EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
by and among
BLPAS Acquisition Corp.
a Delaware Corporation
as Buyer
BORON, XxXXXX & ASSOCIATES, INC.
a Delaware Corporation
as Parent
XXXXXX XXXXX, INC.
a New Jersey corporation
as Seller
and
XXXXX XXXXXXX
and
XXXXXXX XXXXXXX, individually
(each a "Founder" and collectively "Founders") and as
co-trustees (each a "Trustee" and collectively "Trustees") of the
PALLAIS FAMILY TRUST
("Trust")
a trust existing under the laws of the State of California
June 29, 2000
TABLE OF CONTENTS
Page
SECTION 1. PURCHASE AND SALE OF ASSETS 1
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1.1 Sale of Assets 1
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1.2 Liabilities 3
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1.3 Purchase Price and Payment; Post-Closing Adjustment 4
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1.4 Place of Closing; Closing Date 6
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1.5 Transfer of Subject Assets 6
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1.6 Delivery of Records and Contracts 7
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1.7 Further Assurances 7
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1.8 Allocation of Purchase Price 7
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1.9 Procedures for Assets not Transferable 8
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1.10 Employees, Wages, Benefits and Bonuses 8
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SECTION 2. REPRESENTATIONS AND WARRANTIES OF SELLER AND FOUNDERS 11
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2.1 Making of Representations and Warranties 11
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2.2 Organization and Qualification; Capital Stock 11
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2.3 Authority 11
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2.4 Title to Properties; Liens; Condition of Properties 13
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2.5 Location of Subject Assets 13
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2.6 Financial Statements; Undisclosed Liabilities 13
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2.7 Tax Matters 14
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2.8 Collectibility of Accounts Receivable 14
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2.9 Intellectual Property Rights; Employee Restrictions 14
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2.10 Business; Compliance with Laws 15
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2.11 Insurance 16
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2.12 Transactions with Affiliates 16
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2.13 Employee Benefit Plans 16
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2.14 Hazardous Waste, Etc. 16
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2.15 List of Certain Employees, Consultants and Suppliers 17
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2.16 Employees; Labor Matters 18
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2.17 Customers 18
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2.18 Litigation 18
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2.19 Finder's Fee 18
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2.20 Material Adverse Change 18
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2.21 Contracts 19
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2.22 Banking Relations 20
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2.23 Securities Law Matters 20
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2.24 Disclosure 21
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SECTION 3. COVENANTS OF FOUNDERS AND SELLER 22
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3.1 Making of Covenants and Agreements 22
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3.2 Representation Disclaimer 22
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(i)
3.3 Non-Use of Trade Names, etc 22
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3.4 Non-Disclosure and Non-Competition 22
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3.5 Payment of Obligations 23
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3.7 Collection of Assets 23
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3.8 Securities Filings 24
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3.9 Change of Name 24
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SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT 24
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4.1 Making of Representations and Warranties 24
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4.2 Organization of Buyer 24
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4.3 Authority of Buyer 24
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4.4 Parent Stock 25
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4.5 Business; Compliance with Laws 25
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4.6 Litigation 26
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4.7 Finder's Fees 26
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4.8 Material Adverse Change 26
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4.9 SEC Reports 26
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4.10 Disclosure 26
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SECTION 5. COVENANTS OF BUYER AND PARENT 27
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5.1 Operation of Buyer 27
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5.2 Guaranty 28
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5.3 Representation Disclaimer 28
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5.4 Stock Options 28
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SECTION 6. SURVIVAL OF WARRANTIES 28
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6.1 Survival of Warranties 28
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SECTION 7. INDEMNIFICATION 29
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7.1 Indemnification by Founders 29
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7.2 Indemnification by Buyer and Parent 30
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7.3 Notice; Defense of Claims 32
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7.4 Sole Remedy 33
