EXHIBIT 10.12

 

 

 

 

 

 

STOCK PURCHASE AGREEMENT

dated as of

November 27, 2002

between

JAFCO MBO CO., LTD. as Buyer,

 

JAFCO CO., LTD. as Buyer Guarantor,

 

BTC INTERNATIONAL HOLDINGS, INC. as Seller

and

BANCTEC, INC. as Seller Guarantor

relating to the purchase and sale

of

100% of the Common Stock

of

BANCTEC JAPAN, INC.

 

 

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TABLE OF CONTENTS

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Article 1
Definitions

 

 

 

 

 

Section 1.01.  Definitions

 

 

 

 

 

Article 2
Purchase and Sale

 

 

 

 

 

Section 2.01.  Purchase and Sale

 

 

Section 2.02.  Closing

 

 

 

 

 

Article 3
Representations and Warranties of Seller

 

 

 

 

 

Section 3.01.  Corporate Existence and Power

 

 

Section 3.02.  Corporate Authorization

 

 

Section 3.03.  Governmental Authorization

 

 

Section 3.04.  Noncontravention

 

 

Section 3.05.  Capitalization

 

 

Section 3.06.  Ownership of Shares

 

 

Section 3.07.  Subsidiaries

 

 

Section 3.08.  Financial Statements

 

 

Section 3.09.  Books and Records

 

 

Section 3.10.  Absence of Certain Changes

 

 

Section 3.11.  No Undisclosed Material Liabilities

 

 

Section 3.12.  Intercompany Accounts

 

 

Section 3.13.  Material Contracts

 

 

Section 3.14.  Litigation

 

 

Section 3.15.  Compliance with Laws and Court Orders

 

 

Section 3.16.  Properties

 

 

Section 3.17.  Intellectual Property

 

 

Section 3.18.  Customers And Suppliers

 

 

Section 3.19.  Taxes

 

 

Section 3.20.  Insurance Coverage

 

 

Section 3.21.  Finders’ Fees

 

 

Section 3.22.  Employee Benefit Plans

 

 

Section 3.23.  Employee Restrictions

 

 

Section 3.24.  Labor Relations; Employment Law Compliance

 

 

 

 

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Article 4
Representations and Warranties of Buyer

 

 

 

 

 

Section 4.01.  Corporate Existence and Power

 

 

Section 4.02.  Corporate Authorization

 

 

Section 4.03.  Governmental Authorization

 

 

Section 4.04.  Noncontravention

 

 

Section 4.05.  Financing

 

 

Section 4.06.  Purchase for Investment

 

 

Section 4.07.  Litigation

 

 

Section 4.08.  Finders’ Fees

 

 

Section 4.09.  Inspections; No Other Representations

 

 

 

 

 

Article 5
Covenants of Seller

 

 

 

 

 

Section 5.01.  Conduct of the Company

 

 

Section 5.02.  Access To Information.

 

 

Section 5.03.  Notices of Certain Events

 

 

Section 5.04.  No Negotiation

 

 

Section 5.05.  Resignations

 

 

 

 

 

Article 6
Covenants of Buyer

 

 

 

 

 

Section 6.01.  Access

 

 

Section 6.02.  Trademarks; Tradenames

 

 

Section 6.03.  Appointment of Replacement Statutory Auditor

 

 

 

 

 

Article 7
Covenants of Buyer and Seller

 

 

 

 

 

Section 7.01.  Reasonable Best Efforts; Further Assurances

 

 

Section 7.02.  Certain Filings

 

 

Section 7.03.  Public Announcements

 

 

Section 7.04.  Intercompany Accounts

 

 

 

 

 

Article 8
Conditions to Closing

 

 

 

 

 

Section 8.01.  Conditions to Obligations of Buyer and Seller

 

 

Section 8.02.  Conditions to Obligation of Buyer

 

 

Section 8.03.  Conditions to Obligation of Seller

 

 

 

 

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Article 9
Survival; Indemnification

 

 

 

 

 

Section 9.01.  Survival

 

 

Section 9.02.  Indemnification

 

 

Section 9.03.  Procedures

 

 

Section 9.04.  Calculation of Damages

 

 

Section 9.05.  Assignment of Claims

 

 

Section 9.06.  Exclusivity

 

 

 

 

 

Article 10
Termination

 

 

 

 

 

Section 10.01.  Grounds for Termination

 

 

Section 10.02.  Effect of Termination

 

 

 

 

 

Article 11
Guarantees

 

 

 

 

 

Section 11.01.  Buyer Guarantor

 

 

Section 11.02.  Seller Guarantor

 

 

Section 11.03.  Guaranty Unconditional

 

 

Section 11.04.  Waivers Of The Guarantors

 

 

Section 11.05.  Discharge Only Upon Performance In Full; Reinstatement In
Certain Circumstances

 

 

Section 11.06.  Subrogation

 

 

Section 11.07.  Guarantor Representations And Warranties

 

 

 

 

 

Article 12
Miscellaneous

 

 

 

 

 

Section 12.01.  Notices

 

 

Section 12.02.  Amendments and Waivers

 

 

Section 12.03.  Expenses

 

 

Section 12.04.  Successors and Assigns

 

 

Section 12.05.  Governing Law

 

 

Section 12.06.  Dispute Resolution

 

 

Section 12.07.  WAIVER OF JURY TRIAL

 

 

Section 12.08.  Counterparts; Third Party Beneficiaries

 

 

Section 12.09.  Entire Agreement

 

 

Section 12.10.  Captions

 

 

Section 12.11.  Disclosure Schedules

 

 

 

 

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STOCK PURCHASE AGREEMENT

 

                AGREEMENT dated as of November 27, 2002 between JAFCO MBO Co.,
Ltd., a Japanese corporation (“Buyer”), JAFCO Co., Ltd., a Japanese corporation
(“Buyer Guarantor”), BTC International Holdings, Inc., a Delaware corporation
(“Seller”), and BancTec, Inc., a Delaware corporation (“Seller Guarantor”).

 

W  I  T  N  E  S  S  E  T  H :

 

                WHEREAS, Seller is the record and beneficial owner of the Shares
(as defined below) and desires to sell the Shares to Buyer, Buyer desires to
purchase the Shares from Seller, and Buyer Guarantor and Seller Guarantor wish
to guarantee the obligations of Buyer and Seller, respectively, hereunder, in
each case upon the terms and subject to the conditions hereinafter set forth;

 

                The parties hereto agree as follows:

 

ARTICLE 1
DEFINITIONS

 

Section 1.01.  Definitions.  (a)  The following terms, as used herein, have the
following meanings:

 

                “Affiliate” means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control with
such Person; provided that the Company shall not be considered an Affiliate of
Seller.

 

                “Ancillary Agreements” means the Master Know-How Agreement, the
Trademark License Agreement, the Hardware License/Distribution Agreement, and
the Software Reseller Agreement.

 

                “Balance Sheet” means the unaudited balance sheet of the Company
as of the Balance Sheet Date.

 

                “Balance Sheet Date” means September 30, 2002.

 

                “BTI Limited Partnership” means BTI Technologies, L.P., a Texas
limited partnership and an Affiliate of Seller.

 

                “Closing Date” means the date of the Closing.

 

                “Common Stock” means the common stock of the Company.

 

 

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                “Company” means BancTec Japan, Inc., a Japanese corporation,
with registered office at Arco Tower 8F, 8-1, Shimo-meguro 1-chome, Meguro-ku,
Tokyo 153-0064.

 

                “Guarantor” means the Buyer Guarantor or the Seller Guarantor.

 

                “Hardware License/Distribution Agreement” means the Agreement
for Purchase of Units and Spare Parts Products dated as of the date hereof
between the Company and BTI Limited Partnership.

 

                “Intellectual Property Right” means any trademark, service mark,
trade name, mask work, invention, patent, trade secret, copyright, know-how
(including any registrations or applications for registration of any of the
foregoing) or any other similar type of proprietary intellectual property right.

 

                “Japanese Patent License Agreement” means the Japanese Patent
License Agreement dated as of the date of the Closing between the Company and
BTI Limited Partnership.

 

                “Knowledge of Seller”, “Seller’s knowledge” or any other similar
knowledge qualification in this Agreement means to the actual knowledge of any
of the following officers of Seller: Craig Crisman, Brian Stone, Weston Hebert,
Mark Fairchild or Morten Jacobsen.

 

                “Lien” means, with respect to any property or asset, any
mortgage (teitou-ken), lien, pledge (shichi-ken), charge (jouto-tanpo-ken),
security interest or encumbrance in respect of such property or asset.

 

                “Master Know-How Agreement” means the Master Know-How Agreement
dated as of the date hereof between the Company and BTI Limited Partnership.

