EXHIBIT 2.2
EXECUTION COPY
ASSET SALE AND PURCHASE AGREEMENT
AMONG
DISCOUNT MEDIA PRODUCTS, LLC,
as Buyer,
AND
THE TAPE COMPANY
as Seller
Dated as of August 22, 2003
TABLE OF CONTENTS
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SECTION 1. DEFINITIONS.......................................................1
SECTION 2. PURCHASE OF ASSETS AND ASSUMPTION OF LIABILITIES..................9
2.1 Transferred Assets.................................................9
2.2 Liabilities........................................................9
2.3 Excluded Assets....................................................9
SECTION 3. DEPOSIT AND PURCHASE PRICE.......................................11
3.1 Deposit...........................................................11
3.2 Purchase Price....................................................11
3.3 Payments at Closing...............................................11
3.4 Allocation of Purchase Price......................................11
3.5 Adjustments.......................................................11
SECTION 4. CLOSING..........................................................12
4.1 Closing Date......................................................12
4.2 Transfer of Assets................................................12
4.3 Prorations as of the Closing Date; Property Tax Payments..........12
4.4 Income Taxes......................................................13
4.5 Transfer Taxes....................................................13
SECTION 5. REPRESENTATIONS AND WARRANTIES OF SELLER.........................14
5.1 Authorization for Agreement; Consent and No Violation.............14
5.2 Organization......................................................14
5.3 No Finder's Fee...................................................15
5.4 Title.............................................................15
5.5 Accounts Receivable...............................................15
SECTION 6. REPRESENTATIONS AND WARRANTIES OF BUYER..........................15
6.1 Authorization for Agreement; Consents and No Violations...........15
6.2 Organization......................................................16
6.3 Finder's Fees.....................................................16
6.4 No Rights or Options to Purchase..................................16
6.5 Financing.........................................................16
SECTION 7. COVENANTS........................................................16
7.1 Seller's Chapter 11 Bankruptcy Case...............................16
7.2 Break-Up Fee......................................................17
7.3 Seller's Employees................................................17
7.4 Access............................................................18
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7.5 Conduct of the Business...........................................19
7.6 Notification......................................................19
7.7 Injunctions.......................................................19
7.8 Removal of Transferred Assets.....................................20
7.9 Additional Agreements.............................................20
7.10 Rejection of Leases...............................................20
7.11 Cure Amounts......................................................20
SECTION 8. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS......................20
8.1 Representations and Warranties True...............................20
8.2 Compliance with Agreement.........................................20
8.3 Bankruptcy Court Approval.........................................21
8.4 Compliance with Applicable Law....................................21
8.5 No Injunctions....................................................21
8.6 Transaction Documents.............................................21
SECTION 9. CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS.....................21
9.1 Representations and Warranties True...............................21
9.2 Compliance with Agreement.........................................21
9.3 Bankruptcy Court Approval.........................................21
9.4 Compliance with Applicable Law....................................22
9.5 No Injunctions....................................................22
9.6 Transaction Documents.............................................22
SECTION 10. TERMINATION, BREAK-UP FEE AND REMEDIES...........................22
10.1 Termination and Abandonment.......................................22
10.2 Break-Up Fee......................................................23
10.3 Seller's Remedies.................................................23
SECTION 11. [INTENTIONALLY OMITTED]..........................................24
SECTION 12. MISCELLANEOUS....................................................24
12.1 Survival of Representations and Warranties and Covenants..........24
12.2 Expenses..........................................................24
12.3 Assignment........................................................24
12.4 Governing Law.....................................................24
12.5 Amendment and Modification; Waiver................................24
12.6 Notices...........................................................25
12.7 Entire Agreement..................................................26
12.8 Successors........................................................26
12.9 Counterparts......................................................26
12.10 Headings..........................................................26
12.11 Schedules.........................................................26
12.12 Jurisdiction......................................................26
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12.13 Rules of Construction.............................................26
12.14 Access to Information.............................................26
12.15 Public Announcements..............................................27
12.16 Severability......................................................27
12.17 "AS IS" TRANSACTION...............................................28
Exhibits
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A Leased Real Property
B Procedure Approval Order
C Form of Deposit Escrow Agreement
D Form of Bill of Sale and Assignment
E Form of Assumption Agreement
F Business Employees
Schedules
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Section 1 Assumed Contracts
Section 2.3 Excluded Assets
Section 5.1(b) Required Consents
Section 5.1(c) Conflicts, Defaults, and Liens
Section 5.4 Seller's Broker
Section 6.1(b) Required Consents
Section 6.1(c) Conflicts and Defaults
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ASSET SALE AND PURCHASE AGREEMENT
---------------------------------
THIS ASSET SALE AND PURCHASE AGREEMENT (this "Agreement") is made and
entered into this 22nd day of August, 2003, by and between The Tape Company, a
debtor-in-possession and a Delaware corporation ("Seller") and Discount Media
Products, LLC, an Illinois limited liability company ("Buyer").
WITNESSETH:
WHEREAS, Seller is engaged in the business of distributing recording media
and data products (the "Business");
WHEREAS, Seller desires to sell, assign, transfer and convey to Buyer
certain assets used or held for use in the Business, and Buyer desires to
acquire such assets, all upon the terms and conditions set forth herein;
WHEREAS, in connection with such purchase and sale, Buyer will assume
certain liabilities and obligations of Seller as more fully described herein,
all upon the terms and conditions set forth herein; and
WHEREAS, Seller is currently operating as a debtor in possession pursuant
to chapter 11 of title 11 of the United States Code under the administratively
consolidated cases styled Daisytek, Incorporated et al., Case No. 03-34762 (the
"Bankruptcy Cases"), presently pending in the United States Bankruptcy Court for
the Northern District of Texas, Dallas Division (the "Bankruptcy Court"), and
Seller, upon proper approval and authorization from the Bankruptcy Court, may
sell and assign assets outside of the ordinary course of business in accordance
with 11 U.S.C Sections 363 and 365;
NOW, THEREFORE, in consideration of the premises and the mutual covenants,
agreements, representations and warranties contained herein, the parties hereto
agree as follows:
SECTION 1. DEFINITIONS.
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The following terms used in this Agreement shall have the following
meanings unless some other meaning is clearly intended:
"Accounts Receivable" means all of the trade notes or accounts receivable
arising out of Inventory sold or shipped or services performed in connection
with the operation of or relating to the Business.
"Affiliate", as applied to any Person, means any other Person directly or
indirectly controlling, controlled by, or under common control with, that
Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through ownership of voting securities, by
contract or otherwise. For purposes of this definition, a Person shall be deemed
to be "controlled by" a Person if such Person
possesses, directly or indirectly, power to vote 10% or more of the securities
having ordinary voting power for the election of directors of such Person.
"Applicable Law" means, with respect to any Person, any Law applicable to
such Person or its business, properties or assets.
"Asset Removal" has the meaning set forth in Section 7.8.
"Assumed Contracts" has the meaning assigned to that term in the definition
of "Transferred Assets."
"Assumed Liabilities" has the meaning assigned to such term in Section
2.2(a) of this Agreement.
"Bankruptcy Cases" has the meaning assigned to such term in the third
recital of this Agreement.
"Bankruptcy Code" means title 11 of the United States Code, as amended.
"Bankruptcy Court" has the meaning assigned to such term in the fourth
recital of this Agreement.
"Bankruptcy Rules" means the Federal Rules of Bankruptcy Procedure, as
amended.
"Break-Up Fee" has the meaning assigned to that term in Section 7.2 of this
Agreement.
"Business" has the meaning assigned to such term in the first recital of
this Agreement.
"Business Day" means any day of the year other than (a) any Saturday or
Sunday or (b) any other day on which banks located in Dallas, Texas generally
are closed for business other than the retail depository business.
"Business Employee" has the meaning assigned to such term in Section 7.3(a)
of this Agreement.
"Buyer" has the meaning assigned to such term in the preamble to this
Agreement.
"Closing" means the closing of the transactions contemplated by this
Agreement.
"Closing Date" has the meaning assigned to such term in Section 4.1 of this
Agreement.
"Closing Day Payment" has the meaning assigned to that term in Section
3.3(a).
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the official committee of unsecured creditors appointed
under Section 1102 of the Bankruptcy Code in the Bankruptcy Cases.
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"Contracts" means all contracts, commitments, understandings, binding
arrangements, unexpired leases of real and personal property, licenses, purchase
orders and all other legally binding arrangements to which Seller is a party
relating to the Business or the Transferred Assets or to which any of the
Transferred Assets is subject.
"Cure Amounts" has the meaning assigned to that term in Section 2.2(a)(v)
of this Agreement.
"Deposit" has the meaning assigned to such term in Section 3.1 of this
Agreement.
"Deposit Escrow Agreement" has the meaning assigned to such term in Section
3.1 of this Agreement.
"Disclosure Schedule" means the exhibit attached hereto and made a part
hereof containing schedules with specific disclosures regarding this Agreement.
"Effective Time" has the meaning assigned to that term in Section 4.2 of
this Agreement.
"Equipment" means all machinery and equipment, spare parts, furniture,
office equipment, computer equipment and hardware, fittings, tools, apparatus,
signage, maintenance equipment, vehicles and rolling stock and other personal
property of any kind or type that is used or held for use in connection with
Business.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" has the meaning assigned to such term in Section 3.1 of this
Agreement.
"Estimated Transfer Taxes" has the meaning assigned to such term in Section
4.5(c) of this Agreement.
"Excluded Assets" has the meaning assigned to such term in Section 2.3 of
this Agreement.
"Excluded Liabilities" has the meaning assigned to such term in Section
2.2(b) of this Agreement.
"Excluded Records" has the meaning assigned to such term in the definition
of "Records."
"Final Order" means an order of the Bankruptcy Court or other court of
competent jurisdiction: (a) as to which no appeal, notice of appeal or motion
for rehearing or new trial has been timely filed or, if any of the foregoing has
been timely filed, it has been disposed of in a manner that upholds and affirms
the subject order in all material respects without the possibility for further
appeal or rehearing thereon, (b) as to which the time for instituting an appeal
or motion for rehearing or new trial shall have expired, and (c) as to which no
stay is in effect.
"GAAP" means generally accepted accounting principles that have been
established in the United States.
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"Governmental Authority" means any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to any United States or foreign, federal, state or local government, including
any governmental authority, agency, department, board, commission or
instrumentality of such government or any political subdivision thereof, and any
tribunal, court or arbitrator(s) of competent jurisdiction, and shall include
the Bankruptcy Court.
"Improvements" means any and all buildings, structures, fixtures or other
improvements attached or affixed to the Leased Real Property.
"Income Taxes" means income, franchise or other Taxes measured by or based
upon income or profits or interest or penalties thereon.
"Indebtedness" shall mean, with respect to Seller the following: (a) all
obligations, including interest, prepayment penalties, late charges and
collection fees thereon, for borrowed money, (b) all obligations, including
interest, prepayment penalties, late charges and collection fees thereon,
evidenced by bonds, debentures, notes or other similar instruments, (c) all
obligations to pay the deferred purchase price of property or services, (d)
capital lease obligations, (e) all obligations or liabilities of others secured
by a Lien on any asset owned by Seller whether or not such obligation or
liability is assumed by Seller, (f) all obligations, contingent or otherwise, in
respect of any letter of credit or bankers acceptances, (g) all guaranties, and
(h) all obligations incurred in accordance with Section 364(b), (c) or (d) of
the Bankruptcy Code.
"Intellectual Property" has the meaning assigned to that term in the
definition of "Transferred Assets."
"Intellectual Property Rights" means all intellectual property rights,
including both statutory and common law rights, throughout the world, as
applicable, in or to any (a) patents, patent applications and invention
disclosure, (b) copyrights, registrations, renewals and applications for
registrations thereof, (c) trade secrets, know-how and confidential information,
or (d) trademarks, trade names, including, but not limited to, the name "The
Tape Company", service marks, trade dress, product configurations, slogans,
logos and any applications and registrations therefor.