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7.5 Satisfaction of Indemnification Obligations 33
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SECTION 8. MISCELLANEOUS 33
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8.1 Law Governing 33
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8.2 Notices 34
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8.3 Prior Agreements Superseded 34
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8.4 Assignability 35
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8.5 Captions and Gender 35
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8.6 Certain Definitions 35
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8.7 Execution in Counterparts 36
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8.8 Amendments; Waivers 36
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8.9 Severability 36
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8.10 Publicity and Disclosures 36
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8.11 Dispute Resolution 36
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(ii)
8.12 Expenses 36
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(iii)
SCHEDULES
Schedule 1.1(a)(i) Intellectual Property Rights
Schedule 1.1(a)(ii) Receivables
Schedule 1.1(a)(iv) Assumed Contracts
Schedule 1.1(a)(v) Certificates
Schedule 1.1(a)(vii) Equipment
Schedule 1.1(b) Excluded Assets
Schedule 1.2A Excluded Liabilities
Schedule 1.2B Ordinary Course Liabilities
Schedule 1.3(b) Working Capital Statement
Schedule 1.8 Allocation of Purchase Price
Schedule 1.10 Retained Employees
Schedule 1.10(e)(i) First Employee Bonus
Schedule 1.10(e)(ii) Second Employee Bonus
Schedule 2.2 Capitalization
Schedule 2.3 Liens/Consent
Schedule 2.4 Title to Properties
Schedule 2.6(a) Financial Statements
Schedule 2.6(b) Undisclosed Liabilities
Schedule 2.7 Taxes
Schedule 2.8 Guaranteed Accounts Receivable
Schedule 2.9 Intellectual Property Rights
Schedule 2.10 Compliance with Laws
Schedule 2.12 Transactions with Affiliates
Schedule 2.13 Employee Benefit Plans
Schedule 2.14 Hazardous Waste
Schedule 2.15 Employees and Suppliers
Schedule 2.16 Employment Contracts
Schedule 2.17 Customers
Schedule 2.18 Litigation
Schedule 2.20 Material Adverse Changes
Schedule 2.22 Banking Relations
Schedule 4.5 Compliance with Laws
Schedule 4.6 Litigation
Schedule 4.8 Material Adverse Change
Schedule 5.4 Stock Options
EXHIBITS
Exhibit A Contingent Payment
Exhibit B Form of Employment Agreement
Exhibit C Form of Non-Competition Agreement
Exhibit D Form of Stock Option Agreement
Exhibit E Form of Registration Rights Agreement
Exhibit F Form of Transition Plan
Exhibit G Form of Opinion of Counsel of Seller
Exhibit H Form of Stockholders Agreement
Exhibit I Form of Opinion of Counsel of Buyer and Parent
(iv)
ASSET PURCHASE AGREEMENT (the "Agreement") dated as of June 29, 2000 by and
among Boron, XxXxxx & Associates, Inc., a Delaware corporation ("Parent"), BLPAS
Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of
Parent ("Buyer"), Xxxxxx Xxxxx, Inc., a New Jersey corporation ("Seller"), Xxxxx
Xxxxxxx and Xxxxxxx Xxxxxxx, as individuals (each a "Founder" and collectively,
the "Founders") and Xxxxx Xxxxxxx and Xxxxxxx Xxxxxxx, as trustees of the
Pallais Family Trust (the "Trust"), a trust existing under the laws of the State
of California (each a "Trustee" and collectively, the "Trustees").
WHEREAS, Seller is engaged in the business of providing marketing,
educational and other services in the healthcare industry (the "Business");
WHEREAS, the Founders are the settlors of the Trust which owns
approximately 98% of the issued and outstanding capital stock of Seller;
WHEREAS, subject to the terms and conditions set forth herein, Buyer
desires to purchase from Seller, and Seller desires to sell, transfer and assign
to Buyer substantially all of the properties, assets and Business of Seller.
NOW, THEREFORE, in order to consummate said purchase and sale and in
consideration of the mutual agreements set forth herein, the parties hereto
agree as follows:
SECTION 1. PURCHASE AND SALE OF ASSETS.
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1.1 Sale of Assets.
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(a) Subject to the provisions of this Agreement, at the Closing (as
defined in Section 1.4 hereof) the Seller shall sell, transfer and assign to
Buyer and Buyer shall acquire all of the Seller's right, title and interest in
and to all of the properties and assets used or held for use in the Business
(except as hereinafter provided in Section 1.1(b)) of every kind and
description, tangible and intangible, real, personal or mixed, and wherever
located, including without limitation, the following:
(i) all goodwill of the Business, including the name "Xxxxxx
Xxxxx", content development and meeting production materials and processes,
trade secrets, proprietary information, designs, styles, technologies,
inventions, know-how, formulae, processes, procedures, research records,
test information, software and software documentation, source and object
code, algorithms, promotional materials, customer lists, supplier and
dealer lists, market surveys, marketing know-how, research and technical
information, trade names, copyrights and copyright registrations, service
marks, trademarks and patents (including applications and registrations
therefor), including without limitation the Intellectual Property Rights
described in Schedule 2.9 and all licenses to or from third parties with
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respect to the foregoing or rights related thereto, in each case which is
used or held for use in the Business and all documentation and media
constituting, describing or relating to the foregoing, including without
limitation, manuals, memoranda and records;
(ii) all accounts receivable of the Business as of the Closing
Date, a list of which, as of April 30, 2000, is attached hereto as Schedule
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1.1(a)(ii);
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(iii) any cash included in the Base Working Capital (as defined
below);
(iv) all of the orders, commitments, contracts and agreements of
the Business as of the Closing Date, including those as of April 30, 2000,
which are listed on Schedule 1.1(a)(iv) attached hereto (the "Contracts").
