EXHIBIT 4.28
BUSINESS TRANSFER AGREEMENT
THIS BUSINESS TRANSFER AGREEMENT
(this “ Agreement ”), made and entered into as
of August [dd], 2004, by and between Toyo Ink Mfg. Co., Ltd.
(“ Toyo ”), a company incorporated under the
laws of Japan and having its principal office at 3-13, Kyobashi
2-chome, Chuo-ku, Tokyo, 104-8377 Japan, and Top Image Systems,
Ltd. (“ TIS ”), a company incorporated under
the laws of Israel and having its principal office at 2 Habarzel
St. Ramat-Hahayal, Tel-Aviv, 69710 Israel.
WITNESSETH :
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Whereas:
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TIS is a leading innovator of
enterprise solutions for managing and validating the flow of
information between an enterprise and its customers and
employees;
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Whereas:
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Toyo is a Japanese exclusive
distributor of products of TIS (the “ TIS Products
”) pursuant to the Exclusive Software Distribution Agreement
dated June 28 1996 between Toyo and TIS, as amended (the “
OLD EDA ”), and has been conducting business relating
to TIS Products in Japan;
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Whereas:
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Toyo and TIS are desirous of
transferring the complete business and assets of Toyo relating to
TIS Products and related services, as further detailed herein and
in Section 2.1(a) (i) through 2.1(a)(viii) bellow (the “
Transferred Business ”) to TIS (the “
Business Transfer ”);
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Whereas:
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Toyo and TIS are desirous of
terminating the OLD EDA, and TIS is interested in acquiring the
Transferred Business in order to continue and expand its activity
in Japan through TIS’ Japanese subsidiary, Top Imaging
Systems Japan Co., Ltd. (“ TISJ ”);
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Whereas:
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TISJ will negotiate a
sub-distributorship agreement with Toyo Officemation Inc. (“
TOM ”), a Japanese corporation, by which TOM will sell
and distribute the TIS Products to the customers relating the
Transferred Business in Japan;
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NOW, THEREFORE, the parties
hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1.
Interpretation. The terms defined in this Agreement
shall mean and include the plural as well as the singular.
Pronouns of the masculine gender shall mean and include
corresponding words of the feminine and neuter gender, and vice
versa. References to Articles, Sections, Exhibits and
Schedules and subdivisions thereof shall, unless otherwise
specifically set forth, be references to the Articles of, Sections
of, Exhibits and Schedules to this Agreement and the subdivisions
thereof, respectively. The word “including” shall
be deemed to be followed by the words “without
limitation.” A facsimile copy shall, unless otherwise
specifically set forth, be deemed to satisfy the requirement of
“in writing,” “written” and so
on.
1.2.
Headings. The headings
in this Agreement are for convenience of reference only and shall
not limit or otherwise affect the interpretation of any of the
terms or provisions of this Agreement.
ARTICLE II
SALE AND PURCHASE OF THE TRANSFERRED
ASSETS
2.1.
Sale and Purchase of the
Transferred Assets .
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(a)
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At the Closing (as defined in
Section 8.1 hereof), on the terms and subject to the conditions
contained in this Agreement, Toyo shall sell and transfer to TIS
and TIS shall purchase, on as-is-basis, the following assets with
respect to the Transferred Business, the detailed of which are
provided in Schedules 2.1(a)(i) through 2.1(a)(viii) (collectively,
the “ Transferred Assets ”)
including:
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(i)
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the Japanese registered trademark
“FormCatcher”, “FormCATCHER-Integra”,
“FormOUT” and “AfterScan”. Toyo declares
that there are no other registered trademarks relating to the
Transferred Business aside from the above trademarks;
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(ii)
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the maintenance agreements and
any other agreements regarding the TIS Products and related
services between Toyo and its customers which are listed in
Schedule 2.1(a)(ii), subject, where required, to obtaining the
customers’ prior consent (“Transferred
Agreements”);
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(iii)
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customer information regarding
the Transferred Business which is listed in Schedule
2.1(a)(iii);
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(iv)
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Japanese language versions
(localized versions) of the TIS Products and its source codes
thereof, which are listed in Schedule 2.1(a)(iv);
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(v)
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All intellectual property rights
including copyright of customized and/or derivative software and
any other material, know how and proprietary information regarding
the TIS Products and related services, which are listed in Schedule
2.1(a)(v). Toyo declares that there are no other intellectual
property rights used specifically for the conduct of Transferred
Business which Toyo has right to assign. The intellectual property
rights, which (i) are used in the conduct of the Transferred
Business and are licensed to Toyo from third parties (except for
standard software licenses generally available to the public) and
(ii) the intellectual property rights which are jointly owned by
Toyo with a third party and used specifically for the conduct of
the Transferred Business, which Toyo does not have the right to
assign are listed in Schedule 2.1(a)(v)(i); It is clarified that
Toyo is not required hereunder to include in the said schedules
rights with respect to the trademark, trade name and other
intellectual property rights generally used by other divisions of
the Toyo and not specifically required for the conduct of the
Transferred Business.
