schedule "7-A", no approvals or consents with respect to Zomax are
necessary in connection therewith.
B. Broker: Zomax has not retained or dealt with any finder or
broker in connection with this Agreement or the consummation of the transactions
contemplated hereunder.
C. Assets: Zomax and PMG will have at the time of the Closing
examined and inspected all of the Business Assets, and will at the Closing
acquire the Business Assets in their current and as is condition, without
warranty as to condition or any other warranty, except as set forth in Paragraph
6, above and subject to the knowledge of Zomax and PMG regarding the Business
Assets. Except as set forth in this Agreement, neither KIC nor any broker, agent
or other representative of KIC has made any representations or warranties
whatsoever regarding this transaction or any fact relating thereto, including,
without limitation, any representations or warranties concerning the physical
condition of the Business Assets, zoning law, environmental matters, utilities
or any other matter affecting the Business Assets or the use thereof on which
Zomax is relying, and Zomax has relied solely on its own inspections, tests,
audits, studies and investigations. Zomax has not relied and will not rely on,
and KIC disclaims and is not liable for or bound by any express or implied
warranties, guarantees, statements, representations or information pertaining to
the assets, their use, compliance with law or otherwise relating thereto made or
furnished by KIC or any broker or agent representing or purporting to represent
KIC, to whomever made or given, directly or indirectly, verbally or in writing,
except the express representations and warranties herein.
D. Assurances: None of the representations or warranties made
by Zomax in this Agreement or the Exhibits or Schedules hereto, and no
certificate furnished or to be furnished by Zomax in connection with the
transactions contemplated by this Agreement contains or will contain any untrue
statement of a material fact or omits or will omit any material fact.
8. OBLIGATIONS OF THE PARTIES BEFORE CLOSING:
A. Consents: From the date of this Agreement to the Closing,
KIC and Zomax will each exercise its reasonable good faith efforts to obtain the
consent of the other parties to the Assigned Contracts and the Partially
Assigned Contracts to the assignment of such contracts to Zomax, provided,
however, in no event shall KIC be required to provide a guarantee of, or remain
liable under such contract, as a condition of obtaining such consents. Such
consents shall include; (i) with respect to the Partially Assigned Contracts,
consent to separating out of the pertinent contracts that portion of the
obligations of KIC which are set forth on Schedule 8-A, which work KIC will
retain and continue to perform; and (ii) with respect to all of the Assigned
Contracts or Partially Assigned Contracts, consent to separating out of the
pertinent contracts all Fulfillment Services as defined on Schedule "8-A" and
Foreign Work, all of which KIC will retain and continue to perform.
B. Release: From the date of this Agreement to the Closing,
KIC and Zomax will each exercise its good faith efforts to obtain the release of
KIC from all liability under the Assigned Contracts and Partially Assigned
Contracts from and after the effective date of assignment; provided, however, in
no event shall any principal of Zomax or PMG or any person or entity affiliated
with Zomax or PMG be required to provide a personal or corporate guarantee as a
condition to obtaining such release.
C. Employees: Prior to the Closing, Zomax shall offer
employment on terms and conditions to be determined by Zomax in its sole and
absolute discretion, to the individuals listed on Schedule "8-C".
D. Access: Prior to the Closing KIC shall allow Zomax, and its
authorized representatives, access on advance notice and during normal business
hours to the Business Assets for the purpose of inspection and determining the
condition thereof.
E. Terminate Rep Agreement: At or prior to the Closing, Zomax
and KIC shall cause PMG to terminate the Rep Agreement.
F. Merger. At or prior to the Closing, Zomax shall cause a
wholly owned subsidiary to merge with PMG and NGS, and the resulting
organization shall be a subsidiary of Zomax.
9. CONDITIONS PRECEDENT TO KIC'S PERFORMANCE: The obligations of KIC to
sell the Business Assets under this Agreement are subject to the satisfaction,
at or before the Closing, of the following conditions. KIC may waive any or all
of these conditions in whole or in part without prior notice; provided that no
such waiver shall constitute a waiver by KIC of any of its other rights or
remedies, at law or in equity, if Zomax is in default of any of its
representations, warranties or covenants under this Agreement.
