Exhibit 2.1
ASSET PURCHASE AGREEMENT
Dated as of May 31, 2001
By and Between
TYCO ELECTRONICS CORP.,
as Purchaser,
and
QUAD SYSTEMS CORPORATION,
as Seller
TABLE OF CONTENTS
Page
ARTICLE 1. SALE AND PURCHASE OF ASSETS........................... 2
1.1 Purchased Assets...................................... 2
1.2 Excluded Assets....................................... 6
ARTICLE 2. PURCHASE PRICE; INVENTORY............................. 7
2.1 Purchase Price........................................ 7
2.2 Payment of the Purchase Price......................... 7
2.3 Holdback Amount....................................... 7
2.4 Determination of Inventory............................ 8
2.5 Post-Closing Adjustment; Preparation of Statements.... 8
2.6 Transaction Costs.................................... 10
ARTICLE 3. ASSUMPTION OF LIABILITIES AND OBLIGATIONS BY PURCHASER. 11
3.1 Assumed Liabilities.................................. 11
3.2 Excluded Liabilities................................. 12
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF SELLER............. 15
4.1 Representations and Warranties of Seller............. 15
4.2 Definition of "Best Knowledge."...................... 36
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF PURCHASER.......... 36
5.1 Representations and Warranties....................... 36
ARTICLE 6. COVENANTS AND AGREEMENTS............................. 38
6.1 Employee Matters..................................... 38
6.2 Reasonable Efforts to Close.......................... 42
6.3 Disclosures.......................................... 42
6.4 Books and Records and Information.................... 42
6.5 Tax Matters.......................................... 43
6.6 Cure of Defaults..................................... 45
6.7 Required Consents.................................... 45
6.8 Filings; Other Action................................ 46
6.9 Permit Transfers..................................... 46
6.10 Bankruptcy Covenants................................. 47
6.11 Executory Contracts and Unexpired Leases............. 49
6.12 Further Assurances................................... 50
6.13 Purchase of Seller's European Assets................. 50
ARTICLE 7. CONDUCT OF BUSINESS PENDING CLOSING.................. 50
7.1 Conduct of Business Pending Closing.................. 50
7.2 Access and Information............................... 52
7.3 Cooperation.......................................... 52
Table of Contents (cont'd.)
Page
ARTICLE 8. OTHER AGREEMENTS..................................... 53
8.1 Covenant Not to Compete.............................. 53
8.2 Collection of Accounts Receivable on Behalf of Seller. 54
ARTICLE 9. CLOSING DATE; CONDITIONS AND TRANSACTIONS............ 55
9.1 Closing Date and Place............................... 55
9.2 Conditions Precedent to the Obligations of Purchaser. 55
9.3 Conditions Precedent to the Obligations of Seller.... 59
9.4 Non-Compliance with and Termination of this Agreement. 60
9.5 Survival After Termination; Break-up Fee; Expense
Reimbursement........................................ 62
ARTICLE 10. CLOSING DOCUMENTS.................................... 64
10.1 Seller's Obligations................................. 64
10.2 Purchaser's Obligations.............................. 66
10.3 Joint Obligations.................................... 66
ARTICLE 11. INDEMNIFICATION...................................... 66
11.1 Indemnification by Seller............................ 66
11.2 Indemnification by Purchaser......................... 67
11.3 Survival of Representations and Warranties: Threshold
and Deductible....................................... 68
11.4 Notice and Opportunity to Defend..................... 69
11.5 Reduction for Insurance.............................. 70
11.6 Environmental Indemnification and Procedures......... 70
11.7 Priority of Purchaser's Indemnification Claims....... 72
ARTICLE 12. MISCELLANEOUS........................................ 72
12.1 Expenses............................................. 72
12.2 Intentionally Omitted................................ 72
12.3 Notices.............................................. 73
12.4 Counterparts......................................... 74
12.5 Entire Agreement..................................... 74
12.6 Headings............................................. 74
12.7 Assignment and Amendment of Agreement................ 74
12.8 Governing Law........................................ 75
12.9 Failure to Close..................................... 75
12.10 Intentionally Omitted................................ 75
12.11 No Third Party Rights................................ 75
12.12 Non-Waiver........................................... 75
12.13 Severability......................................... 76
12.14 Incorporation of Schedules........................... 76
12.15 Consent to Jurisdiction and Service of Process; Waiver
of Jury Trial........................................ 76
Exhibit 2.1
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of the
31rst day of May, 2001, by and between Quad Systems Corporation, a Delaware
corporation and debtor and debtor-in-possession (the "Seller"), and Tyco
Electronics Corporation, a Pennsylvania corporation (the "Purchaser").
RECITALS
WHEREAS, Seller is engaged in the design, manufacture, sale and
marketing of advanced SMT and APT assembly and processing equipment (the
"Business");
WHEREAS, Seller is a debtor and debtor in possession in case no.
00-35667 (the "Bankruptcy Case") filed under chapter 11 of title 11 of the
United States Code, as amended (the "Bankruptcy Code"), pending before the
United States Bankruptcy Court for the Eastern District of Pennsylvania (the
"Bankruptcy Court");
WHEREAS, Seller wishes to sell, transfer and assign to Purchaser the
Purchased Assets (as defined below), pursuant to and in accordance with the
terms and conditions of this Agreement;
WHEREAS, Purchaser wishes to acquire the Purchased Assets and to
assume only certain liabilities of Seller relating to the Business, pursuant to
and in accordance with the terms and conditions of this Agreement; and
WHEREAS, the parties desire to consummate the transactions
contemplated by this Agreement (the "Proposed Transaction") as promptly as
practicable after the Bankruptcy Court enters an order approving the Proposed
Transaction (the "Sale Order");
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein set forth, the parties hereto hereby agree as
follows:
ARTICLE 1. SALE AND PURCHASE OF ASSETS.
---------------------------
1.1 Purchased Assets.
----------------
Subject to the terms, conditions and exclusions set forth in this
Agreement, and pursuant to sections 363(b) and (f) and 365 of the Bankruptcy
Code, Seller will sell to Purchaser, and Purchaser will purchase, acquire and
accept from Seller, free and clear of all mortgages, pledges, liens, charges,
equities, encumbrances, defects in title, security interests, hypothecations,
assessments, easements, encroachments, consents, claims, options, reservations,
restrictions, condemnation proceedings, burdens or conflicts of all kinds
excepting, with respect to Intellectual Property Rights (as defined in Section
1.1(a) hereof), the rights of persons holding licenses thereto, now or on the
date of Closing, and Permitted Liens (as defined in Section 4.1.28)
(collectively, "Liens"), all of the assets, properties, rights and business of
the Business of every type and description, real, personal and mixed, tangible
and intangible, wherever located and whether or not reflected on the books and
records of Seller (collectively, but in all cases excluding the Excluded Assets
(as defined in Section 1.2 hereof), the "Purchased Assets"), as the same shall
exist on the Closing Date (as defined in Section 9.1 hereof), including, without
limitation, the following:
(a) all United States and foreign patents, patent applications,
licenses, trademarks (whether registered or unregistered), service marks,
trade names, brand names, logos (including, without limitation, the rights
to the names "Quad Systems", "Quad", "Quad Care" or any derivation
thereof), copyrights, internet domain name registrations, and any
applications, extensions or renewals thereof, and any other proprietary
rights, including, without limitation, know-how, inventions, discoveries
and improvements, shop rights, processes, methods and formulae, trade
secrets, product drawings, schematic drawings, blueprints, engineering
data, specifications, designs and other technical information owned by or
licensed to Seller relating to the Business and all of the goodwill
associated with the foregoing (collectively, the "Intellectual Property
Rights"), certain of which are set forth in Schedule 1.1(a) attached hereto
and made a part hereof;
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(b) all inventories of Seller relating to the Business, including,
without limitation, finished goods, work-in process, raw materials,
supplies and other materials (collectively, the "Inventory"), as such
Inventory (determined in accordance with Section 2.4 hereof) exists on the
Closing Date;
(c) except as otherwise provided in Section 6.4 hereof, all business
records, books, models, tracings, price sheets, films, slides, art work and
printing plates, tool drawings, plans, designs, blueprints, computer
software (object code and source code, each to the extent transferable)
data and the like in the possession of or used by Seller relating to the
Business, including, without limitation, customer files, correspondence
with customers and account histories, sales literature and promotional or
other material pertaining to products designed, manufactured or sold by or
for the Business, material relating to the purchase of materials, supplies
and services, research and commercial data, records relating to the
employees of the Business, consultants and contractors, credit information,
catalogs, brochures and training and other manuals (collectively, the
"Books and Records");
(d) all of Seller's rights and interests under all contracts and
commitments entered into, accepted, made or submitted by the Business for
the sale of goods, including, without limitation, those contracts and
commitments specified in Schedule 1.1(d) attached hereto and made a part
hereof (as they may exist on the Closing Date), and the rights and
interests of Seller under any other contracts and commitments for the sale
of goods entered into by Seller for the benefit of the Business in the
ordinary course of business between the date of this Agreement and the
Closing Date (collectively, the "Customer Orders"), but specifically
excluding those contracts and commitments for the sale of goods to
customers in Germany identified prior to the Closing Date and set forth on
Schedule 1.2(d) hereto (to be completed prior to the Closing Date)
(collectively, the "Excluded Customer Orders");
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(e) all equipment, machinery, furniture, fixtures, vehicles, spare
parts, dies, molds, tools, tooling and other items of tangible personal
property owned by Seller for the benefit of the Business, including,
without limitation, such items as are specified in Schedule 1.1(e) attached
hereto and made a part hereof (collectively, the "Equipment");
(f) all of Seller's rights and interests under the unfilled purchase
orders entered into by Seller for the purchase of goods or services for the
benefit of the Business existing as of the date of this Agreement and the
unfilled purchase orders entered into by Seller between the signing of this
Agreement and the Closing Date (collectively, the "Unfilled Purchase
Orders") but specifically excluding (i) the purchase orders set forth in
Schedule 1.1(f) attached hereto and made a part hereof; (ii) any purchase
orders entered into after the date of this Agreement without the
concurrence of Purchaser's Designated Purchaser Representative following
consultation pursuant to Section 7.3 hereof (except to the extent that
Purchaser may elect to assume them); and (iii) any other purchase orders
open on the date hereof which Purchaser, by written notice to Seller at or
prior to Closing, may elect not to assume (collectively, the "Excluded
Purchase Orders");
(g) all of Seller's rights and interests under all personal property
leases (collectively, "Personal Property Leases"), including, without
limitation, those contracts and commitments relating to personal property
specified in Schedule 1.1(g) attached hereto and made a part hereof;
(h) all of Seller's contracts and agreements set forth on Schedule
1.1(h) attached hereto and made a part hereof, including, without
limitation, the QuadCare Service and Maintenance Contracts between the
Seller and its customers (the "QuadCare Contracts") (collectively, the
"Contracts"), but specifically excluding (i) subject to Section 9.2.12, an
Agreement of Technology License, Manufacture and Supply for Tape Feeders
dated June 1996 (the "Samsung Technology License") between Seller and
Samsung Aerospace Industries, Ltd. ("Samsung"), (ii) a QSA-60 Joint
Development and Sales Agreement dated September 22, 1997 between Seller and
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Samsung, (iii) subject to Section 9.2.12, a Software License Agreement for
the Quad Align & Q-Soft on QSA-60 Assembler dated September 22, 1997
between Seller and Samsung (the "Samsung Software License"), (iv) a
Distribution Agreement dated June 1, 1999 between Seller and Mirae
Corporation ("Mirae"), (v) that portion of the QuadCare Contract that
relates to the Mirae Inventory (as defined in Section 1.2(j)), and (vi) any
contracts relating to the sale of products in Germany, as well as those
contracts identified prior to the Closing Date and set forth on Schedule
1.2(d) hereto (which Schedule is to be completed prior to the Closing Date)
(collectively the "Excluded Contracts");
(i) to the extent transferable to Purchaser, all franchises,
approvals, permits, orders, certificates, variances and product licenses
and license applications, permits and other governmental authorizations and
approvals (federal, state and local) relating to, and required to operate,
the Business, as such items are specified in Schedule 1.1(i) attached
hereto and made a part hereof (collectively, the "Licenses and Permits");
(j) all rights and interests of Seller in and to certain real property
leases specified in Schedule 1.1(j) attached hereto and made a part hereof,
including, without limitation, the lease for the premises in Willow Grove,
Pennsylvania, (the "Real Property Leases"), but specifically excluding
those real property leases identified prior to the Closing Date and set
forth on Schedule 1.2(d) hereto (to be completed prior to the Closing Date)
(collectively, the "Excluded Real Property Leases");
(k) all of Seller's causes of action, vendor, supplier and similar
claims, deposits, prepayments, refunds, judgments, claims and demands of
whatever nature relating to the Purchased Assets or the liabilities assumed
by Purchaser pursuant to Section 3.1 hereof, but specifically excluding (i)
Seller's accounts receivable, (ii) Seller's avoidance actions under chapter
5 of the Bankruptcy Code, and (iii) those actions listed on Schedule 1.1(k)
(collectively, the "Excluded Actions"); and
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(l) all of Seller's prepaid expenses and deferred items or credits and
deposits relating to the Purchased Assets existing as of the Closing Date,
(the "Prepaid Expenses"), but specifically excluding those prepaid expenses
and deferred items or credits and deposits relating to Excluded Assets (as
defined in Section 1.2 hereof) not included in the net amount set forth on
Schedule 1.1(l) (collectively, the "Excluded Prepaid Expenses").
1.2 Excluded Assets.
---------------
The Purchased Assets transferred, conveyed, set over, assigned and
delivered to Purchaser shall exclude the following assets (collectively, the
"Excluded Assets"):
(a) all directors' and officers', property, casualty, liability
(including, without limitation, products liability, employer's liability,
workers compensation and umbrella or excess coverage) and individual life
insurance policies owned or obtained by Seller on behalf of the Business;
(b) the corporate minute books and stock registers of Seller;
(c) the income tax records covering transactions of Seller occurring
prior to the Closing Date;
(d) all of Seller's right and interest under the Excluded Customer
Orders, Excluded Contracts, Excluded Actions, Excluded Prepaid Expenses,
Excluded Purchase Orders and Excluded Real Property Leases set forth on
Schedule 1.2(d) attached hereto and made a part hereof;
(e) avoidance actions under chapter 5 of the Bankruptcy Code;
(f) all accounts receivable, notes receivable and other receivables of
Seller as of the Closing Date;
(g) all income tax refunds and other tax refunds receivable by Seller;
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(h) all stock, ownership interests or other securities of any Seller
including without limitation the shares of TriMark Investment Corporation,
HiTech Finance Company, Quad Leasing Company, Quad Foreign Sales
Corporation, Quad Systems Holdings Limited, Quad Systems Limited, Quad
Europe Ltd. and Quad Systems de Mexico, S.A. de C.V.;
(i) all assets relating to the Plans (as defined in Section 4.1.14);
(j) the portion of the Inventory held by Flextronics International USA
Inc. and which shall form part of the settlement between Seller and Mirae
(for the avoidance of doubt, it is noted that such inventory includes both
certain Meridian machines and certain non-Meridian peripheral equipment and
supplies) (the "Mirae Inventory");
(k) all cash and cash equivalents; and
(l) all assets, rights and interests of Seller other than the
Purchased Assets.
ARTICLE 2. PURCHASE PRICE; INVENTORY.
-------------------------
2.1 Purchase Price.
--------------
Subject to the adjustment provisions of Section 2.5 hereof, and upon
the terms and subject to the conditions contained in this Agreement, Purchaser
shall pay to Seller the sum of five million, two hundred and thirty seven
thousand, five hundred dollars ($5,237,500.00) (the "Purchase Price") and pay,
perform and discharge the Assumed Liabilities (as defined in Section 3.1 hereof)
pursuant to Section 3.1 hereof, in full consideration for the Purchased Assets.
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2.2 Payment of the Purchase Price.
-----------------------------
At the Closing, Purchaser shall pay the Purchase Price, less the
Holdback Amount (as defined in Section 2.3 hereof), to Seller by wire transfer
in immediately available funds.
2.3 Holdback Amount.
---------------
A portion of the Purchase Price, in the amount of one million
two hundred and fifty thousand dollars ($1,250,000) (the "Holdback Amount")
shall be held by Purchaser and paid to Seller pursuant to and in accordance with
the terms of the form of holdback agreement attached hereto and made part hereof
as Schedule 2.3 (the "Holdback Agreement").