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(vi)
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catalogs and any and all the
other sales promotion material of the TIS Products, which are
listed in Schedule 2.1(a)(vi);
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(vii)
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goodwill of the Transferred
Business; and
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(viii)
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fixed assets used solely for
Transferred Business that TIS requested and Toyo agreed to transfer
which are listed in Schedule 2.1(a)(viii).
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Toyo represents that the
foregoing are all of the material assets used by Toyo for the
operation of the Transferred Business. In the event that an asset,
which is a material and inherent asset of the Transferred Business,
should not appear in Schedule 2.1 (a)(i) through 2.1(a)(viii) or
Article 2.1 (a) except when TIS had already made its clear written
indication that such asset should not to be transferred, TIS shall
be entitled to require Toyo to transfer such asset to TIS for no
additional consideration and Toyo declares that it shall
transfer such asset to TIS accordingly.
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(b)
The parties hereto agree that TIS
shall succeed from Toyo, upon the Closing, solely the
Transferred Agreements. Toyo represents that TIS does not
succeed any outstanding obligations and liabilities under the
Transferred Agreements which are incurred by Toyo before the
Closing Date. TIS hereby agrees to accept and perform the
Transferred Agreements following the Closing.
2.2.
Purchase Price. The
parties hereto agree that the price for the Transferred Assets (the
“ Upfront Purchase Price ”) is one million and
five hundred thousand US dollars ($1,500,000), which shall be paid
by TIS to Toyo upon the Closing. Further, TIS agree to annually pay
to Toyo, in Japanese yen, the amount equivalent to five percent
(5%) of the total annual sales of TISJ in Japan derived from
licensing of TIS Products and customization to customers
transferred to TISJ by Toyo for two (2) years from the Closing (the
“ Annual Payment ”, “ Payment Term
”). The calculation of the Annual Payment shall include
income received by TISJ from licensing of TIS Products and
customization to customers transferred to TISJ by Toyo, by any
third party distributors or dealers. The Annual Payment shall be
made within sixty (60) days after the end of each twelve calendar
months; provided, however, that the Annual Payment regarding the
period from January 1, 2006 to August 31, 2006 shall be made within
sixty (60) days after the end of August 31, 2006. The Annual
Payment shall be made based solely on amounts collected minus
returns. With respect to each twelve (12) months calendar
period, during the Payment Term, TIS shall provide Toyo written
reports specifying sales for each customer and the total sales and
annual financial statements of TIS and TISJ certified by a
well-known firm of independent certified public accountants.
TIS shall also provide Toyo, upon request made not more than once
per year and no later than three (3) months following delivery of
financial statements for a year, with the information required by
Toyo, necessary or appropriate to certify the report and/or total
annual sales of TISJ. Any reports and/or information provided to
Toyo hereunder shall be subject to the provisions of Section 10.1
and Toyo shall not be entitled to make any use of such reports
and/or information other than for the purposes of this Section 2.2.
TIS may assign TISJ to pay such Annual Payment to Toyo on behalf of
TIS.