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Schedule 1.1(a)(iv) also sets forth those Contracts which require the
consent of any third party prior to the transfer of such Contracts to
Buyer;
(v) all of the franchises, licenses, permits, certifications,
approvals, accreditations and authorizations relating to the Business all
of which are listed on Schedule 1.1(a)(v) attached hereto (the
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"Certificates");
(vi) all of the Seller's work-in-progress as of the Closing Date,
including but not limited to, production and presentation materials,
content development materials, inventory, stock in trade, finished goods
and raw materials;
(vii) all of the Seller's equipment, tools, spare parts, fixtures
and other tangible assets related to or used in connection with the
Business, all of which are listed on Schedule 1.1(a)(vii) attached hereto;
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(viii) all other assets and properties of every nature whatsoever,
tangible and intangible, and wherever located, used or held for use in
connection with the Business, including without limitation, rights under
contracts or agreements with representatives marketing and selling the
products and services of the Business, copies of customer lists, customer
records and histories, customer invoices, lists of suppliers and vendors
and all records relating thereto, market research information, advertising
matter, catalogues, photographs, sales materials, purchasing materials,
files, data, media materials and all records with respect to the Business.
The assets, property and business of Seller being sold to and purchased by
Buyer under this Section 1.1(a) are hereinafter sometimes referred to as the
"Subject Assets."
(b) Notwithstanding the foregoing, there shall be excluded from such
purchase and sale the following property and assets of the Seller:
(i) Seller's corporate franchise and corporate record books
containing minutes of meetings of directors and stockholders (collectively,
the "Corporate Records") and;
(ii) those certain assets specified in Schedule 1.1(b). The
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assets, property and business of the Seller which are excluded from the
Subject Assets under this Section 1.1(b) are hereinafter referred to as the
"Excluded Assets."
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1.2 Liabilities. Except for the Ordinary Course Liabilities (as defined
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below), Buyer shall not assume or be bound by any obligations or liabilities of
the Seller or any affiliate of the Seller of any kind or nature, known, unknown,
accrued, absolute, contingent or otherwise, whether now existing or hereafter
arising whatsoever, including without limitation those matters listed on
Schedule 1.2A (the "Excluded Liabilities"). Except for the Ordinary Course
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Liabilities, Seller shall be responsible for and pay any and all losses,
damages, obligations, liens, assessments, judgments, fines, disposal and other
costs and expenses, liabilities and claims, including, without limitation,
interest, penalties and reasonable fees of counsel, engineers and experts, as
the same are incurred, of every kind or nature whatsoever (all of the foregoing
being a "Claim" or the "Claims"), made by or owed to any person to the extent
any of the foregoing relates to (a) the Excluded Assets, (b) the Excluded
Liabilities or (c) the operations or assets of the Business and arises on the
basis of events, acts, omissions, conditions or any other state of facts
occurring or existing prior to or on the Closing Date (including, in each case,
without limitation, any Claim relating to or associated with tax matters,
pension and benefits matters, any failure to comply with applicable laws and/or
permitting or licensing requirements, environmental and worker health and safety
matters).
Buyer shall be responsible for and pay all Claims relating to Ordinary
Course Liabilities. Seller and Founders shall not assume or be bound by any
obligations which are Ordinary Course Liabilities.
Upon the sale and purchase of the Subject Assets, Buyer agrees to perform
or pay in accordance with their terms the "Ordinary Course Liabilities" which
shall include without limitation:
(i) the obligations of Seller arising under the Contracts from
and after the Closing Date;
(ii) ordinary course trade payables, deferred contract revenues
and accrued operating expenses (other than Taxes, except for accrued
payroll taxes for the payroll period ending on the Closing Date) which are
outstanding at the time of Closing and which were incurred by Seller in the
ordinary course of business;
(iii) obligations arising from the operations or assets of
the Business and arising on the basis of events, acts, omissions or conditions
or any other state of facts first occurring or coming into existence on or
after the Closing Date; and
(iv) those liabilities specified in Schedule 1.2B.
