EXHIBIT
2.1
ASSET PURCHASE AGREEMENT
THIS
ASSET PURCHASE AGREEMENT (the "Agreement"), dated as of April
1,
2007, is made by and among OPTIMA TECHNOLOGIES, LLC, a Delaware
limited
liability company ("Buyer"), AMERICAN TONERSERV CORP., a Delaware
corporation
("ATS"), OPTIMA TECHNOLOGIES, L.L.C., a Nevada limited liability
company
("Seller"), and STEVEN R. JENSEN ("Selling Member").
RECITALS
A.
Seller is
engaged in multiple lines of business, including the
business of print management, printing supplies and repair services
(the
"Printer Business"), which is located at 6041 Siesta Lane, Port
Richey,
Florida (the "Premises").
B.
Selling Member
owns directly or indirectly the entire outstanding
membership interest of Seller.
C.
Buyer is a
wholly-owned subsidiary of ATS.
D.
Seller and
Selling Member desire to sell and Buyer desires to
purchase certain assets of the Printer Business, on the terms and
conditions
set forth in this Agreement.
NOW,
THEREFORE, in consideration of the foregoing and for other good
and
valuable consideration, the receipt and adequacy of which are
hereby
acknowledged, the parties hereto agree as follows:
AGREEMENT
1.
Definitions.
Capitalized terms used
herein shall have the meanings
ascribed thereto in this Agreement, a list of which is included in
the
Schedule of Definitions attached hereto as Schedule 1.
2.
Sale and
Purchase of Assets.
Seller shall sell, transfer, convey,
assign and deliver to Buyer, and Buyer shall purchase from Seller,
on the
Closing Date (as defined in Section 8 hereof) all of Seller's
right, title
and interest in and to all of the assets and rights (the "Purchased
Assets")
of every type and description, used in or relating to the Printer
Business
set forth in this Section 2:
(a) Equipment.
The furniture,
fixtures, equipment, motor
vehicles, machines, tools, inventory, supplies, leasehold
improvements, trade
fixtures, and other tangible assets which are owned by Seller and
used
primarily or exclusively in Seller's operation of the Printer
Business as of
the Closing Date (collectively, "Equipment") set forth on the
Schedule of
Equipment attached hereto as Schedule 2(a). The Equipment shall include
the
following: (i) the
service trucks and the equipment, tools, supplies, and
parts inventory customarily carried thereon; (ii) the handheld
computer
phones and other truck-based service equipment; (iii) the printers
rented or
borrowed, or intended to be rented or borrowed, by customers of the
Printer
Business; and (iv) computers, printers, copiers, fax machines, and
other
equipment used in the operation of the Printer Business, in each
case as set
forth on the Schedule of Equipment.
(b) Inventory.
All inventory,
wherever located, including raw
materials, work-in-process, packaging, finished goods, spare parts
and shop
and production supplies, produced by or employed primarily or
exclusively in
Seller's operation of the Printer Business as of the Closing
Date
("Inventory") set forth on the Schedule of Inventory attached
hereto as
Schedule 2(b).
(c) Customers
and Goodwill. All
rights to solicit and service
Seller's customers and potential customers of the Printer Business
as of the
Closing Date, together with all goodwill related thereto, and all
lists,
records, files, and billing histories associated therewith.
(d) Telephone
and Facsimile Numbers.
All of Seller's rights to
the telephone numbers 727.842.9977, 727.586.1137, 813.891.1297,
407.841.1177,
and 800.448.0345 and the facsimile number 727.847.5653.
(e) Intellectual
Property. All
Intellectual Property (as defined
below) of Seller possessed or owned by Seller and employed
primarily or
exclusively in Seller's operation of the Printer Business as of the
Closing
Date set forth in the Schedule of Intellectual Property attached
hereto as
Schedule 2(e).
As used in this Agreement, "Intellectual Property" shall mean
any
and all intellectual property rights recognized in any country
or
jurisdiction in the world including, without limitation, trade
names,
trademarks (including common-law trademarks), service marks, domain
names and
internet content (including websites), art work, packaging, logos,
all
domestic and foreign copyrights, the respective registrations
and
applications for any of the foregoing, all domestic and foreign
patents,
their applications and registrations, all technology, know-how,
trade
secrets, formulas, drawings, designs, systems, source code, object
code,
design documents, test documents, technical manuals, customer
lists, product
information, development work-in-progress. Intellectual Property includes
all goodwill associated with all of the foregoing.
(f) Permits.
All Permits (as
defined in Section 9(t) hereof) to
the extent assignable or transferable.
(g) Contract
Rights, and Other Intangible Assets. All of
Seller's right, title, and interest in, to, and under the Contracts
(as
defined in Section 9(q) hereof), and all warranties, guarantees,
and service
contracts relating to any Equipment as of the Closing Date.
(h) Books and
Records. All books and
records (including all
discs, tapes, and other media-storage data and information)
relating
primarily or exclusively to Seller's operation of the Printer
Business as of
the Closing Date, other than the corporate records of Seller.
(i) Other
Records, Manuals and Documents. All mailing lists,
customer lists, billing histories, supplier lists, vendor data,
marketing
information and procedures, sales and customer files, advertising
and
promotional materials, current product material, equipment
maintenance
records, warranty information, records of plant operations and the
source and
disposition of materials used and produced in such plants, standard
forms of
documents, manuals of operations or business procedures and other
similar
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procedures, and all other information of Seller relating primarily
or
exclusively to Seller's operation of the Printer Business as of the
Closing
Date.