"Inventory" means (i) all inventories of Seller consisting of finished
goods, samples, and labels, cartons and packaging materials that are used in
connection with, are held for use solely in, or otherwise relate solely to, the
operations of the Business and (ii) all raw materials and work-in-process of
Seller that are used in connection with, are held for use solely in, or
otherwise relate solely to, the Business.
"Law" means any foreign, federal, state or local law (including common
law), statute, code, ordinance, rule, regulation or other requirement enacted,
promulgated, issued or entered by a Governmental Authority.
"Leased Real Property" means all of Seller's leasehold interests in real
property located in Ohio, Washington, Pennsylvania and Texas, as more fully set
forth on Exhibit A, together with all Improvements, easements, privileges, and
appurtenances pertaining or belonging thereto, which are used or held for use in
the Business.
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"Liability" means any liability, obligation, debt or commitment of any kind
(whether known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
whether legal or equitable, and whether due or to become due), including any
liability for Taxes.
"Liens" means any mortgage, pledge, security interest, encumbrance, lien,
right of first refusal, right of consent or approval, right of termination or
charge of any kind (including any agreement to give any of the foregoing), any
conditional sale or other title retention agreement, any lease in the nature
thereof or the filing of or agreement to give any financing statement under the
Uniform Commercial Code of any jurisdiction.
"Lines" means any and all telephone numbers and data lines used solely in
connection with the Business, but shall not include telephone numbers and data
lines used by any Affiliate of Seller.
"Order" means any order, injunction, judgment, decree, ruling, writ,
assessment or arbitration award.
"Outside Date" has the meaning assigned to such term in Section 10.1(a)(iv)
of this Agreement.
"Permits" has the meaning assigned to such term in the definition of
"Transferred Assets."
"Permitted Liens" means (a) Liens relating to any financing of the Buyer
related to the purchase of the Transferred Assets, (b) Liens for Taxes not yet
due and payable, (c) non-monetary Liens that do not materially detract from the
value of any underlying Transferred Asset or materially interfere with the
ability of Seller or Buyer to own and operate any underlying Transferred Asset
in substantially the manner during the six-month period conducted before the
execution of this Agreement, (d) inchoate mechanics', carriers', workers',
repairmen's or other similar Liens arising or incurred in the ordinary course of
business and securing obligations incurred prior to Closing for which Seller is
and will remain liable for payment and removal of such Liens and for which such
Seller has escrowed funds for such payment, and (e) Liens that arise under
zoning, land use and other similar laws, none of which would materially detract
from the value of or unreasonably interfere with the ownership or operation by
Buyer of any underlying Transferred Asset following the Effective Time.
"Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, limited liability companies, limited
liability partnerships, joint stock companies, joint ventures, associations,
companies, trusts, banks, trust companies, land trusts, business trusts or other
organizations and Governmental Authorities, whether or not legal entities.
"Procedure Approval Order" means an order of the Bankruptcy Court that
approves, inter alia, bidding and auction procedures to be followed by Seller
and all potential bidders for the Transferred Assets attached hereto as
Exhibit B.
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"Professional Fees" means compensation for fees or reimbursement of
expenses of any Person in the Bankruptcy Cases under Sections 327, 328, 329,
330, 331, 364, 503 or 506 of the Bankruptcy Code or otherwise.
"Property Taxes" means all ad valorem taxes, real property taxes, personal
property taxes and similar obligations attributable to the Transferred Assets.
"Purchase Price" has the meaning assigned to such term in Section 3.2 of
this Agreement.
"Records" means Seller's, or its Affiliates', books and records, in any
form or media relating to the Business (including all digital records), wherever
located, but excluding (i) any of Seller's, or its Affiliates', business plans,
strategies and financial records to the extent that such plans, strategies and
records address or reflect activities outside of the Business; and (ii) any of
Seller's, or its Affiliates', company minute books or records, Tax Returns or
other materials which do not pertain to the Business (such books and records
described in clauses (i) and (ii), the "Excluded Records").
"Released Claims" means any and all charges, complaints, claims, causes of
action, promises, agreements, rights to payment, rights to any equitable remedy,
rights to any equitable subordination, demands, debts, liabilities, express or
implied contracts, obligations of payment or performance, rights of offset or
recoupment, accounts, damages, costs, losses or expenses (including attorneys'
and other professional fees and expenses) held by any party hereto, whether
known or unknown, matured or unmatured, suspected or unsuspected, liquidated or
unliquidated, absolute or contingent, direct or derivative.
"Sale Motion" has the meaning assigned to such term in Section 7.1(b) of
this Agreement.
"Sale Order" means an order of the Bankruptcy Court, which, among other
things, shall:
(a) authorize the sale, assignment and conveyance of the Transferred
Assets, pursuant to the terms and conditions of this Agreement and
Sections 363(b) and (f) and 365 of the Bankruptcy Code and to the
extent, if any, necessary, Section 105 of the Bankruptcy Code, free
and clear of all claims (including Excluded Liabilities), liens
(including Liens), encumbrances and other interests in the Transferred
Assets (other than the (i) the interests of the bankruptcy estate of
Seller as the debtor in possession, which interests are to be conveyed
to Buyer at Closing, (ii) the Permitted Liens, and (iii) the Assumed
Liabilities);
(b) approve and direct (i) the assumption of all of the Assumed Contracts
by Seller as a debtor in possession, (ii) the assignment of all of the
Assumed Contracts to Buyer, and (iii) the cure by Buyer of any
defaults under all of the Assumed Contracts and the Cure Amounts
therefor and authorize and require payment by Buyer of all Cure
Amounts (pursuant to Section 7.11) on or before Closing pursuant to
Sections 365(a),(b),(c),(f) and (k) of the Bankruptcy Code;
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(c) provide that all of the Assumed Contracts shall remain in full force
and effect for benefit of Buyer notwithstanding any provision in such
Assumed Contracts or under Applicable Law, that prohibits, restricts
or conditions such assignment and transfer or that terminates or
modifies, or permits a party other than Seller to terminate or modify
such Assumed Contracts on account of such assignment and transfer;
(d) provide that the Bankruptcy Court shall retain jurisdiction to resolve
any controversy or claim arising out of or relating to this Agreement
or breach thereof; and
(e) authorizes and directs Seller to make all payments provided for by
this Agreement and the other Transaction Documents on the dates that
Seller is obligated to make such payments.
"Seller" has the meaning assigned to such term in the preamble to this
Agreement.
"Seller's Proration Amount" has the meaning assigned to such term in
Section 4.3 of this Agreement.
"Tax" and "Taxes" mean any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Section 59A of
the Code), customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
"Tax Return" means all returns, declarations, reports, estimates,
information returns and statements required to be filed by or with respect to
Seller in respect of Taxes, including Federal, state, local or foreign Income
Tax returns filed on a consolidated, combined or unitary basis.
"Taxing Authority" means any Governmental Authority exercising any Taxing
authority or Tax regulatory authority.
"Transaction Documents" means this Agreement and any other agreements or
documents executed by or on behalf of a party hereto in connection with the
transactions contemplated by this Agreement.
"Transfer Taxes" means all sales, use, transfer, excise, stock, stamp,
document, filing, recording, authorization and similar taxes, fees and charges.
"Transferred Assets" means, subject to Section 2.3, any and all assets and
rights which are used in or held for use in the Business, including the
following (provided that the Transferred Assets shall not in any event include
Excluded Assets):
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(a) Inventory;
(b) Accounts Receivable;
(c) Leased Real Property;
(d) Equipment;
(e) all rights under (i) all Contracts which relate to the Business or the
Transferred Assets and are listed on Disclosure Schedule, Section 1,
and (ii) all Contracts that are entered into or assumed by Seller in
the ordinary course of business that relate solely to the Business or
the Transferred Assets between the date of this Agreement and the
Effective Time (collectively, the "Assumed Contracts");
(f) to the extent transfer is permitted under Applicable Law, all permits,
approvals, franchises, licenses or other rights granted by any
Governmental Authority and necessary for the lawful ownership of the
Transferred Assets or other lawful conduct of the Business from and
after the Closing as currently conducted (the "Permits");
(g) all Intellectual Property Rights owned by Seller that are used in or
held for use in the Business (the "Intellectual Property");
(h) all goodwill relating to the Business;
(i) all refunds, deposits, prepayments and prepaid expenses relating to
any Assumed Contracts;
(j) all claims, causes of action, choses in action, rights of recovery or
setoff, or other defenses, in each instance whether legal or
equitable, of any kind against any Person who holds an Assumed
Liability;
(k) all Records; and
(l) all Lines.
"Transferred Employees" has the meaning assigned to such term in Section
7.3(a) of this Agreement.
"Unassumed Properties" means all of Seller's leasehold interests in real
property other than (i) the Leased Real Property and (ii) the real property
located at 931 Cole Avenue, Hollywood, California.
"WARN Act" means the Worker Adjustment and Retaining Notification Act, as
amended.
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SECTION 2. PURCHASE OF ASSETS AND ASSUMPTION OF LIABILITIES.
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2.1 Transferred Assets. Subject to the terms and conditions hereof, and
subject to the representations and warranties made herein, at the Closing,
Seller will sell, assign, transfer, convey and deliver to Buyer, and Buyer shall
purchase, acquire and accept from Seller, all of Seller's right, title and
interest in and to the Transferred Assets, free and clear of all claims
(including Excluded Liabilities), Liens and other interests (other than
Permitted Liens), in accordance with Sections 105, 363, and 365 of the
Bankruptcy Code.
2.2 Liabilities.
(a) Subject to the terms and conditions of this Agreement, Buyer
hereby agrees to assume, as of the Effective Time, the following
obligations, liabilities and commitments of Seller (collectively, the
"Assumed Liabilities"):
(i) all liabilities and obligations of Seller arising with
respect to periods commencing on and after the Effective Time under
or pursuant to any Assumed Contracts included in the Transferred
Assets and which relate to the performance of the Assumed Contracts
on and after the Effective Time;
(ii) all liabilities and obligations of Seller occurring,
arising out of or related to Buyer's ownership and operation of the
Business and the Transferred Assets on and after the Effective Time;
(iii) all Liabilities in respect of Transferred Employees for
which Buyer is liable pursuant to Section 7.3;
(iv) Seller's Proration Amount; and
(v) all Liabilities, claims, obligations and commitments for
all cure, compensation and reinstatement costs or expenses of or
relating to the assumption and assignment of the Assumed Contracts
under Section 365 of the Bankruptcy Code and all amounts accrued but
not yet paid under the Assumed Contracts from the date of the filing
of Seller's Bankruptcy Case to and including the Effective Time
("Cure Amounts").
(b) Except for the Assumed Liabilities and subject to Section 4.3,
any and all other obligations, Liabilities, commitments, claims or
Indebtedness of Seller existing prior to the Effective Time or arising
thereafter and which arise out of or are related to or are otherwise
attributable to events, circumstances or omissions occurring prior to, or
in existence prior to, the Effective Time, which are not specifically
assumed by Buyer herein, shall be and remain the obligations and
liabilities of Seller to pay and discharge, and Buyer shall not be
obligated therefore (such obligations, Liabilities, commitments, claims and
Indebtedness collectively, the "Excluded Liabilities").