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The assumption of the Ordinary Course Liabilities by Buyer hereunder shall
not enlarge any rights of third parties under contracts or arrangements with
Buyer or Seller or any of their respective affiliates or subsidiaries. No
parties other than the Buyer, the Parent, the Seller and the Founders shall have
any rights under this Agreement. Notwithstanding anything contained in this
Section 1.2 to the contrary, the only liabilities and obligations of Seller
existing on or prior to the Closing Date (including, without limitation,
contractual liabilities and obligations) to be assumed by Buyer under this
Agreement are the Ordinary Course Liabilities.
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1.3 Purchase Price and Payment; Post-Closing Adjustment.
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(a) In consideration of the sale by Seller to Buyer of the Subject
Assets, subject to the assumption by Buyer of the Ordinary Course Liabilities,
Buyer shall pay to Seller on the Closing Date (as hereinafter defined); (i) by
wire transfer to an account designated by Seller, the sum of Seven Million Five
Hundred Thousand Dollars ($7,500,000); and (ii) the number of shares of
unregistered common stock of the Parent, par value $.01 per share ("Parent
Stock"), determined by dividing $1,500,000 by the Market Value of a share of
Parent Stock. For purposes of this Agreement: (a) "Market Value" shall mean
the average Closing Price of Parent Stock over the twenty trading day period
beginning on the twenty-second trading day preceding the Closing and ending on
the third trading day preceding the Closing Date; (b) the "Closing Price" of
Parent Stock on any date of determination means the closing sale price (or, if
no closing sale price is reported, the last reported sale price) of such
security on the Nasdaq National Market on such date. The consideration payable
to Seller by Buyer on the Closing Date, as adjusted pursuant to Section 1.3 (b)
below, is hereinafter referred to as the "Initial Payment".
(b) At least five days prior to the Closing, Seller will prepare and
deliver to Buyer a statement, subject to Buyer's reasonable approval (the
"Closing Statement"), setting forth a good faith estimate of Seller's Working
Capital (as defined below) as of the close of business on the day immediately
preceding the Closing Date ("Closing Working Capital") and the difference
between Closing Working Capital and $1,000,000 ("Base Working Capital"). The
cash portion of the Initial Payment set forth in Section 1.3(a) above payable to
Seller will be (i) decreased on a dollar-for-dollar basis by the amount by which
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Base Working Capital exceeds the Closing Working Capital. Any amount by which
the Closing Working Capital exceeds the Base Working Capital shall be retained
by the Seller (the "Seller's Retained Amount"). In the event the Closing
Working Capital exceeds the Base Working Capital and there is insufficient cash
in the Closing Working Capital for Seller to retain some or all of the Seller's
Retained Amount (the "Shortfall"), the Parent will pay to the Seller, within 10
days following the end of each calendar month following the Closing Date, an
amount equal to the Seller's Portion of cash collections during the preceding
month. The "Seller's Portion" of each month's cash collection shall mean the
percentage that the Shortfall is to the Closing Working Capital less any amount
of cash the Seller retains.
(i) "Working Capital" shall mean the difference between the
Current Assets and Current Liabilities of the Seller.
(ii) "Current Assets" shall mean, in accordance with generally
accepted accounting principles (GAAP), all accounts receivable, cash,
prepaid expenses, accrued revenue, and prepaid contract costs.
Exclusions from Current Assets shall include, but not be limited to,
those assets listed on Schedule 1.1(b).
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(iii) "Current Liabilities" shall mean, in accordance with GAAP,
the accounts payable, deferred contract revenue, accrued contract
costs and other agreed upon
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contract liabilities of the Seller. Exclusions from Current
Liabilities shall include, but not be limited to, those liabilities
listed on Schedule 1.2A.