(j) Insurance
Proceeds. All
insurance proceeds paid or payable
to Seller in respect of any damage to or destruction or loss of any
assets or
rights of Seller reflected on any of the Schedules referred to in
this
Section 2, including any assets of Seller that, as far as could
reasonably be
foreseen, would have been included in the Purchased Assets but for
such
damage, destruction or loss.
3.
Excluded Assets.
Excluded from the
definition of Purchased Assets
and the purchase and sale hereunder and specifically retained as
the property
of Seller after the Closing Date, are any assets not specifically
described
in Section 2 (the "Excluded Assets"), including without limitation:
(i) all
cash on hand as of the Closing Date, subject to payment of any
revenue
adjustment deficiency contemplated by Section 7(b)(4)(A) hereof;
(ii) all
accounts receivable of the Printer Business as of the Closing Date,
the
collections of which shall be the sole responsibility of Seller;
(iii) any
inventory or equipment not specifically set forth on the Schedule
of
Inventory or the Schedule of Equipment, respectively; (iv)
investment assets
of any kind; (v) security deposits and deposits of any kind; (vi)
books and
records of Seller that do not relate to the operations of the
Printer
Business, including the articles of incorporation, corporate seal,
stock
books, minute books and other corporate records having exclusively
to deal
with the corporate organization and capitalization of Seller; and
(vii) all
rights to receive any insurance proceeds or refunds relating to any
Taxes or
workers' compensation premiums paid by Seller prior to the Closing
Date.
4.
Assumption of
Liabilities.
(a) Assumed
Liabilities. At the
Closing (as defined in Section 8
hereof) and upon the terms and conditions contained in this
Agreement and the
Assumption Agreement (as defined in Section 6 hereof), Buyer shall
assume and
agree to discharge and perform the following (and only the
following)
liabilities of Seller (the "Assumed Liabilities"):
(1) Prepaid
Contracts.
Undischarged liabilities of Seller
not to exceed $93,865.99 in the aggregate for the services to be
performed
and the products to be provided from and after the Closing Date
under any
Prepaid Contracts (as defined below) that are listed on the
Schedule of
Prepaid Contracts attached hereto as Schedule 4(a)(1). The Schedule of
Prepaid Contracts shall list for each Prepaid Contract, (i) the
name of the
customer, (ii) period for which the customer has paid in advance,
(iii) the
amount of the customer's payment in advance, (iv) the percentage of
services
to be performed and the products to be provided from and after the
Closing
Date, and (v) the amount of services to be performed and the
products to be
provided after the Closing Date, which amount (the "Prepaid
Revenue") shall
be equal to the product of (A) the amount described in clause (iii)
above and
(B) the percentage described in clause (iv) above.
As used in this Agreement, "Prepaid Contracts" shall mean
Seller's contracts with customers of the Printer Business pursuant
to which
such customer has paid Seller in advance for services to be
performed and the
products to be provided during the period of time contemplated by
such
contract (usually quarterly).
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(2) Customer
Contracts. Liabilities
of Seller under any
written Contract with a customer of the Printer Business by which
Seller is
bound on the Closing Date (excluding the Prepaid Contracts), which
(i) was
made in the ordinary course of business, (ii) was disclosed to
Buyer pursuant
to Section 9(q), and (iii) is assigned to Buyer pursuant to this
Agreement,
in each case to the extent such liabilities relate to performance
on or after
the Closing Date and do not result from any breach of contract,
breach of
warranty, tort, claim or lawsuit arising on or before the Closing
Date.
(3) Certain
Promissory Notes.
Liabilities of Seller not to
exceed $76,825.27 in the aggregate under certain written promissory
notes
(the "Vehicle Notes") relating to the purchase of any motor
vehicles listed
on the Schedule of Equipment attached hereto as Schedule 2(a),
including
outstanding principal as of the Closing Date and interest that
accrues from
and after the Closing Date, in each case to the extent such
liabilities do
not result from any failure to pay when and as due or any other
breach of the
terms and conditions of such Vehicle Notes, including, without
limitation,
any penalties, late charges or interest accrued on or before the
Closing
Date.
(b) Excluded
Liabilities. Other
than the Assumed Liabilities,
Buyer shall have no responsibility whatsoever with respect to
any
liabilities, contracts, commitments, and other obligations of
Seller or the
Printer Business of any nature or kind, liquidated or contingent,
whether or
not incurred in the ordinary course of business, including,
without
limitation, which shall remain obligations and liabilities of
Seller (the
"Excluded Liabilities"): (i) trade accounts payable as of
the Closing Date;
(ii) accrued expenses as of the Closing Date, including, without
limitation,
salaries, vacation accrual, severance liabilities, bonus and
commission
accrual and deductions payable, and other employee-related
liabilities; (iii)
notes payable; (iv) liabilities for Taxes (as defined below) either
accruing
or relating to the periods before the Closing Date; (v) claims,
liabilities,
or other obligations that relate to injuries, actions, omissions,
conditions
or events that occurred or existed on or prior to the Closing
Date,
including, without limitation, any such claims or events that are
listed in
the Section 9(v), and any liabilities for any claim, judgment,
penalty,
settlement agreement or other obligation to pay in respect of any
such claims
or events; or (vi) liabilities for Environmental Matters (as
defined in
Section 9(o)).