 

                “Material Adverse Effect” means a material adverse effect on the
business, assets or results of operations of the Company, except any such effect
resulting from or arising in connection with (i) this Agreement or the
transactions contemplated hereby, (ii) changes or conditions generally affecting
companies engaged in similar businesses or (iii) changes in economic, regulatory
or political conditions generally.

 

                “Person” means an individual, corporation, partnership, limited
liability company, association, trust or other entity or organization, including
a government or political subdivision or an agency or instrumentality thereof.

 

                “Shares” means the 203 shares of outstanding Common Stock that
are owned by Seller.

 

 

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                 “Software Reseller Agreement” means the Software Reseller
Agreement dated as of the date hereof between the Company and BTI Limited
Partnership.

 

                “Trademark License Agreement” means the Trademark License
Agreement dated as of the date hereof between the Company and BTI Limited
Partnership.

 

                (b)           Each of the following terms is defined in the
Section set forth opposite such term:

 

Term

 

Section

Buyer Obligations

 

11.01

Claim

 

9.03

Closing

 

2.02

Company Intellectual Property Rights

 

3.17

Company Securities

 

3.05

Damages

 

9.02

Indemnified Party

 

9.03

Indemnifying Party

 

9.03

Permitted Liens

 

3.16

Potential Contributor

 

9.05

Purchase Price

 

2.01

Seller Obligations

 

11.02

Third Party Claim

 

9.03

Warranty Breach

 

9.02

 

ARTICLE 2
PURCHASE AND SALE

 

Section 2.01.  Purchase and Sale.  Upon the terms and subject to the conditions
of this Agreement, Seller agrees to sell to Buyer, and Buyer agrees to purchase
from Seller, the Shares at the Closing.  The purchase price for the Shares (the
“Purchase Price”) is -6,500,000,000 in cash.  The Purchase Price shall be paid
as provided in Section 2.02.

 

Section 2.02.  Closing.  The closing (the “Closing”) of the purchase and sale of
the Shares hereunder shall take place at the offices of Baker & McKenzie, 410
Aoyama Building, 2-3, Kita Aoyama 1-chome, Minato-ku, Tokyo 100-8694, Japan, as
soon as possible, after satisfaction of the conditions set forth in Article 8,
or at such other time or place as Buyer and Seller may agree.  All actions to be
taken at the Closing will be deemed to have taken place simultaneously, and no
delivery or payment will be considered to have been made until all transactions
to be taken at the Closing have been completed.  At the Closing:

 

 

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(a)        Buyer shall deliver to Seller the Purchase Price in immediately
available funds by wire transfer to the following account: “Other
Deposit/Non-Resident Account” account number 0042507-0040-JPY-001-TOK at
Deutsche Bank, Tokyo Branch, for the further credit of BTC International
Holdings, Inc., or such other account with a bank in Tokyo, Japan designated by
Seller, by notice to Buyer, which notice shall be delivered not later than two
business days prior to the Closing Date.

 

(b)        Seller shall deliver to Buyer certificates for the Shares.

 

ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER

 

                Except as set forth in the disclosure schedules, Seller
represents and warrants to Buyer as of the date hereof and as of the Closing
Date that:

 

Section 3.01.  Corporate Existence and Power.  Each of Seller and the Company is
a corporation duly incorporated, validly existing and (in the case of Seller) in
good standing under the laws of its jurisdiction of incorporation and has all
corporate powers and all governmental licenses, authorizations, permits,
consents and approvals required to carry on its business as now conducted,
except for those licenses, authorizations, permits, consents and approvals the
absence of which would not have a Material Adverse Effect.  The Company is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction where such qualification is necessary, except for those
jurisdictions where failure to be so qualified would not, individually or in the
aggregate, have a Material Adverse Effect.

 

Section 3.02.  Corporate Authorization.  The execution, delivery and performance
by Seller of this Agreement and the consummation of the transactions
contemplated hereby are within Seller’s corporate powers and have been duly
authorized by all necessary corporate action on the part of Seller.  This
Agreement constitutes a valid and binding agreement of Seller.

 

Section 3.03.  Governmental Authorization.  The execution, delivery and
performance by Seller of this Agreement and the consummation of the transactions
contemplated hereby require no action by or in respect of, or filing with, any
governmental body, agency or official other than any such action or filing as to
which the failure to make or obtain would not have a Material Adverse Effect.

 

Section 3.04.  Noncontravention.  The execution, delivery and performance by
Seller of this Agreement and the consummation of the

 

 

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transactions contemplated hereby do not and will not (i) violate the certificate
of incorporation or bylaws of Seller or the articles of incorporation (teikan)
of the Company, (ii) violate any applicable law, rule, regulation, judgment,
injunction, order or decree, except for any such violations which would not
reasonably be expected to have a Material Adverse Effect, (iii) except as
disclosed in Schedule 3.04 or as to matters which would not reasonably be
expected to have a Material Adverse Effect, require any consent or other action
by any Person under, constitute a default under, or give rise to any right of
termination, cancellation or acceleration of any right or obligation of Seller
or the Company or to a loss of any benefit to which Seller or the Company is
entitled under any provision of any agreement or other instrument binding upon
Seller or the Company or (iv) result in the creation or imposition of any Lien
on any asset of the Company, except for any Permitted Liens.

 

Section 3.05.  Capitalization. (a)  The authorized capital stock of the Company
consists of 800 shares of Common Stock.  As of the date hereof, there are
outstanding 203 shares of Common Stock.

 

(b)           All outstanding shares of Common Stock have been duly authorized
and validly issued and are fully paid and non-assessable.  Except as set forth
in this Section 3.05, there are no outstanding (i) shares of capital stock or
voting securities of the Company, (ii) securities of the Company convertible
into or exchangeable for shares of capital stock or voting securities of the
Company or (iii) options or other rights to acquire from the Company, or other
obligation of the Company to issue, any capital stock, voting securities or
securities convertible into or exchangeable for capital stock or voting
securities of the Company (the items in clauses (i) through (iii) of this
paragraph being referred to collectively as the “Company Securities”).  There
are no outstanding obligations of the Company to repurchase, redeem or otherwise
acquire any Company Securities.

 

Section 3.06.  Ownership of Shares.  Seller is the record and beneficial owner
of the Shares, free and clear of any Lien (other than as disclosed on Schedule
3.06), and will transfer and deliver to Buyer at the Closing valid title to the
Shares free and clear of any Lien.

 

Section 3.07.  Subsidiaries.  The Company has no subsidiaries.

 

Section 3.08.  Financial Statements.  The unaudited balance sheet as of December
31, 2001 and the related unaudited statements of income and cash flows for the
year ended December 31, 2001 and the unaudited interim balance sheet as of
September 30, 2002 and the related unaudited interim statements of income and
cash flows for the nine months ended September 30, 2002 of the Company fairly
present, in conformity with U.S. generally accepted accounting principles
applied on a consistent basis (except as may be indicated in the notes thereto),
the financial position of the Company as of the dates thereof and its

 

 

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results of operations and cash flows for the periods then ended (subject to
normal year-end adjustments in the case of any unaudited interim financial
statements).

 

Section 3.09.  Books and Records.  Except as disclosed on Schedule 3.09, the
books of account, minute books and equity record books of the Company, all of
which were made available to Buyer upon request, are complete and correct in all
material respects, and have been maintained in accordance with sound business
practices and applicable legal requirements.

 

Section 3.10.  Absence of Certain Changes.  Except as disclosed in Schedule 3.10
or as contemplated by this Agreement, since the Balance Sheet Date, the business
of the Company has been conducted in the ordinary course consistent with past
practices and there has not been:

 

(a)        any event, occurrence or development which has had a Material Adverse
Effect;

 

(b)        any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of the Company, or any
repurchase, redemption or other acquisition by the Company of any outstanding
shares of capital stock or other securities of the Company;

 

(c)        any amendment of any material term of any outstanding security of the
Company;

 

(d)        any incurrence, assumption or guarantee by the Company of any
indebtedness for borrowed money other than in the ordinary course of business
consistent with past practices;

 

(e)        any making of any loan, advance or capital contributions to or
investment in any Person other than loans, advances or capital contributions to
or investments made in the ordinary course of business consistent with past
practices;

 

(f)         any transaction or commitment made, or any contract or agreement
entered into, by the Company relating to its assets or business, in either case,
material to the Company, other than transactions and commitments in the ordinary
course of business consistent with past practices and those contemplated by this
Agreement; or

 

(g)        any material change in any method of accounting or accounting
practice by the Company except for any such change required by reason of a
concurrent change in U.S. generally accepted accounting principles.