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(c) No later than 60 days after the Closing, Buyer will prepare and
deliver to Seller a final statement (the "Final Statement") setting forth as of
the Closing Date Seller's actual Closing Working Capital as of the Closing Date
(the "Actual Closing Working Capital"). Such Final Statement shall be prepared
in accordance with GAAP, as applied on a basis consistent with Seller's past
practice, without the benefit of the exceptions listed on Schedule 2.6(a) or
where such practices did not otherwise meet GAAP standards. Subject to Section
1.3(d) below, within 10 days following the delivery of such Final Statement, (i)
if the Actual Closing Working Capital exceeds the Base Working Capital by a sum
greater than or equal to $25,000, the Buyer shall pay the entire amount of the
excess to the Seller; (ii) if the Actual Closing Working Capital exceeds the
Base Working Capital by a sum less than $25,000, no payment shall be due; (iii)
if the Base Working Capital exceeds the Actual Closing Working Capital by a sum
greater than or equal to $25,000, the Seller shall pay the entire difference to
the Buyer; or (iv) if the Base Working Capital exceeds the Actual Closing
Working Capital by a sum less than $25,000, no payment shall be due ( in any
case, if a payment is due under (i) or (iii) above the party making the payment
(the "Reconciliation Amount") being referred to herein as the "Paying Party".
The Paying Party shall pay to the other party the Reconciliation Amount by
certified or bank cashiers check or by wire transfer, as directed by such other
party.
(d) In the event Seller objects to the amounts shown on the Final
Statement, Seller shall notify Buyer in writing of such objection within the
20-day period following the delivery thereof, stating in such written objection
the reasons therefor and setting forth Seller's
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calculation of the Reconciliation Amount. Upon receipt by Buyer of such written
objection, the parties shall attempt to resolve the disagreement concerning the
Reconciliation Amount through negotiation. If Buyer and Seller cannot resolve
such disagreement concerning the Reconciliation Amount within 20 days following
the end of the foregoing 20-day period, the parties shall submit the matter for
resolution to a nationally recognized independent firm of certified public
accountants not affiliated with either Seller or Buyer, with the costs thereof
to be shared equally by the parties. Such accounting firm shall deliver a
statement setting forth its own calculation of the Reconciliation Amount and of
the identity of the Paying Party within 30 days of the submission of the matter
to such firm (which calculation, absent manifest error, shall be binding and
conclusive on the parties and not subject to appeal). The Paying Party shall pay
to the other party the Reconciliation Amount shown to be due on the statement of
such accounting firm promptly in the manner provided above but in no event later
than 10 days following the delivery of such statement by such accounting firm to
the parties. Prior to submitting such dispute to an independent accounting firm,
Parent or Seller shall deposit the amount in dispute in an interest bearing
escrow account with a mutually agreed upon third party until a final
determination is made with respect to the Reconciliation Amount.
(e) Upon the achievement of the performance goals listed in Exhibit A
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hereto and subject to the terms and conditions contained therein, Buyer shall
deliver to Seller, the amount of cash and Parent Stock, if any, earned under
Exhibit A in two separate payments (each a "Contingent Payment" and
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collectively, the "Contingent Payments").
All amounts payable to Seller by Buyer pursuant to this Section 1.3,
including amounts payable, if any, under Exhibit A, is defined herein as the
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"Purchase Price."
1.4 Place of Closing; Closing Date. The closing of the purchase and sale
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provided for in this Agreement (the "Closing") shall be held at the offices of
Xxxxxxx, Procter & Xxxx LLP, New York, 000 Xxxxxxxxx Xxxxxx, XX 00000 at 9:00
a.m. (local time) on June 29, 2000, unless otherwise agreed to by Buyer and
Seller (the "Closing Date").