As used in this Agreement, "Tax" shall mean all taxes, charges,
fees, levies or other assessments, including, without limitation,
income,
excise, gross receipts, personal property, real property, sales,
use, ad
valorem, transfer, franchise, profits, license, withholding,
payroll,
employment, severance, stamp, occupation, windfall profits, social
security
and unemployment or other taxes imposed by the United States or any
agency or
instrumentality thereof, any state, county, local or foreign
government, or
any agency or instrumentality thereof, and any interest or fines,
and any and
all penalties or additions relating to such taxes, charges, fees,
levies or
other assessments.
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5.
Taxes and
Expenses; Apportionment.
(a) Transfer
Taxes. Buyer shall be
responsible for the payment
of all transfer, sales and use, and documentary Taxes, filing and
recordation
fees, if any, and similar charges relating to the sale or transfer
of the
Purchased Assets hereunder, not to exceed Nine Thousand Six Hundred
Dollars
($9,600).
(b) Transaction
Expenses. Each party
shall be responsible for
its own costs and expenses incurred in connection with the
preparation,
negotiation and delivery of this Agreement and any documents or
instruments
related hereto, including, without limitation, attorneys' and
accountants'
fees and expenses.
(c)
Apportionments. Any
and all Taxes (other than as described
in Section 5(a) hereof), assessments, lease rentals (including,
without
limitation, any utilities, additional rent, insurance, Taxes and
common area
maintenance charges), fuel, and other charges applicable to the
Purchased
Assets shall be pro-rated to the Closing Date, and such Taxes and
other
charges shall be allocated between the parties by adjustment at the
Closing,
or as soon thereafter as the parties may agree. All such Taxes shall be
allocated on the basis of the fiscal year of the tax jurisdiction
in
question.
6.
Instruments of
Sale and Transfer. On
or prior to the Closing Date,
Seller shall deliver to Buyer and Buyer shall deliver to Seller, as
the case
may be, such instruments of sale and assignment as shall, in the
reasonable
judgment of Buyer and Seller, be effective to vest in Buyer on the
Closing
Date all of Seller's right, title and interest in and to the
Purchased Assets
and to evidence the assumption of the Assumed Liabilities by
Buyer,
including, without limitation, a Bill of Sale, substantially in the
form
attached hereto as Exhibit A (the "Bill of Sale"), and an
Assignment and
Assumption Agreement, substantially in the form attached hereto as
Exhibit B
(the "Assumption Agreement"). Seller shall take all reasonable
additional
steps as may be necessary to put Buyer in possession and operating
control of
the Purchased Assets at the Closing, and Buyer shall take all
reasonable
additional steps as may be necessary for it to assume the Assumed
Liabilities
at the Closing.
7.
Purchase
Price.
(a) Purchase
Price. Subject to
adjustment as provided below, the
aggregate purchase price (the "Purchase Price") to be paid by Buyer
to Seller
for the Purchased Assets, including the sole consideration for
the
Noncompetition Agreement (as defined in Section 11(e) hereof),
shall be Two
Million Five Hundred Fifty Thousand Dollars ($2,550,000), plus the
aggregate
book value of the Assumed Liabilities.
(b) Payment of
the Purchase Price.
The Purchase Price shall be
paid by Buyer to Seller as follows:
(1)
Cash Portion.
At the Closing, Buyer
shall deliver to
Seller, by wire transfer in accordance with instructions provided
by Seller,
the amount of Seven Hundred Fifty Thousand Dollars ($750,000) (the
"Cash
Portion").
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(2) Promissory
Notes. At the Closing,
Buyer shall deliver
to Seller the following promissory notes (collectively, the
"Notes"):
(A) Convertible
Note. A non-interest
bearing
Convertible Promissory Note, substantially in the form attached
hereto as
Exhibit C-1 (the "Convertible Note"), made payable to Seller in the
principal
amount of Three Hundred Thousand Dollars ($300,000), with a
maturity date of
two (2) years from the Closing Date. On the maturity date, the
Convertible
Note shall automatically convert into that number of shares of
common stock
of ATS (the "Common Stock") that is equal to the quotient obtained
by
dividing (i) the aggregate outstanding principal balance due on
the
Convertible Note, by (ii) the greater of (A) $0.50 per share, or
(B) the
average of the closing bid and asked prices of the Common Stock
quoted in the
over-the-counter market in which the Common Stock is traded for the
five (5)
trading days prior to the Closing Date and the five (5) trading
days on and
after the Closing Date.
(B) Secured
Note. A Secured
Promissory Note,
substantially in the form attached hereto as Exhibit C-2 (the
"Secured
Note"), made payable to Seller in the principal amount of Two
Hundred Fifty
Thousand Dollars ($250,000), bearing interest at the rate of seven
percent
(7%) per annum, with a maturity date that is one hundred five (105)
days
after the Closing Date. The Secured Note shall be secured
by the Purchased
Assets, as more fully described in the Security Agreement (as
defined below).
(C) Contingent
Note. A Contingent
Promissory Note,
substantially in the form attached hereto as Exhibit C-3 (the
"Contingent
Note"), made payable to Seller in the principal amount of One
Million Two
Hundred Fifty Thousand Dollars ($1,250,000), subject to adjustment
as
provided in Section 7(b)(4)(B) hereof, bearing interest at the rate
of seven
percent (7%) per annum. The Contingent Note shall be
payable in thirty (30)
equal monthly installments of principal and interest, commencing on
the
thirtieth (30th) day following the Closing Date, with a maturity
date that is
thirty (30) months following the commencement date. Buyer expressly reserves
against Seller the right of offset against sums payable (including
principal
and any interest accrued thereon) under the Contingent Note an
amount equal
to (i) any revenue adjustment contemplated by Section 7(b)(4)(A),
and (ii)
any Damages (as defined in Section 13(b) sustained by Buyer.