A. Accuracy of Zomax' Warranties: All representations and
warranties by Zomax in this Agreement must be true on the Closing Date as though
made at that time.
B. Performance by Zomax: On or before the Closing Date, Zomax
will have performed, satisfied and complied with all covenants, agreements and
conditions required of it under this Agreement.
C. Company Approval: The execution and delivery of this
Agreement by Zomax and the performance of its covenants and obligations under
it, will have been duly authorized by all necessary company action and Zomax
shall have provided KIC with certificates of good standing and of resolutions
providing such authorization.
D. Consents: All necessary agreements and consents of any
parties to the consummation of the transactions contemplated by this Agreement,
or otherwise pertaining to the matters covered by it, including, without
limitation, the consent of the other parties to the Assigned Contracts and
Partially Assigned Contracts to the assignment thereof to Zomax and the release
of KIC from all liability thereunder for the period after Closing will have been
obtained by KIC and Zomax. At or prior to the Closing, Novell and KIC shall have
terminated the Sublease, Zomax and Novell shall have entered into a sublease of
the Premises, and Aetna Life Insurance shall have consented to such termination
and such sublease.
E. Termination of Rep Agreement: At or prior to the Closing,
KIC and PMG will have terminated the Rep Agreement by executing and delivering
the Termination Agreement in the form attached hereto as Exhibit 9-E.
F. Merger: At or prior to the Closing, PMG and NGS shall have
merged with a wholly owned subsidiary of Zomax.
10. CONDITIONS PRECEDENT TO ZOMAX'S PERFORMANCE: The obligations of
Zomax to purchase the Business Assets under this Agreement are subject to the
satisfaction, at or before the Closing, of the following conditions. Zomax may
waive any or all of these conditions in whole or in part without prior notice;
provided that no such waiver shall constitute a waiver by Zomax of any of its
other rights or remedies, at law or in equity, if KIC is in default of any of
its representations, warranties or covenants under this Agreement.
A. Accuracy of KIC's Warranties: All representations and
warranties by KIC in this Agreement must be true on the Closing Date as though
made at that time.
B. Performance by KIC: On or before the Closing Date, KIC will
have performed, satisfied and complied with all covenants, agreements and
conditions required of it under this Agreement.
C. Corporate Approval: The execution and delivery of this
Agreement by KIC and the performance of its covenants and obligations under it,
will have been duly authorized by all necessary corporate action and KIC shall
have provided Zomax with certificates of good standing and of resolutions
providing such authorization.
D. Consents: All necessary agreements and consents of any
parties to the consummation of the transactions contemplated by this Agreement,
or otherwise pertaining to the matters covered by it, including, without
limitation, the consent of the other parties to the Assigned Contracts and the
Partially Assigned Contracts to the assignment thereof to Zomax will have been
obtained by KIC and Zomax.
11. CLOSING: The sale and purchase provided in this Agreement shall be
consummated at a Closing to be held by mail or facsimile or at the offices of
KIC, 800 Corporate Way, Fremont, CA, on January 31, 1998, or at such other
place, time and date as the parties hereto shall mutually agree upon. The date
and event of the sale and purchase are hereinafter referred to, respectively, as
the "Closing Date" and the "Closing." At the Closing, KIC shall execute and
deliver to Zomax a Bill of Sale in the form attached hereto as Exhibit "B",
transferring title to the Business Assets to Zomax.
12. INVENTORY: Zomax will acquire from KIC the following inventory:
A. Customer Buy-Backs: All customer buy-back agreements which
are either assignable without consent or for which consent to the assignment has
been obtained, and which are otherwise enforceable according to their terms are
hereinafter referred to as Enforceable Buy-Back Agreements. At the Closing Date,
Zomax shall acquire all of the inventory listed on Schedule "12-A" (hereinafter
referred to as the "Inventory"). The Inventory which on or before the Closing
Date has not been delivered to the Facility shall be delivered to the Facility
within a reasonable time, as agreed to by both parties, after the Closing Date,
but in no event later than thirty (30) days after the Closing Date. All shipping
costs (on a F.O.B. basis) shall be shared equally by KIC and Zomax, payable
within ninety (90) days after shipment.