 

 

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Section 3.11.  No Undisclosed Material Liabilities.  There are no liabilities of
the Company of any kind, other than:

 

(a)        liabilities provided for in the September 30, 2002 interim unaudited
balance sheet of the Company or disclosed in the notes thereto or in the notes
to the September 30, 2002 interim unaudited financial statements of the Company;

 

(b)        liabilities not required under generally accepted accounting
principles to be shown on the September 30, 2002 interim unaudited balance sheet
of the Company or in the notes to the September 30, 2002 interim unaudited
financial statements of the Company for reasons other than the contingent nature
thereof or the difficulty of determining the amount thereof;

 

(c)        liabilities disclosed on Schedule 3.11;

 

(d)        liabilities disclosed in, related to or arising under any agreements,
instruments or other matters disclosed in this Agreement or any Schedule hereto;

 

(e)        liabilities incurred in the ordinary course of business since the
Balance Sheet Date; or

 

(f)         other undisclosed liabilities which, individually or in the
aggregate, are not material to the Company.

 

Section 3.12.  Intercompany Accounts.  Schedule 3.12 contains a complete list of
all intercompany balances as of September 30, 2002 between Seller and its
Affiliates, on the one hand, and the Company, on the other hand.  From September
30, 2002 to the date hereof there has not been any accrual of liability by the
Company to Seller or any of its Affiliates or other transaction between the
Company and Seller and any of its Affiliates, except in the ordinary course of
business of the Company consistent with past practice or as disclosed in
Schedule 3.12.

 

Section 3.13.  Material Contracts.  Except as disclosed in Schedule 3.13, the
Company is not a party to or bound by:

 

(a)        any lease (whether of real or personal property) providing for annual
rentals of -35,000,000 or more that cannot be terminated on not more than 60
days’ notice without payment by the Company of any material penalty;

 

(b)        any agreement for the purchase of materials, supplies, goods,
services, equipment or other assets providing for either (i) annual payments by
the Company of -35,000,000 or more or (ii) aggregate payments by the Company of
-35,000,000 or more, in each case that cannot be terminated on not more than 60
days’ notice without payment by the Company of any material penalty;

 

 

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(c)        any sales, distribution or other similar agreement providing for the
sale by the Company of materials, supplies, goods, services, equipment or other
assets that provides for annual payments to the Company of -35,000,000 or more;

 

(d)        any material partnership, joint venture or other similar agreement or
arrangement;

 

(e)        any agreement relating to the acquisition or disposition of any
material business (whether by merger, sale of stock, sale of assets or
otherwise);

 

(f)         any agreement relating to indebtedness for borrowed money or the
deferred purchase price of property (in either case, whether incurred, assumed,
guaranteed or secured by any asset), except any such agreement (i) with an
aggregate outstanding principal amount not exceeding -35,000,000 or (ii) entered
into subsequent to the date of this Agreement as permitted by Section 3.10(d);

 

(g)        any material agreement that limits the freedom of the Company to
compete in any line of business or with any Person or in any area;

 

(h)        any material agreement with Seller or any of its Affiliates or any
director or officer of Seller or any of its Affiliates; or

 

(i)         any other agreement, commitment, arrangement or plan not made in the
ordinary course of business that is material to the Company.

 

Section 3.14.  Litigation.  Except as set forth in Schedule 3.14, there is (i)
no action, suit, investigation or proceeding pending against, or, to Seller’s
knowledge, threatened against or affecting, Seller or any of its properties or
(ii) to the best knowledge of Seller, no action, suit, investigation or
proceeding pending against, or threatened against or affecting, the Company or
any of its properties, in each case before any court or arbitrator or any
governmental body, agency or official which is reasonably likely to have a
Material Adverse Effect or which in any manner challenges or seeks to prevent,
enjoin, alter or materially delay the transactions contemplated by this
Agreement.

 

Section 3.15.  Compliance with Laws and Court Orders.  Except as set forth in
Schedule 3.15, to Seller’s knowledge the Company is not in violation of any
applicable law, rule, regulation, judgment, injunction, order or decree, except
for violations that have not had and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.

 

Section 3.16.  Properties.  The Company has good title to, or in the case of
leased property and assets has valid leasehold interests in, all property and
assets (whether real, personal, tangible or intangible) reflected on the
September 30, 2002 unaudited interim balance sheet of the Company or acquired
after the

 

 

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Balance Sheet Date, except for properties and assets sold or disposed of since
Balance Sheet Date in the ordinary course of business consistent with past
practices or where the failure to have such good title or valid leasehold
interests would not have a Material Adverse Effect.  None of such property or
assets is subject to any Lien, except:

 

(a)        Liens disclosed on Schedule 3.16;

 

(b)        Liens disclosed on the September 30, 2002 unaudited interim balance
sheet of the Company or notes thereto or securing liabilities reflected on the
September 30, 2002 unaudited interim balance sheet of the Company or notes
thereto;

 

(c)        Liens for taxes, assessments and similar charges that are not yet due
or are being contested in good faith;

 

(d)        mechanic’s, materialman’s, carrier’s, repairer’s and other similar
Liens arising or incurred in the ordinary course of business or that are not yet
due and payable or are being contested in good faith;

 

(e)        Liens incurred in the ordinary course of business since the Balance
Sheet Date; or

 

(f)         other Liens which would not have a Material Adverse Effect
(paragraphs (a)-(f) of this Section 3.16 are, collectively, the “Permitted
Liens”).

 

Section 3.17.  Intellectual Property.  (a)  Schedule 3.17 contains a list of all
material Intellectual Property Rights owned or licensed and used or held for use
by the Company (“Company Intellectual Property Rights”), specifying as to each,
as applicable: (i) the nature of such Intellectual Property Right, (ii) the
owner of such Intellectual Property Right, (iii) whether Company Intellectual
Property Rights owned by Seller or the Company have been issued or registered in
the United States, Japan, Korea, the People’s Republic of China or Taiwan, the
Republic of China (or alternatively whether an application for such issuance or
registration has been filed in any such jurisdictions), and the corresponding
registration or application numbers and (iv) the termination or expiration
dates.

 

(b)        To Seller’s knowledge, the Company Intellectual Property constitutes
in all material respects all of the Intellectual Property Rights used in the
business of the Company as presently conducted.  Except as disclosed on Schedule
3.17, no Company Intellectual Property Right is subject to any outstanding
judgment, injunction, order, decree or agreement restricting the use thereof by
the Company or restricting the licensing thereof by the Company to any Person,
except for any judgment, injunction, order, decree or agreement which would not
reasonably be expected to have a Material Adverse Effect. To

 

 

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Seller’s knowledge, no Intellectual Property Right of any other Person infringes
any Company Intellectual Property Rights and no Company Intellectual Property
Right infringes the Intellectual Property Right of any other Person, in each
case except as would not be reasonably expected to have a Material Adverse
Effect.

 

Section 3.18.  Customers And Suppliers.  Schedule 3.18 sets forth a true and
complete list of the names and addresses of the 20 largest customers and the 10
largest suppliers (measured in each case by yen volume of purchases or sales
during the year ended December 31, 2001) of the Company, and the yen amount of
purchases or sales which each such customer or supplier represented during the
years ended December 31, 2000 and December 31, 2001, respectively.  Except as
disclosed on Schedule 3.18, Seller has no knowledge of any actual or threatened
termination, cancellation or material limitation of, or any material change in,
the business relationship of the Company with any customer, supplier, group of
customers or group of suppliers listed therein, except as would not be
reasonably expected to have a Material Adverse Effect.  Except as disclosed on
Schedule 3.18, to Seller’s knowledge no customer of the Company has any right to
any credit or refund for products sold or services rendered or to be rendered by
the Company pursuant to any contract, understanding or practice of the Company
other than pursuant to the normal course return policy of the Company.

 

Section 3.19.  Taxes.  To Seller’s knowledge and except as set forth in the
September 30, 2002 unaudited interim financial statements of the Company
(including the notes thereto) or on Schedule 3.19: (i) the Company has filed on
a timely basis all material tax returns as required by applicable legal
requirements; (ii) each such tax return is true, correct and complete in all
material respects; (iii) all taxes shown as due and payable on all such tax
returns have been paid; (iv) the Company has not requested an extension of time
within which to file any material tax return in respect of any taxable year
which has not since been filed; (v) the prepaid expenses, charges, accruals and
reserves for taxes with respect to the Company reflected on the books of the
Company are adequate to cover material tax liabilities accruing through the end
of the last period for which the Company ordinarily records items on its books.