2.4 Determination of Inventory.
--------------------------
The quantity and valuation of the Inventory shall be determined
as follows:
(a) The value of the Inventory as of the Closing Date shall be
determined from the books and records of the Business. An audit of the
established cycle count procedures shall be conducted by the Purchaser in
support of the perpetual component inventory of the Seller. A test of the
perpetual component inventory shall be conducted via the established cycle
count procedures, while work in process and finished inventory shall be
reviewed via a physical count on the Closing Date or, for offsite
inventory, by confirmation, and the books and records of Seller shall be
adjusted for Inventory quantities as of the Closing Date and such Inventory
shall be valued in accordance with paragraph (b) of this Section 2.4. Such
inventory valuation shall be conducted by Seller's representatives at
Seller's expense jointly with Purchaser's representatives at Purchaser's
expense.
(b) The Inventory reflected on the Contract Asset Statement (as
defined in Section 4.1.3 hereof) and the Final Asset Statement (as defined
in Section 2.5.1 hereof) shall be determined in accordance with generally
accepted accounting principles consistently applied ("GAAP") with the
exception of the exceptions to GAAP listed on Schedule 2.4(b).
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(c) Any disagreement regarding the quantity or value of the Inventory,
or both, shall be resolved in the manner and at the time described in
Section 2.5.1 hereof.
2.5 Post-Closing Adjustment; Preparation of Statements.
--------------------------------------------------
2.5.1 The Purchase Price will be adjusted following the
Closing, as follows:
(a) Following the Closing, and in accordance with Section 2.5.1(c)
hereof, the Purchaser shall prepare a Final Asset Statement (as defined in
Section 2.5.1(c)) setting out the book value, as of the Closing Date, of
the Purchased Assets and the assets purchased by Purchaser under the U.K.
Purchase Agreement (as defined in Section 6.13) (collectively, the "Final
Assets"). The Purchaser acknowledges that notwithstanding that the Mirae
Inventory forms part of the Excluded Assets and notwithstanding the actual
book value thereof, it shall be included in the Final Asset Statement and
the calculation of the value of the Final Assets at an agreed value equal
to $500,000.
(b) If the value of the Final Assets, as set forth on the Final Asset
Statement, is:
(i) greater than $15.4 million, then the Purchase Price shall be
increased by an amount equal to the amount by which the value of the
Final Assets exceeds $15.4 million;
(ii) less than $15.0 million, then the Purchase Price shall be
decreased by an amount equal to the amount by which the value of the
Final Assets is less than $15.0 million (the "Asset Deficiency"); or
9
(iii) greater than or equal to $15.0 million, and less than or
equal to $15.4 million, no adjustment to the Purchase Price will be
necessary.
(c) The Final Asset Statement will be prepared by Purchaser from the
books of account of the Business as of the Closing Date. Except as set
forth in Schedule 2.4(b), the Final Asset Statement shall be prepared in
accordance with GAAP, consistent with the practices of Seller used in the
preparation of the Contract Asset Statement. Purchaser will deliver a
statement showing the Final Assets (the "Final Asset Statement") to Seller
not later than 45 days after the Closing Date. Purchaser will give
representatives of Seller access to the premises of the Business, to its
books and records and to the appropriate personnel of Purchaser for
purposes of confirming the Final Asset Statement. Unless Seller notifies
Purchaser in writing that it disagrees with the Final Asset Statement
within 30 days after receipt thereof, the Final Asset Statement shall be
conclusive and binding on Purchaser and Seller. If Seller notifies
Purchaser in writing of its disagreement with the Final Net Asset Statement
within such 30-day period, then Purchaser and Seller shall attempt to
resolve their differences with respect thereto within 30 days after
Purchaser's receipt of Seller's written notice of disagreement. Any dispute
regarding the Final Asset Statement not resolved by Purchaser and Seller
within such 30-day period will be resolved by an accounting firm mutually
acceptable to both parties or, in the absence of agreement, by an
accounting firm of national reputation selected by lot after eliminating
Seller's and Purchaser's principal outside accountants and one additional
firm designated as objectionable by each of Seller and Purchaser. The
determination by the accounting firm so selected of the Final Asset
Statement and the Final Assets (with such modifications therein, if any, as
reflect such determination) shall be conclusive and binding upon the
parties. The fees and expenses of such accounting firm in acting under this
Section 2.5.1 shall be shared equally by Purchaser and Seller.
2.5.2 Subject to the provisions of the Holdback Agreement, in
the event of an Asset Deficiency, Purchaser shall first deduct from
the portion of the Holdback Amount allocated therefor and retain for
itself an amount equal to the Asset Deficiency. If payment is required
to be made hereunder by Purchaser to Seller, such payment shall be
made not more than five (5) business days following the final
determination of the Final Assets pursuant to Section 2.5.1(c) hereof
in the manner described in Section 2.2 hereof.
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2.6 Transaction Costs.
-----------------
To the extent that section 1146(c) of the Bankruptcy Code does not
apply to all aspects of the transactions contemplated hereby, Seller shall
be responsible for all sales, use, transfer, recording, stamp and similar
Taxes (as defined in Section 4.1.7 hereof) assessed or payable in
connection with the transfer of the Purchased Assets to Purchaser, whether
such Taxes are assessed initially against Seller or Buyer or any affiliates
or Seller or Buyer.
ARTICLE 3. ASSUMPTION OF LIABILITIES AND OBLIGATIONS BY PURCHASER.
-------------------------------------------------------
3.1 Assumed Liabilities.
-------------------
Except as otherwise provided for herein, Purchaser, in addition to
the consideration to be paid pursuant to Section 2 hereof, shall assume at the
Closing and thereafter pay, perform, or discharge in accordance with their
terms, only the following liabilities and obligations of Seller (collectively,
the "Assumed Liabilities"):
(a) Subject to Section 3.1(c), all liabilities and obligations with
respect to, arising out of, or related to, the ownership, possession or use
of the Purchased Assets, but in each case only to the extent arising after
the Closing Date;
(b) all obligations of Seller under the Customer Orders, Unfilled
Purchase Orders, Contracts, Personal Property Leases and Real Property
Leases acquired pursuant to Section 1.1 (collectively, the "Purchased
Contracts and Leases") which by the terms thereof are to be observed, paid,
discharged or performed, as the case may be, in each case only at any time
after the Closing Date (including obligations for goods in transit which
have been ordered but not received by Seller prior to the Closing), but
excluding obligations and liabilities arising out of any breach or default
by Seller under any such Customer Order, Contract, Personal Property Lease
or Real Property Lease prior to the Closing Date (including as set forth in
Section 3.2(d) below);
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(c) all obligations of the Seller arising under the QuadCare
Contracts, whether arising before or after the Closing Date, with the
exception of liabilities under any QuadCare Contracts relating to the Mirae
Inventory; and
(d) the obligations of the Seller to employees, but only to the extent
that Purchaser has expressly agreed to pay, perform or discharge such
obligations pursuant to Section 6.1 of this Agreement.
3.2 Excluded Liabilities.
--------------------
Notwithstanding any implication to the contrary contained in
Section 3.1 hereof or otherwise, Purchaser shall not assume, or in any way be
liable or responsible for, any liabilities, commitments or obligations of Seller
of any kind or nature whatsoever, known or unknown, accrued, fixed, contingent
or otherwise, liquidated or unliquidated, choate or inchoate, due or to become
due, except for the Assumed Liabilities. Without limiting the generality of the
foregoing, Purchaser shall not assume, and Seller shall remain responsible for,
the following (collectively, the "Excluded Liabilities"):
(a) any liability or obligation of Seller relating to or under this
Agreement, or on account of any of the transactions contemplated hereby, or
on account of the filing, prosecution or administration of the Bankruptcy
Case, including, without limitation, any liability or obligation of Seller
to attorneys, accountants, brokers, or others for services rendered or
expenses incurred by or on behalf of Seller, and all other expenses
associated with the transfer of the Purchased Assets;
(b) except as otherwise provided in Section 6.1 hereof, any wages,
salary, severance, bonuses, commissions, vacation or holiday pay, post
retirement medical benefits, fringe benefits, long-term disability
benefits, life insurance benefits, any duties, obligations or liabilities
arising under any of the Plans (as defined in Section 4.1.14)
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or any other employee benefit plan, policy or practice, whether or not
subject to Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA") or otherwise, or any other liability or
obligation of any type relating to the employees of the Business or other
amounts due to any employees or former employees of the Business which
accrue on or prior to the Closing Date;
(c) any liabilities which would arise as either a result of a breach
of any of Seller's representations and warranties hereunder or a breach of
any of Seller's covenants or agreements hereunder;
(d) any liabilities and obligations of Seller for any federal, state,
county, local or foreign income, excise, sales, personal, payroll or other
taxes of any kind whatsoever payable with respect to the operations of the
Business, or from the use, operation, ownership, lease, possession,
control, occupancy, maintenance or condition of the Purchased Assets, up
through and including the Closing Date, whether or not any such liabilities
become known before or after the Closing Date, and for any liability or
obligation whether disputed or not, to any federal, state, local or foreign
taxing authority of Seller or any of its affiliates or subsidiaries with
respect to Taxes (as hereinafter defined) arising from any and all other
operations, activities or transactions of Seller or its affiliates or from
the use, operation, ownership, lease, possession, control, occupancy,
maintenance or condition of any assets or properties, other than the
Purchased Assets, of Seller or its affiliates or subsidiaries at any time;
(e) any tax (including, without limitation, any federal, state,
county, local or foreign income, franchise, sales, transfer, recording,
stamp, documentary or other tax) imposed upon or incurred by Seller arising
out of or in connection with the negotiation and preparation of this
Agreement or the consummation and performance of the transactions
contemplated hereby;
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(f) any liability or obligation of Seller relating to, resulting from,
caused by, or arising out of the ownership, operations or control of the
Business by Seller on or prior to the Closing Date, including, without
limitation, any liability or obligation, arising out of the following:
(i) any accident or occurrence occurring on or prior to the
Closing Date resulting in personal injury, sickness, death, property
damage, property destruction or loss of use of property arising out of
or resulting from the operation of the Business by Seller;
(ii) any breach of contract, workers' compensation claim or
violation of any law or final order of any federal, state, judicial,
quasi-judicial or governmental body including, without limitation, the
Worker Adjustment and Retaining Notification Act;
(iii) any personal injury, sickness, death or property damage
resulting from occurrences occurring on or prior to the Closing Date
arising out of a defect or alleged defect of products manufactured or
sold by Seller prior to the Closing Date including, without
limitation, any such liabilities or obligations for defects or alleged
defects in design or failure to warn; or
(iv) any product recall liabilities or warranty liabilities
relating to products which were manufactured or sold by Seller prior
to the Closing Date (other than liabilities arising under the QuadCare
Contracts), or any shortage in goods delivered before the Closing Date
or in transit at the time of the Closing;
(g) any cure amounts that become payable in respect of the assumption
and assignment to the transferee(s) of the Purchased Contracts and Leases
or any other executory contracts and unexpired leases to be assigned
pursuant to this Agreement, the Sale Order and in accordance with section
365 of the Bankruptcy Code (the "Cure Costs");
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(h) any liability or obligation of Seller or attaching to the Business
arising pursuant to Environmental Laws (as defined in Section 4.1.18
hereof) or principles of common law relating to pollution, protection of
the Environment or health and safety based on events, conditions or
circumstances occurring or existing on or prior to the Closing Date;
(i) any liability, commitment or obligation of Seller of any kind or
nature whatsoever in respect of any Excluded Assets; and
(j) any liability, commitment or obligation of Seller of any kind or
nature whatsoever in respect of any Excluded Customer Orders, Excluded
Contracts, Excluded Actions, Excluded Purchase Orders, Excluded Prepaid
Expenses, or Excluded Real Property Leases.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF SELLER.
----------------------------------------
4.1 Representations and Warranties of Seller.
----------------------------------------
Seller represents and warrants to Purchaser as follows:
4.1.1 Corporate Organization and Standing.
-----------------------------------
Seller is a corporation duly organized, validly existing and
in good standing under the laws of Delaware and has all corporate
power and authority to own or lease its properties and to carry on the
business of the Business as presently conducted. Seller has delivered
to Purchaser complete and correct copies of the Articles of
Incorporation of Seller and by-laws of Seller. Seller is qualified to
do business as a foreign corporation and is in good standing in each
of the jurisdictions set forth in Schedule 4.1.1 attached hereto and
made a part hereof, which are the only jurisdictions in which the
nature of the Business as now being conducted by Seller or the
property owned or leased by Seller for the benefit of the Business
makes such qualification, licensing or registration necessary except
where the failure to be so qualified would not have a material adverse
effect on the Purchased Assets or the results of the operation of the
Business.
15
4.1.2 No Conflict.
-----------
The execution, delivery and performance of this Agreement, and
any necessary approval of this Agreement by the Bankruptcy Court, does
and will not:
(i) conflict with or violate any provision of any Certificate of
Incorporation or by-laws (or other charter or governing documents) of
Seller (to the extent that such document is then governing such
entity);
(ii) conflict with or violate any law applicable to Seller or by
which any property or asset of Seller is or may be bound or affected,
except for any such conflicts or violations that, individually or in
the aggregate, could not reasonably be expected to have a material
adverse effect on the Purchased Assets or the results of the operation
of the Business; or
(iii) assuming that all Required Consents (as defined in Section
6.7 hereof) have been obtained or deemed by operation of the Sale
Order to have been given, result in any breach of or constitute a
default (or an event which with or without notice or lapse of time or
both would become a default) under, or give to others any right of
termination, amendment, acceleration or cancellation of, or result in
the creation of a Lien, on any property or asset of Seller under any
note, bond, mortgage, indenture, contract, agreement, commitment,
lease, license, permit, franchise or other instrument or obligation to
which Seller is a party or by which Seller or any of its assets or
properties is or may be bound or affected, except for such breaches,
defaults or other occurrences which, individually or in the aggregate,
could not reasonably be expected to have a material adverse effect on
the Purchased Assets or the results of the operation of the Business.
16
4.1.3 Contract Asset Statements; SEC Documents; Financial
Statements.
-----------------------------------------------------
(a) Attached as Schedule 4.1.3 is a statement setting forth the book
value of the Purchased Assets and the assets purchased pursuant to the U.K.
Purchase Agreement as at February 28, 2001 (the "Contract Asset
Statement"). Except as set forth on Schedule 2.4(b), the Contract Asset
Statement was prepared in accordance with GAAP and on a basis consistent
with prior practices of Seller and fairly presents the Purchased Assets and
the Assumed Liabilities (whether accrued, contingent or otherwise) of the
Business at February 28, 2001. (b) Seller has filed in a timely manner all
documents that Seller was required to file with the Securities and Exchange
Commission (the "Commission") under Sections 13, 14(a) and 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), during
the 12 months preceding the date of the commencement of the Bankruptcy
Case, but has not filed such documents, including, without limitation, its
Annual Report on Form 10-K for the year ended September 30, 2000, as were
required to be filed thereafter. As of their respective filing dates, all
documents filed by Seller with the Commission (the "SEC Documents")
complied as to form in all material respects with the requirements of the
Exchange Act or the Securities Act of 1933, as amended, as applicable. The
SEC Documents did not contain any untrue statement of material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements made therein, in light of the circumstances under which they
were made, not misleading. The Sellers' unaudited year-end financial
statements for the fiscal year ended September 30, 2000 previously
delivered to Buyer have been prepared in accordance with GAAP consistently
applied and fairly present the consolidated financial position of Seller at
the dates thereof and the results of their operations and cash flows for
the periods then ended (subject to footnotes and to normal, recurring
adjustments). Except as set forth in Schedule 2.4(b), the unaudited
month-end financial statements for the month ended February 28, 2001
previously delivered to Buyer have been prepared in accordance with GAAP
consistently applied and fairly present the consolidated financial position
of Seller at the dates thereof and the results of their operations for the
periods then ended (subject to footnotes and to normal, recurring
adjustments).
17
4.1.4 Intentionally Omitted
4.1.5 Litigation.
----------
Except as set forth in Schedule 4.1.5 attached hereto and made
a part hereof, there is no action, suit, proceeding, arbitration or
investigation pending or, to the best knowledge of Seller, threatened,
against Seller or the directors, officers, agents or employees of Seller
with respect to the Business, and there are no orders, writs, injunctions
or decrees currently in force against Seller or the directors, officers,
agents or employees of Seller with respect to the conduct of the Business.