B. Other Inventory: During the One Hundred Twenty (120) day
period following the Closing Date, Zomax will exercise reasonable good faith
efforts to utilize any active material related to the Business comprising
inventory or used by KIC as a component in manufacturing for the Assigned
Contracts or the Partially Assigned Contracts which is either located at the
Facility at the Closing, or which is listed on Schedule "12-B" (hereinafter
referred to as the "Other Inventory") and Zomax shall have the right to acquire
any such Other Inventory owned by KIC by giving written notice to KIC of its
election to do so, which notice shall identify the Other Inventory to be
acquired and, if the particular Other Inventory so identified or any a part
thereof is not located at the Facility, the location where such Other Inventory
shall be delivered.
That portion of the Other Inventory which on the Closing Date is not
located at the Facility shall be delivered to the Facility or to such other
destination as may be designated by Zomax, within a reasonable time, as agreed
to by both parties, after the Closing Date and notice from Zomax electing to
acquire such particular Other Inventory, but in no event later than thirty (30)
days after such notice from Zomax. All shipping costs of Other Inventory shall
be shared equally by KIC and Zomax. KIC shall cause all such materials acquired
by Zomax to be delivered and/or turned over to Zomax in good and saleable
condition. KIC shall bear the risk of loss of Other Inventory until date of
receipt by Zomax. Zomax shall purchase and KIC shall sell such Other Inventory
at a price equal to the lower of KIC's inventory value as provided on Schedule
"12-B" or market value, and Zomax shall pay KIC for such Other Inventory within
thirty (30) days of receipt of KIC's invoice therefor.
C. Contract Inventory: Upon the assignment after Closing of
each of the Assigned Contracts, Zomax shall acquire the inventory in the
possession of KIC as of the date of such assignment associated with such
Assigned Contract (the "Contract Inventory") at a price equal to the lower of
KIC's inventory value as provided on Schedule 12-C or market value. Zomax shall
pay KIC for such Contract Inventory within 30 days of Zomax's receipt of KIC's
invoice therefor. Any Contract Inventory not delivered to the Facility prior to
such assignment date shall be delivered to the Facility or such other
destination as may be designated by Zomax, within a reasonable time, as agreed
by both parties, but in no event later than 30 days after such assignment date.
All shipping costs of Contract Inventory shall be shared equally by KIC and
Zomax. KIC shall cause all such Contract Inventory to be delivered and/or turned
over to Zomax in good and saleable condition. KIC shall bear the risk of loss of
Contract Inventory until date of receipt by Zomax.
D. Disposition of Remaining Inventory: KIC shall retain all
Other Inventory related to the Business for a period of one hundred twenty (120)
days after the Closing Date. At the expiration of such one hundred twenty (120)
day period, all such Other Inventory which Zomax has not elected to acquire
(including, without limitation any such Other Inventory located at the Facility)
shall belong to KIC and may be disposed of in any lawful manner selected by KIC.
KIC shall be responsible for all cost and expense of the disposition of such
Other Inventory.
13. RIGHTS AND OBLIGATIONS OF THE PARTIES CONCURRENT WITH OR AFTER
CLOSING:
A. Solicitation for Employment: During the thirty (30) day
period following the Closing Date, Zomax shall have the right to solicit for
employment the KIC employees listed on Schedule "13-A." With the aforementioned
exception, KIC and Zomax each agree that they will not prior to July 1, 1998,
hire or approach for hire any employee of the other party without the other
party's prior written consent, which consent may be withheld in such party's
sole and absolute discretion. The foregoing prohibition against hiring or
approaching for hire shall not apply to restrain a party from approaching for
hire or hiring any former employee of a party after the date of termination of
the employment of such employee.
B. Collections: During the one hundred eighty (180) day period
following the Closing Date, Zomax will exercise good faith efforts to assist KIC
in collecting any outstanding accounts receivable due KIC which were generated
through sales with respect to which PMG is entitled to a commission under the
Rep Agreement.