2.3 Excluded Assets. The Transferred Assets shall not include the
following assets of Seller (collectively such assets, the "Excluded Assets"):
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(a) any cash of Seller on hand or in banks as of the Effective Time,
and any cash equivalents of Seller;
(b) any Intellectual Property Rights owned by Seller that are not
used in the Business;
(c) all claims, causes of action, choses in action, rights of
recovery and rights of recoupment or set-off of any kind against any Person
solely arising out of or relating to the other Excluded Assets;
(d) all claims, rights and causes of action of Seller arising under
or relating to Chapter 5 of the Bankruptcy Code (whether or not asserted as
of the Effective Time), including, without limitation, any such claims and
actions arising under Sections 544, 545, 547, 548, 549 or 551 of the
Bankruptcy Code as well as all claims, counterclaims, defenses and rights
of equitable remedies against any creditor of Seller or any Affiliate of
Seller (except for any claims, causes of action, choses in action, rights
of recovery or setoff, or other defenses, in each instance whether legal or
equitable, of any kind against any Person who holds an Assumed Liability;
(e) Seller's rights under the Transaction Documents and all cash and
non-cash consideration payable or deliverable to Seller pursuant to the
terms and provisions hereof;
(f) rights under any Contract that is not an Assumed Contract;
(g) all rights and claims in or to any refunds or credits of or with
respect to any Taxes, assessments or similar charges paid by or on behalf
of Seller, in each case to the extent applicable to any period prior to the
Effective Time (but not any of the foregoing paid by Buyer);
(h) the Excluded Records;
(i) all claims arising prior to the Effective Time under any
directors and officers liability insurance policies owned by Seller;
(j) professional retainers paid by Seller;
(k) any letters of credit or similar financial accommodations issued
to any third party(ies) for the account of Seller;
(l) any intercompany receivable of Seller (i.e., any receivable owed
to Seller from any of its Affiliates); and
(m) those assets, if any, listed on Disclosure Schedule, Section
2.3.
Buyer expressly agrees and understands that Seller shall not sell, assign,
transfer, convey or deliver to Buyer any of the Excluded Assets.
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SECTION 3. DEPOSIT AND PURCHASE PRICE.
--------------------------
3.1 Deposit. Upon execution of this Agreement, Buyer and Seller shall
establish with Wells Fargo Bank Texas, N.A. (the "Escrow Agent") an escrow
account, and Buyer shall deposit $380,000 with the Escrow Agent (the "Deposit"),
which Deposit shall be earnest money and shall be distributed pursuant to
Sections 3.3(b) or 10.3, as applicable, and shall be held pursuant to an escrow
agreement in the form attached hereto as Exhibit B (the "Deposit Escrow
Agreement").
3.2 Purchase Price. The aggregate purchase price ("Purchase Price")
payable by Buyer to Seller in consideration for the Transferred Assets shall be
an amount equal to (x) $3,800,000 minus the Seller's Proration Amount, plus (y)
an amount equal to all September rent payments with respect to the Unassumed
Properties and the Leased Real Property; provided, the Purchase Price shall be
adjusted on the Closing Date in accordance with the provisions of Section 3.5.
3.3 Payments at Closing.
(a) At the Closing, subject to the satisfaction of the other terms
and conditions of this Agreement, Buyer shall pay or cause to be paid:
(i) to Seller, by wire transfer of immediately available
funds to an account designated by Seller, an amount equal to the
difference between the Purchase Price and the Deposit (the "Closing
Day Payment"); and
(ii) to the appropriate Governmental Authorities, the
Estimated Transfer Taxes.
(b) At the Closing, subject to the satisfaction of the other terms
and conditions of this Agreement, Seller and Buyer shall instruct the
Escrow Agent to release the Deposit held pursuant to the Deposit Escrow
Agreement to Seller.
3.4 Allocation of Purchase Price. Promptly following the Closing Date,
the Purchase Price and the Assumed Liabilities shall be allocated among the
various Transferred Assets as determined by the mutual agreement of Buyer and
Seller. Such allocation shall be binding on Buyer and Seller for all Tax
purposes, and neither party shall take any contrary position regarding such
allocation in any Tax Return, proceeding or contest.
3.5 Adjustments. The Purchase Price shall be increased by the amount, if
any, by which the total of the value of Seller's Inventory and Accounts
Receivable as of the day before the Closing Date exceeds $7,964,000, or the
Purchase Price shall be reduced by the amount, if any, by which the total of the
value of the Seller's Inventory and Accounts Receivable as of the day before the
Closing Date is less than $7,964,000. For the purpose of the foregoing
adjustment, the value of Seller's Inventory shall be determined in a manner
consistent with Seller's past practices based upon the records of the Seller for
the last business day prior to the Closing Date and shall include Inventory in
transit to Seller to the extent prepaid by Seller.
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SECTION 4. CLOSING.
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4.1 Closing Date. Subject to the satisfaction or waiver of the conditions
set forth in Section 8 and Section 9, the Closing shall take place at 10:00 a.m.
on the first Business Day after the satisfaction of the conditions set forth in
Section 8.3, or such other date as the parties may mutually agree upon in
writing, at the office of Vinson & Elkins L.L.P., 2001 Ross Avenue, Suite 3700,
Dallas, Texas 75201. Subject to the provisions of Section 10 of this Agreement,
failure to consummate the purchase and sale provided for in this Agreement on
such date shall not result in the termination of this Agreement and shall not
relieve any party of any obligation under this Agreement. The date on which the
Closing takes place is referred to herein as the "Closing Date."
4.2 Transfer of Assets. At the Closing, effective as of 12:01 a.m. on the
Closing Date (the "Effective Time"):
(a) Seller shall sell, assign, transfer and convey to Buyer (or its
designee) all of its right, title and interest in and to the Transferred
Assets. Such sale, assignment, transfer and conveyance shall be effected,
evidenced or accompanied by delivery by Seller to Buyer of a bill of sale
and assignment covering all Transferred Assets in the form of Exhibit C
hereto.
(b) Buyer shall deliver:
(i) an amount equal to the Closing Day Payment to Seller; and
(ii) the Estimated Transfer Taxes, to the appropriate
Government Authorities.
(c) Buyer and Seller shall execute and deliver the following
documents and agreements:
(i) an assumption agreement providing for the assumption by
Buyer of the Assumed Liabilities in the form of Exhibit D hereto; and
(ii) a joint instruction letter to the Escrow Agent
instructing the Escrow Agent to distribute the Deposit to Seller.
4.3 Prorations as of the Closing Date; Property Tax Payments.
(a) Buyer and Seller agree that the following items attributable to
the Transferred Assets and the Business shall be prorated as of the
Effective Time pursuant to the most recent information available to Seller
(as estimated by Seller pursuant to Section 4.3(b)), with Seller to be
responsible for and to receive the benefit of the same for the period prior
to the Closing Date (such amount payable by Seller, "Seller's Proration
Amount"), and the Buyer to be responsible for and to receive the benefit of
the same after the Effective Time:
(i) Property Taxes and assessments;
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(ii) water, sewer and other utility charges and similar types
of charges and installments or special benefit assessments; and
(iii) electric, gas, telephone and other utility charges.
If the final Property Tax rates or assessed value for the
current Tax year is not established as of the date of the calculation of
the above proration, then such proration shall be based on the property Tax
rates or assessed value in effect for preceding Tax year.
(b) No later than the close of business on the fifth Business Day
before the Closing Date, Seller shall deliver to Buyer a good faith
estimate of the Seller's Proration Amount.
(c) Seller shall pay, on or before Closing, all accrued and unpaid
Property Taxes owed by Seller or its Affiliates with respect to the
Transferred Assets as of the Effective Time.
4.4 Income Taxes. All Income Taxes in respect of the Transferred Assets
and income of the Business for the period or portions of periods ending on or
prior to the Closing Date shall be borne by Seller. Except as otherwise provided
in this Agreement, all Income Taxes in respect of the Transferred Assets and
income of the Business for the period or portions of periods beginning after the
Effective Time shall be borne by Buyer.
4.5 Transfer Taxes.
(a) In accordance with Section 1146(c) of the Bankruptcy Code, the
making or delivery of any instrument of transfer under a plan confirmed
under Section 1129 of the Bankruptcy Code shall not be taxed under any Law
imposing a Transfer Tax. The instruments transferring the Transferred
Assets to Buyer shall contain the following endorsement:
"Because this Bill of Sale and Assignment has been authorized
pursuant to Order of the United States Bankruptcy Court for the
Northern District of Texas relating to a plan of reorganization
of The Tape Company, it is exempt from transfer taxes, stamp
taxes or similar taxes pursuant to 11 U.S.C. Section 1146(c)."
(b) In the event Transfer Taxes are assessed at Closing or at any
time thereafter on the transfer of any Transferred Assets, such Taxes
incurred as a result of the transactions contemplated hereby shall be paid
by Buyer. Buyer and Seller shall cooperate in providing each other with any
appropriate resale exemption certifications and other similar
documentation.
(c) No later than the close of business on the fifth Business Day
before the Closing Date, Buyer shall deliver to Seller a good faith
estimate of the Transfer Taxes required to be paid by Buyer pursuant to
Section 4.5(b) (the "Estimated Transfer
13
Taxes"). Buyer shall consult with Seller in good faith in determining the
Estimated Transfer Taxes.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF SELLER.
----------------------------------------
Seller hereby represents and warrants to Buyer as follows:
5.1 Authorization for Agreement; Consent and No Violation.
(a) Seller has all requisite corporate power and authority to enter
into this Agreement and the other Transaction Documents to which it is a
party and to consummate the transactions contemplated hereby and thereby.
Subject to the entry of the Sale Order, the execution, delivery and
performance of this Agreement and the other Transaction Documents by Seller
and the consummation of the transactions contemplated hereby and thereby
have been duly authorized by all necessary corporate actions of Seller,
and, subject to the entry and effectiveness of the Sale Order, this
Agreement is, and the other Transaction Documents and any documents or
instruments to be executed and delivered by Seller pursuant hereto, will
be, duly executed and delivered and legal, valid and binding obligations of
Seller enforceable in accordance with their terms, except as enforceability
may be limited by applicable bankruptcy, insolvency, moratorium, or similar
Laws from time to time in effect which affect creditors' rights generally
and by legal and equitable limitations on the availability of equitable
remedies.
(b) Except for the entry of the Sale Order and as otherwise set
forth on the Disclosure Schedule, Section 5.1(b) neither the execution and
delivery of this Agreement or the other Transaction Documents nor the
consummation of the transactions contemplated hereby or thereby by Seller
requires the consent or approval of, the giving of notice to, registration,
filing or recording with or the taking of any other action by, Seller in
respect of any Governmental Authority or any other Person.
(c) Except for Permitted Liens and as otherwise set forth in
Disclosure Schedule, Section 5.1(c), the execution and delivery of this
Agreement and the other Transaction Documents and the consummation of the
transactions contemplated hereby and thereby by Seller shall not conflict
with, or result in any violation of, or default (with or without notice or
lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any material obligation or the loss of a
material benefit under, or the creation of any Lien, upon any of the
Transferred Assets, pursuant to (i) any provision of the organizational
documents of Seller, (ii) the provisions of any Contract to which Seller is
a party or to which any of the Transferred Assets are subject or (iii)
Applicable Law.
5.2 Organization. Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, has all
requisite power and authority to own, lease and operate its properties and to
carry on its business as now being conducted, and is duly qualified to do
business as a foreign corporation and in good standing to conduct business in
each jurisdiction in which the business it is conducting, or the operation,
ownership or leasing of its properties, makes such qualification necessary,
other than in such jurisdictions where the
14
failure so to qualify could not reasonably be expected to have a material
adverse effect on the Business or the Transferred Assets.
5.3 No Finder's Fee. Except as set forth in the Disclosure Schedule,
Section 5.3, Seller has not employed or retained any broker, agent, finder,
financial advisor or other party, or incurred any obligation for brokerage fees,
finder's fees, financial advisory fees or commissions with respect to the
transactions contemplated by this Agreement or the other Transaction Documents,
or otherwise dealt with anyone purporting to act in the capacity of a finder,
broker or financial advisor with respect thereto whereby Buyer may be obligated
to pay such a fee or commission.
5.4 Title. Subject to the Bankruptcy Court's entry of the Sale Order,
Seller will transfer to Buyer, at the Closing, title to all of the Transferred
Assets, free and clear of any Liens, claims or Excluded Liabilities other than
Permitted Liens.