Seller has provided to Purchaser complete and correct copies of all
pleadings, agreements, motions, orders and other material documents
relating to the matters referred to on Schedule 4.1.5, including, without
limitation, any and all agreements, motions, orders and other material
documents relating to any settlement arrangements with Samsung, Speedline,
Mirae and Zevetech and all other documents either specifically requested by
Purchaser or known to Seller to be material to an understanding of the
matters referred to on such Schedule 4.1.5.
4.1.6 Licenses and Permits; Compliance with Laws.
------------------------------------------
Except as set forth in Schedule 4.1.6 attached hereto and
made a part hereof, Seller owns, holds or possesses in its own name,
all Licenses and Permits necessary to entitle it to use its corporate name,
to own or lease, operate and use its assets and properties and to carry on
and conduct the Business and its operations as presently conducted, except
for such Licenses and Permits, the absence of which would not have a
material adverse effect on the Purchased Assets or the results of the
operation of the Business. Seller is not in violation of or default under
any Licenses and Permits or any judgment, order, writ, injunction or decree
of any court or administrative agency issued against it or any statute,
law, ordinance, rule or regulation applicable to it, which could reasonably
be expected, individually or in the aggregate, to have a material adverse
effect on the Purchased Assets or the results of the operation of the
Business or which could reasonably be expected to interfere materially with
the consummation of the transactions contemplated herein. Schedule 1.1(i)
attached hereto and made a part hereof sets forth a complete and correct
list of all Licenses and Permits related to the design, manufacture, and
marketing of the products of the Business, all of which are in full force
and effect as of the date hereof.
18
4.1.7 Taxes.
-----
(a) Definitions. For purposes of this Agreement:
(i) The term "Taxes" means all federal, state, local, foreign,
and other net income, gross income, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, license, lease, service,
service use, withholding, payroll, employment, excise, severance,
stamp, occupation, premium, property, windfall profits, customs,
duties, or other taxes, fees, assessments, or charges of any kind
whatever, together with any interest and any penalties, additions to
tax, or additional amounts with respect thereto, and the term "Tax"
means any one of the foregoing Taxes;
(ii) The term "Returns" means all returns, declarations, reports,
statements, and other documents required to be filed in respect of
Taxes, and the term "Return" means any one of the foregoing Returns;
(iii) The term "Code" means the Internal Revenue Code of 1986, as
amended. All citations to the Code or to the regulations promulgated
thereunder shall include any amendments or any substitute or successor
provisions thereto.
(b) Seller has properly filed on a timely basis, or so will file, when
due, all Returns relating to the Business or the Purchased Assets for all
periods (or any portion thereof) ending on or prior to the Closing Date.
All such Returns were or will be correct and complete in all material
respects.
(c) There are no liens for Taxes (other than for current Taxes not yet
due and payable) on the Purchased Assets or the income or operation of the
Business.
19
(d) Seller is not a person other than a United States person within
the meaning of the Code.
(e) Except as set forth in Schedule 4.1.7 hereof, there is no dispute
or claim concerning any Tax liability of Seller either (i) claimed or
raised by any authority in writing or (ii) as to which any of Seller and
the directors and officers (and employees responsible for Tax matters) of
Seller has actual knowledge after reasonable investigation.
(f) Except as set forth on Schedule 4.1.7, in the six years preceding
the date of this Agreement, no claim has ever been made by an authority in
a jurisdiction where Seller does not file Tax returns that it is or may be
subject to taxation by that jurisdiction.
(g) Seller has not waived any statute of limitation in respect of
Taxes or agreed to any extension of time with respect to a Tax assessment
or deficiency.
4.1.8 Brokers, Finders.
----------------
Seller has not retained any broker or finder in connection
with the transactions contemplated herein and is not obligated and has
not agreed to pay any brokerage or finder's commission, fee or similar
compensation.
4.1.9 Absence of Certain Changes.
--------------------------
(a) Since February 28, 2001, except as set forth in Schedule 4.1.9
attached hereto and made a part hereof or as approved by order of the
Bankruptcy Court in the Bankruptcy Case, Seller has conducted the Business
in the ordinary course, and there has not occurred with respect to the
Business:
(i) any event which could have a material adverse effect on the
Purchased Assets or the results of the operation of the Business;
(ii) any payment, discharge or satisfaction of any liabilities or
obligations (whether accrued, absolute, contingent or otherwise) in
excess of $20,000, other than the payment, discharge or satisfaction,
in the ordinary course of business, of liabilities or obligations
incurred in the ordinary course of business;
20
(iii) except (x) in the ordinary course of business and (y) as
set forth on Schedule 4.1.9 attached hereto and made a part hereof in
relation to any debtor-in-possession financing facility approved by
the Bankruptcy Court in the Bankruptcy Case, any assets (whether real,
personal or mixed, tangible or intangible) becoming subject to any
mortgage, pledge, lien, security interest, encumbrance, or restriction
or charge of any kind;
(iv) any cancellation or waiver of any claims or rights of value,
or any sale, transfer, distribution or other disposal of any assets
(except for sales of finished goods inventory or other assets in the
ordinary course of business), or disposal of any assets for any amount
to affiliates of Seller;
(v) any disposal or lapse of any rights in, to or for the use of
any patent, trademark, trade name or copyright, or any disclosure to
any person not an employee or other disposal of any customer lists
used by the Business;
(vi) except as set forth in Schedule 4.1.9, any increase in the
base compensation or other payment to any director, officer or
employee of the Business, whether now or hereafter payable or granted,
or entry into or variation of the terms of any employment or incentive
agreement with any such person (other than increases or variations in
base compensation in the ordinary course consistent in timing and
amount with past practices) or entry into or variation of the terms of
any employment or incentive agreements with any such person;
(vii) any capital expenditure, purchase order or commitment for
additions to property or equipment, or lease agreement which exceeds
$10,000 individually or $25,000 in the aggregate, and which, if
purchased, would be reflected in the property or equipment accounts;
21
(viii) except as set forth on Schedule 4.1.9, any change in any
method of accounting or keeping its books of account or accounting
practices;
(ix) any damage, destruction or loss of any asset included in the
Purchased Assets, whether or not covered by insurance which exceeds
$100,000; and
(x) except liabilities incurred in the ordinary course of
business, any obligation or liability, including, without limitation,
any liability for nonperformance or termination of any contract.
4.1.10 Material Contracts.
------------------
Schedule 4.1.10 attached hereto and made a part hereof lists
all of the Material Contracts (as hereinafter defined) existing on the date
hereof to which Seller is a party and that relate to the Business. As used in
this Section 4.1.10, "Material Contracts" means:
(a) all currently effective (or which may become effective prior to
Closing) leases or other agreements under which Seller is lessee of, or
holds or operates, any machinery, equipment, vehicle or other tangible
personal property owned by a third party and used in the business of the
Business, except for leases and agreements under which Seller's total
unpaid obligations are less than $10,000 individually or $25,000 in the
aggregate;
(b) all currently effective (or which may become effective prior to
Closing) contracts and agreements to which Seller is a party relating to
the Business and which are:
(i) outstanding contracts with the officers, employees, agents,
consultants, advisors, salesmen, sales representatives, distributors,
sales agents or dealers of Seller relating to the Business,
22
(ii) collective bargaining agreements of Seller which relate to
the Business, or
(iii) pension, profit-sharing, bonus, severance, retirement,
stock option or employee benefit plans or other similar plans or
arrangements of Seller relating to the Business;
(c) all mortgages, indentures, security agreements, pledges, notes,
loan agreements or guarantees relating to the Business;
(d) all uncompleted customer contracts and supplier contracts relating
to the Business which are expected to result in a material loss to Seller;
and
(e) all uncompleted customer contracts and supplier contracts relating
to the Business and not priced in a manner consistent with Seller's past
practices.
Seller has provided to Purchaser complete and correct copies of all
Material Contracts.
4.1.11 Intellectual Property Rights.
----------------------------
(a) Except as set forth on Schedule 4.1.11(a) and subject to the
rights of persons holding licenses thereto, Seller owns (or otherwise has
the right to use pursuant to a valid license, sublicense or other
agreement), free and clear of all Liens, and has the unrestricted right to
use, sell, or license, all Intellectual Property Rights.
(b) Schedule 4.1.11(b) sets forth all Intellectual Property Rights
owned or licensed by the Seller and all filings and applications for any
Intellectual Property Rights filed by the Seller, specifying as to each
item, as applicable: the nature of the item, including the title; the owner
of the item; the jurisdictions in which the item is issued or registered or
in which an application for issuance or registration has been filed; and
the issuance, registration, or application numbers and dates.
23
(c) Schedule 4.1.11(c) sets forth all material licenses, sublicenses,
distributor agreements and other agreements or permissions ("IP Licenses")
under which Seller is a (i) licensor, or (ii) licensee or distributor,
except such licenses, sublicenses and other agreements relating to
off-the-shelf software which is commercially available on a retail basis
and used solely on the computers of Seller ("Off-the-Shelf Software"). With
the exception of the IP License between Seller and Samsung, Seller has
substantially performed all obligations imposed on it under any IP License
or Off-the-Shelf Software, and is not, nor to the knowledge of Seller is
another party thereto, in breach of or default thereunder in any respect,
nor is there any event which with notice or lapse of time or both would
constitute a default thereunder. All of the IP Licenses and all
Off-the-Shelf Software licenses are valid, enforceable, and in full force
and effect, and will continue to be on identical terms immediately
following the completion of the transactions contemplated by this
Agreement, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer,
moratorium or similar laws affecting the enforcement of creditors' rights
generally and by general principles of equity relating to enforceability
(regardless of whether considered in a proceeding at law or in equity).
(d) The products of Seller have been marked as required by
intellectual property related statutes. Seller has given the public notice
of its copyrights and trademarks as required by statute.
(e) To the best knowledge of Seller, all of Seller's Intellectual
Property Rights are valid and enforceable. To the best knowledge of Seller,
all of its patents are valid and enforceable. Seller has taken all
necessary and desirable actions to maintain and protect each Intellectual
Property Right owned by Seller.
(f) Seller has taken all reasonable precautions to protect the
secrecy, confidentiality, and value of its trade secrets and the
proprietary nature and value of its technology.
24
(g) Except as set forth on Schedule 4.1.11(g), to the best knowledge
of Seller, none of the products or services (including, without limitation,
all products and services using or incorporating any of Seller's
Intellectual Property Rights) currently licensed, sold or made available by
Seller to any person, used by Seller or licensed to Seller by any person,
infringes upon or otherwise violates any Intellectual Property Rights of
others.
(h) Except as set forth on Schedule 4.1.11(h), no litigation is
pending and no claim has been made against Seller or, to the best knowledge
of Seller, is threatened, and Seller does not know of any basis for any
claim, contesting the right of Seller to sell, license or make available to
any person any of Seller's products or services or use the Intellectual
Property Rights currently or previously sold, licensed or made available to
such person or used by Seller.
(i) No former employer or client of any employee of Seller, and no
current or former client or employer of any consultant of Seller, has made
a claim against Seller or, to the best knowledge of Seller, againsI such
employee, consultant or any other person, that such employee or such
consultant is utilizing or infringing upon the Intellectual Property Rights
of such former employer or client.
(j) It is not necessary for Seller's business to use any Intellectual
Property Right owned by any director, officer, employee or consultant of
Seller (or persons the Company presently intends to hire). To the best
knowledge of Seller, at no time during the conception or reduction to
practice of any of Seller's Intellectual Property Rights was any developer,
inventor or other contributor to such Intellectual Property Right operating
under any grants from any Governmental Authority or subject to any
employment agreement, invention and assignment, nondisclosure agreement or
other contractual obligation with any person that could adversely affect
Seller's Intellectual Property Rights.
(k) Except as set forth on Schedule 4.1.11(k), each of Seller's
current and former employees and consultants has executed an agreement with
Seller assigning to Seller all right, title and interest in and to any
Intellectual Property Rights created or devised by such employee in
connection with such employee's employment by Seller.
25
(l) Seller has entered into such written agreements as are necessary
to assign all moral rights in its copyrights worldwide upon completion of
the transaction contemplated hereby.
(m) Seller has provided to Purchaser complete and correct copies of
all other material documents relating to matters, actions, suits or
proceedings referred to on Schedules 4.1.11(a), (b), (c), (g), (h) and (k).
4.1.12 No Consent.
----------
Except for (i) the approval of the Proposed Transaction and
related filings by the Bankruptcy Court and (ii) any periodic or
current reports required to be filed pursuant to an order of the
Bankruptcy Court, no consent, approval, authorization order, filing,
registration or qualification of or with any court, governmental
authority or third person is required to be made or obtained by Seller
in connection with the execution and delivery of this Agreement by
Seller or the consummation by Seller of the transactions contemplated
hereby.
4.1.13 Authorization.
-------------
Seller has full right, power and authority to enter into this
Agreement and, subject to approval by the Bankruptcy Court, to perform
fully its obligations hereunder. The execution and delivery of this
Agreement by Seller, the performance by Seller of its obligations hereunder
and the consummation by Seller of the transactions contemplated hereby have
been duly authorized by all requisite corporate action on the part of
Seller. This Agreement has been duly executed and delivered by Seller and
upon receipt of any required approval of the Bankruptcy Court is the valid
and binding obligation of Seller enforceable against it in accordance with
its terms.
26
4.1.14 Employees; Benefit Plans.
------------------------
(a) Schedule 4.1.14 attached hereto and made a part hereof sets forth
all employee contracts, arrangements and "employee welfare benefit" or
"employee pension benefit" plans relating to the Business, as such plans
are defined in Sections 3(1) and 3(2), respectively, of ERISA
(collectively, the "Plans"), which Schedule includes, without limitation,
all collective bargaining, employment, consulting, compensation, pension,
retirement, severance, separation, vacation, holiday, sickness, educational
assistance, insurance, welfare, workers' compensation, profit sharing,
incentive and bonus plans and agreements, under which Seller, with respect
to any employee, former employee, director or beneficiary of the Business,
has any obligation. Except as set forth in Schedule 4.1.14 attached hereto
and made a part hereof, Seller has furnished to Purchaser true and correct
copies of instruments evidencing all such contracts and arrangements and
the Plans, all as amended to date.
(b) None of the Plans is a multi-employer plan within the meaning of
Section 3(37) of ERISA, and neither Seller nor any entity which is required
to be treated as a single employer with Seller pursuant to Section 414 (b),
or (c) of the Code ("ERISA Affiliate") has maintained or sponsored, has
been required to contribute to, has terminated or withdrawn from (either
completely or partially), and no withdrawal liability (as defined in
Section 4201, 4063 or 4064 of ERISA) has been incurred by Seller or an
ERISA Affiliate with respect to, any defined benefit plan or multi-employer
plan, and there is no basis to anticipate that any demand for payment of
any withdrawal liability will be made. None of the Plans and no employee
pension benefit plan maintained by an ERISA Affiliate is subject to Title
IV of ERISA or Section 412 of the Code and during the six (6) year period
preceding the Closing Date, neither Seller nor any ERISA Affiliate has
incurred any liability under Title IV of ERISA which has not been
satisfied. Neither Seller nor any ERISA Affiliate has terminated any
defined benefit pension plan subject to Title IV of ERISA during the six
(6) year period preceding the Closing Date for which Seller or ERISA
Affiliate has not received a favorable determination letter from the
Internal Revenue Service, and a copy of any such determination letter has
been provided to Purchaser by Seller.
27
(c) The Plans have been administered in compliance with their terms
and with all filings, reporting, disclosure, and other requirements of
ERISA and the Code. Each Plan which is a group health plan (within the
meaning of Section 4980B(g)(2) of the Code) has complied at all times with
the health care continuation coverage requirements of Section 4980B of the
Code and Part 6 of Title I of ERISA. Each Plan (together with its related
funding instrument), is an employee pension benefit plan, is qualified
under Section 401 of the Code and the regulations issued thereunder, and
has been qualified from the date of its adoption to the date of this
Agreement, and each such Plan and its related funding instrument have been
the subject of a favorable determination letter issued by the Internal
Revenue Service holding that such Plan and funding instrument are so
qualified. A copy of all determination letters, which have been issued by
the Internal Revenue Service with respect to each Plan which is an employee
pension benefit plan, has been provided to Purchaser by Seller.