2.3. Payment of
Upfront Purchase Price. On the Closing Date, TIS shall
pay to Toyo the Upfront Purchase Price TIS shall remit the Upfront
Purchase Price to the following bank account of Toyo. The
remittance charge shall be borne by TIS.
Bank
and branch name: Mitsubishi-Tokyo Bank, Kyobashi branch
Type
of account: current bank account (“toza
yokin”)
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Number
of account: 2594302
2.4. Fulfilment
of Obligations . TIS or TISJ as the case may be, shall
perform any and all obligations in accordance with Section 2.1(b)
above except for those as separately agreed by Toyo and
TIS.
2.5.
Termination of OLD EDA . TIS and Toyo agree that the
OLD EDA shall be terminated upon the Closing and that
notwithstanding the provisions of the OLD EDA, there is no right or
obligation between TIS and Toyo other than as provided for herein.
Notwithstanding the above, sections 7 and 8 of the OLD EDA shall
survive termination.
ARTICLE III
TREATMENET OF THE PURCHASE ORDER
3.1.
Treatment of the Purchase
Order. Notwithstanding Section 2.4 hereof, with respect
to the sale of the TIS Products and the related services (including
customization, development and software solution of the TIS
Products) (the “ Related Services ”), which will
be ordered by the customer from Toyo before the Closing Date which
are listed in Schedule 3.1 (including all the information detailed
in Section 3.1(a) hereto) and will be delivered by TISJ to the
ordering customer after the Closing Date;
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(a)
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Toyo shall assign the Purchase
Order to TIS or TISJ and TIS or TISJ shall be the seller and the
supplier of such TIS Products and the Related Services subject to
the ordering customer’s consent. In this case, TIS or
TISJ shall reimburse to Toyo the cost equivalent to gross cost of
sales of such TIS Products and the Related Services, including the
labor cost and the overhead cost, the amount of which shall be
reasonably acceptable to TIS. Toyo shall provide TIS with
information relating to the process flow, period, total number of
man-days, labor and unit cost and any additional information which
is reasonably necessary for TIS to assess the cost associated with
such TIS Products and Related Services. Further, the Gross
Profit, from selling and supplying such TIS Products and the
Related Services shall be allocated on pro-rata basis according to
the degree of the contribution to selling and supplying such TIS
Products and the Related Services between Toyo and
TIS.
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The Gross Profit
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= (the total sales) – (the
cost of goods sold including license fees, labor cost and
customization).
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(b)
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In the case that the ordering
customer does not consent that TIS or TISJ will be the seller and
the supplier of such TIS Products and Related Services, Toyo will
be the seller and the supplier of such TIS Products and Related
Services, and TIS shall reasonably cooperate with Toyo for such
sale. Toyo shall pay TIS the cost equivalent to gross cost of sales
of such TIS Products and Related Services, including the labor cost
and the overhead cost, the amount of which shall be reasonably
acceptable to Toyo. TIS shall provide Toyo with information
relating to the process flow, period, total number of man-days,
labor and unit cost and any additional information which is
reasonably necessary for Toyo to assess the costs associated with
such TIS Products and Related Services. The Gross Profit from
selling and supplying such TIS Products and the Related Services
shall be allocated on pro-rata basis according to the degree of the
contribution to selling and supplying such TIS Products and the
Related Services between Toyo and TIS.
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(c)
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In the case when TIS or TISJ
designates TOM to be the seller and the supplier of such TIS
Products and Related Services, Section 3.1(a) shall be applied
mutatis mutandis. In the case of this Section 3.1(c), TIS and
TISJ shall be, jointly and severally liable with TOM, for the
reimbursement of the costs to Toyo, as set forth in Section
3.1(b).
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(d)
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The contribution of Toyo and TIS
or TISJ shall be decided by mutual consultation between Toyo and
TIS or TISJ separately on a case-by-case basis.
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(e)
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Income derived from customers
under the provisions of this Section 3.1 shall not be subject to
the Annual Payment under Section 2.2 above. Prior to the Closing,
Toyo shall provide TIS the estimation of the costs and fees with
respect to Purchase Orders referred to in this Section and
Transferred Agreements (i.e. maintenance fees) and appropriate
adjustments and payments made.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1.