 

Section 3.20.  Insurance Coverage.  Seller has made available to Buyer a list
of, and true and complete copies of, all insurance policies and fidelity bonds
relating to the assets, business, operations, employees, officers or directors
of the Company.  There are no material claims by the Company pending under any
of such policies or bonds as to which coverage has been questioned, denied or
disputed by the underwriters of such policies or bonds or in respect of which
such underwriters have reserved their rights.

 

Section 3.21.  Finders’ Fees.  Except for Deutsche Securities Limited, there is
no investment banker, broker, finder or other intermediary which has been

 

 

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retained by or is authorized to act on behalf of Seller or the Company who might
be entitled to any fee or commission in connection with the transactions
contemplated by this Agreement.

 

Section 3.22.  Employee Benefit Plans.  The Company has made available to Buyer
a list of and copies of each material employee benefit plan, each employment,
severance or similar contract, plan arrangement or policy and each other plan or
arrangement (written or oral) providing for compensation, bonuses,
profit-sharing, stock option or other stock related rights or other forms of
incentive or deferred compensation, vacation benefits, insurance (including any
self-insured arrangements), health or medical benefits, employee assistance
program, disability or sick leave benefits, workers’ compensation, supplemental
unemployment benefits, severance benefits and post-employment or retirement
benefits (including compensation, pension, health, medical or life insurance
benefits) which is maintained, administered or contributed to by the Company and
covers any employee or former employee of the plans (and, if applicable, related
trust or funding agreements or insurance policies).

 

Section 3.23.  Employee Restrictions.  To Seller’s knowledge, except as
disclosed in Schedule 3.23, no employee or director of the Company is a party
to, or is otherwise bound by, any contract, including any confidentiality,
noncompetition or proprietary rights agreement, with any other Person that in
any way adversely affects or will affect (x) the performance of his or her
duties for the Company, (y) his or her ability to assign to the Company rights
to any invention, improvement, discovery or information relating to the business
of the Company, or (z) the ability of the Company to conduct its business, in
each case except as would not be reasonably expected to have a Material Adverse
Effect.  To Seller’s knowledge, as of the date of this Agreement no director,
key employee or group of employees of the Company intends to terminate his or
their employment with the Company within the next year except as disclosed in
Schedule 3.23.

 

Section 3.24.  Labor Relations; Employment Law Compliance.  To Seller’s
knowledge, except as disclosed in Schedule 3.24:

 

(A)           THE COMPANY HAS COMPLIED IN ALL MATERIAL RESPECTS WITH ALL LEGAL
REQUIREMENTS RELATING TO EMPLOYMENT PRACTICES, TERMS AND CONDITIONS OF
EMPLOYMENT, EQUAL EMPLOYMENT OPPORTUNITY, NONDISCRIMINATION, IMMIGRATION, WAGES,
HOURS, BENEFITS AND COLLECTIVE BARGAINING.  THE COMPANY IS NOT LIABLE FOR THE
PAYMENT OF ANY MATERIAL FINES, PENALTIES OR OTHER AMOUNTS, HOWEVER DESIGNATED,
FOR FAILURE TO COMPLY WITH ANY OF THE FOREGOING LEGAL REQUIREMENTS.

 

(B)           THE COMPANY HAS NOT BEEN, NOR IS NOW, A PARTY TO ANY COLLECTIVE
BARGAINING AGREEMENT OR OTHER LABOR CONTRACT.  THE COMPANY IS NOT A PARTY TO ANY
OTHER MATERIAL AGREEMENT, ARRANGEMENT OR UNDERSTANDING WITH ANY EMPLOYEE UNION,
EMPLOYEE ORGANIZATION OR TRADE UNION IN RESPECT OF ANY EMPLOYEE.  NO

 

 

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APPLICATION OR PETITION FOR AN ELECTION OF OR FOR CERTIFICATION OF A COLLECTIVE
BARGAINING AGENT REPRESENTING THE COMPANY’S EMPLOYEES IS PENDING.

 

(C)           AS OF THE DATE OF THIS AGREEMENT, THERE HAS NOT BEEN AT ANY TIME,
THERE IS NOT PRESENTLY PENDING OR EXISTING, NOR THREATENED, ANY STRIKE,
SLOWDOWN, PICKETING, WORK STOPPAGE OR MATERIAL EMPLOYEE GRIEVANCE PROCESS
INVOLVING THE COMPANY, AND NO EVENT HAS OCCURRED OR CIRCUMSTANCE EXISTS THAT MAY
PROVIDE THE BASIS FOR ANY WORK STOPPAGE OR OTHER MATERIAL LABOR DISPUTE
INVOLVING THE COMPANY THAT MIGHT HAVE A MATERIAL ADVERSE EFFECT.

 

(D)           AS OF THE DATE OF THIS AGREEMENT, THERE IS NOT PENDING OR
THREATENED ANY MATERIAL PROCEEDING AGAINST OR INVOLVING THE COMPANY RELATING TO
THE ALLEGED MATERIAL VIOLATION OF ANY LEGAL REQUIREMENT PERTAINING TO LABOR
RELATIONS OR EMPLOYMENT MATTERS, NOR ANY ORGANIZATIONAL ACTIVITY OR OTHER LABOR
DISPUTE, LABOR GRIEVANCE OR ARBITRATION PROCEEDING AGAINST OR INVOLVING THE
COMPANY THAT MIGHT HAVE A MATERIAL ADVERSE EFFECT.

 

ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER

 

                Buyer represents and warrants to Seller as of the date hereof
and as of the Closing Date that:

 

Section 4.01.  Corporate Existence and Power.  Buyer is a corporation duly
incorporated and validly existing under the laws of Japan and has all corporate
powers and all material governmental licenses, authorizations, permits, consents
and approvals required to carry on its business as now conducted.

 

Section 4.02.  Corporate Authorization.  The execution, delivery and performance
by Buyer of this Agreement and the consummation of the transactions contemplated
hereby are within the corporate powers of Buyer and have been duly authorized by
all necessary corporate action on the part of Buyer.  This Agreement constitutes
a valid and binding agreement of Buyer.

 

Section 4.03.  Governmental Authorization.  The execution, delivery and
performance by Buyer of this Agreement and the consummation of the transactions
contemplated hereby require no material action by or in respect of, or material
filing with, any governmental body, agency or official.

 

Section 4.04.  Noncontravention.  The execution, delivery and performance by
Buyer of this Agreement and the consummation of the transactions contemplated
hereby do not and will not (i) violate the articles of incorporation (teikan) of
Buyer, (ii) violate any applicable law, rule, regulation,

 

 

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judgment, injunction, order or decree, (iii) require any consent or other action
by any Person under, constitute a default under, or give rise to any right of
termination, cancellation or acceleration of any right or obligation of Buyer or
to a loss of any benefit to which Buyer is entitled under any provision of any
agreement or other instrument binding upon Buyer or (iv) result in the creation
or imposition of any material Lien on any asset of Buyer.

 

Section 4.05.  Financing.  Buyer has, sufficient cash, available lines of credit
or other sources of immediately available funds to enable it to make payment of
the Purchase Price and any other amounts to be paid by it hereunder.

 

Section 4.06.  Purchase for Investment.  Buyer is purchasing the Shares for
investment for its own account and not with a view to, or for sale in connection
with, any distribution thereof.  Buyer (either alone or together with its
advisors) has sufficient knowledge and experience in financial and business
matters so as to be capable of evaluating the merits and risks of its investment
in the Shares and is capable of bearing the economic risks of such investment.

 

Section 4.07.  Litigation.  There is no action, suit, investigation or
proceeding pending against, or to the knowledge of Buyer threatened against or
affecting, Buyer before any court or arbitrator or any governmental body, agency
or official which in any manner challenges or seeks to prevent, enjoin, alter or
materially delay the transactions contemplated by this Agreement.

 

Section 4.08.  Finders’ Fees.  There is no investment banker, broker, finder or
other intermediary which has been retained by or is authorized to act on behalf
of Buyer who might be entitled to any fee or commission from Seller or any of
its Affiliates upon consummation of the transactions contemplated by this
Agreement.

 

Section 4.09.  Inspections; No Other Representations.  Buyer is an informed and
sophisticated purchaser, and has engaged expert advisors, experienced in the
evaluation and purchase of companies such as the Company as contemplated
hereunder.  Buyer has undertaken such investigation and has been provided with
and has evaluated such documents and information as it has deemed necessary to
enable it to make an informed and intelligent decision with respect to the
execution, delivery and performance of this Agreement.  Buyer acknowledges that
Seller has given Buyer complete and open access to the key employees, documents
and facilities of the Company.  Buyer will undertake prior to Closing such
further investigation and request such additional documents and information as
it deems necessary.  Buyer agrees to accept the Shares and the Company in the
condition they are in on the Closing Date based upon its own inspection,
examination and determination with respect thereto as to all matters, and
without reliance upon any express or implied representations or warranties of
any nature made by or on behalf of or imputed to Seller, except as expressly set

 

 

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forth in this Agreement.  Without limiting the generality of the foregoing, 
Buyer acknowledges that Seller makes no representation or warranty with respect
to (i) any projections, estimates or budgets delivered to or made available to
Buyer of future revenues, future results of operations (or any component
thereof), future cash flows or future financial condition (or any component
thereof) of the Company or the future business and operations of the Company or
(ii) any other information or documents made available to Buyer or its counsel,
accountants or advisors with respect to the Company or its businesses or
operations, except as expressly set forth in this Agreement.