(3) Security
Agreement. To secure
the timely payment of the
amounts due under the Secured Note and the Contingent Note, Buyer
shall
execute and deliver to Seller a Security Agreement, substantially
in the form
attached hereto as Exhibit D (the "Security Agreement"), and if
requested by
Seller, a UCC-1 financing statement in the form prepared by Seller
and
presented to Buyer, or such other instrument as may be reasonably
requested
by Seller for the purpose of perfecting Seller's security interest
in the
Purchased Assets.
(4) Purchase
Price Adjustments.
(A) Revenue
Adjustment. The Cash
Portion shall be
adjusted as follows:
(i) in the event that the Prepaid Revenue exceeds the
PPP Arrears (as defined below), the Cash Portion shall be reduced
by an
amount equal to such excess (and Seller shall immediately deliver
payment
therefor by check or wire transfer; provided, however, to the
extent such
6
excess exceeds the Cash Portion, such excess shall be offset
against sums
payable (including principal and interest accrued thereon) under
the
Contingent Note); or (ii) in the event that the Prepaid Revenue is
less than
the PPP Arrears, the Cash Portion shall be adjusted upward by an
amount equal
to such deficiency.
As used in this Agreement, "PPP Arrears" shall mean the
aggregate value (as of the Closing Date) of any services that have
been
performed and the products that have been provided prior to the
Closing Date
for which the customers are billed in arrears for the previous
period
(generally quarterly or monthly), the actual value of which shall
be measured
by Seller, or, if Buyer and Seller mutually agree, shall be
estimated in good
faith.
(B) Contingent
Adjustment. The
principal amount of the
Contingent Note shall be adjusted as follows: (i) in the event that the
aggregate Gross Profit (as defined below) for the Contingent Period
(as
defined below) equals or exceeds the Bonus Threshold (as defined
below), the
principal amount of the Contingent Note shall be adjusted upward by
an amount
equal to 50% of such excess; or (ii) in the event that the
aggregate Gross
Profit for the Contingent Period is less than the Trigger Amount
(as defined
below), the principal balance of the Contingent Note shall be
adjusted
downward by an amount equal to such deficiency. During the Contingent
Period, Selling Member shall in the exercise of good business
judgment have
decision-making power over any decisions with respect to Gross
Profit,
including choice of and dealings with customers, prospective
clients,
vendors, suppliers and other business associates, and products and
services
sold or rendered by the Printer Business, subject to the reasonable
oversight
of the Board of Directors of ATS (the "ATS Board") and any
applicable
provisions of the Management Agreement (as defined in Section
11(f)), and as
more fully described in the Management Agreement; provided,
however, Selling
Member agrees to use vendors and suppliers recommended by ATS so
long as they
are not inferior in pricing or quality.
As used in this Agreement, the following terms shall have
the following meanings:
"Bonus Threshold" shall mean $3,018,750, which amount is
115% of the Target Amount.
"Contingent Period" shall mean the 18 month period
immediately following the Closing Date.
"Gross Profit" shall have the meaning set forth on
Schedule 7(b)(4)(B) attached hereto.
"Target Amount" shall mean $2,625,000.
"Trigger Amount" shall mean $2,231,250, which amount is
85% of the Target Amount.
(i) Examples.
The following examples
are designed to
be illustrative of this provision, and shall not be interpreted as
a
limitation:
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1) If Gross
Profit for the Contingent Period is
$4,000,000, then the Contingent Note will be adjusted upward by
$490,625 (50%
of the difference between $4,000,000 and the Bonus Threshold of
$3,018,750.
2) If Gross
Profit for the Contingent Period is
$3,000,000, then the Contingent Note will not be adjusted upward or
downward
($3,000,000 does not exceed the Bonus Threshold nor is it less than
the
Trigger Amount).
3) If Gross
Profit for the Contingent Period is
$2,000,000, then the Contingent Note will be adjust downward by
$231,250 (the
difference between $2,000,000 and the Trigger Amount of
$2,231,250).
(c) Allocation
of Purchase Price. The
Purchase Price
shall be allocated in a manner intended to comply with the
allocation method
required by section 1060 of the Internal Revenue Code of 1986, as
amended
(the "Code"). The
parties shall cooperate to comply with all substantive and
procedural requirements of section 1060 of the Code and any
regulations
thereunder, and the allocation shall be adjusted if, and to the
extent
necessary, to comply with the requirements of section 1060 of the
Code.
Neither Buyer nor Seller shall take, or permit any affiliated
person to take,
for federal, state, or local income tax purposes, any position
inconsistent
with the allocation set forth below, or if applicable, such
adjusted
allocation. Seller and
Buyer shall attach to their tax returns for the tax
year in which the Closing shall occur an information statement on
Form 8594,
which shall be completed in accordance with the allocations set
forth on the
Purchase Price Allocation attached hereto as Schedule 7(c).
8.
Closing.
Subject to
satisfaction or waiver of the conditions to
closing set forth herein, the closing of the transactions
contemplated by
this Agreement (the "Closing") shall take place at 4:00 p.m. (EDT)
on April
1, 2007 (the "Closing Date"), at the office of Johnson, Pope,
Bokor, Ruppel &
Burns LLP, located at 911 Chestnut Street, Clearwater, FL
33756, or at such
other time, date and place as may be mutually agreed upon.