5.5 Accounts Receivable. Disclosure Schedule, Section 5.5 contains a
complete and accurate schedule of the receivables as of the Closing Date, all of
which have arisen solely out of bona fide sales and deliveries of goods,
performance of services, and other business transactions in the ordinary course
of business consistent with past practice and, to the knowledge of Seller, are
not subject to valid defenses, setoffs or counterclaims. The receivables are
collectible in the ordinary course of Seller's business.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF BUYER.
---------------------------------------
Buyer hereby represents and warrants to Seller as follows:
6.1 Authorization for Agreement; Consents and No Violations.
(a) Buyer has all requisite corporate power and authority to enter
into this Agreement and the other Transaction Documents to which it is a
party and to consummate the transactions contemplated hereby and thereby.
The execution, delivery and performance of this Agreement and the other
Transaction Documents by Buyer and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
actions of Buyer, and this Agreement is, and the other Transaction
Documents to be executed and delivered by Buyer pursuant hereto shall be,
duly executed and delivered and legal, valid and binding obligations of
Buyer enforceable in accordance with their terms, except as enforceability
may be limited by applicable bankruptcy, insolvency, moratorium, or similar
Laws from time to time in effect which affect creditors' rights generally
and by legal and equitable limitations on the availability of equitable
remedies.
(b) Except as set forth in Disclosure Schedule, Section 6.1(b),
neither the execution and delivery of this Agreement or the other
Transaction Documents nor the consummation of the transactions contemplated
hereby and thereby by Buyer requires the consent or approval of, the giving
of notice to, registration, filing or recording with or the taking of any
other action by Buyer in respect of any Governmental Authority or any other
Person.
15
(c) Subject to the receipt of the consents or approvals set forth in
Disclosure Schedule, Section 6.1(c), the execution and delivery of this
Agreement and the other Transactions Documents and the consummation of the
transactions contemplated hereby and thereby by Buyer shall not conflict
with, or result in any violation of, or default (with or without notice or
lapse of time, or both), or give rise to a right of termination,
cancellation or acceleration of any material obligation or the loss of a
material benefit under (i) any provision of the organizational documents of
Buyer, (ii) the provisions of any contract to which Buyer is a party, or
(iii) applicable Law.
6.2 Organization. Buyer is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of Illinois,
has all the requisite power and authority to own, lease and operate its
properties and to carry on its business as now being conducted, and is duly
qualified to do business as a foreign limited liability company and in good
standing to conduct business in each jurisdiction in which the business it is
conducting, or the operation, ownership or leasing of its properties, makes such
qualification necessary, other than in such jurisdictions where the failure so
to qualify could materially and adversely affect the ability of Buyer to
consummate the transactions contemplated by this Agreement and the other
Transaction Documents.
6.3 Finder's Fees. Buyer has not employed or retained any broker, agent,
finder, financial advisor or other party or incurred any obligation for
brokerage fees, finder's fees, financial advisory fees or commissions with
respect to the transactions contemplated by this Agreement or the other
Transaction Documents, or otherwise dealt with anyone purporting to act in the
capacity of a finder or broker or financial advisor with respect thereto whereby
Buyer or Seller may be obligated to pay such a fee or a commission.
6.4 No Rights or Options to Purchase. Buyer does not have, nor does any
Affiliate of Buyer have, any interest in, right or option to purchase any of the
Transferred Assets which arises or exists outside of the terms of this
Agreement.
6.5 Financing. Buyer has sufficient funds available to pay the Purchase
Price and consummate the transactions contemplated hereby and the other
Transaction Documents and all fees and expenses related thereto. Buyer
acknowledges that its obligations under this Agreement are not subject to any
conditions regarding its ability to obtain financing for the transactions
contemplated by this Agreement and the other Transaction Documents.
SECTION 7. COVENANTS.
---------
7.1 Seller's Chapter 11 Bankruptcy Case.
(a) This Agreement and the transactions contemplated hereby are
subject to (i) the terms and conditions of the Procedure Approval Order,
(ii) the approval and authorization of the Bankruptcy Court by the entry of
the Sales Order and (iii) the applicable provisions of the Bankruptcy Code
and the Bankruptcy Rules.
(b) Seller shall file with the Bankruptcy Court a motion, with
supporting papers (the "Sale Motion"). The Sale Motion shall seek, inter
alia, (i) the entry of the Sale Order; and (ii) authority to assume and
assign the Assumed Contracts to Buyer. The
16
Sale Motion shall request that the only adequate assurance of future
performance required by Section 365(f)(2) of the Bankruptcy Code is Buyer's
promise to perform its obligations under the Assumed Contracts. Seller
shall use commercially reasonable efforts to promptly seek entry of the
Sale Order.
7.2 Break-Up Fee. Pursuant to the Procedure Approval Order, Seller shall
be obligated to pay Buyer a termination fee equal to $114,000 (the "Break-Up
Fee") if the Agreement is terminated pursuant to Section 10.1(a)(vi). The
Break-Up Fee shall be payable as an allowed administrative expense under Section
503(b) of the Bankruptcy Code. Seller shall pay the Break-Up Fee to Buyer by
wire transfer of immediately available funds to an account designated by Buyer
within three Business Days after a termination of the Agreement pursuant to
Section 10.1(a)(vi).
7.3 Seller's Employees.
(a) At least 3 Business Days prior to the Closing Date, Buyer shall
offer employment to those employees of Seller in relation to the Business
set forth on Exhibit F ("Business Employees"), on substantially the same
terms and conditions as in effect immediately prior to the Closing Date,
except as allowed in Section 7.3(b). Buyer shall employ on such terms and
conditions any Business Employee who accepts such offer, with such
employment to be effective on the Closing Date. Those employees who accept
such offer are referred to herein as the "Transferred Employees." As of the
Closing Date, Seller shall terminate its or their employment relationship
with all Transferred Employees. Seller waives any claims against Buyer and
any Transferred Employees arising from such employment by Buyer, including
any claims arising under any employment agreement, confidentiality
agreement or non-competition agreement between such Transferred Employee
and Seller.
(b) Buyer shall take such action as may be necessary so that on and
after the Closing Date and for one year thereafter, the Transferred
Employees are either, as the Buyer may determine, (i) provided employee
benefits, plans and programs (including but not limited to incentive
compensation, life insurance, welfare, 401(k), pension, severance, salary
continuation and fringe benefits) which, in the aggregate, are not
materially less favorable than those made available by Seller immediately
prior to the Closing Date or (ii) provided employee benefits, plans and
programs (including but not limited to incentive compensation, life
insurance, welfare, 401(k), pension, severance, salary continuation and
fringe benefits) on substantially the same basis as employees of the Buyer
having similar responsibilities and positions. For purposes of eligibility
to participate and vesting in all pension benefits provided by Buyer to
Transferred Employees, such Transferred Employees will be credited with
their years of service with the Seller and prior employers to the extent
service with the Seller and prior employers is taken into account under the
plans of the Buyer. The eligibility of any Transferred Employee to
participate in any welfare benefit plan or program of Buyer shall not be
subject to any exclusions for any pre-existing conditions or waiting
periods if such individual has met the participation requirements of
similar benefit plans and programs of the Seller. Buyer shall be
responsible for all COBRA liabilities under Code
17
Section 4980B or ERISA Sections 601 - 608, including the rules and
regulations there under, with respect to all employees and former employees
of the Business.
(c) (i) Prior to the Effective Time, Seller, in its sole reasonable
discretion, shall give the employees of Seller any notice that Seller may
determine to be required or advisable under the WARN Act, any regulation
relating thereto, or any similar state or local laws or regulations; and,
except as expressly set forth below in this Section 7.3(c), Buyer shall
assume no Liability with respect to whether or not Seller elects to provide
such notice, to the service of such notice or to the contents of such
notice. Seller hereby agrees to indemnify, defend and hold harmless Buyer
and its Affiliates against or with respect to all Liabilities of Buyer
under the WARN Act or under any similar state, local or foreign law as a
result of, or arising out of, the termination of employment by Seller of
any of Seller's employees occurring prior to the Effective Time.
(ii) From and after the Effective Time, Buyer, in its sole
reasonable discretion, shall give Business Employees any notice that
Buyer may determine to be required or advisable under the WARN Act,
any regulation relating thereto, or any similar state or local laws
or regulations; and, except as expressly set forth below in this
Section 7.3(c), Seller shall assume no liability with respect to
whether or not Buyer elects to provide such notice, to the service of
such notice or to the contents of such notice. Notwithstanding the
foregoing, Buyer shall not take any action on or after the Closing
Date that would cause any termination of employment of any employees
by Seller on or prior to the Closing Date to constitute a "plant
closing" or "mass layoff" under the WARN Act or any similar state,
local or foreign law or otherwise create any liability to the Seller
or any of its Affiliates for the termination of any employees. Buyer
hereby agrees to indemnify, defend and hold harmless Seller and its
Affiliates against or with respect to all Liabilities of Seller under
the WARN Act or under any similar state, local or foreign law as a
result of, or arising out of, the termination by Buyer of any
Business Employee's employment occurring from and after the Effective
Time.
(d) The provisions of this Section 7.3 shall neither create any
rights in any Transferred Employee to continued employment with Buyer for
any specified period of time, nor create any third-party beneficiary rights
in any Business Employee or, if hired by Buyer, any Transferred Employee,
or any other Person (including any heir, beneficiary, executor,
administrator, or representative of any Business Employee, Transferred
Employee or any other Person claiming through any such employee or other
Person), with respect to such employee's or other Person's employment or
any term or condition thereof.
7.4 Access.
(a) From and after the date of this Agreement until the Closing
Date, Seller shall, upon reasonable advance notice, (i) afford to Buyer's
officers, independent public accountants, counsel, lenders, consultants and
other representatives, reasonable access during normal business hours to
the Business and the Transferred Assets and all records
18
pertaining to the Business and Transferred Assets and (ii) furnish to Buyer
such documents and information concerning the Business and the Transferred
Assets as Buyer from time to time may reasonably request. This access shall
be subject to any existing confidentiality agreements and to the execution
of additional confidentiality agreements reasonably required by Seller.
Buyer shall not be entitled to (i) access to any materials containing
privileged communications, (ii) information about employees, disclosure of
which might violate an employee's reasonable expectation of privacy, (iii)
bids, letters of intent, expressions of interest or other proposals
received from others in connection with the Business or the Transferred
Assets, or (iv) information in violation of Applicable Law or that would
cause a breach of any obligation by which Seller is bound. Buyer shall
indemnify, defend and hold harmless Seller from and against any and all
Liabilities asserted against or suffered by them relating to, resulting
from or arising out of, examinations or inspections made by Buyer or its
representatives pursuant to this Section 7.4.
(b) For a period of sixty (60) days after the Closing, to the extent
any information about the Business and used in connection with the Business
is maintained on a computer system not transferred to Buyer pursuant to the
terms and conditions of this Agreement, Seller shall, upon reasonable
advance notice from Buyer and during normal business hours, use
commercially reasonable efforts to afford Buyer access to the premises
where such computer information is located and to the computers containing
such information, and provide Buyer with such reasonable assistance
necessary, including access to Seller's personnel, for Buyer to obtain such
information.
(c) For a period of sixty (60) days after the Closing Seller shall,
upon reasonable notice and during Seller's normal business hours, provide
Buyer reasonable assistance and access to Seller's employees, agents and
personnel in connection with the identification and routing of the Lines
through Buyer's Chicago office.
7.5 Conduct of the Business. Without in any way limiting any other
obligations of Seller hereunder, during the period from the date hereof to the
Closing, Seller agrees to conduct the Business only in the ordinary and normal
course consistent with past practice since the filing of the Bankruptcy Cases;
provided, that future purchases of Inventory shall be made on a weekly basis in
an amount not to exceed the cost of the Inventory sold during the immediately
preceding week.
7.6 Notification. Prior to the Closing, Seller shall notify Buyer, and
Buyer shall notify Seller, of any litigation, arbitration, appeal or
administrative proceeding pending, or, to its knowledge, threatened against
Seller or Buyer, as the case may be, which challenges the transactions
contemplated hereby.