1.5 Transfer of Subject Assets. As a condition to Closing, (a) Seller
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shall deliver or cause to be delivered to Buyer (i) good and sufficient
instruments of transfer transferring to Buyer all of Seller's right, title and
interest in the Subject Assets and such instruments of transfer (w) shall be in
the form which is usual and customary for transferring the type of property
involved under the laws of the jurisdictions applicable to such transfers, (x)
shall be in form and substance satisfactory to Buyer and its counsel, (y) shall
effectively vest in Buyer good title to all of Seller's right, title and
interest in the Subject Assets free and clear of all mortgages, pledges,
security interests, charges, taxes, liens, restrictions and encumbrances of any
kind (collectively, "Liens"), except for liens for taxes not yet due and payable
and liens held by equipment lessors and landlords,(collectively, "Permitted
Liens") and (z) where applicable, shall be accompanied by evidence of the
discharge of all liens and encumbrances against the Subject Assets; (ii) an
employment agreement in the form of Exhibit B, executed by Xxxxx Xxxxxxx, (the
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"Employment Agreement"); (iii) a non-competition agreement in the form of
Exhibit C, executed by Xxxxx Xxxxxxx (the "Non-Competition Agreement"); (iv) a
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stock option agreement in the form of Exhibit D, executed by Xxxxx Xxxxxxx (the
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"Stock Option Agreement"); (v) a registration rights agreement in the form of
Exhibit E executed by the Trustees (the "Registration Rights Agreement"); (vi) a
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transition plan in the form of Exhibit F, executed by Xxxxx Xxxxxxx (the
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"Transition Plan"); (vii) an Opinion of Counsel of Seller substantially in the
form
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attached hereto as Exhibit G; (viii) a stockholders agreement in the form
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of Exhibit H executed by all of the stockholders of Seller setting forth their
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rights with respect to the Purchase Price (the "Stockholders Agreement"); (ix)
evidence of the termination of that certain Loan Agreement between Fleet Bank,
N.A. and Xxxxxx Xxxxx, Inc. dated as of June 4, 1998; (x) the termination of all
UCC-1 financing statements affecting the Subject Assets, except for those filed
in connection with Permitted Liens; (xi) a release releasing Buyer from any
obligations with respect to that certain deferred compensation agreement between
Seller and Xxxxxxx Van Miert; (xii) certified copies of the resolutions adopted
by (y) the shareholders of Seller approving the transactions contemplated
herein; and (z) the board of directors of Seller approving the transactions
contemplated herein and terminating, effective at least one day prior to the
Closing Date, the Xxxxxx Xxxxx Profit Sharing Plan, the Xxxxxx Xxxxx Pension
Plan and the deferred compensation agreement between Seller and Xxxxxxx Van
Miert; (xiii) an employment agreement executed by Xxxx Xxxxxxxxxx; (xiv) a stock
option agreement executed by Xxxx Xxxxxxxxxx; (xv) executed severance and non-
competition agreements by those people listed in the Transition Plan; and (xvi)
such other documentation as may be reasonably requested by Buyer in connection
with the consummation of the transactions contemplated by this Agreement; and
(b) Buyer shall deliver to Seller and the Founders, as applicable (i) the
amount of cash and Parent Stock set forth in Section 1.3; (ii) the Employment
Agreement executed by Parent; (iii) the Registration Rights Agreement executed
by Buyer and Parent; (iv) the Stock Option Agreement executed by Parent; (v) an
Opinion of Counsel of Buyer and Parent substantially in the form attached hereto
as Exhibit I; (vi) Xxxx Xxxxxxxxxx'x employment agreement executed by Parent;
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(vii) Xxxx Xxxxxxxxxx'x stock option agreement executed by Parent; (viii) the
severance and non-competition agreements executed by Parent and Buyer; and (ix)
such other documentation as may be reasonably requested by Seller in connection
with the consummation of the transactions contemplated by this Agreement.
1.6 Delivery of Records and Contracts. As a condition to Closing, Seller
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shall deliver or cause to be delivered to Buyer all of the Contracts listed on
Schedule 1.1(a)(iv). Seller shall also deliver all authorizations, waivers and
consents required by such Contracts, as set forth on Schedule 1.1(a)(iv), to
effect the transfer of such Contracts to Buyer, in form and substance reasonably
satisfactory to Buyer, and no such authorizations, waivers and consents shall
impose any burdensome conditions or requirements on Buyer. Seller shall also
deliver to Buyer at the Closing, all of the Seller's business records, books and
other data relating to the assets, business and operations of the Business, to
the extent the same constitute part of the Subject Assets. If Seller is unable
to deliver all of its records, books and data, it shall retain that portion of
the records, books and data not so delivered, and make provision for such
delivery in a reasonable manner following the Closing. For five years after the
Closing Date, neither party shall destroy any business records, books or data in
its possession without first giving notice to the other party of its intention
to destroy such records, books or data. Each party shall afford the other
reasonable access to such records, books and data upon request.
1.7 Further Assurances. Each party agrees, from time to time after the
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Closing and at the reasonable request of the other party, and without further
consideration, to (i) execute and deliver further instruments of transfer,
assumption and assignment (in addition to those delivered under Section 1.5) and
take such other actions as the other party may reasonably require to more
effectively transfer and assign to, including assignments in such forms as are
acceptable to the United States Patent and Trademark Office, and vest in, Buyer
each of the Subject Assets or
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to complete the assumption of the Ordinary Course Liabilities by Buyer; and (ii)
cooperate with and provide assistance to the other party in transferring
possession of the Subject Assets to Buyer and assumption of the Ordinary Course
Liabilities by Buyer.