9.
Representations
and Warranties of Seller and Selling Member.
Seller and Selling Member hereby, jointly and severally, represent
and
warrant to Buyer that:
(a)
Organization. Seller
is a limited liability company duly
organized, validly existing, and in good standing under the laws of
the State
of Nevada and has all requisite power and authority to carry on the
Printer
Business as presently conducted. Seller is duly qualified or
licensed to do
business and is in good standing in each jurisdiction in which the
nature of
its business or its properties makes such qualification or
licensing
necessary, other than in such jurisdictions where the failure to be
so
qualified or licensed would not have a material adverse effect on
Seller.
(b)
Capitalization.
Selling Member is the sole owner of the
entire membership interest and economic interest of Seller.
(c) Authority;
Enforceability. Seller
has full power and
authority to execute and deliver this Agreement and the Transaction
Documents
(as defined below) to which it is a party, and to perform its
obligations
hereunder and thereunder. Selling Member has all requisite
capacity, power
8
and authority to execute and deliver this Agreement and each of
the
Transaction Documents to which he is a party and to perform his
obligations
hereunder and thereunder. This Agreement and the Transaction
Documents to
which they are a party constitute the valid and legally binding
obligations
of Seller or Selling Member, as the case may be, enforceable in
accordance
with their respective terms and conditions, except as may be
limited by (i)
applicable bankruptcy, insolvency, reorganization, moratorium and
other laws
affecting enforcement of creditors' rights generally, and (ii) laws
relating
to the availability of specific performance, injunctive relief or
other
equitable remedies.
As used in this Agreement, "Transaction Documents" shall mean
the
Convertible Note, the Secured Note, the Contingent Note, the
Security
Agreement, the Bill of Sale, the Assumption Agreement, the Key
Employee
Employment Agreements (as defined in Section 11(d)(4) hereof),
the
Noncompetition Agreement, and the Management Agreement.
(d) No Conflict.
The execution,
delivery and performance of this
Agreement and the Transaction Documents to which they are a party
by Seller,
or Selling Member, as the case may be, and the consummation of
the
transactions contemplated hereby and thereby will not (i) violate,
conflict
with, result in any breach of, or constitute a default (or an event
that,
with notice or lapse of time or both, would constitute a default)
under
Seller's articles of organization or operating agreement (or
equivalent
documents); (ii) violate, conflict with, result in any breach of,
or
constitute a default (or an event that, with notice or lapse of
time or both,
would constitute a default) under any Contract or Judgment (as
defined below)
to which Seller or Selling Member, as the case may be, is a party
or by which
it is bound, or which relates to the Purchased Assets or the
Printer
Business; (iii) result in the creation of any Encumbrance (as
defined below)
on any of the Purchased Assets; (iv) violate any statute,
ordinance,
regulation, order, judgment or decree of any court or governmental
agency or
board; or (v) violate or result in the suspension, revocation,
modification,
invalidity or limitation of any Permits relating to the Purchased
Assets or
the Printer Business; or (vi) give any party with rights under any
Contract,
Judgment or other restriction to which Seller is a party or by
which it is
bound or which relates to the Purchased Assets or the Printer
Business, the
right to terminate, modify or accelerate any rights, obligations
or
performance under such Contract, Judgment or restriction.
As used in this Agreement, "Judgment" shall mean any judgment,
order, award, writ, injunction or decree of any governmental
authority or
arbitrator.
As used in this Agreement, "Encumbrances" shall mean any
security
interest, mortgage, lien, charge, option, easement, license,
adverse claim or
restriction of any kind, including, without limitation, any
restriction on
the use, transfer, voting, receipt of income or other exercise of
any
attributes of ownership.
(e) No Consents.
Except as set forth in
the Schedule of Required
Consents attached hereto as Schedule 9(e), no consents, approvals
or
authorizations of, or declaration, filing or registration with,
any
governmental authority or any other person or entity are required
for the
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execution, delivery and performance by Seller or Selling Member, as
the case
may be, of this Agreement and the Transaction Documents to which
they are a
party, and the consummation of the transactions contemplated hereby
and
thereby.
(f) Title to
Purchased Assets.
Seller has good and marketable
title to the Purchased Assets. Upon consummation of the
transactions
contemplated by this Agreement, Buyer will acquire good and
marketable title
to the Purchased Assets, free and clear of any and all
Encumbrances.
(g) Sufficiency
of Purchased Assets.
The Purchased Assets,
together with the services, equipment, and facilities to be
provided in
accordance with the Management Agreement, are adequate to conduct
the Printer
Business as it is presently conducted and as it has been conducted
during the
periods reflected in the Financial Statements (as defined in
Section 9(k)
hereof), and the Purchased Assets conveyed to Buyer on the Closing
Date will
be adequate to enable Buyer to continue to conduct the Business as
it is
presently conducted.
(h) Condition of
Purchased Assets.
Except as set forth on the
Schedule of Conditions attached hereto as Schedule 9(h), the
machinery,
equipment, furniture and other physical assets included in the
Purchased
Assets do not have any structural defects, are in good operating
condition
and repair (ordinary wear and tear excepted), and are adequate for
the
conduct of the Printer Business as it is presently conducted.
The Schedule
of Conditions contains a complete and accurate list each item of
Equipment
that will need to be repaired during the twelve (12)-month period
following
the Closing Date, together with the total estimated cost of such
anticipated
repairs (with the effect that the amount, if any, by which the
total actual
cost of such repairs exceeds such estimated amount shall be
considered
Damages for which Buyer shall be entitled to indemnification under
this
Agreement).