 

ARTICLE 5
COVENANTS OF SELLER

 

                Seller agrees that:

 

Section 5.01.  Conduct of the Company.  From the date hereof until the Closing
Date, Seller shall cause the Company to conduct its business in the ordinary
course consistent with past practice and to use its reasonable best efforts to
preserve intact its business organizations and relationships with third parties
and to keep available the services of its present directors and employees. 
Without limiting the generality of the foregoing, from the date hereof until the
Closing Date, except as disclosed on Schedule 5.01 Seller will not permit the
Company to:

 

(a)        adopt or propose any change in its articles of incorporation
(teikan);

 

(b)        merge or consolidate with any other Person or acquire a material
amount of assets from any other Person;

 

(c)        sell, lease, license or otherwise dispose of any material assets or
property except (i) pursuant to existing contracts or commitments or (ii)
otherwise in the ordinary course consistent with past practice; or

 

(d)        agree or commit to do any of the foregoing.

 

Section 5.02.  Access To Information.  (a)  From the date hereof until the
Closing Date, Seller will (i) give, and will cause the Company to give, Buyer,
its counsel, financial advisors, auditors and other authorized representatives
reasonable access to the offices, properties, books and records of the Company
and to the books and records of Seller relating to the Company, (ii) furnish,
and will cause the Company to furnish, to Buyer, its counsel, financial
advisors, auditors and other authorized representatives such financial and
operating data and other information relating to the Company as such Persons may
reasonably request and (iii) instruct the employees, counsel and financial
advisors of Seller or the Company to cooperate with Buyer in its investigation
of the Company. Any

 

 

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investigation pursuant to this Section shall be conducted in such manner as not
to interfere unreasonably with the conduct of the business of Seller or the
Company.  Notwithstanding the foregoing, Buyer shall not have access to
personnel records of the Company relating to individual performance or
evaluation records, medical histories or other information which in Seller’s
good faith opinion is sensitive or the disclosure of which could subject the
Company to risk of liability.

 

(b)        On and after the Closing Date, Seller will afford promptly to Buyer
and its agents reasonable access to its books of account, financial and other
records (including, without limitation, accountant’s work papers), information,
employees and auditors to the extent necessary or useful for Buyer in connection
with any audit, investigation, dispute or litigation or any other reasonable
business purpose relating to the Company; provided that any such access by Buyer
shall not unreasonably interfere with the conduct of the business of Seller.

 

Section 5.03.  Notices of Certain Events.  Seller shall promptly notify Buyer
upon becoming aware of:any notice or other communication from any Person
alleging that the consent of such Person is or may be required in connection
with the transactions contemplated by this Agreement; any notice or other
communication from any governmental or regulatory agency or authority in
connection with the transactions contemplated by this Agreement; and

 

(c)        any actions, suits, claims, investigations or proceedings commenced
relating to Seller or the Company that, if pending on the date of this
Agreement, would have been required to have been disclosed pursuant to Section
3.14.

 

Section 5.04.  No Negotiation.  Other than discussions with Buyer regarding the
transactions contemplated hereby, Seller shall not, from the date hereof until
such time, if any, as this Agreement is terminated, directly or indirectly,
make, solicit, initiate, encourage or entertain submission of any proposal or
offer from any Person relating to any acquisition or purchase of all or a
material portion of the Shares or the Company’s business.

 

Section 5.05.  Resignations.  Seller shall cause Mark Fairchild and Paul Weston
Hebert to resign as director and statutory auditor, respectively, of the Company
effective as of the Closing Date.

 

ARTICLE 6
COVENANTS OF BUYER

 

                Buyer agrees that:

 

Section 6.01.  Access.  Buyer will cause the Company, on and after the Closing
Date, to afford promptly to Seller and its agents reasonable access to its

 

 

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properties, books, records, employees and auditors to the extent necessary or
useful (i) to permit Seller to determine any matter relating to its rights and
obligations hereunder or to any period ending on or before the Closing Date or
(ii) for Seller in connection with any audit, investigation, dispute or
litigation or any other reasonable business purpose relating to the Company;
provided that any such access by Seller shall not unreasonably interfere with
the conduct of the business of Buyer.

 

Section 6.02.  Trademarks; Tradenames.  Buyer shall not permit the Company to
use any of the marks or names set forth on Schedule 6.02 other than as
specifically permitted under the terms of the Trademark License Agreement.

 

Section 6.03.  Appointment of Replacement Statutory Auditor.  Promptly following
the Closing, Buyer shall cause the Company to convene and hold an extraordinary
general meeting and cause the appointment of a replacement statutory auditor to
replace Paul Weston Hebert with immediate effect.

 

ARTICLE 7
COVENANTS OF BUYER AND SELLER

 

                Buyer and Seller agree that:

 

Section 7.01.  Reasonable Best Efforts; Further Assurances.  Subject to the
terms and conditions of this Agreement, Buyer and Seller will use their
reasonable best efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary or desirable under applicable laws and
regulations to consummate the transactions contemplated by this Agreement. 
Seller and Buyer agree, and Seller, prior to the Closing, and Buyer, after the
Closing, agree to cause the Company, to execute and deliver such other
documents, certificates, agreements and other writings and to take such other
actions as may be necessary or desirable in order to consummate or implement
expeditiously the transactions contemplated by this Agreement.

 

Section 7.02.  Certain Filings.  Seller and Buyer shall cooperate with one
another (i) in determining whether any action by or in respect of, or filing
with, any governmental body, agency, official or authority is required, or any
actions, consents, approvals or waivers are required to be obtained from parties
to any material contracts, in connection with the consummation of the
transactions contemplated by this Agreement and (ii) in taking such actions or
making any such filings, furnishing information required in connection therewith
and seeking timely to obtain any such actions, consents, approvals or waivers.

 

 

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Section 7.03.  Public Announcements.  The parties agree to consult with each
other before issuing any press release or making any public statement with
respect to this Agreement or the transactions contemplated hereby and, except
for any press releases and public announcements the making of which may be
required by applicable law or any listing agreement with any national securities
exchange, will not issue any such press release or make any such public
statement prior to such consultation.

 

Section 7.04.  Intercompany Accounts.  All intercompany accounts between the
Seller or its Affiliates, on the one hand, and the Company, on the other hand,
as of the Closing shall be settled (irrespective of the terms of payment of such
intercompany accounts) in the manner provided in this Section.  At least two
business days prior to the Closing, Seller shall prepare and deliver to Buyer a
statement setting out in reasonable detail the calculation of all such
intercompany account balances expected to be paid at Closing as provided in the
following sentence based upon the latest available financial information as of
such date and, to the extent requested by Buyer, provide Buyer with supporting
documentation to verify the underlying intercompany charges and transactions. 
All such intercompany account balances shall be paid in full in cash on or prior
to the Closing, other than trade accounts payable in the ordinary course of
business which have been outstanding 90 days or less, which shall be subject to
settlement in accordance with the terms stipulated in relevant invoices,
distributor agreements or other relevant documentation.

 

ARTICLE 8
CONDITIONS TO CLOSING

 

Section 8.01.  Conditions to Obligations of Buyer and Seller.  The obligations
of Buyer and Seller to consummate the Closing are subject to the satisfaction of
the following conditions:

 

(a)           No provision of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit the consummation of the Closing.

 

(b)           All actions by or in respect of or filings with any governmental
body, agency, official or authority required to permit the consummation of the
Closing shall have been taken, made or obtained, except for any such actions or
filings the failure to take, make or obtain would not reasonably be expected to
have a Material Adverse Effect.

 

(c)           The Company and BTI Limited Partnership shall have entered into
the Ancillary Agreements on or before the Closing Date.

 

 

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(d)           The Company and BTI Limited Partnership shall have entered into
the Japanese Patent License Agreement on or before the Closing Date.