(d) None of the Plans which is an employee welfare benefit plan
provides benefits to retirees or other former employees of Seller,
regardless of whether such benefits are vested, and Seller has not
terminated any employee welfare benefit plan providing benefits to
retirees.
(e) Neither Seller nor any ERISA Affiliate nor any of their employees
or directors, nor, to the best knowledge of Seller, any plan fiduciary of
any of the Plans, has engaged in any transaction in violation of Section
406(a) or (b) of ERISA or any "prohibited transaction" (as defined in
Section 4975(c)(1) of the Code) for which no exemption exists under Section
4975(d) of the Code and which could subject any of the Plans or any
fiduciary of any of the plans to any tax or penalty imposed by Section 4975
of the Code or 502 of ERISA, and no "reportable event" (as defined in
Section 4043 of ERISA and the regulations promulgated thereunder), other
than such as may arise out of the consummation of the transactions
contemplated by this Agreement, has occurred in connection with any Plan.
28
(f) Other than routine claims for benefits made in the ordinary course
of business, there are no pending claims, investigations or causes of
action ("Claims") and to the best knowledge of Seller, no such Claims are
threatened against any Plan or fiduciary of any such Plan by any
participant, beneficiary or governmental agency with respect to the
qualification or administration of any such Plan, and there is no basis to
anticipate that any such Claim will be made.
(g) With respect to each of the Plans, Seller has provided to
Purchaser a copy of all related trust agreements, all amendments thereto
and written interpretations together with the three most recent annual Form
5500 reports, the most recent summary plan description and any subsequent
summary of material modification, the three most recent summary annual
reports, any insurance contracts related to such Plans, and any employee
handbooks, manuals and policy statements relating to such Plans. Seller has
provided Purchaser with true and complete age, salary, service and related
data for employees, former employees and beneficiaries thereof covered
under the Quad Systems Corporation Retirement Savings Plan 401K Plan (the
"Savings Plan") as of the Closing Date.
(h) Seller shall either contribute or accrue on its books the amount
of any employer matching contributions or discretionary contributions (in
an amount determined in accordance with Seller's past practices) to the
Savings Plan which is in the ordinary course of business and would be
contributed for or attributable to the period prior to the Closing Date.
(i) Except as set forth on Schedule 4.1.14(i), neither the execution
and delivery of this Agreement nor any of the transactions contemplated
herein will terminate or modify, or give a third person a right to
terminate or modify, the provisions or terms of any Plan, contract or
arrangement (including employment agreements) listed on Schedule 4.1.14 and
will not constitute an event under any Plan, contract or arrangement
(including employment agreements) listed on Schedule 4.1.14 that will
result in any payment (including parachute payments, severance payments or
any similar payments) becoming due to any employees of Seller.
29
4.1.15 Product Liability and Recalls.
-----------------------------
(a) Except as set forth on Schedule 4.1.15 attached hereto and made a
part hereof, there is no action, suit, claim, inquiry, proceeding or
investigation in any case by or before any court or governmental body
pending or, to the best knowledge of Seller, threatened, against or
involving the Business relating to any product alleged to have been
designed, manufactured or sold by the Business and alleged to have been
defective or improperly designed or manufactured.
(b) Except as set forth on Schedule 4.1.15 hereto, there is no
pending, or to the best knowledge of Seller, threatened recall or
investigation of any product sold by Seller in connection with the
Business.
4.1.16 Books and Records.
-----------------
The Books and Records of the Business are complete and
correct in all material respects and have been maintained in accordance
with sound business practices.
4.1.17 Personal Property.
-----------------
Except as set forth in Schedule 4.1.17 hereto, Seller has or
will have at the Closing, (a) good and valid title to all of the
Purchased Assets, including, without limitation, the personal property
acquired after the date of this Agreement (except for the inventory
and other assets sold or otherwise disposed of in accordance with the
provisions of this Agreement), and (b) valid leasehold interests in
all Personal Property Leases listed in Schedule 1.1(g) hereto as
leased by it, in each case free and clear of all Liens. Seller enjoys
peaceful and undisturbed possession under all Personal Property
Leases. The Inventory and the tangible personal property set forth in
Schedule 4.1.17 hereto constitutes all tangible personal property
necessary in the operation of the Business as presently conducted.
Except as set forth in Schedule 4.1.17 hereto, the personal property
is maintained in good operating condition, reasonable wear and tear
excepted for the purposes for which it is currently being used. Seller
has provided to Purchaser complete and correct copies of the Personal
Property Leases.
30
4.1.18 Environmental Matters.
---------------------
(a) For purposes of this Agreement, the capitalized terms defined
below shall have the meanings ascribed to them below.
(i) "Environmental Law(s)" means all federal, state or local law
(including common law), statute, ordinance, rule, regulation, code, or
other requirement relating to the environment, natural resources, or
public or employee health and safety and includes, but is not limited
to the Comprehensive Environmental Response Compensation and Liability
Act ("CERCLA"), 42 U.S.C.ss.9601 et seq., the Hazardous Materials
Transportation Act, 49 U.S.C.ss.1801 et seq., the Resource
Conservation and Recovery Act ("RCRA"), 42 U.S.C.ss.6901 et seq., the
Clean Water Act, 33 U.S.C. Sectionss.1251 et seq., the Clean Air Act,
42 U.S.C.ss. 7401 et seq., the Toxic Substance Control Act, 15
U.S.C.ss.2601 et seq., the Oil Pollution Act of 1990, 33 U.S.C.ss.2701
et seq., and the Occupational Safety and Health Act, 29 U.S.C.ss.651
et seq., as such laws have been amended or supplemented, and the
regulations promulgated pursuant thereto, and all analogous state or
local statutes and any applicable transfer statutes.
(ii) "Environmental Permits" means all approvals, authorizations,
consents, permits, licenses, registrations and certificates required
by any applicable Environmental Law.
(iii) "Hazardous Substance(s)" means, without limitation, any
flammable explosives, radioactive materials, urea formaldehyde foam
insulation, polychlorinated biphenyls, petroleum and petroleum
products (including but not limited to waste petroleum and petroleum
products), methane, hazardous materials, hazardous wastes, pollutants,
contaminants and hazardous or toxic substances, as defined in or
regulated under any applicable Environmental Laws.
(iv) "Release" means any past or present spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, dumping or disposing of a Hazardous Substance into
the environment.
31
(b) Except as disclosed in Schedule 4.1.18 attached hereto and made a
part hereof, Seller has obtained all Environmental Permits that are
required for the lawful operation of its business. Seller (i) is in
compliance with all terms and conditions of its Environmental Permits and
with any applicable Environmental Law, and (ii) has not received written
notice of any violation by or claim against the Business under any
Environmental law, except, in either case, where such non compliance or
violation would not have a material adverse effect on the Purchased Assets
or the results of operation of the Business.
(c) Except as disclosed in Schedule 4.1.18 hereof, except, in either
case, where such non compliance or violation would not have a material
adverse effect on the Purchased Assets or the results of operation of the
Business, there have been no Releases, or threatened Releases of any
Hazardous Substances into, on or under any of the properties owned or
operated (or formerly owned or operated) by Seller in respect of the
Business, in any case in such a way as to create any liability (including
the costs of investigation and remediation) under any applicable
Environmental Law.
(d) Except as disclosed in Schedule 4.1.18 hereof, Seller has not been
identified as a potentially responsible party at any federal or state
National Priority List site.
4.1.19 Customers and Suppliers.
-----------------------
Schedule 4.1.19 attached hereto and made a part hereof
contains a list setting forth the 25 largest customers of the
Business, by dollar amount, over the 12 months ended September 30, 2000,
and the 25 largest suppliers of the Business, by dollar amount, over the 12
months ended September 30, 2000. Except for cash on delivery and
pre-payment arrangements generally required by suppliers and except as set
forth on Schedule 4.1.19, all purchase and sale orders and other
commitments for purchases and sales made by Seller in connection with the
Business have been made in the ordinary course of business in accordance
with past practices, and no payments have been made to any supplier or
customers or any of their respective representatives other than payments to
such suppliers for the payment of the invoiced price of supplies purchased
or goods sold in the ordinary course of business. With the exception of BP
Microsystems Inc. ("BPM"), no customer of Seller has communicated an intent
to cease purchasing Seller's products following the Closing Date.
32
4.1.20 Certain Agreements.
------------------
Except as set forth on Schedule 4.1.20 attached hereto and
made a part hereof, all of the Contracts, Material Contracts, Customer
Orders, Unfilled Purchase Orders, Real Property Leases and Personal
Property Leases (collectively, the "Commitments") are legal, valid and
binding obligations of the Business enforceable (except as enforcement may
be limited by equitable principles limiting the right to obtain specific
performance or other equitable remedies or by applicable bankruptcy or
insolvency laws and related decisions affecting creditors' rights
generally) against Seller; have been negotiated in good faith on an "arm's
length" transaction basis; are, to the best knowledge of Seller,
enforceable against the other parties in accordance with their respective
terms; are fully assignable without the consent of any third party; and,
except as listed on Schedule 4.1.20 hereto, Seller has no knowledge of any
default or claimed or purported or alleged default or state of facts which,
with notice or lapse of time or both, would constitute a default on the
part of any party in the performance of any obligation to be performed or
paid by any party under the Commitments, and has not received or given
notice of any default or claimed or purported or alleged default or state
of facts which, with notice or lapse of time or both, would constitute a
default on the part of any party in the performance or payment of any of
the Commitments.
4.1.21 Approvals, etc.
--------------
Subject to the receipt of Bankruptcy Court approval, all
consents, approvals, authorizations and orders (corporate,
governmental or otherwise) necessary for the due authorization, execution
and delivery by Seller of, and enforcement against Seller of, this
Agreement and the valid delivery of the Purchased Assets have been obtained
or will be obtained prior to the Closing Date.
33
4.1.22 Powers of Attorney.
------------------
There are no powers of attorney executed on behalf of Seller.
4.1.23 Restrictions on Business Activities.
-----------------------------------
Except for this Agreement or as set forth in Schedule 4.1.23
attached hereto and made a part hereof, there is no agreement,
judgment, injunction, order or decree binding upon Seller which has or
could reasonably be expected to have the effect of prohibiting or impairing
any business practice of Seller, acquisition of property by Seller, or the
conduct of business by Seller as currently conducted or as proposed to be
conducted by Seller except where such prohibition or impairments would not
have a material adverse effect on the Purchased Assets or the results of
operation of the Business.
4.1.24 Inventory.
---------
The Inventory as reflected in the most recent financial
statements (i) is carried at an amount not in excess of the lower of
cost or net realizable value, and (ii) does not include any inventory which
is obsolete, surplus or not usable or saleable in the lawful and ordinary
course of the Business as heretofore conducted, in each case net of
reserves provided therefor.
4.1.25 Labor Matters.
-------------
(a) Except as set forth in Schedule 4.1.25 attached hereto and made a
part hereof, there are no (i) labor strikes, disputes, slowdowns,
representation campaigns or work stoppages with respect to employees of the
Business pending or, to the best knowledge of Seller, threatened against or
affecting the Business, (ii) grievance or arbitration proceedings arising
out of collective bargaining agreements to which Seller is a party (other
than informal grievances), (iii) unfair labor practice complaints pending
or, to the best knowledge of Seller, threatened against the Business, or
(iv) collective bargaining agreements or other labor union contracts
applicable to persons employed by the Business and to the best knowledge of
Seller, there are no activities or proceedings of any labor union to
organize any such employees.
34
(b) Except to the extent set forth in Schedule 4.1.25 hereto, Seller
is in material compliance with all applicable laws respecting employment
and employment practices, terms and conditions of employment and wages and
hours, and is not engaged in any unfair labor practice.
4.1.26 Product Warranty.
----------------
Seller does not have any liability (and there is no basis
for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against any of them
giving rise to any liability) for replacement or repair of any product
manufactured, sold and delivered by Seller or other damages in
connection therewith under any express or implied warranty with
respect thereto, in excess of $424,132.00. No product manufactured,
sold, or delivered by the Business is subject to any guaranty,
warranty, or other indemnity beyond the applicable standard terms and
conditions of sale, except for products covered by the QuadCare
Contracts. Schedule 4.1.26 hereto includes copies of the standard
terms and conditions of sale for the Business (containing applicable
guaranty, warranty and indemnity provisions).
4.1.27 Federal Tax Identification Number.
---------------------------------
Seller's Federal Tax Identification Number is 23-2180139.
4.1.28 Title to Purchased Assets.
-------------------------
Seller has good and valid title to (or valid leasehold
rights in the case of leased property) all of the Purchased Assets,
free and clear of all Liens, except for Liens (a) to be released on or
before the Closing Date, (b) as set forth on Schedule 4.1.28 hereto
and for which Seller will be responsible to discharge following
Closing, (c) mechanics', carriers', workmen's, repairmen's or similar
Liens arising or incurred in the ordinary course of business, and not
exceeding $10,000 individually or in the aggregate, and
35
(d) Liens for Taxes, assessments and other governmental charges which
are not due and payable or which may hereafter be paid without
penalty, or which are being contested in good faith, so long as such
contest does not involve any substantial danger of the sale,
forfeiture or loss of any Purchased Asset material to the operation of
the Business or may otherwise cause a material adverse effect on the
Purchased Assets or the results of operation of the Business
(together, "Permitted Liens"). Notwithstanding the foregoing, Seller
acknowledges that Purchaser is not assuming liability for any such
Permitted Liens and all Permitted Liens shall be discharged by Seller
following Closing. Upon delivery of and payment for the Purchased
Assets as herein provided, Seller will convey to Purchaser good and
valid title thereto, free and clear of any Liens, except Permitted
Liens.
4.2 Definition of "Best Knowledge."
For purposes of this Agreement, the term "to the best knowledge
of Seller" or other term of similar import means that the officers of Seller
have no actual knowledge that the representation or warranty is untrue in any
material respect.
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
-------------------------------------------
5.1 Representations and Warranties.
------------------------------
Purchaser represents and warrants to Seller as follows:
5.1.1 Organization and Standing.
-------------------------
Purchaser is a corporation duly organized, validly existing
and in good standing under the laws of the Commonwealth of
Pennsylvania and has all corporate power and authority to execute and
deliver this Agreement, to carry on the businesses in which it is
engaged, to own and use the properties owned and used by it, to
consummate the transactions contemplated hereby, and perform its
obligations hereunder.
36
5.1.2 Authorization.
-------------
All corporate and other proceedings required to be taken on
the part of Purchaser, including, without limitation, all action
required to be taken by the directors or shareholders of Purchaser to
authorize Purchaser to enter into and carry out this Agreement and to
purchase the Purchased Assets, have been, or prior to the Closing will
be, duly and properly taken. This Agreement has been duly executed and
delivered by Purchaser and is the valid and binding obligation of
Purchaser enforceable against it in accordance with its terms, except
as enforcement may be limited by equitable principles limiting the
right to obtain specific performance or other equitable remedies, or
by applicable bankruptcy or insolvency laws and related decisions
affecting creditors' rights generally.
5.1.3 Compliance.
----------
The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, upon
satisfaction of the conditions set forth in Article 9 hereof, will
not:
(a) result in the breach of any of the terms or conditions of, or
constitute a default under or violate, as the case may be, the
articles of organization or by-laws of Purchaser, or any agreement,
lease, mortgage, note, bond, indenture, license, guarantee or other
document or undertaking, oral or written, to which Purchaser or any of
its subsidiaries or affiliates is bound, or by which any of its or
their properties or assets may be affected; or
(b) violate any rule, regulation, writ, injunction, order or
decree of any court, administrative agency or governmental body.
5.1.4 Litigation.
----------
There are no actions, suits, proceedings, arbitrations, or
investigations pending, or to Purchaser's best knowledge, threatened,
which question the validity of this Agreement or any actions taken or
to be taken in connection herewith or the consummation of the
transactions contemplated herein.
37
5.1.5 Approvals, etc.
--------------
All consents, approvals, authorizations and orders
(corporate, governmental or otherwise) necessary for the due
authorization, execution and delivery by Purchaser of this Agreement
and the consummation of the transactions contemplated hereby have been
obtained or will be obtained prior to the Closing Date.
ARTICLE 6. COVENANTS AND AGREEMENTS.