(i) Inventory.
All Inventory consists
of items of a quantity and
quality historically useable and/or saleable in the normal course
of
business, except for items of obsolete and slow-moving material and
materials
which are below standard quality, all of which have been written
down to
estimated net realizable value in accordance with generally
accepted
accounting principles.
With the exception of items which are obsolete or of
below standard quality which have been written down to their
estimated net
realized value, the Inventory is free from defects in materials
and/or
workmanship. The
Inventory is not excessive in kind or amount, or slow
moving, in light of the Printer Business done or expected to be
done. Since
the Balance Sheet Date there has not been a material change in the
level of
Inventory. All
Inventory is located at the Leased Real Property.
(j) Books and
Records. Seller's
books, accounts and records are,
and have been, maintained in Seller's usual, regular and ordinary
manner, in
accordance with generally accepted accounting practices and all
transactions
to which Seller has been a party are properly reflected
therein.
(k) Financial
Statements.
(1) Seller has
delivered the following financial statements
of the Printer Business to an independent auditor chosen by Buyer
to cause
the preparation of audited financial statements, and made available
to Buyer
10
(collectively, the "Financial Statements"): (i) an internally prepared
unaudited balance sheet ("Balance Sheet") dated as of December 31,
2006 (the
"Balance Sheet Date"), (ii) internally prepared unaudited balance
sheets
dated as of December 31 for each of the years 2005, and (iii)
internally
prepared unaudited statements of income for each of the years 2005
through
2006.
(2) The
Financial Statements (i) were prepared from the
books and records kept by Seller for the Printer Business, (ii) are
true and
correct in all material respects, (iii) have been prepared in
accordance with
historic accounting principles applied consistently throughout the
periods
involved, and (iv) fully and fairly present the financial condition
of the
Printer Business as of the dates thereof and the results of the
operations of
the Printer Business for the periods indicated. The Balance Sheet contained
in the Financial Statements fairly reflect all assets and
liabilities of the
Printer Business of the types normally reflected in balance sheets
as of the
dates thereof, and except for current liabilities incurred in the
ordinary
course of business consistent with past practices (and not
materially
different in type or amount), the Printer Business does not have
any
liabilities or obligation of any nature, whether accrued,
absolute,
contingent or otherwise, whether due or to become due, whether
properly
reflected as a liability or a charge or reserve against an asset or
equity
account, and whether the amount thereof is readily ascertainable,
that are
not reflected in the Financial Statements.
(l) Absence of
Certain Changes. Since
the Balance Sheet Date,
Seller has conducted the Printer Business in the ordinary course of
business,
consistent with past practice, and:
(1) There have been no material
adverse changes in the
financial condition, operations, assets or prospects of the Printer
Business.
(2) Seller has
not (i) entered into any transaction that is
materially adverse to the Printer Business or the Purchased Assets,
(ii) made
(or committed to make) capital expenditures in an amount which
exceeds
$10,000 for any item or $25,000 in the aggregate, (iii) made any
change in
its accounting methods or principles (or the application of those
methods or
principles), or (iv) incurred any indebtedness for borrowed money
in excess
of $10,000.
(3) Seller has
not sold or transferred any assets necessary
for the operation of the Printer Business (other than assets that
have been
replaced with other assets of equal or greater value and the sale
of
inventory in the ordinary course of business).
(4) Seller has
not entered into any employment, bonus or
deferred compensation agreement with any employee of the Printer
Business
that will affect the Printer Business or Seller's obligations under
this
Agreement.
(5) Seller has
not granted or agreed to grant any increase
in any rates of salaries, compensation or commissions to employees
or
independent contractors of the Printer Business, or provided any
additional
pension, retirement or other employment benefits for employees or
independent
contractors of the Printer Business.
11
(6) Seller has
not, other than in the ordinary course of
business, consistent with past practice, acted to (i) delay the
payment of
any accounts payable or accrued expenses of the Printer Business,
or (ii)
defer any expenses of the Printer Business.
(7) Seller has maintained usual
and customary levels of
inventory and supplies.
(m) Compliance
with Laws. Seller, in
the conduct of the Printer
Business and in the ownership of the Purchased Assets, has not
violated and
is not in violation of, nor has it made any improper payments or
incurred any
liability in respect of, any material provision of federal, state
or local
laws, codes, regulations or ordinances, including, without
limitation,
relating to environmental protection, health, hazardous or toxic
substances,
building use and occupancy, fire or safety hazards, occupational
safety,
labor or employee benefit or employment discrimination laws, nor
has Seller
or Selling Member, as the case may be, received any notices of
investigation
or violation pertaining to any such matters.
(n) Employment
Matters. The Schedule
of Employees attached
hereto as Schedule 9(n) contains a true and complete list of all
employees
who are employed by Seller and provide services to the Printer
Business as of
the date of this Agreement (other than Selling Member and
Management
Personnel), and said list correctly reflects their salaries, wages,
other
compensation (other than benefits under any: (i) employee pension
benefit
plan (as defined in Section 3(2) of the Employment Retirement
Income Security
Act of 1974, as amended ("ERISA")) ("Plan"), including, without
limitation,
any multiemployer plan as defined in Section 3(37) of ERISA
("Multiemployer
Plan"); (ii) employee welfare benefit plan (as defined in Section
3(1) of
ERISA) ("Welfare Plan"); or (iii) bonus, deferred compensation,
stock
purchase, stock option, severance plan, salary continuation,
vacation, sick
leave, fringe benefit, incentive, insurance, welfare or similar
arrangement
("Employee Benefit Plan")), dates of employment and positions.