Representations and Warranties of Toyo. As of the
date hereof and the Closing Date, Toyo represents and warrants to
TIS as follows:
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(a)
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Incorporation and Valid Legal
Existence of Toyo.
Toyo is a corporation duly organized and validly existing under the
laws of Japan and has all necessary power and authority to own,
lease and operate its assets and properties, including the
Transferred Assets, and to carry on its business, including the
Transferred Business, as presently conducted.
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(b)
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Execution of and Performance
under this Agreement. Toyo has all necessary power and
authority to execute and deliver this Agreement and to perform
fully its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this
Agreement by Toyo, the performance of the obligations of Toyo
hereunder and the consummation of the transactions contemplated
hereby on its part have been duly and validly authorized by the
appropriate corporate actions of Toyo and does not conflict with
the organizational or governing instruments of Toyo or any
agreement or law to which Toyo is a party or by which Toyo or its
assets are bound.
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(c)
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Full
Disclosure.
Neither this Agreement (including the Schedules attached hereto)
nor any certificates made or delivered in connection herewith
contain any untrue statement of a material fact. There is no
material fact or information relating to the business, condition
(financial or otherwise), affairs, operations, or assets connected
to the Transferred Business that has not been disclosed to TIS by
Toyo.
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(d)
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No Breach.
Neither the execution and
delivery of this Agreement nor compliance by Toyo with the terms
and provisions hereof will conflict with, or result in a breach or
violation of, any of the terms, conditions and provisions of:
(i) any judgment, order, injunction, decree, or ruling of any
court or governmental authority, domestic or foreign, (ii) any
agreement, contract, lease, license or commitment to which Toyo is
a party or to which it is subject and which would impair the
ability of Toyo to execute, deliver or perform this Agreement. The
execution, delivery and compliance of Toyo with this Agreement will
not (a) give to others any rights, including rights of
termination, cancellation or acceleration, in or with respect to
any agreement, contract or commitment referred to in this
paragraph, or to any of Toyo’s properties or (b) otherwise
require the consent or approval of any person, which consent or
approval has not heretofore been obtained (except for requirements
of customer’s agreement as provided in this
Agreement).
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(e)
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Consents.
No consent, approval, order,
license, permit, action by, or authorization of or designation,
declaration, or filing with any governmental authority on the part
of Toyo is required that has not been, or will not have been,
obtained by Toyo prior to the Closing in connection with the valid
execution, delivery and performance of this Agreement.
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(f)
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Ownership of Transferred
Business. Toyo is the
sole owner, free and clear of any rights of any third party, of all
Transferred Assets.
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(g)
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Contracts.
Schedule 2.1(a)(ii) contains a true
and complete list of all material contracts and agreements related
to the Transferred Business, to which Toyo is a party or by which
its property is bound and which TIS desired and agreed to be
transferred and obligated by. Each of such contracts and agreements
is in full force and effect, and neither Toyo nor, to the knowledge
of Toyo, any other party thereto is in breach thereof. True and
correct copies of all such contracts have been delivered to
TIS.
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(f)
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Debts to
Employees. Toyo have
paid, or will pay, until the Closing, all amounts due under any
applicable law or agreement to the Seconded Employees until the
Closing date and made the required provision with respect to any
severance pay to be paid to the Seconded Employees upon termination
of their services by Toyo, including all amounts due as salary and
social benefits.
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4.2.
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Representations and Warranties
of TIS . As of the
date hereof and the Closing Date, TIS represents and warrants to
Toyo as follows:
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(a)
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Incorporation and Valid Legal
Existence of TIS .
TIS is a corporation duly organized and validly existing under the
laws of Israel and has all necessary power and authority to own,
lease and operate its assets and properties, including the
Transferred Assets, and to carry on its business, including the
Transferred Business, as presently conducted.
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(b)
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Execution of and Performance
under this Agreement . TIS
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