------------------------
6.1 Employee Matters.
----------------
6.1.1 Employment Status.
-----------------
(a) Seller shall use commercially reasonable efforts to retain
Employees (as hereafter defined), and to maintain in good standing through
the Closing all relationships and agreements with Employees, independent
contractors or consultants, in each case from the date hereof through the
Closing Date and to cooperate with Purchaser in hiring its Employees
offered employment pursuant to Section 6.1.1(b); provided, that the
foregoing shall not require that Seller offer any compensation or other
incentives in addition to the compensation and benefits being provided or
required to be provided as of the date of this Agreement. As used herein,
"Employee" means any employee of Seller, and an "Inactive Employee" means
an Employee who is not actively at work due to approved leave of absence,
short-term disability leave or military leave.
(b) Purchaser may but shall not be obligated to offer employment to
each Employee of Seller listed on Schedule 6.1.1(b) attached hereto and
made a part hereof (each such employee, an "Offer Employee") on such terms
and conditions as Purchaser shall determine (subject to the provisions of
this Section) effective as of the Closing Date. The time at which the
employment by Purchaser of each Offer Employee who is not an Inactive
Employee as of the Closing Date and who accepts such offer of employment
shall become effective is as of the Closing Date (the "Effective Time of
Employment"). The effective time of employment of any such Offer Employee
who is an Inactive Employee as of the Closing Date shall be such time (if
any) within one hundred eighty (180) days following the Closing Date when
such Inactive Employee returns to active status and reports to work with
Purchaser and Purchaser shall have no obligation to employ any such
Inactive Employee who fails to return to active status or to report to work
with Purchaser within such one hundred eighty (180) day period.
38
Each Offer Employee who becomes employed by Purchaser pursuant to one of
the two preceding sentences shall be considered a "Transitioned Employee"
from and after his or her Effective Time of Employment.
(c) From the date hereof through the Closing, Seller shall permit
Purchaser to communicate with all Employees of the Seller and the
consultants, at reasonable times and upon reasonable notice, concerning
Purchaser's plans, operations, business, customer relations and general
personnel matters and to interview such employees and consultants and
review the personnel records and such other information concerning such
employees and consultants as Purchaser may reasonably request (subject to
obtaining any legally required written permission of any affected Employee
or consultant and to other applicable law), provided that such contacts
shall be conducted in a manner that is reasonably acceptable to Seller.
(d) Seller shall be solely responsible for any and all liabilities
relating to or arising in connection with any actual, constructive or
deemed termination of employment (including without limitation, severance
or separation pay or benefits or other similar compensation or benefits
under any applicable law, regulation or benefit plan) (i) to or with
respect to any Employee other than a Transitioned Employee, whether as a
result of the consummation of the transactions contemplated hereby or
otherwise, and whether before, on or after the Closing Date, or (ii) to any
Transitioned Employee, whether as a result of (A) the consummation of the
transactions contemplated hereby, (B) any event occurring before the
Closing or (C) any action or failure to act of Seller. Except as provided
in this Section 6.1.1(d), Purchaser shall be solely responsible for any and
all liabilities relating to or arising in connection with any actual,
constructive or deemed termination of employment of any Transitioned
Employee with Purchaser after such Transitioned Employee's Effective Time
of Employment.
39
6.1.2 Certain Benefits.
----------------
(a) From and after the Closing Date, Seller shall remain solely
responsible for any and all liabilities relating to or arising in
connection with (i) the requirements of Section 4980B of the Code to
provide continuation of health care coverage under any benefit plan in
respect of (A) Employees who are not Transitioned Employees, and their
beneficiaries and dependents, and (B) Transitioned Employees and their
beneficiaries and dependents arising as a result of qualifying events that
occur on or before the Transitioned Employee's Effective Time of
Employment, and (ii) claims for benefits incurred by Transitioned Employees
and their beneficiaries and dependents before the Transitioned Employee's
Effective Time of Employment. The foregoing notwithstanding, Purchaser
shall be responsible for any and all liabilities relating to or arising in
connection with (i) the requirements of Section 4980B of the Code to
provide continuation of health care coverage in respect of Transitioned
Employees and their beneficiaries and dependents arising as a result of
qualifying events after the Transitioned Employee's Effective Time of
Employment, and (ii) claims for benefits incurred by Transitioned Employees
and their beneficiaries and dependents after the Transitioned Employee's
Effective Time of Employment.
(b) For purposes of this Agreement, the following claims and
liabilities shall be deemed to be incurred as follows: (i) life, accidental
death and dismemberment and business travel accident insurance benefits,
upon the death, commencement of disability or accident giving rise to such
benefits; (ii) salary continuation or other short-term disability benefits,
or long-term disability, upon the event or commencement of the condition
resulting in the disability giving rise to such benefit; (iii)
hospital-provided health, dental, prescription drug or other benefits,
which become payable with respect to any hospital confinement, upon
commencement of such confinement; and (iv) health, dental and/or
prescription drug benefits, upon provision of such services, materials or
supplies.
40
6.1.3 Workers' Compensation.
---------------------
(a) From and after the Closing Date: (i) Seller shall remain solely
responsible for any and all liabilities relating to or arising in
connection with any and all claims for workers' compensation benefits (x)
incurred by or in respect of any Employee who is not a Transitioned
Employee on, prior to or after the Closing Date, and (y) incurred by or in
respect of Transitioned Employees on or before the Closing Date and (ii)
Purchaser shall be solely responsible for any and all liabilities to or in
respect of any Transitioned Employee relating to or arising in connection
with any and all claims for worker's compensation benefits incurred after
the Closing Date.
(b) For purposes of this Section 6.1, a claim for workers'
compensation benefits shall be deemed to be incurred when the first event
giving rise to the claim occurs.
6.1.4 Employment Taxes.
----------------
(a) Seller and Purchaser shall (i) treat Purchaser as a "successor
employer" and Seller as a "Predecessor," within the meaning of Sections
3121(a)(1) and 3306(b)(1) of the Code, with respect to Transitioned
Employees who are employed by Purchaser for purposes of Taxes imposed under
the United States Federal Unemployment Tax Act ("FUTA") or the United
States Federal Insurance Contributions Act ("FICA"), and (ii) cooperate
with each other to avoid, to the extent possible, the filing of more than
one IRS Form W-2 with respect to each such Transitioned Employee for the
calendar year within which the Closing Date occurs.
(b) At the reasonable request of Purchaser with respect to any
particular applicable Tax law relating to employment, unemployment
insurance, social security, disability, workers' compensation, payroll,
health care or other similar Tax other than Taxes imposed under FICA and
FUTA, Seller shall and Purchaser shall (i) treat Purchaser as a successor
employer and Seller as a predecessor employer, within the meaning of the
relevant provisions of such Tax law, with respect to Transitioned Employees
who are employed by Purchaser, and (ii) cooperate with each other to avoid,
to the extent possible, the filing of more than one individual information
reporting form pursuant to each such Tax law with respect to each such
Transitioned Employee for the calendar year within which the Closing Date
occurs.
41
6.1.5 401(k) Plan.
-----------
With respect to all periods and employee contributions made
through the Closing Date, Seller shall contribute to its 401(k) plan
all matching contributions required thereunder, and shall vest all
matching contributions with respect to Employees as of the Closing
Date. In addition, Seller shall take all necessary actions to cause
the 401(k) plan to allow distributions to Employees of their account
balances under the 401(k) plan, in accordance with the provisions of
Code Section 401(k)(10).
6.2 Reasonable Efforts to Close.
---------------------------
During the period commencing on the date of the execution of this
Agreement and continuing until the Closing Date, Purchaser and Seller shall use
reasonable efforts to comply promptly with all requests or requirements which
applicable federal or state law or governmental officials may impose on them
with respect to the transactions which are the subject of this Agreement, and to
consummate such transactions as promptly as practicable. The reasonable efforts
of Purchaser and Seller shall include, without limitation, good faith response,
in cooperation with each other, to all requests for information, documentary or
otherwise, by any governmental agency. Each party shall use commercially
reasonable efforts to fulfill or obtain the fulfillment of the conditions to the
Closing set forth in Article 9.
6.3 Disclosures.
-----------
Except as required by law or occurring after the Closing, neither
Seller nor Purchaser, without the prior written consent of the other (which will
not be unreasonably withheld), will make any press release or any similar public
announcement concerning the transactions contemplated hereby. Except as required
by law or occurring after the Closing, no written or oral announcement or
private disclosure with respect to the transactions contemplated hereby will be
made to any person unrelated to Seller or Purchaser unless jointly approved by
Seller and Purchaser. If disclosure is required by law, the disclosing party
shall consult in advance with the other party and attempt in good faith to
reflect such other party's concerns in the required disclosure.
42
6.4 Books and Records and Information.
---------------------------------
6.4.1 Purchaser agrees that all documents delivered to
Purchaser by Seller pursuant to this Agreement and all documents of
the Business (including, but not limited to, files, books and records)
shall after the Closing be open for inspection by representatives of
Seller at any time during regular business hours for reasonable and
necessary purposes until such time as documents are destroyed or
possession thereof is given to the other party as provided for in
Section 6.4.2 hereof and that Seller may during such period at its
expense make such copies thereof as it may reasonably request. Seller
agrees that all documents that are retained by Seller after the
Closing Date and that are related to the Business (other than tax
records of Seller) shall be open for inspection by representatives of
Purchaser at any time during regular business hours until such time as
documents are destroyed or possession thereof is given up to the other
party as provided for in Section 6.4.2 hereof and that Purchaser may
during such period at its expense make such copies thereof as it may
reasonably request.
6.4.2 Without limiting the generality of Section 6.4.1, for
a period ending on the sixth anniversary of the Closing Date, neither
Purchaser nor Seller shall destroy or give up possession of any item
referred to in Section 6.4.1 hereof without first offering to the
other the opportunity, at such other's expense (but without any other
payment), to obtain the same. Thereafter each party shall be free to
dispose of them as it deems fit.
6.4.3 Purchaser shall use reasonable efforts to afford
Seller access to Employees who were previously employees of Seller,
and remain in the employ of Purchaser or its affiliates, as Seller
shall reasonably request for its proper corporate purposes, including,
without limitation, the defense of legal proceedings. Such access may
include interviews or attendance at depositions or legal proceedings.
All out-of-pocket expenses reasonably incurred by Purchaser in
connection with this Section 6.4.3 shall be paid or promptly
reimbursed by Seller.
43
6.5 Tax Matters.
-----------
6.5.1 Taxes Through Closing Date.
--------------------------
Seller shall be solely responsible for and shall indemnify
and hold harmless Purchaser for all Taxes with respect to the
Purchased Assets for or pertaining to all periods up to and including
the Closing Date, and Purchaser shall be responsible for and indemnify
and hold harmless Seller for all Taxes with respect to the Purchased
Assets for or pertaining to all periods thereafter except that any
Taxes imposed upon the ownership of property on a particular date, or
similar tax, shall be prorated over the period ending on the Closing
Date and the period thereafter. Any claim for indemnification
hereunder shall be subject to the procedures set forth in Section 11.4
hereof.
6.5.2 Cooperation and Exchange of Information.
---------------------------------------
Purchaser shall provide Seller with such cooperation and
information as Seller reasonably may request with respect to the
filing of any Return, amended Return or claim for refund, the
determination of a liability for Taxes, or a right to refund of Taxes,
or the conduct of any audit or other proceeding in respect of Taxes.
Such cooperation and information shall include providing copies of all
relevant Returns, together with accompanying schedules and related
work papers, documents relating to rulings or other determinations by
taxing authorities, and records concerning the ownership and tax basis
of property, which Purchaser may possess concerning the Business.
Purchaser shall make its employees available to Seller on a mutually
convenient basis to provide explanation of any documents or
information provided hereunder. Notwithstanding the foregoing,
Purchaser shall not be required to prepare any documents, or determine
any information not then in its possession in response to a request
under this Section 6.5.2. Seller shall reimburse Purchaser for any
reasonable out-of-pocket costs incurred by Purchaser in providing any
Return, document or other written information, and shall reimburse
Purchaser for any reasonable out-of-pocket costs (including regular
wages, salaries and traveling expenses) of making employees available,
upon receipt of reasonable documentation of such costs. Except as
44
otherwise provided in Section 1.2(c) hereof, Purchaser shall retain
all Returns, schedules and work papers and all material records or
other documents relating thereto, until the expiration of the period
of time beginning on the Closing Date and ending on the date on which
taxes may no longer be assessed under the applicable statutes of
limitation, including the period of waivers or extensions thereof. Any
information obtained under this Section 6.5.2 shall be kept
confidential, except as may be otherwise necessary in connection with
the filing of returns or claims for refund or in conducting any audit
or other proceeding.
6.5.3 Allocation/Tax Position.
-----------------------
The allocation of the Purchase Price to the Purchased Assets
and post-Closing Tax treatment of the transaction shall be as
specified by Purchaser in accordance with Section 1060 of the Code and
shall be reported on IRS Form 8594. Neither party shall assert any
position inconsistent therewith at any time after the Closing.
6.6 Cure of Defaults.
----------------
Seller shall, on or prior to the Closing, provide evidence
satisfactory to Purchaser that it has paid any and all Cure Costs and cured any
and all defaults and breaches under and satisfied (or, with respect to any
Assumed Liability or obligation that cannot be rendered non-contingent and
liquidated prior to the Closing Date, made effective provision reasonably
satisfactory to Purchaser and the Bankruptcy Court for satisfaction from funds
of Seller of) any liability or obligation arising from or relating to
pre-Closing periods under the Purchased Contracts and Leases, and any other
executory contracts and unexpired leases to be assumed by Seller and assigned to
Purchaser or Purchaser's designated transferee(s), so that such contracts and
leases may be assumed by Seller and assigned to Purchaser in accordance with the
provisions of section 365 of the Bankruptcy Code, the Sale Order and this
Agreement. Seller shall be solely responsible for payment of all Cure Costs and
curing all defaults and the Sale Order shall so provide.
45
6.7 Required Consents.
-----------------
Seller shall use commercially reasonable best efforts, prior to
the Closing, to (i) obtain the Sale Order and all consents required in
connection with the transactions contemplated hereby, including, without
limitation, any consents required to be obtained in connection with the
assumption and assignment of the Purchased Contracts and Leases (the "Required
Consents") and (ii) undertake all actions required pursuant to the Sale Order
and all Required Consents. Purchaser shall provide reasonable cooperation and
assistance to Seller in Seller's efforts to obtain any Required Consents;
provided, however, that Purchaser shall not be required to incur or be liable
for any expenses, costs or obligations in connection therewith.
6.8 Filings; Other Action.
---------------------
Subject to the terms and conditions hereof, as promptly as
practicable, Seller and Purchaser shall (a) use commercially reasonable best
efforts to cooperate with each other in (i) determining which filings are
required to be made prior to the Closing Date with, and which material consents,
approvals, permits, or authorizations are required to be obtained prior to the
Closing Date from, governmental or regulatory authorities of the United States
and the several states or the District of Columbia and foreign jurisdictions in
connection with the execution and delivery of this Agreement and the
consummation of the Proposed Transaction and (ii) timely making all such filings
and timely seeking all such consents, approvals, permits, or authorizations, and
(b) using all commercially reasonable efforts to take, or cause to be taken, all
other action and do, or cause to be done, all other things reasonably necessary
or appropriate to consummate the transactions contemplated hereby as soon as
practicable. In connection with the foregoing, Seller will promptly provide to
Purchaser, and Purchaser will promptly provide to Seller, copies of all
correspondence, filings, or communications (or memoranda setting forth the
substance thereof) between such party or any of its representatives, on the one
hand, and any governmental bodies, on the other hand, with respect to this
Agreement and the transactions contemplated hereby. The parties acknowledge that
certain actions may be necessary with respect to the foregoing in making
notifications and obtaining clearances, consents, approvals, waivers, or similar
third party actions that are material to the consummation of the transactions
contemplated hereby, and each party agrees to take all commercially reasonable
actions as are necessary, to complete such notifications and obtain such
clearances, approvals, waivers, or third party actions.
46
6.9 Permit Transfers.
----------------
Seller shall use commercially reasonable best efforts, at and as of
the Closing, to cause the transfer, reissuance or modification of any Permits
(including, without limitation environmental Permits, if any) to the extent that
such is required to cause the Permits to remain in full force and effect in the
possession of the Purchaser after the Closing. Purchaser shall provide
reasonable cooperation and assistance to Seller in Seller's efforts to transfer,
reissue or modify any such Permits; provided, however, that Purchaser shall not
be required to incur or be liable for any expenses, costs or obligations in
connection therewith.