 

Section 8.02.  Conditions to Obligation of Buyer.  The obligation of Buyer to
consummate the Closing is subject to the satisfaction of the following further
conditions:

 

(a)           (i)  Seller shall have performed in all material respects all of
its obligations hereunder required to be performed by it on or prior to the
Closing Date, (ii) the representations and warranties of Seller and Seller
Guarantor contained in this Agreement and in any certificate or other writing
delivered by Seller pursuant hereto shall be true at and as of the Closing Date,
as if made at and as of such date, with only such exceptions as would not in the
aggregate reasonably be expected to have a Material Adverse Effect and (iii)
Buyer shall have received certificates signed by respective executive officers
of Seller, Seller Guarantor and, with respect to the Company, by the President
of the Company to the foregoing effect.

 

(b)           Buyer shall have received all documents it may reasonably request
relating to the existence of Seller, Seller Guarantor and the Company and the
authority of Seller and Seller Guarantor for this Agreement, all in form and
substance reasonably satisfactory to Buyer.

 

(c)           Mark Fairchild and Paul Weston Hebert shall have submitted signed
resignations, effective as of the Closing, from their positions as director and
statutory auditor, respectively, of the Company.

 

Section 8.03.  Conditions to Obligation of Seller.  The obligation of Seller to
consummate the Closing is subject to the satisfaction of the following further
conditions:

 

(a)           (i)  Buyer shall have performed in all material respects all of
its obligations hereunder required to be performed by it at or prior to the
Closing Date, (ii) the representations and warranties of Buyer and Buyer
Guarantor contained in this Agreement and in any certificate or other writing
delivered by Buyer or Buyer Guarantor pursuant hereto shall be true in all
material respects at and as of the Closing Date, as if made at and as of such
date and (iii) Seller shall have received certificates signed by the respective
executive officers of Buyer and Buyer Guarantor to the foregoing effect.

 

(b)           Seller shall have received all documents it may reasonably request
relating to the existence of Buyer and Buyer Guarantor and the authority of
Buyer and Buyer Guarantor for this Agreement, all in form and substance
reasonably satisfactory to Seller.

 

 

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(c)           (i)  Buyer shall have paid the Purchase Price to Seller in cash
and (ii) the Company shall have paid the up-front fees amounting to
¥4,000,000,000 in aggregate to BTI Limited Partnership in consideration for BTI
Limited Partnership entering into the Ancillary Agreements.

 

ARTICLE 9
SURVIVAL; INDEMNIFICATION

 

Section 9.01.  Survival.  The covenants, agreements, representations and
warranties of the parties hereto contained in this Agreement or in any
certificate or other writing delivered pursuant hereto or in connection herewith
shall survive the Closing until eighteen (18) months following the Closing Date;
provided that the covenants, agreements, representations and warranties
contained in Sections 4.09, 6.01, 6.02, and Article 9 shall survive
indefinitely.  Notwithstanding the preceding sentence, any covenant, agreement,
representation or warranty in respect of which indemnity may be sought under
this Agreement shall survive the time at which it would otherwise terminate
pursuant to the preceding sentence, if notice of the inaccuracy or breach
thereof giving rise to such right of indemnity shall have been given to the
party against whom such indemnity may be sought prior to such time.

 

Section 9.02.  Indemnification.  (a)  Seller hereby indemnifies Buyer and its
Affiliates against and agrees to hold each of them harmless from any and all
damage, loss, liability and expense (including, without limitation, reasonable
expenses of investigation and reasonable attorneys’ fees and expenses in
connection with any action, suit or proceeding whether involving a third party
claim or a claim solely between the parties hereto) (“Damages”) incurred or
suffered by Buyer or any of its Affiliates arising out of any misrepresentation
or breach of warranty (each such misrepresentation and breach of warranty a
“Warranty Breach”) or breach of covenant or agreement made or to be performed by
Seller pursuant to this Agreement; provided that with respect to indemnification
by Seller for any Warranty Breach pursuant to this Section, (i) Seller shall not
be liable unless the aggregate amount of Damages with respect to such Warranty
Breaches exceeds -50 million and then only to the extent of such excess and (ii)
Seller’s maximum liability for all such Warranty Breaches shall not exceed -1.2
billion.

 

(b)           Buyer hereby indemnifies Seller and its Affiliates against and
agrees to hold each of them harmless from any and all Damages incurred or
suffered by Seller or any of its Affiliates arising out of any Warranty Breach
or breach of covenant or agreement made or to be performed by Buyer pursuant to
this Agreement; provided that with respect to indemnification by Buyer for any
Warranty Breach pursuant to this Section, (i) Buyer shall not be liable unless
the

 

 

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aggregate amount of Damages with respect to such Warranty Breaches exceeds -50
million and then only to the extent of such excess and (ii) Buyer’s maximum
liability for all such Warranty Breaches shall not exceed -1.2 billion.

 

Section 9.03.  Procedures.  (a)  The party seeking indemnification under Section
9.02 (the “Indemnified Party”) agrees to give prompt notice to the party against
whom indemnity is sought (the “Indemnifying Party”) of the assertion of any
claim, or the commencement of any suit, action or proceeding (“Claim”) in
respect of which indemnity may be sought under such Section and will provide the
Indemnifying Party such information with respect thereto that the Indemnifying
Party may reasonably request. The failure to so notify the Indemnifying Party
shall not relieve the Indemnifying Party of its obligations hereunder, except to
the extent such failure shall have adversely prejudiced the Indemnifying Party.

 

(b)           The Indemnifying Party shall be entitled to participate in the
defense of any Claim asserted by any third party (“Third Party Claim”) and,
subject to the limitations set forth in this Section, shall be entitled to
control and appoint lead counsel for such defense, in each case at its expense.

 

(c)           If the Indemnifying Party shall assume the control of the defense
of any Third Party Claim in accordance with the provisions of this Section 9.03,
(i) the Indemnifying Party shall obtain the prior written consent of the
Indemnified Party (which shall not be unreasonably withheld) before entering
into any settlement of such Third Party Claim, if the settlement does not
release the Indemnified Party from all liabilities and obligations with respect
to such Third Party Claim or the settlement imposes injunctive or other
equitable relief against the Indemnified Party, and (ii) the Indemnified Party
shall be entitled to participate in the defense of such Third Party Claim and to
employ separate counsel of its choice for such purpose.  The fees and expenses
of such separate counsel shall be paid by the Indemnified Party.

 

(d)           Each party shall cooperate, and cause their respective Affiliates
to cooperate, in the defense or prosecution of any Third Party Claim and shall
furnish or cause to be furnished such records, information and testimony, and
attend such conferences, discovery proceedings, hearings, trials or appeals, as
may be reasonably requested in connection therewith.

 

(e)           Each Indemnified Party shall use reasonable efforts to collect any
amounts available under insurance coverage, or from any other Person alleged to
be responsible, for any Damages payable under Section 9.02.

 

Section 9.04.  Calculation of Damages.  (a)  The amount of Damages payable under
Section 9.02 by the Indemnifying Party shall be net of any (i) amounts recovered
or recoverable by the Indemnified Party under applicable

 

 

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insurance policies or from any other Person alleged to be responsible therefor,
(ii) tax cost incurred by the Indemnified Party arising from the receipt of
indemnity payments and (iii) tax benefit realized by the Indemnified Party
arising from the incurrence or payment of any such Damages.  In computing the
amount of any such tax cost or tax benefit, the Indemnified Party shall be
deemed to fully utilize, at the highest marginal tax rate then in effect, all
tax items arising from the receipt of any indemnity payment hereunder or the
incurrence or payment of any indemnified Damages.  If the Indemnified Party
receives any amounts under applicable insurance policies, or from any other
Person alleged to be responsible for any Damages, subsequent to an
indemnification payment by the Indemnifying Party, then such Indemnified Party
shall promptly reimburse the Indemnifying Party for any payment made or expense
incurred by such Indemnifying Party in connection with providing such
indemnification payment up to the amount received by the Indemnified Party, net
of any expenses incurred by such Indemnified Party in collecting such amount.

 

(b)           The Indemnifying Party shall not be liable under Section 9.02  for
any (i) incidental, indirect, consequential, exemplary or punitive Damages or
(ii) Damages for lost profits.

 

(c)           Notwithstanding any other provision of this Agreement to the
contrary, if on the Closing Date the Indemnified Party knows of any information
that would cause one or more of the representations and warranties made by the
Indemnifying Party to be inaccurate as of the date made, the Indemnified Party
shall have no right or remedy after the Closing with respect to such inaccuracy
and shall be deemed to have waived its rights to indemnification in respect
thereof.

 

Section 9.05.  Assignment of Claims.  If the Indemnified Party receives any
payment from an Indemnifying Party in respect of any Damages pursuant to Section
9.02 and the Indemnified Party could have recovered all or a part of such
Damages from a third party (a “Potential Contributor”) based on the underlying
Claim asserted against the Indemnifying Party, the Indemnified Party shall
assign such of its rights to proceed against the Potential Contributor as are
necessary to permit the Indemnifying Party to recover from the Potential
Contributor the amount of such payment.