The Schedule
of Employees also contains a true and complete list of all
employees whom
Buyer and Seller have agreed will be Management Personnel (as
defined in the
Management Agreement), and a true and complete list of all
employees whom
Buyer and Seller have agreed will be Company Personnel (as defined
in the
Management Agreement).
With respect to employees of Seller:
(1) There is no
pending or threatened unfair labor practice
charges or employee grievance charges
(2) There is no
request for union representation, labor
strike, dispute, slowdown or stoppage actually pending or, to the
best of
Seller's and Selling Member's knowledge, threatened against or
directly
affecting Seller.
(3) No grievance
or arbitration proceeding arising out of or
under collective bargaining agreements is pending and no claims
therefor
exist.
12
(4) The
employment of each of Seller's employees is
terminable at will without cost to Seller except for payments
required under
the Plans, Welfare Plans and Employee Benefit Plans and payment of
accrued
salaries or wages and vacation pay. Except as required by Section
4980B of
the Code, Seller has no liability to provide medical benefits to
former
employees of Seller or their spouses or dependents.
(5) Seller has
not taken any actions which were calculated
to dissuade any present employees, representatives or agents of
Seller from
becoming associated with Buyer. To Seller's knowledge, no officer
or other
key employee of Seller intends to terminate employment with Seller
prior to
or following the Closing, other than as contemplated by Section
11(c) hereof.
(o)
Environmental Matters.
Except as set forth on the Schedule
of Environmental Matters attached hereto as Schedule 9(o):
(1) Seller is
(and at all times preceding the date hereof
has been) in compliance with all Environmental Laws (as defined
below).
There has been no Release (as defined below) by Seller or, to the
best of
Seller's or Selling Member's knowledge, any other person of any
Hazardous
Material (as defined below) at, on, under, in, to or from any of
the
facilities located on the Premises and used in the Printer
Business
("Facilities"). To the
best of Seller's or Selling Member's knowledge, there
is no Release of any Hazardous Material at, on, under, in, or from
any other
property that has migrated, or is migrating to, on, or under, or is
otherwise
threatening any Facility. No person is currently alleging
through a written
Claim (as defined below) or, to Seller's knowledge, through an
unwritten
Claim, that Seller is actually or potentially responsible for the
presence or
Release of any Hazardous Material at any location, whether at any
Facility or
otherwise. Seller is
not currently subject to any written Claim or, to
Seller's knowledge, any unwritten Claim, by any person alleging any
actual or
threatened injury or damage to any person, property, natural
resource or the
environment arising from or relating to the actual or alleged
exposure to any
Hazardous Material or to the actual or alleged presence or Release
of any
Hazardous Materials at, on, under, in, to or from any Facility in
connection
with any operations or activities thereat. To the best of Seller's or
Selling Member's knowledge, neither the Facilities nor any
operations or
activities at the Facilities, nor any other operations or
activities of
Seller is subject to any Claim or any Encumbrance relating to
any
Environmental Law or Environmental Claims (as defined below).
There are no
underground storage tanks presently located at any Facility.
(2) There is no
administrative order or notice, consent
order or agreement, litigation, summons, settlement or citation
with respect
to Hazardous Materials or Releases thereof or any actual or alleged
violation
of any Environmental Law in connection with the operation of the
Facilities.
No state, local or foreign government, governmental agency or
regulatory
authority is alleging that any condition exists at any Facility
which is
violation of or would require remediation under any Environmental
Law.
13
(3) Seller holds
and is in compliance with all Environmental
Permits (as defined below). All such Environmental Permits are
in full force
and effect. Seller has
made timely applications or notifications for the
renewal of all Environmental Permits for which Environmental Laws
require
that applications or notices must be filed by it on or before the
date hereof
to maintain the Environmental Permits in full force and effect up
to and
through the date hereof.
(4) Seller has
timely filed all reports, obtained all
required approvals, generated and maintained in all material
respects all
required data, documentation and records required by the
Environmental Laws
or Environmental Permits, or any regulation, code, plan, order,
decree,
judgment, injunction, notice or demand letter issued, entered,
promulgated,
or approved thereunder, except where the failure to do so would not
result,
individually or in the aggregate, in a Material Adverse Change (as
defined in
Section 9(y) hereof).
As used in this Agreement, the following terms shall have the
following meanings:
"Claim" shall mean any private, judicial or administrative
claim, demand, cause of action, suit, litigation, proceeding,
arbitration,
hearing, inquiry, investigation, action, order, consent, agreement
or similar
action.
"Environmental Claim" shall mean any written notice of
violation, written notice of potential or actual responsibility or
liability,
claim, suit, action, demand, directive or order by any person for
any damage
(including, but not limited to, personal injury, tangible or
intangible
property damage, contribution, indemnity, indirect or consequential
damages,
damage to the environment, environmental removal, response or
remediation
costs, nuisance, pollution, contamination or other adverse effects
on the
environment or for fines, penalties or restrictions on existing
environmental
permits or licenses) resulting from or relating to (i) the presence
of, the
Release into the environment of, or exposure to, any Hazardous
Material, (ii)
the generation, manufacture, processing, distribution, use,
handling,
transportation, storage, treatment or disposal of any Hazardous
Material,
(iii) the violation of any Environmental Laws, or (iv) the
non-compliance
with any Environmental Laws.