6.10 Bankruptcy Covenants.
--------------------
(a) Seller shall promptly provide Purchaser with proposed final drafts
of all documents, motions, orders, filings or pleadings that Seller
proposes to file with the Bankruptcy Court which relate to the approval or
consummation of the transactions contemplated hereby, this Agreement, or
any provision therein or herein, and will provide Purchaser and its counsel
with reasonable opportunity, but in any event not less than 48 hours before
filing such papers, to review and comment on such filings.
(b) Without limiting the generality of Section 6.10(a) hereof, within
three (3) business days after execution of this Agreement, Seller shall
file with the Bankruptcy Court a motion and supporting papers (the
"Procedures Motion") in substantially the form attached hereto as Exhibit A
to this Agreement and satisfactory to Purchaser and its counsel, seeking
the Bankruptcy Court's entry of an order (the "Procedures Order"), which
shall include, without limitation, the following provisions (except as
waived in writing or on the record at the hearing on the Procedures Motion
by Seller and Purchaser):
47
(i) scheduling the date(s) for the auction and hearing (the "Sale
Hearing") to consider entry of the Sale Order; and
(ii) the establishment of commercially reasonable bidding
procedures and requirements regarding competing bids ("Competing
Bids"), including (among other things) (x) a minimum initial
incremental bidding requirement of not less than $750,000 greater
overall value to Seller than that provided by the Proposed
Transaction, (y) subsequent incremental bidding requirements of at
least $200,000 in excess of the higher of (A) the last bid or (B) the
initial Competing Bid amount, and (z) in the event a Competing Bid is
chosen by Seller as the highest or best offer for the Purchased Assets
pursuant to the requirements and provisions of the Procedures Order
(an "Alternative Transaction"), payment to Purchaser of a break-up fee
in the amount of $225,000 and expense reimbursement not to exceed
$112,500, which payments shall constitute an administrative expense of
Seller pursuant to section 503(b) of the Bankruptcy Code entitled to a
first priority under section 507(a)(1) payable from the sales proceeds
of any Alternative Transaction or from other sources.
(c) Seller shall take such steps necessary to schedule a hearing to
approve the Procedures Order on reasonable notice sufficient to satisfy the
conditions set forth herein, the requirements of the Bankruptcy Code and
related Bankruptcy Rules.
(d) Without limiting the generality of section 6.10(a) hereof, Seller
shall use reasonable best efforts to obtain the Bankruptcy Court's entry of
the Sale Order, substantially in the form attached hereto as Exhibit B to
this Agreement, approving the transactions contemplated herein within
twenty (20) days following the date hereof. The Sale Order shall be in form
and substance reasonably satisfactory to Purchaser and its counsel and
shall provide, without limitation, that:
48
(i) as of the Closing Date, the transactions contemplated by this
Agreement will effect a legal, valid, enforceable and effective sale
and transfer of the Purchased Assets to Purchaser and shall vest
Purchaser with title to the Purchased Assets free and clear of all
Liens;
(ii) the consideration provided by Purchaser pursuant to this
Agreement constitutes reasonably equivalent value and fair
consideration for the Purchased Assets;
(iii) Purchaser is a good faith purchaser of the Purchased
Assets, as that term is used in section 363(m) of the Bankruptcy Code,
and is entitled to the protections provided by such section;
(iv) as of the Closing Date, the Purchased Contracts and Leases
will have been duly assigned to Purchaser in accordance with sections
365 and 105 of the Bankruptcy Code;
(v) Seller shall be solely responsible for any and all Cure Costs
relating to the assumption and assignment of the Purchased Contracts
and Leases; and
(vi) the Purchased Contracts and Leases will be transferred to,
and remain in full force and effect for the benefit of Purchaser (or
its designated transferee(s)), notwithstanding any provision in any
such contract or lease or in applicable law (including those described
in sections 365(b)(2) and (f) of the Bankruptcy Code) that prohibits,
restricts or limits in any way such assignment or transfer.
(e) Seller shall take such steps necessary to schedule the Sale
Hearing on reasonable notice sufficient to satisfy the conditions set forth
herein, the requirements of the Bankruptcy Code and related Bankruptcy
Rules.
49
(f) In the event an appeal is taken, or a stay pending appeal is
requested or reconsideration is sought, from the Sale Order, Seller shall
promptly after becoming aware thereof notify Purchaser of such notice of
appeal, request for a stay pending appeal or motion for reconsideration.
Seller shall also provide Purchaser with written notice (and copies) of any
other or further notice of appeal, motion or application filed in
connection with any appeal from or application for reconsideration of,
either of such orders and any related briefs.
6.11 Executory Contracts and Unexpired Leases.
----------------------------------------
Seller shall consult with Purchaser before rejecting any
executory contract or unexpired lease included in or related to the Purchased
Assets. Schedule 6.11 attached hereto and made a part hereof sets forth all
Purchased Contracts and Leases to be assumed and assigned to Purchaser or its
designated transferee(s) in accordance with this Agreement, the Sale Order and
section 365 of the Bankruptcy Code.
6.12 Further Assurances.
------------------
Each of the parties shall execute such documents and take such
further actions as may be reasonably required or desirable to carry out the
provisions hereof and the transactions contemplated hereby. Each such party
shall use commercially reasonable efforts to fulfill or obtain the fulfillment
of the conditions to the Closing set forth in Article 9.
6.13 Purchase of Seller's European Assets.
------------------------------------
Purchaser and Seller shall cooperate and use commercially
reasonable efforts to give effect to an agreement of purchase and sale, in a
form reasonably satisfactory to Purchaser and Seller, for the transfer of all or
substantially all of the assets of Quad Europe Ltd. ("QEL") to Purchaser (the
"U.K. Purchase Agreement").
50
ARTICLE 7. CONDUCT OF BUSINESS PENDING CLOSING.
-----------------------------------
7.1 Conduct of Business Pending Closing.
-----------------------------------
Seller agrees that, during the period between the date of
this Agreement and the Closing Date, Seller shall conduct the Business in a
manner materially consistent with past practices of Seller, and Seller shall not
engage in any transactions out of the ordinary course of business. Furthermore,
except as may otherwise be required under this Agreement and insofar as the
Business is concerned, Seller will not do any of the following without the prior
consent of Purchaser:
(i) except as set forth in Schedule 7.1(i), incur or permit to be
incurred any obligation or other liabilities (exclusive of health and
property insurance premiums) which is an Assumed Liability, which
would arise after Closing or for which Purchaser would be ultimately
responsible, in excess of $5,000 except for Inventory purchases in the
normal and ordinary course of business consistent with past practice;
(ii) except as provided for pursuant to any employee retention
plan entered into by Seller as part of its Bankruptcy Case and
approved by the Bankruptcy Court, increase the rate of compensation
for any of the employees of the Business, except for increases in the
ordinary course and consistent with past practices, or otherwise enter
into or alter any employment, consulting, or service agreement
respecting the Business;
(iii) commence, enter into, or alter any profit sharing, deferred
compensation, bonus, stock option, stock purchase, pension,
retirement, or incentive plan or any fringe benefit plan for the
Employees;
(iv) sever or terminate any of the Employees except for cause in
the ordinary course of the Business it being acknowledged by Purchaser
that, in the foregoing case, Purchaser's consent shall not be
unreasonably withheld or delayed;
51
(v) except as disclosed on Schedule 7.1(v), make or commit to any
capital expenditure in excess of $10,000 or make or commit to such
expenditures which would, in the aggregate, exceed $25,000;
(vi) merge or consolidate with any other person or (except in the
ordinary course of business) acquire a material amount of assets of
any other person;
(vii) lease, license, or otherwise surrender, relinquish,
encumber, or dispose of any Purchased Assets other than the
disposition of obsolete or damaged assets in the ordinary course of
business or the sale of Inventory in the ordinary course of business;
provided, however, that Seller may comply with the Procedures Order;
(viii)except as set forth on Schedule 2.4(b), change any method
of accounting or accounting practice used by it, except for any change
required or permitted by GAAP regulation or rules of the Securities
Exchange Commission; or
(ix) agree or commit to do any of the foregoing.
7.2 Access and Information.
----------------------
Seller shall grant to Purchaser and to Purchaser's financial
advisors, legal counsel, accountants, consultants, financing sources, and other
authorized representatives, reasonable access during normal business hours for
the period from the date hereof to the Closing, to all its books, records,
properties and personnel (other than consultants not listed on Schedule 6.1(c)),
and, during such period, shall furnish as promptly as practicable to Purchaser
(a) a copy of each material report, schedule, and other document filed or
received by them pursuant to the requirements of laws and (b) all other
information as Purchaser reasonably may request in furtherance of the
transactions contemplated hereby, provided that Purchaser shall not disclose any
competitively sensitive information (unless Purchaser is legally compelled to do
so in which case Purchaser shall provide Seller with prompt written notice of
the legal requirement to disclose so that Seller may seek a protective order or
other appropriate remedy) and provided further, that no investigation pursuant
to this Section 7.2 or otherwise shall affect any representations or warranties
made herein or the conditions to the obligations of the respective parties to
consummate the transactions contemplated by this Agreement.
52
7.3 Cooperation.
-----------
Purchaser shall have the right to have its designated
representatives, as identified to Seller in writing from time to time (the
"Designated Purchaser Representatives"), present at the principal offices of
Seller during reasonable business hours from the date hereof until the Closing.
Such Designated Purchaser Representatives shall have the right to review and
become familiar with the conduct of the Business and shall be available to be
consulted and shall have authority on behalf of Purchaser in regard to
consultation in regard to Material Decisions (as defined below in this Section
7.3). Purchaser shall take all reasonable actions necessary to ensure that its
Designated Purchaser Representatives will be readily available during normal
business hours. Without notice to and consultation with the Designated Purchaser
Representatives (but not subject to their consent), Seller shall not take any
action involving any Material Decision. "Material Decision" shall mean, for
purposes of this Agreement, entering into, terminating, or materially amending
or waiving any of Seller's rights in respect of any of the following to the
extent the same may materially affect the Purchased Assets or operations of the
Business following the Closing: (i) any Contract, Personal Property Lease, Real
Property Lease or Customer Order; (ii) any purchase order for products or
supplies involving in excess of $5,000 in any instance to be delivered, or the
payment for which shall become due, after the Closing; (iii) the acceptance of
any material Customer Order that deviates in any material respect from the terms
and conditions of current pricing policies; (iv) any action to respond to any
material customer or regulatory complaint outside of the normal course of
business; (v) any general communication with customers related to the Business
or the transactions contemplated hereby; or (vi) a material change in pricing,
promotional, marketing or any other decision that would affect in any material
respect any of Seller's customary profit margins.
53
ARTICLE 8. OTHER AGREEMENTS.
----------------
8.1 Covenant Not to Compete.
-----------------------
(a) Seller agrees that, as part of the consideration for the payment
by Purchaser of the Purchase Price, for a period of five (5) years
immediately following the Closing Date, neither Seller nor any of its
divisions or subsidiaries will, directly or indirectly, operate, perform,
have any interest in or otherwise be engaged in or concerned with a
business which develops, manufactures, prepares, sells, installs or
distributes products or performs services in competition with the Business.
For these purposes, ownership of securities of a company whose securities
are publicly traded under a recognized securities exchange not in excess of
10% of any class of such securities shall not be considered to be
competition with Purchaser.
(b) Further, Seller agrees that for a period of five (5) years
following the Closing Date neither Seller nor any of its related or
affiliated entities will induce any of Seller's employees hired by
Purchaser on the Closing Date to terminate his or her relationship with
Purchaser and to work in a business that competes with the Business.
(c) Each of Seller and Purchaser acknowledges that the restrictions on
its activities under Sections 8.1(a) and (b) hereof (as the case may be)
are necessary for the reasonable protection of Purchaser and Seller (as the
case may be) and constitute a material inducement to Purchaser's entering
into and performing this Agreement. Each of Seller and Purchaser further
acknowledges, stipulates and agrees that a breach of any of such
obligations and agreements will result in irreparable harm and continuing
damage to the other party for which there will be no adequate remedy at law
and further agrees that in the event of any breach of said obligations and
agreements, the other party and its successors and assigns will be entitled
to injunctive relief and to such other relief as is proper under the
circumstances.
54
(d) The restrictions set forth in this Section 8.1 shall not apply to
any corporation or other business entity which shall be the surviving or
resulting corporation following a merger or consolidation in which Seller
is a constituent corporation so long as such corporation or other entity,
following such merger or consolidation, is not directly or indirectly
controlled or operated by the persons who directly or indirectly controlled
Seller on Closing or immediately before any such merger or consolidation.
8.2 Collection of Accounts Receivable on Behalf of Seller.
-----------------------------------------------------
On or before Closing, Purchaser and Seller shall enter into an
agreement in a mutually acceptable form wherein, among other obligations,
Purchaser shall agree to act as the agent of Seller and use commercially
reasonable efforts to attempt to collect Seller's accounts receivable and
forward such amounts collected, less administrative fees, to Seller or to any
trust or other entity designated by Seller or pursuant to any order of the
Bankruptcy Court (the "Receivables Collection Agreement").
ARTICLE 9. CLOSING DATE; CONDITIONS AND TRANSACTIONS.
-----------------------------------------
9.1 Closing Date and Place.
----------------------
The consummation of the sale and purchase of the Business
contemplated by this Agreement (the "Closing") will take place at the offices of
counsel to Seller at Hangley, Aronchick, Segal & Pudlin, One Logan Square,
Philadelphia, PA at 10:00 a.m. eastern time on June 29, 2001, or at such other
earlier date and time as may be mutually agreeable to the parties hereto (the
"Closing Date"). The parties hereto agree that the Closing may be effected by
facsimile.
9.2 Conditions Precedent to the Obligations of Purchaser.
----------------------------------------------------
The obligations of Purchaser under this Agreement are subject to
the fulfillment by Seller prior to or at the Closing of each of the following
conditions, any one or more of which may be waived by Purchaser:
55
9.2.1 No Injunctive Proceedings.
-------------------------
No preliminary or permanent injunction or other order
(including a temporary restraining order) of any state or federal court or
other governmental agency which prevents the consummation of the
transactions which are the subject of this Agreement or prohibits
Purchaser's ownership of the Business shall have been issued and remain in
effect.
9.2.2 Representations and Warranties.
------------------------------
All representations and warranties of Seller contained in
this Agreement (disregarding all qualifications and exceptions contained
therein related to materiality) shall be true in all respects on and as of
the Closing Date, with the same force and effect as though made on and as
of the Closing Date, except for changes permitted pursuant to this
Agreement and except for such changes contemplated and permitted by this
Agreement and except for breaches that, individually or in the aggregate,
could not reasonably be expected to have a material adverse effect on the
Purchased Assets or the results of the operation of the Business.
9.2.3 Performance of Agreements, Instruments of Transfer.
--------------------------------------------------
Seller shall have fully performed in all material respects
all obligations, agreements, conditions and commitments required to be
fulfilled by Seller pursuant to the terms hereof on or prior to the Closing
Date, and Seller shall have tendered to Purchaser the documents,
instruments and certificates required by Article 10 hereof.
9.2.4 Compliance Certificate.
----------------------
Seller shall have delivered to Purchaser its certificate,
dated the Closing Date, executed on its behalf by its duly authorized
representative, as to the fulfillment of the conditions set forth in
Sections 9.2.2 and 9.2.3 hereof.
9.2.5 Material Changes.
----------------
There shall not have been any material adverse effect on the
Purchased Assets or the results of the operation of the Business from the
date hereof to the Closing Date.
56
9.2.6 Consents, etc.
-------------
All Required Consents shall have been obtained by Seller or
deemed by operation of the Sale Order to have been given and shall be in
full force and effect, including, without limitation, any Required Consents
required to be obtained in connection with the assumption and assignment of
the Purchased Contracts and Leases, and Purchaser shall have been furnished
with evidence reasonably satisfactory to it that each such Required Consent
has been either (i) expressly granted, or (ii) deemed, by operation of the
Sale Order, to have been given.
9.2.7 Government Requirements.
-----------------------
Any person required in connection with the transactions
contemplated hereby to file a notification and report form in compliance
with, or obtain any consent or approval required under, any government
requirements, shall have filed such form or requested such consent or
approval and the applicable waiting period with respect to each such form
(including any extension thereof by reason of a request for additional
information) shall have expired or been terminated or the requisite consent
or approval required thereby shall have been obtained without any material
condition or limitation.