C. IS Services: KIC will, to the extent of its contractual
rights, provide Zomax IS services substantially equivalent to what is currently
provided in the Facility and at KIC's Fremont facility and as more particularly
described in Exhibit 13.C, for use with the customers assigned to Zomax by KIC
and such other customers as Zomax may designate, for a period of six (6) months
after Closing, at no cost to Zomax, assuming that the software vendors involved
impose no additional cost. KIC will use good faith efforts to provide such
services, but they will be provided without warranty. It is understood and
agreed that outages, downtime and inability to perform IS services shall not be
a failure of KIC's good faith efforts to provide such services unless KIC
willfully refuses to act in good faith to provide or restore such services. KIC
shall not be liable for consequential, special or incidental damages except for
a failure of KIC to make good faith efforts to provide such services; further
provided that KIC's liability for any and all damages, including but not limited
to, consequential, special or incidental damages, relating to this Section shall
be limited to an aggregate amount of Two Hundred and Forty Thousand Dollars
($240,000.00). The fact that the IS services are provided without warranty shall
not negate the obligations of KIC as set forth in this Section.
D. Requirements Contracts: KIC and Zomax shall enter into at
the Closing a Requirements Contract in the form attached hereto as Exhibit "D".
E. Competition:
(i) For a period of six (6) months following the
Closing, KIC shall not, directly, or through its affiliates, solicit or seek to
obtain orders for delivery during such six (6) month period, from any of the
customers listed on Exhibit "B-1" for the products or services supplied by KIC
to such customer which were supplied to such customer by KIC during such
previous six (6) month period listed on Schedule 13.E(i), but excluding, without
limitation, Foreign Work and Fulfillment Services.
Further, for a period commencing with the Closing and ending March 31,
1998, KIC shall not, directly or through its affiliates, solicit any work from
the customers listed on Exhibit "B-1" from KIC's California operation without
the prior agreement from Zomax California Management. As used herein, "Zomax
California Management" means Anthony Angelini or his successor as shall be
designated by Zomax. Such approval shall be in writing.
(ii) For a period of six (6) months following the
Closing, Zomax shall not, and shall cause it affiliates, including, without
limitation, NGS and PMG, to not directly, or through their affiliates, solicit
or seek to obtain orders for delivery during such six (6) month period, from any
of the customers listed on Schedule "1.F.1" which were represented by PMG under
the Rep Agreement, for the products or services listed on Schedule 13.E.(ii).
The foregoing limitation upon Zomax shall not, however, restrict Zomax from
providing products or services to any such customer which were supplied to such
customer by Zomax during such previous six (6) month period.
Further, for a period commencing with the Closing and ending March 31,
1998, Zomax shall not, directly or through its affiliates, solicit any work from
the customers listed on Exhibit "l-F-1" from Zomax's California operation
without the prior agreement from KIC's California Management. As used herein,
"KIC's California Management" means Jay Waltz or his successor as shall be
designated by KIC. Such approval shall be in writing.
F. Sales Representative Agreement: At or prior to February 15,
1998, with an effective date of January 1, 1998, Kao Infosystems (Ireland)
Limited ("KIC Ireland") and PMG Ltd. shall have entered into a manufacturer's
representative agreement in substantially the form attached hereto as Schedule
"8-G" pursuant to the terms of which PMG Ltd., either directly or through an
affiliate entity, will act as the exclusive sales representative of KIC Ireland
in Ireland for the sale of KIC Ireland products to Novell, Inc. Such agreement
shall be terminable by either party upon sixty (60) days notice, provided that
the effective date of termination is no earlier than March 31, 1998.
G. Activity Under Novell Contracts Between 1/1/98 and the
Closing: The effective date of the assignment of the Partially Assigned
Contracts and Assigned Contracts between KIC and Novell shall be January 1,
1998. The revenue accruing from Novell under the assigned portion of such
contracts and under the product purchase portion of Agreement for Manufacturing
Turnkey Products for the Software Industry between Novell, Inc. and KAO
Infosystems Company dated as of November 7, 1995 (the "Turnkey Agreement") from
and including January 1, 1998 through the Closing (the "Novell Revenue") shall
be billed to Novell by Zomax, and Zomax shall be responsible for the collection
of the Novell Revenue. KIC shall invoice, and Zomax shall pay KIC for the
services and products provided by KIC from and including January 1, 1998 through
the Closing associated with the Novell Revenue in an amount as provided in the
calculation on Exhibit 13-F, but in no event shall such amount be less than one
hundred seventy-five thousand dollars ($175,000). Zomax shall pay KIC the amount
of such invoice within thirty (30) days of Zomax's receipt of such invoice. All
of the limitation of liability and disclaimer of warranty provisions, including
without limitation, the warranty of MERCHANTABILITY disclaimer applicable to the
Business Assets as provided in Section 2 hereof shall also be applicable to such
products and services.