7.7 Injunctions. Prior to the Closing, if any Governmental Authority
issues or otherwise promulgates any injunction, stay, decree or similar order
which prohibits the consummation of the transactions contemplated hereby, the
parties shall use their respective commercially reasonable best efforts to have
such injunction, stay, decree or order dissolved or otherwise eliminated as
promptly as possible and, prior to or after the Closing, to pursue the
underlying litigation diligently and in good faith.
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7.8 Removal of Transferred Assets.
(a) On or prior to September 26, 2003, Buyer shall remove, or cause
to be removed, all Transferred Assets located at the Unassumed Properties
(the "Asset Removal"). Seller shall cooperate with, and provide reasonable
assistance to, Buyer with respect to the Asset Removal.
(b) Buyer agrees to indemnify and hold harmless Seller and its
Affiliates from and against all costs, losses and damages (including
reasonable attorney's fees) incurred by Seller or its Affiliates as a
result of any and all actions, or failures to act, of Buyer, Buyer's
Affiliates, or any agent, contractor, representative or employee of Buyer
in connection with the Asset Removal.
7.9 Additional Agreements. Subject to the terms and conditions of this
Agreement, each of the parties hereto shall use its commercially reasonable
efforts to do, or cause to be taken all action and to do, or cause to be done,
all things necessary, proper, or advisable under applicable Law to consummate
and make effective the transactions contemplated by this Agreement, including,
the fulfillment of the conditions set forth in Section 8 and Section 9 to the
extent that the fulfillment of such is within the control of such party. If at
any time after the Closing Date, any further action is necessary or desirable to
carry out the purposes of this Agreement, the parties to this Agreement and
their duly authorized representatives shall use commercially reasonable efforts
to take all such action.
7.10 Rejection of Leases. Prior to the Closing, Seller shall file a motion
to the Bankruptcy Court to reject all Unassumed Properties as of September 30,
2003. Seller's leasehold interest in the real property located at 931 Cole
Avenue, Hollywood, California, shall remain a part of Seller's estate and shall
be assumed or rejected in Seller's sole discretion.
7.11 Cure Amounts. At the Closing, Buyer shall pay to the applicable third
parties all Cure Amounts.
SECTION 8. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS.
-------------------------------------------
The obligations of Buyer at the Closing hereunder are subject to the
satisfaction or, to the extent permitted by Applicable Law, waiver, on or prior
to the Closing Date of the conditions set forth below.
8.1 Representations and Warranties True. Each of the representations and
warranties made by Seller in this Agreement shall be true and correct in all
material respects on and as of the Closing Date with the same effect as though
such representations and warranties had been made or given on and as of the
Closing Date; provided that any such representation or warranty that by its
terms is qualified by a materiality standard or a material adverse effect
qualification shall not be further qualified by the above reference to "in all
material respects." Seller shall have delivered to Buyer a certificate, dated
the Closing Date and signed by an officer of Seller, as to the satisfaction of
the condition contained in this Section 8.1.
8.2 Compliance with Agreement. Seller shall have performed and complied
in all material respects with all of its covenants and obligations under this
Agreement which are to be
20
performed or complied with by Seller prior to or on the Closing Date. Seller
shall have delivered to Buyer a certificate, dated the Closing Date and signed
by an officer of Seller, as to the satisfaction of the condition contained in
this Section 8.2.
8.3 Bankruptcy Court Approval. This Agreement and the transactions
contemplated hereby, including, without limitation, the assumption and
assignment of the Assumed Contracts, shall have been approved by the Bankruptcy
Court by entry of the Sale Order, and the Sale Order shall not have been stayed
as of the Closing Date.
8.4 Compliance with Applicable Law. All requirements of any Applicable
Law necessary for the valid consummation of the transactions contemplated herein
to occur at the Closing shall have been fulfilled, and all filings required to
be made with any Governmental Authority under any Applicable Law and all
consents, approvals and orders required to be obtained from any Governmental
Authority under any Applicable Law, in each case, in order to permit Seller or
Buyer to consummate the transactions contemplated hereby to occur at the Closing
shall have been made or obtained.
8.5 No Injunctions. No temporary restraining order, preliminary or
permanent injunction, stay or other order issued by any Governmental Authority
preventing the consummation of the transactions contemplated hereby to occur at
the Closing shall be in effect.
8.6 Transaction Documents. Seller shall have executed and tendered for
delivery to Buyer all Transaction Documents to be delivered by Seller at Closing
pursuant to this Agreement.
SECTION 9. CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS.
--------------------------------------------
The obligations of Seller at the Closing hereunder are subject to the
satisfaction or, to the extent permitted by Applicable Law, waiver, on or prior
to the Closing Date of the conditions set forth below.
9.1 Representations and Warranties True. Each of the representations and
warranties made by Buyer in this Agreement shall be true and correct in all
material respects on and as of the Closing Date with the same effect as though
such representations and warranties had been made or given on and as of the
Closing Date; provided that any such representation or warranty that by its
terms is qualified by a materiality standard or a material adverse effect
qualification shall not be further qualified by the above reference to "in all
material respects." Buyer shall have delivered to Seller a certificate, dated
the Closing Date and signed by an officer of Buyer, as to the satisfaction of
the condition contained in this Section 9.1.
9.2 Compliance with Agreement. Buyer shall have performed and complied in
all material respects with all of its covenants and obligations under this
Agreement which are to be performed or complied with by it prior to or on the
Closing Date. Buyer shall have delivered to Seller a certificate, dated the
Closing Date and signed by an officer of Buyer, as to the satisfaction of the
condition contained in this Section 9.2.
9.3 Bankruptcy Court Approval. This Agreement and the transactions
contemplated hereby, including, without limitation, the assumption and
assignment of the
21
Assumed Contracts, shall have been approved by the Bankruptcy Court by entry of
the Sale Order, and the Sale Order shall not have been stayed as of the Closing
Date.
9.4 Compliance with Applicable Law. All requirements of any Applicable
Law necessary for the valid consummation of the transactions contemplated herein
to occur at the Closing shall have been fulfilled, and all filings required to
be made with any Governmental Authority under any Applicable Law and all
consents, approvals and orders required to be obtained from any Governmental
Authority under any Applicable Law, in each case, in order to permit Seller or
Buyer to consummate the transactions contemplated hereby to occur at the Closing
shall have been made or obtained.
9.5 No Injunctions. No temporary restraining order, preliminary or
permanent injunction, stay or other order issued by any Governmental Authority
preventing the consummation of the transactions contemplated hereby to occur at
the Closing shall be in effect.
9.6 Transaction Documents. Buyer shall have executed and tendered for
delivery to Seller all Transaction Documents to be delivered by Buyer at Closing
pursuant to this Agreement.
SECTION 10. TERMINATION, BREAK-UP FEE AND REMEDIES.
--------------------------------------
10.1 Termination and Abandonment.
(a) This Agreement may be terminated and abandoned on or prior to
the Closing Date as follows:
(i) by Buyer, upon the occurrence of a material breach of one
or more representations, warranties, covenants or obligations of
Seller that has not been waived by Buyer; provided that any
representation or warranty that by its terms is qualified by a
materiality standard or material adverse effect qualification shall
not be further qualified by the above reference to "material";
provided, further that, if such breach of any representation,
warranty, covenant or obligation is capable of being cured by Seller,
Seller shall have the opportunity to cure such breach for a period of
30 days from the date of written notice of such breach;
(ii) by Seller, upon the occurrence of a material breach of one
or more representations, warranties, covenants or obligations of
Buyer that has not been waived by Seller; provided that any
representation or warranty that by its terms is qualified by a
materiality standard or material adverse effect qualification shall
not be further qualified by the above reference to "material";
provided, further that, if such breach of a representation, warranty,
covenant or obligation (other than any covenant to or obligation to
pay money pursuant to this Agreement) is capable of being cured by
Buyer, Buyer shall have the opportunity to cure such breach for a
period of 30 days from the date of notice of such breach;
(iii) by mutual written consent of the parties hereto;
22
(iv) by either Seller or Buyer, if the Closing has not occurred
on or before September 12, 2003 (the "Outside Date"); provided,
however, that this right to terminate this Agreement shall not be
available to a party hereto whose breach of this Agreement has been
the cause of, or resulted in, the failure of the closing to occur on
or before such date;
(v) by either Buyer or Seller, if a Governmental Authority
shall have issued an order, decree, or ruling or taken any other
action, in each case permanently restraining, enjoining, or otherwise
prohibiting the transactions contemplated by this Agreement, and such
order, decree, ruling, or other action shall have become a Final
Order; and
(vi) by Seller, upon payment of the Break-Up Fee to Buyer,
contemporaneously with the closing and funding of a transaction with
a Successful Bidder (as such term is defined in the Procedure
Approval Order) involving all or any portion of the Transferred
Assets that is approved by the Bankruptcy Court by entry of the Sale
Order.
(b) In the event of termination of this Agreement by Seller or Buyer
written notice shall promptly be given to the other party and each party
shall pay its own expenses incident to the preparation for the consummation
of this Agreement and the transactions contemplated hereby. Upon
termination of this Agreement pursuant to Section 10.1(a), the obligations
of the parties set forth herein shall forthwith be of no further force and
effect; provided, however, that this Section 10.1(b) and Sections 7.2,
10.2, 10.3 and 12.2 through 12.16, and the obligations thereunder and the
rights and remedies for any breaches of this Agreement occurring prior to
such termination, in each case, shall survive any such termination.
10.2 Break-Up Fee.
(a) If Buyer receives a Break-Up Fee pursuant to Section 7.2, Buyer
may not claim any additional damages as a result of such termination and
Buyer hereby waives any right to seek any additional damages, including
consequential damages.
(b) As a condition of payment, and upon receipt of the Break-Up Fee
pursuant to Section 7.2, Buyer hereby irrevocably and unconditionally
releases, acquits, and forever discharges Seller and its successors,
assigns, officers, directors, employees, agents, stockholders,
subsidiaries, parent companies and other Affiliates (corporate or
otherwise) of and from any and all Released Claims, including, without
limitation, all Released Claims arising out of, based upon, resulting from
or relating to the negotiation, execution, performance, breach or otherwise
related to or arising out of the Transaction Documents or any agreement
entered into in connection therewith or related thereto.
10.3 Seller's Remedies.
(a) If, prior to the Closing, Buyer should breach this Agreement in
a manner which gives rise to a termination right pursuant to Section
10.1(a)(ii), then Seller shall
23
receive the Deposit and may pursue any and all other rights and remedies
available to it under law or equity, including the right to seek
consequential damages.
(b) If this Agreement is terminated by Seller pursuant to Section
10.1(a)(ii), Buyer and Seller shall promptly instruct the Escrow Agent to
release the Deposit to Seller. If this Agreement is terminated either by
Buyer or Seller pursuant to any provision of Section 10 (other than a
termination by Seller pursuant to Section 10.1(a)(ii)), then, Buyer and
Seller shall promptly instruct the Escrow Agent to release the Deposit to
Buyer.
SECTION 11. [INTENTIONALLY OMITTED]
SECTION 12. MISCELLANEOUS
-------------
12.1 Survival of Representations and Warranties and Covenants. Regardless
of any investigation at any time (whether before or after the execution of this
Agreement) made by or on behalf of any party hereto or of any information any
party may have in respect thereof, the representations and warranties contained
in this Agreement shall not survive the Closing. The covenants contained in this
Agreement that are performable in their entirety prior to or at Closing shall
not survive the Closing, and the covenants that are able to be performed after
Closing shall survive the Closing indefinitely until such are fully performed.
12.2 Expenses. Except as otherwise expressly set forth in this Agreement
to the contrary, each of the parties hereto agrees to be responsible for its own
costs, without right of reimbursement from the other, incurred by it incident to
the performance of its obligations hereunder, whether or not the transactions
contemplated by this Agreement shall be consummated, including those costs
incident to the preparation, execution and delivery of this Agreement and the
other Transaction Documents, and the fees and disbursements of legal counsel,
accountants and consultants employed by the respective parties in connection
with the transactions contemplated by this Agreement. In the event of a dispute
between Buyer and Seller in connection with this Agreement and the transactions
contemplated hereby, each of the parties hereto hereby agrees that, without
limiting in any respect any of its other rights and remedies, the prevailing
party shall be entitled to reimbursement by the other party of reasonable legal
fees and expenses incurred in connection with any action or proceeding.