9.2.8 Sale Order.
----------
The Sale Order shall have been entered by the Bankruptcy
Court within twenty (20) days following the date hereof. The Sale Order
shall have been entered in form and substance satisfactory to Purchaser and
its counsel and shall not be stayed or reversed, ordered to be
reconsidered, or, in any manner not approved by Purchaser, amended or
modified.
57
9.2.9 Procedures Order.
----------------
The Procedures Order shall have been entered by the
Bankruptcy Court in accordance with Section 6.10 hereof. The Procedures
Order shall been entered in form and substance satisfactory to Purchaser
and its counsel and shall have become effective in accordance with its
terms, and, specifically, the break-up fee and expense reimbursement
provisions contained therein, shall have been approved and remain in full
force and effect, and shall not have been stayed, vacated, modified or
supplemented without Purchaser's prior consent. Seller shall have complied
with the terms of the Procedures Order.
9.2.10 Certain Senior Management.
-------------------------
Those individuals identified on Schedule 9.2.10 attached
hereto and made a part hereof who are currently employed by Seller shall
have come to a satisfactory agreement on terms of employment with
Purchaser.
9.2.11 Settlements.
-----------
Seller shall have (A) resolved or settled, to the
satisfaction of Purchaser, any and all actions, suits, proceedings,
arbitrations, or investigations pertaining to Seller and Mirae, (B)
complied with all requirements of Section 4.1.5 hereof, and (C) Purchaser
shall be reasonably satisfied that Seller's litigation with Zevetech will
not have a material adverse effect on the Purchased Assets.
9.2.12 Amendment of Samsung Agreements and Assignment of
-------------------------------------------------
Intellectual Property Rights.
----------------------------
Seller shall have amended the Samsung Technology License and
the Samsung Software License in a form reasonably satisfactory to Purchaser
(the "Amended Samsung Agreements"). The Amended Samsung Agreements shall
provide, among other provisions, that Seller, or its assignees, shall have
the right to (i) manufacture tape-feeders following the Closing; and (ii)
use the Q-Soft software to manufacture tape-feeders. In the event that the
conditions of this Section 9.2.12 are satisfied, the Amended Samsung
Agreements shall form part of the Assumed Contracts.
58
9.2.13 Intentionally Omitted.
9.2.14 Name Change.
-----------
Seller shall have prepared for filing on the Closing Date a
change of name certificate to effect the change of name of Seller to a name
in the opinion of Purchaser, dissimilar to Quad Systems or any derivatives
thereof.
9.2.15 U.K. Purchase Agreement and Receivables
---------------------------------------
Collection Agreement.
--------------------
On or prior to Closing, Seller and Purchaser shall
have consummated the U.K. Purchase Agreement and any supporting
documentation required to give effect to the U.K. Purchase Agreement and
shall have entered into the Receivable Collection Agreement.
9.3 Conditions Precedent to the Obligations of Seller.
-------------------------------------------------
The obligations of Seller under this Agreement are subject to the
fulfillment by Purchaser prior to the Closing of each of the following
conditions, any one or more of which may be waived by Seller:
9.3.1 No Injunctive Proceedings.
-------------------------
No preliminary or permanent injunction or other order
(including a temporary restraining order) of any state or federal court or
other governmental agency which prevents the consummation of the
transactions which are the subject of this Agreement or prohibits
Purchaser's ownership of the Business shall have been issued and remain in
effect.
9.3.2 Payment.
-------
Purchaser shall have delivered to Seller the payment
provided for in Section 2.1 hereof.
59
9.3.3 Representations and Warranties.
------------------------------
Except as otherwise contemplated by this Agreement, all
representations and warranties of Purchaser contained in this Agreement
shall be true and correct in all material respects as of the Closing Date.
9.3.4 Performance of Agreements, Instruments of Transfer.
--------------------------------------------------
Purchaser shall have fully performed in all material respects
all obligations, agreements, conditions and commitments required to be
fulfilled by Purchaser on or prior to the Closing Date and shall have
tendered to Seller the documents, instruments and certificates required by
Article 10 hereof.
9.3.5 Compliance Certificate.
----------------------
Purchaser shall have delivered to Seller its certificate,
dated the Closing Date, executed on its behalf by its President or a Vice
President, as to the fulfillment of the conditions set forth in Sections
9.3.3 and 9.3.4 hereof.
9.3.6 Government Requirements.
-----------------------
Any person required in connection with the transactions
contemplated hereby to file a notification and report form in compliance
with, or obtain any consent or approval required under, any government
requirements, shall have filed such form or requested such consent or
approval and the applicable waiting period with respect to each such form
(including any extension thereof by reason of a request for additional
information) shall have expired or been terminated or the requisite consent
or approval required thereby shall have been obtained without any material
condition or limitation.
9.3.7 Sale Order.
----------
The Sale Order shall have been entered by the Bankruptcy
Court and shall not be stayed, reversed, ordered to be reconsidered,
amended or modified.
60
9.3.8 U.K. Purchase Agreement.
-----------------------
On or prior to Closing, Seller and Purchaser shall have
consummated the U.K. Purchase Agreement and any supporting documentation
required to give effect to the U.K. Purchase Agreement and shall have
entered into the Receivables Collection Agreement.
9.4 Non-Compliance with and Termination of this Agreement.
-----------------------------------------------------
(a) Each of the parties hereto agrees to use its reasonable best
efforts to bring about the satisfaction of the conditions required to be
performed by it hereunder prior to and at the Closing, including, without
limitation, compliance with the requirements of Section 6.2 hereof.
(b) This Agreement may be terminated at any time prior to the Closing
without any liability of either party to the other, except as provided in
Section 9.5 hereof:
(i) by the mutual agreement of Seller and Purchaser provided,
such termination is set forth in writing executed by both parties;
(ii) at the election of Purchaser, if any of the conditions
specified in Section 9.2 hereof shall not have been met by the Closing
Date and shall not have been waived in writing by Purchaser;
(iii) at the election of Seller, if any of the conditions set
forth in Section 9.3 hereof shall not have been met by the Closing
Date and shall not have been waived in writing by Seller;
(iv) at the election of Seller or Purchaser, if there is any
injunction, stay, order, or decree of any nature of any governmental
body of competent jurisdiction that is in effect that prohibits or
materially restrains the consummation of the transactions contemplated
hereby;
61
(v) at the election of Seller, if Purchaser has materially
breached any representation, warranty, covenant or agreement contained
in this Agreement, which breach cannot be or is not cured prior to the
scheduled Closing Date and which breach(es), individually or in the
aggregate, could reasonably be expected to have a material adverse
effect the Seller's ability to consummate the Proposed Transaction;
(vi) at the election of Purchaser, if Seller has breached any
representation, warranty, covenant or agreement contained in this
Agreement, which breach cannot be or is not cured prior to the
scheduled Closing Date and which breach(es), individually or in the
aggregate, could have a material adverse effect on the Purchased
Assets or the results of the operation of the Business;
(vii) at any time after twenty (20) days of the signing of this
Agreement at the election of Purchaser, if by such date the Sale Order
has not been entered;
(viii) at any time following the date hereof, at the election of
Purchaser, if the Procedures Order shall have been amended or modified
in any manner which Purchaser has determined, in its reasonable
judgment, to be adverse to the interest of Purchaser;
(ix) at the election of Purchaser, if the Closing does not occur
within thirty (30) days of the date of this Agreement;
(x) at any time following the date hereof, at the election of
Purchaser, upon approval by the Bankruptcy Court of any Alternative
Transaction; or
(xi) at the election of Purchaser, if the Bankruptcy Case is
converted to chapter 7 of the Bankruptcy Code or a trustee is
appointed for the Seller.
If this Agreement so terminates, it shall become null and void and
have no further force or effect, except as provided or referenced in
Section 9.5 hereof.
62
9.5 Survival After Termination; Break-up Fee;
-----------------------------------------
Expense Reimbursement.
---------------------
(a) If this Agreement terminates pursuant to Section 9.4 and the
transactions contemplated hereby are not consummated, this Agreement shall
become null and void and have no further force or effect except that any
such termination shall be without prejudice to the rights of (i) Purchaser
to receive the damages and payments described in Section 9.5(b) or (ii)
Seller to seek damages on account of the nonsatisfaction of the conditions
set forth in Article 9 resulting from the material breach or violation of
the representations, warranties, covenants or agreements of Purchaser under
this Agreement. Notwithstanding anything in this Agreement to the contrary,
the provisions of Sections 7.2 and 12.8 relating to the obligation of
Purchaser to keep confidential and not to use certain information and data
obtained by it from Seller and to return documents to Seller shall remain
in full force and effect.
(b) If (i) as of the date of the Sale Hearing (A) Purchaser has not
committed any breach of this Agreement, (B) neither Purchaser nor Seller
has exercised its right to terminate this Agreement, and (C) Purchaser
confirms in writing that it is not aware of any condition of Seller to
consummate the Closing which has not been satisfied or which if not
satisfied and in Purchaser's control, cannot be satisfied by Purchaser by
delivering to Seller such documents to satisfy such condition, (ii) an
Alternative Transaction is approved by the Bankruptcy Court and
consummated, and (iii) Purchaser remains committed, and is able, to
consummate the Proposed Transaction, subject to satisfaction (or waiver) of
the conditions set forth in Section 9 hereof, then Purchaser shall be paid
simultaneously with the consummation of the Alternative Transaction (1) an
amount equal to the reasonable and documented out-of-pocket costs and
expenses (including without limitation attorneys', financial advisors',
accountants', engineers' and other consultants' fees) incurred by Purchaser
not to exceed $112,500 in the aggregate (the "Expense Reimbursement") and
(2) $225,000 (the "Break-Up Fee").
63
(c) Payment of the Expense Reimbursement and Break-Up Fee shall be
full consideration for the Purchaser's efforts and expenses in connection
with the preparation, negotiation and execution of the draft term sheet,
this Agreement and the Proposed Transaction, including the substantial due
diligence efforts of Purchaser and its professionals and advisors and
Seller shall have no further liability hereunder.
(d) Payment of any Expense Reimbursement and Break-Up Fee due to
Purchaser shall be made to the extent possible from the sales proceeds of
the Alternative Transaction, but nothing contained herein shall in any way
limit Seller's liability for amounts due Purchaser as described herein. The
Expense Reimbursement and Break-Up Fee will in any event constitute an
administrative expense of Seller pursuant to section 503(b) of the
Bankruptcy Code entitled to a first priority under section 507(a)(1) of the
Bankruptcy Code payable from the sales proceeds of the Alternative
Transaction.
ARTICLE 10. CLOSING DOCUMENTS.
-----------------
10.1 Seller's Obligations.
-------------------
On the Closing Date, Seller shall deliver to Purchaser physical
possession of all tangible Purchased Assets and shall execute and/or deliver to
Purchaser all of the following in form and substance reasonably satisfactory to
Purchaser and its counsel: 10.1.1Resolutions.
Copies of resolutions of Seller certified by the Secretary or
an Assistant Secretary of Seller authorizing the execution, delivery and
performance of this Agreement and the transactions contemplated hereby.
10.1.2 Bill of Sale.
------------
A warranty bill of sale, duly executed by Seller, in form and
substance reasonably satisfactory to counsel for Purchaser, sufficient to
convey, transfer and assign to Purchaser all right, title and interest of
Seller in and to the Purchased Assets free and clear of all Liens in
accordance with this Agreement.
64
10.1.3 Assignments.
-----------
Assignments of the Intellectual Property Rights, Customer
Orders, Unfilled Purchase Orders, Contracts, Personal Property Leases, Real
Property Leases, Environmental Permits, and Licenses and Permits, duly
executed by Seller, in form and substance reasonably satisfactory to
counsel for Purchaser, and all consents which Seller is able to obtain
therefor, or permitted alternate arrangements with respect thereto, such
consents to be in form and substance reasonably satisfactory to counsel for
Purchaser.
10.1.4 Books and Records.
-----------------
Except as otherwise provided in Section 1.2(c) hereof, all
books and records of the Business.
10.1.5 Compliance Certificate.
----------------------
The certificate required by Section 9.2.4 hereof.
10.1.6 FIRPTA Certificate.
------------------
A certificate that Seller is not a foreign person within the
meaning of Section 1445 of the Code, which certificate shall set forth all
information required by, and otherwise be executed in accordance with,
Treasury Regulation Section 1.1445-2(b).
10.1.7 Court Docket.
------------
A certified copy of the Bankruptcy Court's docket sheet for
the Bankruptcy Case dated as of the Closing Date.
10.1.8 Opinion of Counsel.
------------------
An opinion of counsel to the Seller, Hangley, Aronchick,
Segal & Pudlin, dated the Closing Date, in form and substance reasonably
satisfactory to Purchaser, which opinion shall be subject to customary
assumptions, qualifications and limitations, and be limited in scope to
provide that, as of a specified time on the Closing Date, the Sale Order
has been (i) signed, (ii) filed and docketed in the Bankruptcy Case in the
Office of the Clerk of the Bankruptcy Court, and (iii) has not been
appealed or stayed and no request for rehearing has been filed with the
Bankruptcy Court with respect to the Sale Order.
65
10.2 Purchaser's Obligations.
-----------------------
At the Closing, Purchaser shall deliver to Seller the following:
10.2.1 Resolutions.
-----------
Copies of resolutions of Purchaser certified by the
Secretary or an Assistant Secretary of Purchaser, authorizing the
execution, delivery and performance of this Agreement and the transactions
contemplated hereby.
10.2.2 Assumption Agreement.
--------------------
An assignment and assumption agreement, duly executed by
Purchaser, in form and substance reasonably satisfactory to counsel for
Seller, sufficient to effect the assumption by Purchaser of the Assumed
Liabilities.
10.2.3 Payment.
-------
Funds in the amounts and payable as set forth in Section 2.1
hereof and all other payments required to be made by Purchaser on or prior
to the Closing Date pursuant to the provisions of this Agreement.
10.2.4 Compliance Certificate.
----------------------
The certificate required by Section 9.3.5 hereof.
10.3 Joint Obligations.
-----------------
The parties will deliver each to the other the certificates,
records, schedules, and the other documents required by the terms of this
Agreement.
66
ARTICLE 11. INDEMNIFICATION.
---------------
11.1 Indemnification by Seller.
-------------------------
Subject to the limits set forth in this Article 11, Seller agrees
to indemnify, defend and hold Purchaser and each of Purchaser's shareholders,
affiliates, officers, directors, employees, agents, successors and assigns
(Purchaser and such persons are collectively hereinafter referred to as
"Purchaser's Indemnified Persons"), harmless from and against any and all loss,
liability, damage or deficiency (including interest, penalties, costs of
preparation and investigation, and reasonable attorneys' fees) (collectively
"Losses") that Purchaser's Indemnified Persons may suffer, sustain, incur or
become subject to, arising out of or due to: (a) the breach of any
representations or warranty of Seller in this Agreement; (b) the breach of any
representation or Warranty of QEL in the U.K. Purchase Agreement; (c) the
non-fulfillment of any covenant, undertaking, agreement or other obligation of
Seller under this Agreement; (d) the non-fulfillment of any covenant,
undertaking, agreement or other obligations of QEL under the U.K. Purchase
Agreement; or (e) any Losses arising out of or resulting from any Excluded
Liability under this Agreement or under the U.K. Purchase Agreement.
11.2 Indemnification by Purchaser.
----------------------------
Subject to the limits set forth in this Article 11, Purchaser
agrees to indemnify, defend and hold Seller and Seller's affiliates, officers,
directors, employees, agents, successors and assigns (Seller and such persons
are hereinafter collectively referred to as "Seller's Indemnified Persons"),
harmless from and against any and all Losses that Seller's Indemnified Persons
may suffer, sustain, incur or become subject to arising out of or due to: (a)
the breach of any representation or warranty of Purchaser in this Agreement; (b)
the breach of any covenant, undertaking, agreement or other obligation of
Purchaser under this Agreement, including but not limited to, the discharge of
the Assumed Liabilities; (c) the manufacture, sale, shipment or other
distribution of the products of the Business by Purchaser after the Closing
Date; (d) the ownership, operations or control of the Business after the Closing
Date; or (e) Purchaser's obligations under the Real Property Leases.
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11.3 Survival of Representations and Warranties: Threshold and
---------------------------------------------------------
Deductible.