H. Employee Benefits: As soon as practicable after the Closing
but no later than sixty (60) days after the Closing Date, assets and liabilities
representing the account balances of the KIC employees who are hired by Zomax
(the "Continuing Employees") in the Kao Corporation of America Profit Sharing
Plan (the "KIC 401(k) Plan") shall be transferred to a tax-qualified defined
contribution plan sponsored by Zomax for its eligible employees in a
trust-to-trust transfer that satisfies Section 414(l) of the Internal Revenue
Code of 1986, as amended (the "Code"). Prior to such transfer, Zomax shall
cooperate with KIC in the preparation, execution and delivery of such
documentation as KIC may deem necessary to complete the trust-to-trust transfer,
Zomax will, at the request of KIC and with the approval of a Continuing
Employee, withhold from the Continuing Employee's compensation and transfer to
the trustee of the KIC 401(k) Plan, such installment payments as may be required
to repay the Continuing Employee's loan under the KIC 401(k) Plan.
KIC shall automatically continue coverage under its Flexible Plan
("KIC's Health Care Plan") for Continuing Employees and their eligible
dependents effective as of the Closing Date and shall be reimbursed by Zomax for
coverage provided to Continuing Employees who remain employed by Zomax at the
applicable COBRA premium rate imposed by KIC's Health Care Plan. Zomax shall
make such COBRA payments to KIC by the first of each month for which the
coverage is provided. KIC's obligation under this Agreement to provide coverage
under KIC's Health Care Plan for Continuing Employees and their eligible
dependents shall terminate on March 1, 1998, provided the Continuing Employee
and/or eligible dependent becomes covered under the Zomax Health Care Plans. In
the event a Continuing Employee terminates employment with Zomax prior to March
1, 1998, or a Continuing Employee and/or eligible dependent does not become
covered under Zomax's Health Care Plans on March 1, 1998, KIC shall continue to
provide COBRA coverage under KIC's Health Care Plan to the extent required by
COBRA and at the expense of the Continuing Employee or eligible dependent. For
purposes of COBRA, the qualifying event (i.e., termination of employment) shall
occur on the date of Closing, and applicable COBRA coverage period (e.g., 18
months) shall run from the date of Closing.
14. Confidentiality: The parties will not, except as is appropriate in
connection with the operation of their respective businesses or to consummate
the provisions of this Agreement, release to the press or otherwise make public
any information regarding those transactions without the prior consent of each
other unless those transactions are abandoned in which case either party may
announce or disclose that fact.
15. ATTORNEYS' FEES: In the event that any litigation, arbitration, or
other proceeding is commenced between the parties hereto or their personal
representatives, successors or assigns concerning the enforcement or
interpretation of any provision of this Agreement or the rights and duties of
any party in relation thereto, the party or parties prevailing in such
litigation, arbitration or other proceeding shall be entitled, in addition to
such other relief as may be granted, to a reasonable sum as and for attorneys'
fees, which sum shall be determined by the Court in such litigation or by a
separate legal action brought for that purpose. For the purposes of this
paragraph, the "prevailing party" shall be determined in accordance with the
provisions of California Civil Code ss. 1717.
16. NOTICES: All notices and other communications to be made pursuant
to this Agreement shall be in writing and shall be deemed to have been duly
given on the date of service, if served personally on the party to whom service
is given, or on the second (2nd) day after mailing, if mailed to the party to
whom notice is to be given, by first-class mail, registered or certified,
postage prepaid, and properly addressed as follows:
KIC: 40 Grissom Road
Plymouth, MA 02360
Attn: Kelvin William, Esq.