12.3 Assignment. No party shall assign any of its rights or obligations
under this Agreement without the prior written consent of the other parties to
this Agreement and any attempted assignment without such written consent shall
be null and void and without legal effect.
12.4 Governing Law. This Agreement shall be governed by and construed and
interpreted in accordance with the Bankruptcy Code, to the extent applicable,
and the laws of the State of Texas applicable to agreements made and to be
performed entirely within such state, including all matters of construction,
validity and performance.
12.5 Amendment and Modification; Waiver. Buyer, on the one hand, and
Seller, on the other hand, may amend, modify and supplement this Agreement in
such manner as may be mutually agreed by them in writing. Any provision of this
Agreement may be waived only in a
24
writing signed by the party to be charged with such waiver. No course of dealing
between Buyer and Seller shall be effective to amend or waive any provision of
this Agreement.
12.6 Notices. All notices, requests, demands and other communications
hereunder shall be in writing and deemed to be duly given, (i) when delivered by
hand, with a record of receipt, (ii) the fourth day after mailing, if mailed by
certified or registered mail, return receipt requested with postage prepaid,
(iii) the day delivered by a nationally recognized overnight courier, with a
record of receipt, or (iv) the day of transmission, with confirmation of
receipt, if delivered by facsimile or telecopy during regular business hours
(which regular business hours shall be 9:00 am - 5:00 pm on each Business Day),
or the day after transmission, with confirmation of receipt, if delivered by
facsimile or telecopy after regular business hours, to the parties at the
following addresses or telecopy numbers (or to such other address or telecopy
number as a party may have specified by the notice given to the other party
pursuant to this provision):
If to Buyer:
Discount Media Products, LLC
830 Sivert Drive
Wood Dale, Illinois 60191
Attention: Robert K. Daly and Michael J. Cullen
Fax: ____________________________
with a copy to:
Chuhak & Tecson, P.C.
30 South Wacker Drive, Suite 2600
Attention: Donald J. Russ, Jr.
Chicago, Illinois 60606
Fax: (312) 444-9027
If to Seller:
The Tape Company
c/o Daisytek International Corporation
1025 Central Expressway South
Suite 200
Allen, Texas 75013
Attention: Dale Booth
Fax: (972) 424-4604
with a copy to:
Vinson & Elkins L.L.P.
2001 Ross Avenue
Suite 3700
Dallas, Texas 75201
25
Attention: Paul E. Heath
Facsimile: (214) 999-7976
or to such other addresses as either party may provide to the other in writing.
12.7 Entire Agreement. Except for any confidentiality agreements between
the parties not contained in this Agreement (which shall survive the execution
and delivery of this Agreement but shall terminate automatically upon the
Closing), this Agreement (including the Exhibits and Schedules hereto) cancels,
merges and supersedes all prior and contemporaneous understandings and
agreements relating to the subject matter of this Agreement, written or oral,
between the parties hereto and contains the entire agreement of the parties
hereto, and the parties hereto have no agreements, representations or warranties
relating to the subject matter of this Agreement which are not set forth herein.
12.8 Successors. This Agreement shall be binding upon and shall inure to
the benefit of each of the parties hereto and to their respective successors and
permitted assigns, and nothing in this Agreement, express or implied, is
intended to confer upon any other Person any rights or remedies of any nature
whatsoever under or by reason of this Agreement.
12.9 Counterparts. This Agreement may be executed in one or more
counterparts each of which shall be deemed an original but all of which together
shall constitute but one and the same instrument.
12.10 Headings. The headings used in this Agreement are for convenience
only and shall not constitute a part of this Agreement.
12.11 Schedules. All of the Exhibits and Schedules attached hereto are
incorporated herein and made a part of this Agreement by reference. Any
capitalized term used in any Exhibit or Schedule but not otherwise defined
therein shall have the meaning as defined in this Agreement.
12.12 Jurisdiction. During the Bankruptcy Cases, and prior to the entry of
a final decree by the Bankruptcy Court closing such cases, any suit, action or
proceeding between the parties hereto relating to this Agreement, or in any
other manner arising out of or relating to the transactions contemplated by or
referenced in this Agreement or any other Transaction Document shall be
commenced and maintained exclusively in the Bankruptcy Court. The parties hereto
submit themselves unconditionally and irrevocably to the personal jurisdiction
of such court.
12.13 Rules of Construction. Unless the context otherwise requires, as used
in this Agreement: (a) a term has the meaning assigned to it; (b) an accounting
term not otherwise defined has the meaning assigned to it in accordance with
GAAP; (c) "including" means including, without limitation; and (d) words in the
singular include the plural and words in the plural include the singular.
12.14 Access to Information. After the Closing Date, Buyer and Seller shall
grant to the other such access to their respective financial records and other
books and records in their possession related to their conduct of the Business
and such cooperation and assistance as shall
26
be reasonably required to enable each of them to complete their legal,
regulatory, stock exchange and financial reporting requirements, to complete
their Tax Returns or for other reasonable business purposes; including for the
Seller and any representative of Seller's bankruptcy estate to review and
analyze claims filed against such estate or avoidance actions held by such
estate. In the event that any such Tax Return becomes the subject of any audit
or investigation, Buyer and Seller shall give the other all reasonable
cooperation, access and assistance as needed during normal business hours with
respect to such financial data and other books and records as may be necessary
to enable such first party to defend any such audit or investigation. Each party
shall, for a period of six years after the Closing Date plus any additional time
during which such party has been advised that there is an ongoing Tax audit or
investigation with respect to such periods, keep such financial records and
other books and records reasonably accessible and not destroy or dispose of such
materials without the written consent of the Buyer or the Seller, as applicable;
provided no party shall be responsible or liable hereunder for, or as a result
of, any accidental loss or destruction of or damage to any such materials. Buyer
and Seller shall promptly reimburse the other for its reasonable out-of-pocket
expenses associated with requests made by such first party under this Section
12.14, but no other charges shall be payable by the requesting party to the
other party in connection with such requests.
12.15 Public Announcements.
(a) Neither Buyer nor Seller shall issue any press release or other
public announcement with respect to this Agreement or the transactions
contemplated hereby without the prior written approval of the other, except that
(i) after consultation with the other party, a party or its Affiliate shall be
permitted to make disclosures to the public or to any Governmental Authority as
such party's counsel shall deem necessary under Applicable Law or as may be
mutually agreed in advance, and (ii) Seller may provide this Agreement to its
lenders and the Committee and other Persons in connection with Seller's
Bankruptcy Cases.
(b) Notwithstanding anything herein to the contrary, the parties
hereto (and each employee, representative, Affiliate or other agent of the
parties hereto) may disclose to any and all Persons, without limitation of any
kind, the U.S. federal income tax treatment and tax structure of the
transactions contemplated herein and all materials of any kind (including
opinions and other tax analyses) that are provided to the parties hereto
relating to such tax treatment and tax structure. For this purpose, "tax
structure" is limited to facts relevant to the U.S. federal income tax treatment
of the transactions contemplated herein and does not include information
relating to the identity of the Parties hereto, their respective Affiliates,
agents or advisors.
12.16 Severability. If any term or other provision of this Agreement is
invalid, illegal, or incapable of being enforced under Applicable Law, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated herein are not affected in any manner adverse to any party. Upon
such determination that any term or other provision is invalid, illegal, or
incapable of being enforced, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in a mutually acceptable manner in order that the
transactions contemplated herein are consummated as originally contemplated to
the fullest extent possible.
27
12.17 "AS IS" TRANSACTION. BUYER HEREBY ACKNOWLEDGES AND AGREES THAT,
EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN, SELLER MAKES NO (AND SELLER
EXPRESSLY DISCLAIMS AND NEGATES ANY) REPRESENTATIONS OR WARRANTIES OF ANY KIND,
WRITTEN OR ORAL, STATUTORY, EXPRESS OR IMPLIED, WITH RESPECT TO THE TRANSFERRED
ASSETS OR ANY OTHER MATTER WHATSOEVER, INCLUDING, WITHOUT LIMITATION, INCOME TO
BE DERIVED OR EXPENSES TO BE INCURRED IN CONNECTION WITH THE TRANSFERRED ASSETS,
THE PHYSICAL CONDITION OF ANY PART OF THE TRANSFERRED ASSETS, THE ENVIRONMENTAL
CONDITION OR OTHER MATTER RELATING TO THE PHYSICAL CONDITION OF ANY LEASED REAL
PROPERTY, THE ZONING OF ANY SUCH LEASED REAL PROPERTY, THE VALUE OF THE
TRANSFERRED ASSETS (OR ANY PORTION THEREOF), THE TRANSFERABILITY OF THE
TRANSFERRED ASSETS, THE TERMS, AMOUNT, VALIDITY OR ENFORCEABILITY OF ANY ASSUMED
LIABILITIES, THE TITLE OF THE TRANSFERRED ASSETS (OR ANY PORTION THEREOF), THE
MERCHANTABILITY OR FITNESS OF THE TRANSFERRED ASSETS FOR ANY PARTICULAR PURPOSE,
OR ANY OTHER MATTER OR THING RELATING TO THE TRANSFERRED ASSETS OR ANY PORTION
THEREOF. WITHOUT IN ANY WAY LIMITING THE FOREGOING, EXCEPT AS OTHERWISE
EXPRESSLY PROVIDED HEREIN, SELLER HEREBY DISCLAIMS ANY WARRANTY, EXPRESS OR
IMPLIED, OF MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE AS TO ANY
PORTION OF THE TRANSFERRED ASSETS. BUYER FURTHER ACKNOWLEDGES THAT BUYER HAS
CONDUCTED AN INDEPENDENT INSPECTION AND INVESTIGATION OF THE PHYSICAL CONDITION
OF THE TRANSFERRED ASSETS AND ALL SUCH OTHER MATTERS RELATING TO OR AFFECTING
THE TRANSFERRED ASSETS AS BUYER DEEMED NECESSARY OR APPROPRIATE AND THAT IN
PROCEEDING WITH ITS ACQUISITION OF THE TRANSFERRED ASSETS, EXCEPT FOR ANY
REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH HEREIN, BUYER IS DOING SO
BASED SOLELY UPON SUCH INDEPENDENT INSPECTIONS AND INVESTIGATIONS. ACCORDINGLY,
SUBJECT TO BUYER'S RIGHTS UNDER THIS AGREEMENT, BUYER WILL ACCEPT THE
TRANSFERRED ASSETS AT THE CLOSING "AS IS," "WHERE IS," AND "WITH ALL FAULTS" AND
WITHOUT RECOURSE AGAINST SELLER.
[Signature page follows]
28
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
SELLER:
THE TAPE COMPANY
Debtor in Possession
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
BUYER:
DISCOUNT MEDIA PRODUCTS, LLC
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
S-1
Exhibit A
Leased Real Property
--------------------
Ohio: 11240 Cornell Park Drive
Suite 100
Blue Ash, Ohio
Washington: 2823 152nd Avenue, N.E.
Redmond, Washington 98052
Pennsylvania: Folcroft West Business Park
Darby Commons, Fairfax #5
Folcroft, PA 19323
Texas: 1525 Capital Drive
Suite 110
Carrollton, TX 75066
A-1
Exhibit B
Procedure Approval Order
------------------------
B-1
Exhibit C
Form of Deposit Escrow Agreement
--------------------------------
THIS DEPOSIT ESCROW AGREEMENT (this "Agreement") is made and entered into
as of ____________, 2003, by and among The Tape Company, a debtor-in-possession
and a Delaware corporation ("Seller"), Discount Media Products, LLC, an Illinois
limited liability company (the "Buyer"), and Wells Fargo Bank Texas, N.A., a
national banking association with its headquarters in Dallas, Texas (the "Escrow
Agent").