 

Section 9.06.  Exclusivity.  Except as specifically set forth in this Agreement,
effective as of the Closing Buyer waives any rights and claims Buyer may have
against Seller, whether in law or in equity, relating to the Company or the
Shares or the transactions contemplated hereby.  The rights and claims waived by
Buyer include, without limitation, claims for contribution or other rights of
recovery arising out of or relating to any, claims for breach of contract,
breach of representation or warranty, negligent misrepresentation and all other
claims for

 

 

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breach of duty.  After the Closing, Section 9.02 will provide the exclusive
remedy for any misrepresentation, breach of warranty, covenant or other
agreement (other than those contained in Sections 5.02(a), 6.01 and 6.02) or
other claim arising out of this Agreement or the transactions contemplated
hereby.

 

ARTICLE 10
TERMINATION

 

Section 10.01.  Grounds for Termination.  This Agreement may be terminated at
any time prior to the Closing:

 

(a)           by mutual written agreement of Seller and Buyer;

 

(b)           by either Seller or Buyer if the Closing shall not have been
consummated on or before December 15, 2002; or

 

(c)           by either Seller or Buyer if consummation of the transactions
contemplated hereby would violate any nonappealable final order, decree or
judgment of any court or governmental body having competent jurisdiction.

 

The party desiring to terminate this Agreement pursuant to clauses 10.01(b) or
10.01(c) shall give notice of such termination to the other party.

 

Section 10.02.  Effect of Termination.  If this Agreement is terminated as
permitted by Section 10.01, such termination shall be without liability of
either party (or any stockholder, director, officer, employee, agent, consultant
or representative of such party) to the other party to this Agreement; provided
that if such termination shall result from the willful (i) failure of either
party to fulfill a condition to the performance of the obligations of the other
party, (ii) failure to perform a covenant of this Agreement or (iii) breach by
either party hereto of any representation or warranty or agreement contained
herein, such party shall be fully liable for any and all Damages incurred or
suffered by the other party as a result of such failure or breach.  The
provisions of Sections 12.03, 12.05 and 12.06 and of the confidentiality
agreement referred to in Section 12.09  shall survive any termination hereof
pursuant to Section 10.01.

 

ARTICLE 11
GUARANTEES

 

Section 11.01.  Buyer Guarantor.  Buyer Guarantor hereby irrevocably and
unconditionally guarantees to Seller the prompt and full discharge by Buyer of
all of Buyer’s covenants, agreements, obligations and liabilities under this

 

 

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Agreement including, without limitation, the due and punctual payment of all
amounts which are or may become due and payable by Buyer hereunder when and as
the same shall become due and payable (collectively, the “Buyer Obligations”),
in accordance with the terms hereof.  Buyer Guarantor acknowledges and agrees
that, with respect to all Buyer Obligations to pay money, such guaranty shall be
a guaranty of payment and performance and not of collection and shall not be
conditioned or contingent upon the pursuit of any remedies against Buyer.  If
Buyer shall default in the due and punctual performance of any Buyer Obligation,
including the full and timely payment of any amount due and payable pursuant to
any Buyer Obligation, Buyer Guarantor will forthwith perform or cause to be
performed such Buyer Obligation and will forthwith make full payment of any
amount due with respect thereto at its sole cost and expense.

 

Section 11.02.  Seller Guarantor.  Seller Guarantor hereby irrevocably and
unconditionally guarantees to Buyer the prompt and full discharge by Seller of
all of Seller’s covenants, agreements, obligations and liabilities under this
Agreement including, without limitation, the due and punctual payment of all
amounts which are or may become due and payable by Seller hereunder, when and as
the same shall become due and payable (collectively, the “Seller Obligations”),
in accordance with the terms hereof.  Seller Guarantor acknowledges and agrees
that, with respect to all Seller Obligations to pay money, such guaranty shall
be a guaranty of payment and performance and not of collection and shall not be
conditioned or contingent upon the pursuit of any remedies against Seller.  If
Seller shall default in the due and punctual performance of any Seller
Obligation, including the full and timely payment of any amount due and payable
pursuant to any Seller Obligation, Seller Guarantor will forthwith perform or
cause to be performed such Seller Obligation and will forthwith make full
payment of any amount due with respect thereto at its sole cost and expense.

 

Section 11.03.  Guaranty Unconditional.  The liabilities and obligations of each
Guarantor pursuant to this Agreement are unconditional and absolute and, without
limiting the generality of the foregoing, shall not be released, discharged or
otherwise affected by:

 

(a)           any acceleration, extension, renewal, settlement, compromise,
waiver or release in respect of any Buyer Obligation or Seller Obligation by
operation of law or otherwise;

 

(b)           the invalidity or unenforceability, in whole or in part, of this
Agreement;

 

(c)           any modification or amendment of or supplement to this Agreement;

 

 

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(d)           any change in the corporate existence, structure or ownership of
Buyer, Buyer Guarantor, Seller or Seller Guarantor or any insolvency,
bankruptcy, reorganization or other similar proceeding affecting any of them or
their assets; or

 

(e)           any other act, omission to act, delay of any kind by any party
hereto or any other Person, or any other circumstance whatsoever that might, but
for the provisions of this Section, constitute a legal or equitable discharge of
the obligations of any Guarantor hereunder.

 

Section 11.04.  Waivers Of The Guarantors.  Each Guarantor hereby waives any
right, whether legal or equitable, statutory or non-statutory, to require Seller
or Buyer to proceed against or take any action against or pursue any remedy with
respect to Seller, Buyer or any other Person or make presentment or demand for
performance or give any notice of nonperformance before Seller or Buyer may
enforce its rights hereunder against such Guarantor.

 

Section 11.05.  Discharge Only Upon Performance In Full; Reinstatement In
Certain Circumstances.  Each Guarantor’s obligations hereunder shall remain in
full force and effect until the Buyer Obligations and Seller Obligations shall
have been performed in full.  If at any time any performance by any Person of
any Buyer Obligation or Seller Obligation is rescinded or must be otherwise
restored or returned, whether upon the insolvency, bankruptcy or reorganization
of Seller or Buyer or otherwise, such Guarantor’s obligations hereunder with
respect to such Buyer Obligation or Seller Obligation shall be reinstated at
such time as though such Buyer Obligation or Seller Obligation had become due
and had not been performed.

 

Section 11.06.  Subrogation.  Upon performance by any Guarantor of any Buyer
Obligation or Seller Obligation, such Guarantor shall be subrogated to the
rights of Seller against Buyer or Buyer against Seller, as the case may be, with
respect to such Buyer Obligation or Seller Obligation; provided that such
Guarantor shall not enforce any Buyer Obligation by way of subrogation against
Seller or Buyer while any Buyer Obligation or Seller Obligation is due and
unperformed by Seller or Buyer.

 

Section 11.07.  Guarantor Representations And Warranties.  Each Guarantor
represents and warrants to each other party to this Agreement as of the date
hereof and as of the Closing Date that:

 

(a)           Such Guarantor is a corporation duly incorporated, validly
existing and (in the case of Seller Guarantor) in good standing under the laws
of its jurisdiction of incorporation and has all corporate powers and all
governmental licenses, authorizations, permits,

 

 

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consents and approvals required to carry on its business as now conducted,
except for those licenses, authorizations, permits, consents and approvals the
absence of which would not materially and adversely affect the ability of such
Guarantor to perform its obligations under this Agreement.

 

(b)           The execution, delivery and performance by such Guarantor of this
Agreement and the consummation of the transactions contemplated hereby are
within such Guarantor’s corporate powers and have been duly authorized by all
necessary corporate action on the part of such Guarantor.  This Agreement
constitutes a valid and binding agreement of such Guarantor.

 

(c)           The execution, delivery and performance by such Guarantor of this
Agreement and the consummation of the transactions contemplated hereby require
no action by or in respect of, or filing with, any governmental body, agency or
official; and any such action or filing as to which the failure to make or
obtain would not materially and adversely affect the ability of such Guarantor
to perform its obligations under this Agreement.

 

(d)           The execution, delivery and performance by such Guarantor of this
Agreement and the consummation of the transactions contemplated hereby do not
and will not (i) violate the certificate of incorporation, articles of
incorporation, charter, bylaws or similar governing documents of such Guarantor,
(ii) assuming compliance with the matters referred to in paragraph (c), violate
any applicable law, rule, regulation, judgment, injunction, order or decree,
except for any such violations which would not reasonably be expected to
materially and adversely affect the ability of such Guarantor to perform its
obligations under this Agreement, or (iii) except as to matters which would not
reasonably be expected to materially and adversely affect the ability of such
Guarantor to perform its obligations under this Agreement, require any consent
or other action by any Person under, constitute a default under, or give rise to
any right of termination, cancellation or acceleration of any right or
obligation of such Guarantor or to a loss of any benefit to which such Guarantor
is entitled under any provision of any agreement or other instrument binding
upon such Guarantor.