1.8 Allocation of Purchase Price. The Purchase Price payable by Buyer
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pursuant to Section 1.3 and the amount of the Ordinary Course Liabilities
assumed by Buyer shall represent payment for the Subject Assets in the amount
set forth on Schedule 1.8 hereto. The amounts reflected in said Schedule shall
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represent the fair market values of the Subject Assets at the Closing, to the
best of the knowledge and belief of the parties hereto. At or as soon as
practicable after the Closing, Buyer and Seller shall execute an IRS Form 8594
in accordance with the allocation set forth in said Schedule and in compliance
with Section 1060 of the Internal Revenue Code of 1986, as amended, and the
rules and regulations thereunder. All tax returns and reports filed by Buyer
and Seller with respect to the transactions contemplated by this Agreement shall
be consistent with such Schedule. A Preliminary form 8594 will be prepared, if
possible, at the time of Closing.
1.9 Procedures for Assets not Transferable. If any of the contracts or
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agreements or any other property or rights included in the Subject Assets is not
assignable or transferable either by virtue of the provisions thereof or under
applicable law without the consent of some party or parties and any such consent
is not obtained prior to the Closing, this Agreement and the related instruments
of transfer shall not constitute an assignment or transfer thereof and, unless
otherwise agreed between Buyer and Seller with respect to any such contract,
Buyer shall not assume the Seller's obligations with respect thereto, but Seller
shall use all commercially reasonable efforts to obtain any such consent as soon
as possible after the Closing or otherwise obtain for Buyer the practical and
economic benefit of such property or rights and Buyer shall use all commercially
reasonable efforts to assist in that endeavor. In the event the Seller and a
vendor continue to be parties to an agreement after the Closing as a result of a
required consent not having been obtained, the Buyer shall perform under such
agreement if it receives the benefits thereof.
1.10 Employees, Wages, Benefits and Bonuses.
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(a) Seller shall terminate all employees of the Business prior to or
on the Closing Date and shall be responsible for making all severance payments
to such employees in respect of such terminations. Buyer shall not assume or
have any obligations or liabilities with respect to such terminations.
(b) Seller shall pay all wages, salaries, commissions, and the cost
of all fringe benefits provided to each employee of the Business which shall
have become due for work performed as of and through the day on which such
employee is terminated, and Seller shall collect and pay all taxes in respect of
such wages, salaries, commissions and benefits except for accruals for any of
the foregoing which are taken into account in calculating the Closing Working
Capital.
(c) Buyer shall offer employment to commence on the Closing Date to
all of Seller's employees listed on Schedule 1.10. Such employees shall be
-------------
hired by Buyer at the same compensation level and job title as such employee had
while employed by Seller with full credit for prior service. Seller
acknowledges and agrees that Buyer may interview and discuss employment terms
and issues with employees.
8
(d) Seller's benefit plans which Buyer wishes to continue are set
forth in the Transition Plan. Seller's benefit plans not listed in the
Transition Plan shall not be assumed or continued by Buyer. Seller acknowledges
and agrees that Buyer is not assuming and shall not have any obligations or
liabilities under, any benefit plan maintained by Seller for the benefit of
employees of the Business, except to the extent set forth in the Transition
Plan.
(e) The Buyer agrees to pay to certain of its employees a bonus at
the end of each Contingency Period as set forth below.