RECITALS
--------
A. Pursuant to that certain Asset Purchase Agreement dated as of August
___, 2003, by and between the Seller and the Buyer (the "Purchase Agreement"),
concurrently with the execution hereof, the Buyer has agreed to acquire certain
assets and properties of the Seller that are used or held for use in the
Business (the "Acquisition"). Unless otherwise defined herein, capitalized terms
used herein shall have the meanings assigned to them in the Purchase Agreement.
B. The Buyer and the Seller wish to enter into this Agreement in order
to provide security for the Buyer's obligations with respect to all or a portion
of the damages that may become payable by the Buyer to the Seller under the
terms of the Purchase Agreement.
AGREEMENTS
----------
NOW, THEREFORE, in consideration of the recitals and of the respective
agreements and covenants contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties, intending to be legally bound hereby, agree as follows:
1. Appointment of the Escrow Agent. The Escrow Agent is hereby appointed
escrow agent and depository for the Buyer and the Seller with respect to the
Escrowed Property (as hereinafter defined).
2. Escrow. Concurrently with the execution hereof and pursuant to the
terms of the Purchase Agreement, the Buyer shall deliver to the Escrow Agent the
amount of $380,000 in cash by wire transfer of immediately available funds to an
account designated by the Escrow Agent as the "Tape Company Escrow Account" (the
"Escrow Account") to secure the Buyer's obligations with respect to all or a
portion of the damages that may become payable by the Buyer to the Seller under
the terms of the Purchase Agreement (the "Escrowed Property"). The Buyer and the
Seller direct that the Escrowed Property and any and all interest, dividends,
income or other proceeds earned thereon from and after the date hereof (the
"Interest") be held and disposed of by the Escrow Agent as herein provided.
3. Disbursement of Escrow. The Escrowed Property and Interest, if any,
shall be held and disbursed by the Escrow Agent as follows:
C-1
(a) Upon the Closing. If the Closing of the transactions
contemplated by the Purchase Agreement occurs, then upon receipt of written
instructions from the Buyer and the Seller, the Escrow Agent shall (i) deliver
the Escrowed Property to the Seller, and (b) deliver the Interest not previously
distributed pursuant to Section 3(c), if any, to the Buyer.
(c) Failure to Close.
(i) If the Purchase Agreement is terminated and the Buyer and
the Seller agree on who is entitled to the Escrowed Property, then upon
receipt of joint written instructions from the Buyer and the Seller, the
Escrow Agent (1) shall deliver the Escrowed Property as set forth in such
instructions to the party designated in such instructions and (2) deliver
the Interest not previously distributed pursuant to Section 3(c), if any,
to the Buyer;
(ii) If the Purchase Agreement is terminated and the Buyer and
the Seller do not agree on who is entitled to the Escrowed Property, then,
upon a Final Determination (as defined below), the prevailing party shall
submit such Final Determination to the Escrow Agent, together with an
opinion of counsel for the presenting party reasonably satisfactory to the
Escrow Agent to the effect that such decision is a Final Determination, and
the Escrow Agent shall (A) deliver the Escrowed Property as instructed in
such Final Determination, and (B) deliver any Interest then held by the
Escrow Agent to Buyer.
A "Final Determination" shall mean a final non-appealable judgment of
a court of competent jurisdiction and shall be accompanied by an opinion of
counsel for the presenting party reasonably satisfactory to the Escrow Agent to
the effect that such judgment is a Final Determination. The Escrow Agent shall
act on such Final Determination (and opinion of counsel) without further
question.
(d) Interest. Any Interest on the Escrowed Property (other than that
Interest distributed as provided in Section 3(a) or Section 3(b)) shall be
distributed to the Buyer within ten days of the end of each calendar quarter in
which the Interest was paid. Notwithstanding anything to the contrary contained
herein, any provision hereof requiring the disbursement of Interest by the
Escrow Agent shall be construed to refer only to Interest which has accrued and
been paid to the Escrow Agent. Any Interest which has accrued and, except for
the fact that it has not been paid to the Escrow Agent, would otherwise be
required to be disbursed, shall be disbursed within two Business Days of being
paid.
(e) Early Release of Escrowed Property. Prior to the release of all
of the Escrowed Property in accordance with Section 3(a) or Section 3(b) hereof,
the Buyer and the Seller may, by joint written notice, instruct the Escrow Agent
to release the Escrowed Property and Interest to the Buyer and/or the Seller in
such amounts as are set forth in the written instructions, and the Escrow Agent
shall be entitled to conclusively rely without liability thereon.
4. Investment of Escrowed Property. The Escrow Agent shall, from time to
time invest and reinvest the Escrowed Property, if any, in such of the following
investments as the
C-2
Buyer and the Seller may from time to time elect by joint notice in writing
("Permitted Investments"):
(i) Any U.S. Government or U.S. Government Agency security;
(ii) Any commercial paper rated A1/P1 or better;
(iii) Any certificate of deposit or time deposit in any bank
with a long-term debt rating of A or better from Moody's Investors
Services Inc. or Standard & Poor's Corporation;
(iv) The Wells Fargo 100% Treasury Fund; or
(v) The following institutional money market funds:
(1) Dreyfus Treasury Cash Management Fund
(2) Federated Treasury Obligations Fund
(3) AIM Treasury Portfolio
In the absence of joint written instructions to the contrary from the Buyer and
the Seller, the Escrow Agent shall invest the Escrowed Property in Permitted
Investments set forth in clause (iv) of this Section 4(a).
(b) Any Interest received on such investment and reinvestment of the
Escrowed Property shall be reinvested as provided in this Section 4 until
distributed as provided in Section 3.
(c) The Escrow Agent will act upon investment instructions the
Business Day after such instructions are received, provided the requests are
communicated within a sufficient amount of time to allow the Escrow Agent to
make the specified investment. Instructions received after an applicable
investment cutoff deadline will be treated as being received by the Escrow Agent
on the next Business Day, and the Escrow Agent shall not be liable for any loss
arising directly or indirectly, in whole or in part, from the inability to
invest the Escrowed Property on the day the instructions are received. The
Escrow Agent shall not be liable for any loss incurred by the actions of third
parties or by any loss arising by error, failure or delay in making of an
investment or reinvestment, and the Escrow Agent shall not be liable for any
loss of principal or income in connection therewith, unless such error, failure
or delay results from the Escrow Agent's gross negligence or willful misconduct.
As and when the Escrowed Property or any Interest, if any, or any portion
thereof is to be released under this Agreement, the Escrow Agent shall cause the
Permitted Investments to be converted into cash, and the Escrow Agent shall not
be liable for any loss of principal or income in connection therewith. None of
the parties hereto shall be liable for any loss of principal or income due to
the choice of Permitted Investments in which the Escrowed Property is invested
or the choice of Permitted Investments that are converted into cash pursuant to
this Section 4.
5. The Escrow Agent. To induce the Escrow Agent to act hereunder, it is
further agreed by the Buyer and the Seller that:
C-3
(a) The Escrow Agent shall not be under any duty to give the
Escrowed Property held by it hereunder any greater degree of care than it gives
its own similar property and shall not be required to invest any Escrowed
Property held hereunder except as directed in this Agreement. Uninvested funds
held hereunder shall not earn or accrue interest.
(b) This Agreement expressly sets forth all the duties of the Escrow
Agent with respect to any and all matters pertinent hereto. No implied duties or
obligations shall be read into this Agreement against the Escrow Agent. The
Escrow Agent shall not be bound by the provisions of any agreement among the
other parties hereto except this Agreement.
(c) The Escrow Agent shall not be liable, except for its own gross
negligence or willful misconduct and, except with respect to claims based upon
such gross negligence or willful misconduct that are successfully asserted
against the Escrow Agent, the Buyer and the Seller shall, severally and not
jointly, indemnify and hold harmless the Escrow Agent (and any successor escrow
agent) from and against one-half of any and all losses, liabilities, claims,
actions, damages, and expenses, including reasonable attorneys' fees and
disbursements, arising out of and in connection with this Agreement. Without
limiting the foregoing, the Escrow Agent shall in no event be liable in
connection with its investment or reinvestment of any cash held by it hereunder
in good faith, in accordance with the terms hereof, including without
limitation, any liability for any delays (not resulting from its gross
negligence or willful misconduct) in the investment or reinvestment of the
Escrowed Property or any loss of interest incident to any such delays. This
Section 5(c) shall survive notwithstanding any termination of this Agreement or
the resignation of the Escrow Agent.
(d) The Escrow Agent shall be entitled to rely in good faith upon
any order, judgment, certification, demand, notice, instrument or other writing
delivered to it hereunder in accordance with the terms hereof without being
required to determine the authenticity or the correctness of any fact stated
therein or the propriety or validity of the service thereof. The Escrow Agent
may act in reliance upon any instrument or signature believed by it in good
faith to be genuine and may assume that any person purporting to give receipt or
advice or make any statement or execute any document in connection with the
provisions hereof has been duly authorized to do so.
(e) The Escrow Agent may act pursuant to the advice of counsel with
respect to any matter relating to this Agreement and shall not be liable for any
action taken or omitted in good faith in accordance with such advice.
(f) The Escrow Agent does not have any interest in the Escrowed
Property deposited hereunder but is serving as escrow holder only and has only
possession thereof. The Buyer and the Seller shall each pay or reimburse the
Escrow Agent upon request for one-half of any transfer taxes or other taxes
relating to the Escrowed Property incurred in connection herewith and shall
indemnify and hold harmless the Escrow Agent from any amounts that it is
obligated to pay in the way of such taxes. Any payments of income from the
Escrow Account shall be subject to withholding regulations therein in force with
respect to United States taxes. It is understood that the Escrow Agent shall be
responsible for income reporting only with respect to income earned on
investment of the Escrowed Property and is not responsible for any other
C-4
reporting. This Section 5(f) shall survive notwithstanding any termination of
this Agreement or the resignation of the Escrow Agent.
(g) The Escrow Agent makes no representation as to the validity,
value, genuineness or the collectability of any security or other document or
instrument held by or delivered to it.
(h) The Escrow Agent shall not be called upon to advise any party as
to the wisdom in selling or retaining or taking or refraining from any action
with respect to any securities or other property deposited hereunder.
(i) The Escrow Agent (and any successor escrow agent) may at any
time resign as such by delivering the Escrowed Property and Interest, if any, to
any successor escrow agent jointly designated by the Buyer and the Seller in
writing or to any court of competent jurisdiction, whereupon the Escrow Agent
shall be discharged of and from any and all further obligations arising in
connection with this Agreement. The resignation of the Escrow Agent will take
effect on the date (the "Resignation Date") which is the earlier to occur of:
(i) the date a successor is appointed (including a court of competent
jurisdiction) or (ii) the date which is 30 days after the date of delivery of
its written notice of resignation to the other parties hereto. Upon the
appointment of a successor escrow agent, such successor escrow agent shall
deliver written notice to the Buyer and the Seller on the appointment of such
successor escrow agent. If at the Resignation Date the Escrow Agent has not
received a designation of a successor escrow agent, the Escrow Agent's sole
responsibility after the Resignation Date shall be to safekeep the Escrowed
Property and Interest, if any, until receipt of a designation of successor
escrow agent or a joint written disposition instruction by the other parties
hereto.
(j) The Escrow Agent shall have no responsibility for the contents
of any writing of any third party contemplated herein as a means to resolve
disputes and may rely without any liability upon the contents thereof.