 

ARTICLE 12
MISCELLANEOUS

 

Section 12.01.  Notices.  All notices, requests and other communications to any
party hereunder shall be in writing (including facsimile transmission) and shall
be given,

 

 

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                if to Buyer, to:

 

JAFCO MBO Co., Ltd.

8-2, Marunouchi 1-chome

Chiyoda-ku, Tokyo

Japan

Attention: Tomoya Shiraishi

Fax: 813-5223-7093

 

with a copy to:

 

Tokyo Aoyama Aoki Law Office/Baker & McKenzie
The Prudential Tower 11F
13-10, Nagata-cho 2-chome
Chiyoda-ku, Tokyo 100-0014
Japan

Attention: Hiroshi Kondo

Fax: 813-5157-2900

 

 

                if to Buyer Guarantor, to:

 

JAFCO Co., Ltd.

8-2, Marunouchi 1-chome

Chiyoda-ku, Tokyo

Japan

Attention: Tomoya Shiraishi

Fax: 813-5223-7093

 

with a copy to:

 

Tokyo Aoyama Aoki Law Office/Baker & McKenzie
The Prudential Tower 11F
13-10, Nagata-cho 2-chome
Chiyoda-ku, Tokyo 100-0014
Japan

Attention: Hiroshi Kondo

Fax: 813-5157-2900

 

 

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                if to Seller, to:

 

BTC International Holdings, Inc.

2701 East Grauwyler Road

Building 3

Irving, Texas  75061

United States of America

Attention: Brian Stone, Chief Financial Officer

Fax:  1-972-579-6448

 

with a copy to:

 

James J. Slaby, Jr., Esq.

Sheppard, Mullin, Richter & Hampton LLC

333 South Hope Street Forty-Eighth Floor

Los Angeles, CA 90071

Phone: (213) 620-1780

Fax: (213) 620-1398

 

and an additional copy to:

 

Davis Polk & Wardwell

Akasaka Twin Tower East 11F

17-22, Akasaka 2-chome

Minato-ku, Tokyo  107-0052

Japan

Attention:  Theodore A. Paradise

Fax:  813-5561-4425

 

 

                if to Seller Guarantor, to:

 

BancTec, Inc.

2701 East Grauwyler Road

Building 3

Irving, Texas  75061

United States of America

Attention: Brian Stone, Chief Financial Officer

Fax:  1-972-579-6448

 

 

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with a copy to:

 

James J. Slaby, Jr., Esq.

Sheppard, Mullin, Richter & Hampton LLC

333 South Hope Street Forty-Eighth Floor

Los Angeles, CA 90071

Phone: (213) 620-1780

Fax: (213) 620-1398

 

and an additional copy to:

 

Davis Polk & Wardwell

Akasaka Twin Tower East 11F

17-22, Akasaka 2-chome

Minato-ku, Tokyo  107-0052

Japan

Attention:  Theodore A. Paradise

Fax:  813-5561-4425

 

                All such notices, requests and other communications shall be
deemed received on the date of receipt by the recipient thereof if received
prior to 5 p.m. in the place of receipt and such day is a business day in the
place of receipt.  Otherwise, any such notice, request or communication shall be
deemed not to have been received until the next succeeding business day in the
place of receipt.

 

Section 12.02.  Amendments and Waivers.  (a)  Any provision of this Agreement
may be amended or waived if, but only if, such amendment or waiver is in writing
and is signed, in the case of an amendment, by each party to this Agreement, or
in the case of a waiver, by the party against whom the waiver is to be
effective.

 

                (b)           No failure or delay by any party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.

 

Section 12.03.  Expenses.  All costs and expenses incurred in connection with
this Agreement shall be paid by the party incurring such cost or expense.

 

Section 12.04.  Successors and Assigns.  The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of each other party hereto.

 

Section 12.05.  Governing Law.  This Agreement shall be governed by and
construed in accordance with the law of the State of New York, without regard to
the conflicts of law rules of such state.

 

 

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Section 12.06.  Dispute Resolution.  In the event of any dispute, controversy,
or claim arising out of or relating to this Agreement or the interpretation,
enforceability, performance, breach, termination or validity hereof, the parties
shall use their best efforts to settle the matter through mutual agreement.  If
the parties are unable to reach an amicable resolution of such dispute, the
matter shall be solely and finally settled by binding arbitration.  The
arbitration proceedings shall be conducted in the English language and any
judgment issued by an arbitrator shall be in English.  Any arbitration commenced
by Buyer shall be conducted in New York, New York, in accordance with the
International Arbitration Rules then prevailing of the American Arbitration
Association.  Any arbitration commenced by Seller shall be conducted in Tokyo,
Japan, in accordance with the Commercial Arbitration Rules then prevailing of
the Japan Commercial Arbitration Association.  In any such proceeding, neither
party shall be entitled under any circumstances to receive (i) incidental,
indirect, consequential, exemplary or punitive Damages or (ii) Damages for lost
profits.  Judgment of the arbitrator(s) shall be final and binding and may be
entered in, and shall be fully enforceable by, a court of proper jurisdiction. 
Notwithstanding the foregoing provisions, either party shall have the right to
institute a legal action in a court of proper jurisdiction for injunctive relief
and/or a decree for specific performance pending final settlement by
arbitration.  In the event either party seeks injunctive relief of any provision
of this Agreement, the party against whom such relief is sought agrees to waive
and hereby does waive any requirement that the party seeking the injunctive
relief post a bond or any other security.

 

Section 12.07.  WAIVER OF JURY TRIAL.  EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.

 

Section 12.08.  Counterparts; Third Party Beneficiaries.  This Agreement may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument.  This Agreement shall become effective when each party hereto shall
have received a counterpart hereof signed by the other party hereto.  No
provision of this Agreement is intended to confer upon any Person other than the
parties hereto any rights or remedies hereunder.

 

Section 12.09.  Entire Agreement.  This Agreement, the Ancillary Agreements, the
Japanese Patent License Agreement between BTI Limited Partnership and the
Company dated as of the date hereof, the confidentiality agreement (Himitsu Hoji
Keiyakusho) dated August 21, 2001 and the letter agreement dated September 20,
2002 between Buyer and Seller constitute the entire agreement between the
parties with respect to the subject matter of

 

 

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this Agreement and supersede all prior agreements and understandings, both oral
and written, between the parties with respect to the subject matter of this
Agreement.

 

Section 12.10.  Captions.  The captions herein are included for convenience of
reference only and shall be ignored in the construction or interpretation
hereof.

 

Section 12.11.  Disclosure Schedules.  (a)  Seller may revise the Schedules to
this Agreement by delivering revised Schedules to Buyer at any time prior to the
Closing.  Buyer shall have the right to review the revised Schedules for a
period of five days after receipt thereof.  At any time within such five–day
time period Buyer shall have the right to terminate this Agreement by delivery
of a notice to Seller if the revised information would be reasonably likely to
have a Material Adverse Effect.  This notice, if given, shall specify the
information forming the basis for the decision to terminate.  Seller shall have
five days after receipt of such notice to review with Buyer the information
forming the basis for the decision to terminate and to attempt to agree on
corrective measures, if any.  If the parties cannot agree on corrective measures
within such five–day period, then this Agreement shall terminate.  If this
Agreement is not terminated as permitted by this Section, Buyer shall be deemed
to have accepted such revisions, and the Schedules attached to this Agreement as
of the date hereof shall be deemed to be superseded by the revised Schedules.

 

                (b)           The parties acknowledge and agree that (i) the
Schedules to this Agreement may include certain items and information solely for
informational purposes for the convenience of Buyer and (ii) the disclosure by
Seller of any matter in the Schedules shall not be deemed to constitute an
acknowledgment by Seller that the matter is required to be disclosed by the
terms of this Agreement or that the matter is material.

 

 

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                IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.

 

JAFCO MBO CO., LTD.

 

By:

 

 

Name:

 

Title:

 

 

BTC INTERNATIONAL HOLDINGS, INC.

 

By:

 

 

Name:

 

Title:

 

 

JAFCO CO., LTD., as Buyer Guarantor

 

By:

 

 

Name:

 

Title:

 

 

BANCTEC, INC., as Seller Guarantor

 

By:

 

 

Name:

 

Title:

 

 

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