With a copy to: Potter Anderson & Corroon LLP
Hercules Plaza
P.O. Box 951
Wilmington, DE 19899
Attn: David B. Brown, Esq.
Zomax: 5353 Nathan Lane
Plymouth, MN 55442
Attn: CFO
With a copy to: Fredrikson & Byron, P.A.
1100 International Center
900 Second Avenue South
Minneapolis, MN 55402-3397
Attn: Dobson West
Any party may change its address for the purpose of receiving notice in the
manner provided for notices above.
17. INDEMNIFICATION: Subject to the limitations hereinafter set forth,
Zomax (in its capacity as indemnifying party, as "Indemnifying Party") hereby
agrees to indemnify KIC (in its capacity as indemnified party, as "Indemnitee")
and hold KIC harmless, and KIC (in its capacity as indemnifying party, as
"Indemnifying Party") hereby agrees to indemnify Zomax (in its capacity as
indemnified party, as "Indemnitee") and hold Zomax harmless, from, against and
in respect of any and all damages, deficiencies, actions, suits, proceedings,
demands, assessments, judgments, claims, losses, costs, expenses, obligations
and liabilities (including costs of collection and reasonable experts' and
attorneys' fees and expenses) exceeding in the aggregate the amount of
Twenty-Five Thousand Dollars ($25,000.00) arising from or related to:
(i) any breach or inaccuracy, or any allegation by a third
party of any fact which, if true as alleged, would give rise to such a breach or
inaccuracy, in any representation or warranty of such Indemnifying Party;
(ii) the failure of such Indemnifying Party to perform any
covenant or agreement hereunder to be performed by it.
Notwithstanding the foregoing, no claims may be made or suit instituted
under this Section 17 after the first anniversary date of the Closing Date.
18. MISCELLANEOUS PROVISIONS:
A. Successors And Assigns: This Agreement may not be assigned
except with the prior written consent of the parties hereto. This Agreement
shall be binding on and inure to the benefit of the parties and their respective
successors and assigns.
B. Exhibits: All Exhibits referred to are attached hereto and
incorporated herein by this reference.
C. Governing Law: This Agreement shall be construed in
accordance with the laws of the State of California, without giving effect to
any choice or conflict or law provision or rule that would cause the application
of the laws of any other jurisdiction.
D. Integrated Agreement Modification: This instrument contains
the entire agreement of the parties and cannot be amended or modified except by
a written Agreement, executed by each of the parties hereto.
E. Captions: The captions in this Agreement are for
convenience purposes only, and shall have no effect on its construction or
interpretation.
F. Singular And Plural: Gender: When required by the context
of this Agreement, the singular shall include the plural, and the masculine
shall include the feminine, and the impersonal pronoun "it" shall refer to
either of the above, a corporation, partnership, joint venture, or other entity,
regardless of number or gender.
G. Severability: The unenforceability, invalidity, or
illegality of any provision shall not render the other provisions unenforceable,
invalid or illegal.
H. Waiver: No consent or waiver, express or implied, by either
party to this Contract of any breach or default by the other in the performance
of any obligation hereunder shall be deemed or construed to be a consent to or
waiver of any other breach or default by such party hereunder. Failure on the
part of any party hereto to complain of any act or failure to act of the other
party or to declare the other party in default hereunder, irrespective of how
long such failure continues, shall not constitute a waiver of the rights of such
party hereunder.
I. Execution of Documents: The parties hereto hereby agree to
execute and deliver such further instruments, agreements, contracts and
documents, as may be reasonably required to effectuate the stated and intended
purposes of this Agreement.
J. Counterparts: This Agreement may be executed in one (1) or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
K. Survival of Warranties: All warranties and representations
of the parties contained in paragraphs 6 and 7 shall survive the Closing.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
Dated: 2/3/98 KAO INFOSYSTEMS COMPANY
By: /s/ Vincent G. Borazini
Its: VP West Coast PDS
KIC
Dated: 2/3/98 ZOMAX OPTICAL MEDIA, INC., a
Minnesota Corporation
By: /s/ James T. Anderson
Its: CEO
ZOMAX