----------
The several representations and warranties of the parties
contained in this Agreement or in any document delivered pursuant hereto
including, without limitation, the U.K. Purchase Agreement, and the parties'
right to indemnity in accordance with this Article 11 shall survive the Closing
Date and shall remain in full force and effect thereafter for a period of time
ending on March 31, 2002 and shall be effective with respect to any inaccuracy
therein or breach thereof, notice of which shall have been duly given within
such period in accordance with Section 11.4 hereof after which they shall
terminate and be of no further force or effect. Notwithstanding the foregoing,
Purchaser may give notice of, and make a claim relating to, and shall be
indemnified in connection with: (i) the breach of the representations and
warranties contained in Section 4.1.7 hereof, at any time prior to sixty (60)
days after the expiration of the appropriate statute of limitations and any
extensions thereof; (ii) any breach of the representations and warranties
contained in Section 4.1.18 hereof occurring before March 31, 2002 after which
such representation and warranty shall terminate and be of no further force or
effect; and (iii) any breach of the representations and warranties contained in
Section 4.1.17 hereof, at any time. Except as provided in Section 11.6 hereof,
anything to the contrary contained herein notwithstanding, neither party shall
be entitled to any recovery from the other party with respect to any inaccuracy
or breach of warranties or representations in this Agreement, the U.K. Agreement
or both this Agreement and the U.K. Agreement unless and until the amount of
such Loss suffered, sustained or incurred by the asserting party, or to which
such party becomes subject, by reason of an inaccuracy or breach under this
Agreement, the U.K. Agreement or both this Agreement and the U.K. Agreement,
shall exceed $250,000 calculated on a cumulative basis and not a per item basis
(the "Basket Amount"), and then only with respect to the excess over the Basket
Amount but in no event shall either party be liable to the other in an aggregate
amount in excess of $5.8 million (the "Cap"). The Basket Amount and the Cap
shall not be applicable to any Tax Claim, claims arising under Section 4.1.18,
or to Losses based on fraud, willful misrepresentation or deceit by Seller. The
covenants in this Agreement shall survive in accordance with their respective
terms.
For the purposes of this Agreement, "Tax Claim" shall mean any
claim arising out of or otherwise in respect of (i) Section 4.1.7 hereof, or
(ii) any Excluded Liability included in Section 3.2(d) or 3.2(e) hereof.
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11.4 Notice and Opportunity to Defend.
--------------------------------
If there occurs an event which either party asserts is an
indemnifiable event pursuant to Sections 11.1 or 11.2 hereof, the party seeking
indemnification (the "Indemnitee") shall notify the party obligated to provide
indemnification (the "Indemnitor") promptly. If such event involves (a) any
claim, or (b) the commencement of any action or proceeding by a third person,
the Indemnitee will give the Indemnitor written notice of such claim or the
commencement of such action or proceeding within fifteen (15) days of
Indemnitee's becoming aware thereof; provided, however, that delay or failure to
so notify the Indemnitor shall only relieve the Indemnitor of its obligations to
the extent, if at all, that it is prejudiced by reasons of such delay or
failure. The Indemnitor shall have a period of 30 days within which to respond
thereto. If the Indemnitor accepts responsibility or does not respond within
such 30-day period, the Indemnitor shall be obligated to compromise or defend,
at its own expense and by counsel chosen by the Indemnitor and reasonably
satisfactory to the Indemnitee, such matter, and the Indemnitor shall provide
the Indemnitee with such assurances as may be reasonably required by the
Indemnitee to assure that the Indemnitor will assume and be responsible for the
entire liability at issue. If the Indemnitor does respond within such 30-day
period and rejects responsibility for such matter in whole or in part, the
Indemnitee shall be free to pursue, without prejudice to any of its rights
hereunder, such remedies as may be available to the Indemnitee under applicable
law. The Indemnitee agrees to cooperate fully with the Indemnitor and its
counsel in the defense against any such asserted liability. In any event, the
Indemnitee shall have the right to participate in a non-controlling manner and
at its own expense in the defense of such asserted liability. Any compromise of
such asserted liability by the Indemnitor shall require the prior written
consent of the Indemnitee and until such consent is obtained or refused (but in
no event more than 15 days after such consent is requested) the Indemnitor shall
continue the defense of such asserted liability. If, however, the Indemnitee
refuses its consent to a bona fide offer of settlement which the Indemnitor
wishes to accept, the Indemnitee may continue to pursue such matter, free of any
participation by the Indemnitor, at the sole expense of the Indemnitee. In such
event, the obligation of the Indemnitor to the Indemnitee shall be equal to the
lesser of (i) the amount of the offer of settlement which the Indemnitee refused
to accept plus the costs and expenses of the Indemnitee prior to the date the
Indemnitor notifies the Indemnitee of the offer of settlement, and (ii) the
actual out-of-pocket amount the Indemnitee is obligated to pay as a result of
the Indemnitee's continuing to pursue such matter. The Indemnitor shall be
entitled to recover from the Indemnitee any additional expenses incurred by the
Indemnitor as a result of the decision of the Indemnitee to pursue such matter.
69
11.5 Reduction for Insurance.
-----------------------
The amount which the Indemnitor is required to pay to, for, or
on behalf of the Indemnitee pursuant to this Article 11 shall be reduced
(including, without limitation, retroactively) by any insurance proceeds
actually recovered by or on behalf of the Indemnitee in reduction of the related
indemnifiable loss (the "Indemnifiable Loss"). Amounts required to be paid, as
so reduced, are hereinafter sometimes called an "Indemnity Payment". If the
Indemnitee shall have received, or if the Indemnitor shall have paid on its
behalf, an Indemnity Payment in respect of an Indemnifiable Loss and shall
subsequently receive, directly or indirectly, insurance proceeds (which
duplicate in whole or in part, the Indemnity Payment) in respect of such
Indemnifiable Loss, then the Indemnitee shall promptly pay to the Indemnitor the
amount of such insurance proceeds, or, if less, the amount of the Indemnity
Payment. The parties hereto agree that the foregoing shall not affect the
subrogation rights of any insurance companies making payments hereunder.
11.6 Environmental Indemnification and Procedures.
--------------------------------------------
(a) Seller shall indemnify, defend and hold harmless on a first-dollar
basis without regard to the Basket Amount and the Cap, Purchaser from and
against any and all Losses incurred or suffered by Purchaser to the extent
that the Losses arise by reason of, or result from (i) the failure of any
representation or warranty of Seller contained in Section 4.1.18 hereof to
have been true in all material respects when made and as of the Closing
Date, (ii) the presence of any and all environmental conditions,
environmental liabilities or Hazardous Substances at, in, by, from, or
related to, the facilities of the Business that arose, commenced, occurred
or existed prior to the Closing Date, or (iii) recycling, reclamation,
incineration, or the arrangement of transportation, by Seller in the
operation of the Business of any Hazardous Substances that occurred on or
before the Closing Date.
70
(b) The parties agree that in the event a claim for indemnification is
made pursuant to subparagraph (a) above, then, in lieu of the procedures
set forth in Section 11.4 hereof, the following procedures shall apply:
In seeking indemnification for a claim under this Section 11.6
("Environmental Claim"), Purchaser shall promptly notify Seller of the
assertion of any Environmental Claim in respect of which indemnity may be
sought hereunder and will give Seller such information with respect thereto
as Seller may reasonably request, but failure to give such notice shall not
relieve Seller of any liability hereunder. Seller shall have the right, but
not the obligation, exercisable by written notice to Purchaser within 30
days of receipt of notice from Purchaser of the Environmental Claim in
respect of which indemnity may be sought hereunder, to assume the defense
of the Environmental Claim; provided, however, that if any action is
required prior to the expiration of Seller's 30-day response period in
order to preserve the rights of Purchaser, Purchaser shall so notify Seller
and Purchaser may assume the defense of the Environmental Claim until
Seller responds, subject to the right of Seller to control such action as
provided below unless Seller provides written notice that it will timely
perform such required action. In such event, Seller shall have full control
over any actions, including, without limitation, any remedial action,
negotiation or litigation and settlement thereof, in connection with any
such Environmental Claim, provided that:
(i) if remedial action or other action proposed to be taken by
Seller in settlement of the Environmental Claim would materially and
adversely affect Purchaser's operation of its business, including any
material impairment in its relationships with customers, suppliers,
the government, or the general public, such action shall not be taken
without Purchaser's prior written consent (which consent shall not be
unreasonably withheld); provided, however, Purchaser's consent is not
required if Seller agrees to compensate Purchaser for any Losses
resulting from the remedial action's effect on Purchaser's operation
of the Business;
(ii) Seller shall not compromise or settle any Environmental
Claim unless such compromise or settlement provides only for the
payment of money, provides a complete release of Purchaser, and does
not materially and adversely affect Purchaser's operation of the
Business without Purchaser's consent (which consent shall not be
unreasonably withheld); and
71
(iii) Purchaser may participate in (but not control) the
settlement or defense of an Environmental Claim through counsel chosen
by Purchaser, provided that the fees and expenses of such counsel
shall be borne by Purchaser.
11.7 Priority of Purchaser's Indemnification Claims.
----------------------------------------------
Any claim for indemnification by the Purchaser against the Seller
arising under this Agreement shall constitute an expense of administration in
the Bankruptcy Case under section 503(b) of the Bankruptcy Code entitled to a
first priority under section 507(a)(1) of the Bankruptcy Code.
11.8 No Double Recovery.
------------------
Purchaser agrees that any recovery by Purchaser (or its affiliate
signing the U.K. Agreement) or any of Purchaser's Indemnified Persons QEL under
the U.K. Agreement shall be credited against Seller's obligations under Section
11.1 (insofar as they relate to the U.K. Agreement or the transaction
contemplated thereby) in order to preclude any duplicative recovery, and any
amount paid by Seller pursuant to Section 11.1 on account of the U.K. Agreement
or the transaction contemplated thereby likewise shall be credited against QEL's
indemnification obligations under the U.K. Agreement.
ARTICLE 12. MISCELLANEOUS.
-------------
12.1 Expenses.
--------
Except as otherwise set forth in this Agreement and except that a
party not in breach of this Agreement shall be entitled to recover from a
breaching party all expenses and costs incurred by the non-breaching party by
reason of such breach (including, without limitation, all legal expenses and
costs), each of the parties hereto shall pay its own expenses and costs incurred
or to be incurred by it in negotiating, closing and carrying out this Agreement.
12.2 Intentionally Omitted.
72
12.3 Notices.
-------
All notices, requests, demands and other communications given
hereunder (collectively, "Notices") shall be in writing and personally
delivered, sent by telecopier or telex or mailed by registered or certified
mail, postage prepaid, as follows:
12.3.1 If to Seller at:
---------------
Prior to Closing:
----------------
At the Seller's regular business address.
Port-Closing: At an address to be provided by Seller
------------
prior to Closing.
with a copy to:
Hangley, Aronchick, Segal & Pudlin
One Logan Square
Philadelphia, PA 19103
Attention Thomas F. Hurley, Esq.
If to Purchaser at:
-------------------
Tyco Electronics Corporation
2901 Fulling Mill Road
Middletown, PA
Attention: Harold Barnes, Controller
with a copy to:
Tyco Electronics Corporation
Mailstop R20-2B
307 Constitution Avenue
Menlo Park, CA 94025
Attention: Stephen E. Creager, General Counsel
Telecopier: 650-361-5942
and with a copy to:
Tyco International (US) Inc.
One Tyco Park
Exeter, NH 03833
Attention: General Counsel
Telecopier: 603-778-7700
and with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, NY 10019-6064
Attention: Alan W. Kornberg, Esq.
Telecopier: 212-757-3990
73
12.3.2 All Notices shall be deemed delivered when actually
received if personally delivered, sent by telecopier or telex or three
days after having been placed in the mail, addressed in accordance
with Sections 12.3.1 or 12.3.2 hereof, as the case may be, provided
that any Notice sent by telecopier or telex must immediately be placed
in the mail. Each of the parties shall hereafter notify the other in
accordance with this Section 12.3 of any change of address to which
Notice is required to be mailed.
12.4 Counterparts.
------------
This Agreement, and any subsequent amendments thereto, may be
executed simultaneously in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
12.5 Entire Agreement.
----------------
This Agreement constitutes the entire agreement between the
parties and supersedes any prior understandings, agreements, or representations
by or among the parties, written or oral, to the extent they related in any way
to the subject matter hereof.
12.6 Headings.
--------
The headings contained in this Agreement and in the schedules
hereto are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
12.7 Assignment and Amendment of Agreement.
-------------------------------------
This Agreement shall be binding upon the respective successors
and assigns of the parties hereto. This Agreement may be amended only by written
agreement of the parties hereto, duly executed by an authorized representative
of each of the parties hereto. Notwithstanding the forgoing, Purchaser shall
have the absolute right to assign this Agreement, in whole or in part, to an
affiliate.
74
12.8 Governing Law.
-------------
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the Commonwealth of Pennsylvania applicable to
contracts made in that state without giving effect to the conflict of laws
principles thereof.
12.9 Failure to Close.
----------------
If for any reason this Agreement is terminated prior to the
Closing, Purchaser shall return to Seller all documents and other information,
including all originals and all copies thereof, theretofore delivered to
Purchaser by Seller. Purchaser shall not retain copies of any such documents or
other information, and shall not thereafter for a period of five years disclose
to any person for any purpose or use any information conveyed to Purchaser in
connection with the transactions contemplated by this Agreement, except for such
information which was: (a) possessed by Purchaser prior to the disclosure
thereof by Seller; (b) disclosed to Purchaser by an independent third party
without a violation of any obligation of confidentiality on the part of such
third party to Seller; or (c) ascertainable from public or published information
or trade sources.
12.10 Intentionally Omitted.
12.11 No Third Party Rights.
---------------------
This Agreement is not intended and shall not be construed to
create any rights in any parties other than Seller and Purchaser and no person
shall have any rights as a third party beneficiary hereunder, including, without
limitation, any rights with respect to the provisions of Section 6.1 hereof.
12.12 Non-Waiver.
----------
The failure in any one or more instances of a party to insist
upon performance of any of the terms, covenants or conditions of this Agreement,
to exercise any right or privilege in this Agreement conferred, or the waiver by
said party of any breach of any of the terms, covenants or conditions of this
Agreement shall not be construed as a subsequent waiver of any such terms,
covenants, conditions, rights or privileges, but the same shall continue and
remain in full force and effect.
75
12.13 Severability.
------------
The invalidity of any provision of this Agreement or portion of a
provision shall not affect the validity of any other provision of this Agreement
or the remaining portion of the applicable provision.
12.14 Incorporation of Schedules.
--------------------------
The schedules hereto are incorporated into this Agreement and
shall be deemed a part hereof as if set forth herein in full. References herein
to "this Agreement" and the words "herein," "hereof" and words of similar import
refer to this Agreement (including its schedules as an entirety). In the event
of any conflict between the provisions of this Agreement and any such schedule
the provisions of this Agreement shall control.
12.15 Consent to Jurisdiction and Service of Process;
----------------------------------------------
Waiver of Jury Trial.
--------------------
All disputes arising out of or related to this Agreement,
including, without limitation, any dispute relating to the interpretation,
meaning or effect of any provision hereof, will be resolved by the Bankruptcy
Court and the parties hereto each submit to the exclusive jurisdiction of the
Bankruptcy Court for the purpose of adjudicating any such dispute; provided,
however, that the parties agree that if the Bankruptcy Court does not accept
jurisdiction over any such dispute, such dispute shall then be brought
exclusively in the courts of the Commonwealth of Pennsylvania located in the
city of Philadelphia or of the United States of America for the Eastern District
of Pennsylvania and each party hereby expressly submits to the personal
jurisdiction and venue of such courts for the purposes thereof and expressly
waives any claim of improper venue and any claim that such courts are an
inconvenient forum.
SELLER AND PURCHASER HEREBY IRREVOCABLY WAIVE, TO THE FULLEST EXTENT
PERMITTED BY LAW, ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR
COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.
76
IN WITNESS WHEREOF, Seller and Purchaser have duly executed and
delivered this Agreement as of the day and year first above written.
SELLER
QUAD SYSTEMS CORPORATION, debtor
and debtor-in-possession
By: /s/ Theodore Shoneck
-----------------------------
Its: President
----------------------------
PURCHASER
TYCO ELECTRONICS CORPORATION
By: /s/ Paul Timashenka
-----------------------------
Its: Vice President
----------------------------
77