(k) In the event of any disagreement between the Buyer and the
Seller resulting in adverse claims or demands being made in connection with the
Escrowed Property and Interest, if any, or in the event that the Escrow Agent in
good faith is in doubt as to what action it should take hereunder, the Escrow
Agent shall be entitled to retain the Escrowed Property and Interest, if any,
until the Escrow Agent shall have received (i) a Final Determination (as defined
in Section 3(b) and accompanied by the opinion of counsel referred to in Section
3(b)) directing delivery of the Escrowed Property and Interest, if any, or (ii)
a written agreement executed by the Buyer and the Seller directing delivery of
the Escrowed Property and Interest, if any, in which event the Escrow Agent
shall disburse the Escrowed Property and Interest, if any, in accordance with
such Final Determination or agreement. The Escrow Agent shall act on such Final
Determination or agreement without further question.
(l) The compensation of the Escrow Agent (as payment in full) for
the services to be rendered by the Escrow Agent hereunder shall be the amount of
$2,500 for the initial year paid by the Buyer at the time of execution of this
Agreement and $2,000 annually thereafter, together with reimbursement for all
reasonable expenses, disbursements and advances incurred or made by the Escrow
Agent in performance of its duties hereunder (including
C-5
reasonable fees, expenses and disbursements of its counsel). All fees and
expenses of the Escrow Agent hereunder shall be paid by the Buyer. Any fees or
expenses of the Escrow Agent or its counsel which are not paid as provided for
herein may be taken from any property held by the Escrow Agent hereunder.
(m) No prospectuses, press releases, reports and promotional
material or other similar materials which mentions the Escrow Agent's name or
the rights, powers, or duties of the Escrow Agent shall be issued by the other
parties hereto or on such parties' behalf unless the Escrow Agent shall first
have given its specific written consent thereto.
(n) The other parties hereto authorize the Escrow Agent, for any
securities held hereunder, to use the services of any United States central
securities depository it deems appropriate, including, but not limited to, the
Depository Trust Company and the Federal Reserve Book Entry System.
6. Time of Performance. Whenever, under the terms hereof, the time for
performance of any provision shall fall on a date which is not a regular
Business Day of the Escrow Agent, the performance thereof on the next succeeding
regular Business Day by the Escrow Agent shall be deemed to be in full
compliance with the terms hereof.
7. Amendment; Termination. This Agreement may be modified only by a
writing signed by all of the parties hereto. This Agreement shall terminate
without further action of any party when all of the terms hereof shall have been
fully performed.
8. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, and such counterparts shall constitute and be
one and the same instrument.
9. Headings. The paragraph headings contained herein are for convenience
of reference only and are not intended to define, limit, or describe the scope
or intent of any provision of this Agreement.
10. Notices. All notices, requests, consents, waivers, and other
communications required or permitted to be given hereunder shall be in writing
and shall be deemed to have been duly given (a) if transmitted by facsimile,
upon acknowledgment of receipt thereof in writing by facsimile or otherwise; (b)
if personally delivered, upon delivery or refusal of delivery; (c) if mailed by
registered or certified United States mail, return receipt requested, postage
prepaid, upon delivery or refusal of delivery; or (d) if sent by a nationally
recognized overnight delivery service, upon delivery or refusal of delivery. All
notices, consents, waivers, or other communications required or permitted to be
given hereunder shall be addressed to the respective party to whom such notice,
consent, waiver, or other communication relates at the following addresses:
C-6
If to Buyer:
Discount Media Products, LLC
830 Sivert Drive
Wood Dale, Illinois 60191
Attention: Robert K. Daly and Michael J. Cullen
Fax: ____________________________
with a copy to:
Chuhak & Tecson, P.C.
30 South Wacker Drive, Suite 2600
Chicago, Illinois 60606
Attention: Donald J. Russ, Jr.
Fax: (312) 444-9027
If to Seller:
The Tape Company
c/o Daisytek International Corporation
1025 Central Expressway South
Suite 200
Allen, Texas 75013
Attention: Dale Booth
Fax: (972) 424-4604
with a copy to:
Vinson & Elkins L.L.P.
2001 Ross Avenue
Suite 3700
Dallas, Texas 75201
Attention: Paul E. Heath
Facsimile: (214) 999-7976
if to the Escrow Agent, to:
Wells Fargo Bank Texas, N.A.
1445 Ross Avenue, 2nd Floor
MAC: T5303-022
Dallas, Texas 75202
Attn: Nancye Patterson
Telephone: (214) 777-4078
Facsimile: (214) 777-4086
or to such other addresses as either party may provide to the other in writing.
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11. Severability. The invalidity, illegality or unenforceability of any
provision of this Agreement shall in no way affect the validity, legality or
enforceability of any other provision and if any provision is held to be
unenforceable as a matter of law, the other provisions shall not be affected
thereby and shall remain in full force and effect.
12. Taxpayer Identification Numbers. The parties acknowledge that payment
of any Interest earned on the Escrowed Property invested in this escrow, or the
distribution of any other amounts under this escrow, will be subject to backup
withholding penalties unless a properly completed Internal Revenue Service Form
W-8 or W-9 certification is submitted to the Escrow Agent by the party entitled
to receive such payment. Any Form W-8 or W-9 certification shall be submitted to
the Escrow Agent on or before the execution of this Agreement.
13. Waivers. Any waiver by any party hereto of any breach of or failure
to comply with any provision of this Agreement by any other party hereto shall
be in writing and shall not be construed as, or constitute, a continuing waiver
of such provision, or a waiver of any other breach of, or failure to comply
with, any other provision of this Agreement.
14. Assignment; Third Parties. No party may assign any of its rights or
obligations under this Agreement without the written consent of the other
parties, except as provided in Section 5(i). Subject to the foregoing, this
Agreement shall be binding upon and inure solely to the benefit of the parties
hereto and their respective permitted successors and assigns, heirs,
administrators and representatives and shall not be enforceable by or inure to
the benefit of any other third party, except as provided in Section 5(i) with
respect to a resignation by the Escrow Agent.
15. Governing Law; Choice of Forum. This Agreement shall be construed in
accordance with and governed by the internal law of the State of Texas (without
reference to its rules as to conflicts of law).
16. Waiver of Offset Rights. The Escrow Agent hereby waives any and all
rights to offset that it may have against the Escrowed Property and Interest, if
any, including, without limitation, claims arising as a result of any claims,
amounts, liabilities, costs, expenses or other losses ("Claims") that the Escrow
Agent may be otherwise entitled to collect from any party to this Agreement,
other than Escrow Agent Claims arising under this Agreement.
C-8
IN WITNESS WHEREOF, the parties have duly executed this Agreement to be
effective as of the date first written above.
BUYER:
DISCOUNT MEDIA PRODUCTS, LLC
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
SELLER:
THE TAPE COMPANY
Debtor-in-Possession
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
ESCROW AGENT:
WELLS FARGO BANK
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
C-9
Exhibit D
Form of Bill of Sale and Assignment
-----------------------------------
KNOW ALL MEN BY THESE PRESENTS THAT, The Tape Company, a
debtor-in-possession and a Delaware corporation ("Grantor"), in consideration of
the payment by __________________________, a __________ _________ (the
"Grantee"), of the consideration specified in the Purchase Agreement (as
hereinafter defined), the receipt and sufficiency of which are hereby
acknowledged, does hereby sell, convey, transfer, assign and deliver unto the
Grantee, pursuant to that certain Asset Purchase Agreement, dated as of August
__, 2003 (the "Purchase Agreement"), by and between the Grantor and the Grantee,
all of the Grantor's rights, titles, and interests in and to the Transferred
Assets (as defined in the Purchase Agreement).
This Bill of Sale and Assignment shall be subject to the terms and
conditions set forth in the Purchase Agreement and nothing contained in this
Bill of Sale and Assignment shall be construed to limit, terminate or expand the
representations, warranties and covenants set forth in the Purchase Agreement.
The Grantor covenants and agrees, for the benefit of the Grantee and its
successors and assigns, without further consideration, and whenever and as often
as required so to do by the Grantee and its successors and assigns, to execute
and deliver to the Grantee such other instruments of conveyance, transfer, and
assignment and take such other action as the Grantee may require more fully and
effectively to transfer, assign and convey to and vest in the Grantee and its
successors and assigns, and to put the Grantee and its successors and assigns in
actual possession and operating control of, the Transferred Assets.
The Grantor hereby constitutes and appoints the Grantee and its successors
and assigns Grantor's true and lawful attorneys with full power of substitution,
in Grantor's name and stead but on behalf and for the benefit of the Grantee and
its successors and assigns, to demand and receive any and all of the Transferred
Assets and to give receipts and releases for and in respect of the same, and any
part thereof, and from time to time to institute and prosecute, at the expense
and for the benefit of the Grantee and its successors and assigns, any and all
proceedings at law, in equity or otherwise which the Grantee or its successors
or assigns may deem proper for the collection or reduction to possession of any
of the Transferred Assets or for the collection and enforcement of any claim or
right of any kind hereby sold, conveyed, transferred and assigned, or intended
so to be, and to do all acts and things in relation to the Transferred Assets
which the Grantee or its successors or assigns shall deem desirable. The
foregoing powers are coupled with an interest and are and shall be irrevocable
by the Grantor or by dissolution of the Grantor or in any manner or for any
reason whatsoever.
Nothing in this Bill of Sale and Assignment, express or implied, is
intended or shall be construed to confer upon, or to give to, any person, firm,
corporation or other entity other than the Grantor, the Grantee, and their
respective successors and assigns, any right or remedy under, or by reason of
this Bill of Sale and Assignment or any term, covenant or condition hereof, and
all the terms, covenants, conditions, promises and agreements contained in this
Bill of Sale and
D-1
Assignment shall be for the sole and exclusive benefit of the Grantor, the
Grantee and their respective successors and assigns.
The terms and conditions of this Bill of Sale and Assignment shall be
governed and construed in accordance with the laws of the State of Texas.
IN WITNESS WHEREOF, each of the undersigned has executed this Bill of Sale
and Assignment as of this __ day of August, 2003
THE TAPE COMPANY
Debtor-in-Possession
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
D-2
Exhibit E
Form of Assumption Agreement
----------------------------
THIS ASSUMPTION AGREEMENT (the "Agreement") is made and entered into as of
this __ day of August, 2003, by and between The Tape Company a
debtor-in-possession ("Seller"), and Discount Media Products, LLC, an Illinois
limited liability company ("Buyer").
W I T N E S S E T H:
- - - - - - - - - --
WHEREAS, concurrently with the execution and delivery hereof, the Seller
has sold to the Buyer certain assets and properties of the Seller that are used
or held for use in the business of distributing computer and office supplies and
products, pursuant to that certain Asset Purchase Agreement, dated as of August
__, 2003 (the "Purchase Agreement"), by and between the Seller and the Buyer;
and
WHEREAS, pursuant to the Purchase Agreement, the Buyer has agreed to assume
certain liabilities and obligations of the Seller.
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Buyer hereby covenants and agrees
with the Seller as follows:
1. Effective as of the date hereof, the Buyer hereby agrees to assume
and be solely responsible for the payment, performance and discharge of all of
the Assumed Liabilities (as defined in the Purchase Agreement).
2. This Agreement shall be subject to the terms and conditions set forth
in the Purchase Agreement, and nothing contained in this Assumption Agreement
shall be construed to limit, terminate or expand the representations, warranties
and covenants set forth in the Purchase Agreement.
3. The Buyer and the Seller hereby agree to execute and deliver any and
all additional documents that the Buyer or the Seller may reasonably request in
order to more fully effect the agreements set forth in this Agreement.
4. The undertakings, covenants, and agreements set forth herein shall be
binding upon and inure to the benefit of the Buyer and the Seller and their
respective successors and assigns.
5. The terms and conditions of this Agreement shall be governed and
construed in accordance with the laws of the State of Texas.
E-1
IN WITNESS WHEREOF, Buyer and Seller have executed this Agreement as of the
date first written above.
SELLER:
THE TAPE COMPANY
Debtor-in-Possession
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
BUYER:
DISCOUNT MEDIA PRODUCTS, LLC
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
E-2
Exhibit F
Business Employees
------------------
All employees employed by Seller and who work out of the Leased Real
Property, and those employees from Seller's Chicago Office to be identified no
later than five (5) days prior to the Closing.
F-1