"Environmental Laws" shall mean any federal, state, regional,
county, local, foreign, governmental statute, law, regulation,
ordinance or
license pertaining to protection of the environment, health or
safety of
persons, natural resources, conservation, wildlife, waste
management, any
Hazardous Material activity, or pollution (including, without
limitation,
regulation of Releases to air, land, water and groundwater), and
includes,
without limitation, the Comprehensive Environmental Response,
Compensation
and Liability Act, as amended by the Superfund Amendments and
Reauthorization
Act, Solid Waste Disposal Act, as amended by the Resource
Conversation and
Recovery Act and Hazardous and Solid Waste Amendments, Federal
Water
Pollution Control Act, as amended by the Clean Water Act, Clear Air
Act, as
amended, Toxic Substances Control Act, Emergency Planning and
Community
Right-to-Know Act, National Environmental Policy Act, Safe Drinking
Water
14
Act, Occupational Safety and Health Act and all rules and
regulations
promulgated under all such statutes, and any similar or
implementing state
law, including all amendments, rules and regulations promulgated
thereunder;
in each case as in effect on the date hereof.
"Environmental Permits" shall mean all permits, certificates,
licenses, approvals, registrations and authorizations required
under
Environmental Laws in connection with the operation of the its
business and
the use and ownership of the Facilities.
"Hazardous Material" shall mean any pollutants, contaminants,
pesticides, asbestos, polychlorinated biphenyls, petroleum
(including crude
oil or any fraction thereof), lead-based paint, explosive or
radioactive
substances, or hazardous, extremely hazardous, special, dangerous
or toxic
wastes, substances, chemicals or materials the exposure to, or
manufacture,
possession, presence, use, generation, storage, transportation,
treatment,
release, disposal, abatement, cleanup, removal, remediation or
handling of
which, is prohibited, controlled or regulated by an Environmental
Law.
"Release" shall mean any release, deposit, discharge,
emission, leaking, spilling, seeping, migrating, injecting,
pumping, pouring,
emptying, escaping, dumping, disposing or other movement of
Hazardous
Materials.
(p) Taxes.
All Tax obligations of
Seller with respect to its
operation of the Printer Business have been timely paid or are
being
contested in good faith, and, except as reflected in the balance
sheets
included in the Financial Statements and in any balance sheet
hereafter
delivered to Buyer, Seller has no liability for any Tax obligations
with
respect to its operation of the Printer Business and no interest or
penalties
have accrued or are accruing with respect thereto, whether state,
county,
local or otherwise with respect to any periods prior to the Closing
Date
except, in each case, any Tax obligations that, if not timely paid
by Seller,
could not result in (i) an Encumbrance on any of the Purchased
Assets or (b)
the commencement of any Claim against Buyer. Neither Seller nor Selling
Member is a "foreign person" (as that term is defined in Section
1445 of the
Code).
(q) Contracts.
Seller has provided
Buyer access to all material
contracts, agreements, leases or other instruments or obligations,
oral or
written, to which Seller or Selling Member, as the case may be, is
a party
and which relate to the operation of the Printer Business,
including, without
limitation, the Axon Contract (as defined in Section 11(h)
hereof);
employment and employment related agreements; independent
contractor and
independent contractor-related agreements; covenants not to
compete; loan
agreements; notes; indentures or mortgages; debentures; security
agreements;
pledge agreements; sales representative, distribution, franchise,
advertising
and similar agreements; leases and subleases of leased personal
property or
the Premises; license agreements; purchase orders and purchase
contracts; and
sales orders and sales contracts (each, a "Contract"). All such Contracts
are valid and in full force and effect and are enforceable in
accordance with
their respective terms. No default by Seller has occurred
thereunder and, to
the best of Seller's and Selling Member's knowledge, no default by
the other
contracting parties has occurred thereunder. No event, occurrence
or
condition exists which, with the lapse of time, the giving of
notice, or
15
both, or the happening of any further event or condition, would
become a
default by Seller thereunder. Seller has not received notice
that any party
to any such Contract intends to cancel, terminate or refuse to
renew such
Contract, and to the best of Seller's or Selling Member's
knowledge, no party
to any such Contract intends to cancel, terminate or refuse to
renew such
Contract. Other than
as set forth in the Schedule of Required Consents, no
consent, approval or authorization of any third party is required
for the
assignment of any such Contract to Buyer and all such Contracts
will continue
to be binding on the other parties thereto following the Closing
and their
assignment to Buyer.
(r) Warranties.
Except as may be set
forth on the Schedule of
Warranties attached hereto as Schedule 9(r), Seller has not made
any oral or
written warranties with respect to the quality or absence of
defects of its
products which it has sold or performed which are in force as of
the date
hereof. There are no
claims pending or anticipated or threatened against
Seller with respect to the quality of or absence of defects in such
products.
(s) Affiliated
Transactions. The
Schedule of Affiliated
Transactions attached hereto as Schedule 9(s) sets forth every
business
relationship (including employment relationships) between Seller,
on the one
hand, and Selling Member and/or Selling Member's Affiliates (as
defined
below), on the other hand. None of said parties (other than
Seller),
directly or indirectly, own any assets which are used in the
Printer
Business, or is engaged in any business which competes with the
Printer
Business.
As used in this Agreement, "Affiliate" shall mean with respect
to
any person means any other person who directly or indirectly
co