(i) At the end of the First Contingency Period (as defined in
Exhibit A) the Buyer shall pay to those employees of Buyer who are listed
on Schedule 1.10(e)(i) and (a) are employed by the Buyer on June 30, 2001
-------------------
or (b) who's employment with Buyer was terminated following the Closing by
Buyer for reasons other than "for cause" (each a " First Bonus Eligible
Employee" and collectively, the "First Bonus Eligible Employees") a bonus
(the "First Bonus"), if such bonus should become due and payable. Each
First Bonus Eligible Employee shall receive the amount of cash as is set
forth next to such First Bonus Eligible Employee's name on Schedule
--------
1.10(e)(i) or a proportional share thereof depending on the amount of the
----------
First Bonus. If a person listed on Schedule 1.10(e)(i) is not a First Bonus
-------------------
Eligible Employee at the time a bonus becomes payable hereunder, his or her
proportional share of the First Bonus shall be distributed to the First
Bonus Eligible Employees on a pro rata basis. The First Bonus shall be paid
by the Buyer to the First Bonus Eligible Employees in the amount of
$550,000 (the "Target First Bonus"). The amount of the First Bonus shall
be based on the EBIT (as defined in Exhibit A) and EBIT Percentage (as
defined in Exhibit A) earned by the Buyer during the First Contingency
Period. If Buyer achieves an EBIT of $3,150,000 (the "First Maximum EBIT")
and an EBIT Percentage of 14.59% (the "First Maximum EBIT Percentage") the
First Bonus shall be 100% of the Target First Bonus (1 x $550,000 =
$550,000). The First Bonus can be earned down to 0% of the Target First
Bonus. If Buyer achieves an EBIT of $2,520,000 (the "First Minimum EBIT")
and an EBIT Percentage of 11.67% (the "First Minimum EBIT Percentage") the
First Bonus shall be 0% of the Target First Bonus (0 x $550,000 = $0). At
any given level of EBIT between the First Minimum EBIT and the First
Maximum EBIT, the amount of the First Bonus shall be determined by dividing
the amount of EBIT actually earned less the First Minimum EBIT by the
difference between the First Minimum EBIT and the First Maximum EBIT and
multiplying the result by the Target First Bonus, provided that the
corresponding EBIT Percentage level is achieved. In the event the EBIT
Percentage level achieved is not at least equivalent to its corresponding
EBIT amount, the First Bonus will be based on the EBIT Percentage achieved.
In such case the First Bonus shall be determined by dividing the EBIT
Percentage actually earned less the First Minimum EBIT Percentage by the
difference between the First Minimum EBIT Percentage and the First Maximum
EBIT Percentage and multiplying the result by the Target First Bonus.
Under no circumstances shall the First Bonus Eligible Employees be entitled
to any part of the First Bonus if the Buyer's EBIT is less than $2,520,000
or the EBIT Percentage is less than 11.67%. The maximum amount of the
First Bonus that may be earned shall be $550,000, regardless of the fact
that the Buyer may exceed the First Maximum EBIT or the First Maximum EBIT
Percentage.
(ii) At the end of the Second Contingency Period (as defined in
Exhibit A) the Buyer
9
shall pay to those employees of Buyer who are listed on Schedule
--------
1.10(e)(ii) and (a) are employed by the Buyer on June 30, 2002
-----------
or (b) who's employment with Buyer was terminated following the Closing by
Buyer, for reasons other than "for cause" (each a " Second Bonus Eligible
Employee" and collectively, the "Second Bonus Eligible Employees") a bonus
(the "Second Bonus"), if such bonus should become due and payable. Each
Second Bonus Eligible Employee shall receive the amount of cash as is set
forth next to such Second Bonus Eligible Employee's name on Schedule
--------
1.10(e)(ii) or a proportional share thereof depending on the amount of the
-----------
Second Bonus. If a person listed on Schedule 1.10(e)(ii) is not a Second
--------------------
Bonus Eligible Employee at the time a bonus becomes payable hereunder, his
or her proportional share of the Second Bonus shall be distributed to the
Second Bonus Eligible Employees on a pro rata basis. The Second Bonus
shall be paid by the Buyer to the Second Bonus Eligible Employees in the
amount of $600,000 (the "Target Second Bonus"). The amount of the Second
Bonus shall be based on the EBIT and EBIT Percentage earned by the Buyer
during the Second Contingency Period. If Buyer achieves an EBIT of
$3,780,000 (the "Second Maximum EBIT") and an EBIT Percentage of 14.59%
(the "Second Maximum EBIT Percentage") the Second Bonus shall be 100% of
the Target Second Bonus (1 x $600,000 = $600,000). The Second Bonus can be
earned down to 0% of the Target Second Bonus. If Buyer achieves an EBIT of
$3,024,000 (the "Second Minimum EBIT") and an EBIT Percentage of 11.67%
(the "Second Minimum EBIT Percentage") the Second Bonus shall be 0% of the
Target Second Bonus (0 x $600,000 = $0). At any given level of EBIT
between the Second Minimum EBIT and the Second Maximum EBIT, the amount of
the Second Bonus shall be determined by dividing the amount of EBIT
actually earned less the Second Minimum EBIT by the difference between the
Second Minimum EBIT and the Second Maximum EBIT and multiplying the result
by the Target Second Bonus, provided that the corresponding EBIT Percentage
level is achieved. In the event the EBIT Percentage level achieved is not
at least equivalent to its corresponding EBIT amount, the Second Bonus will
be based on the EBIT Percentage achieved. In such case the Second Bonus
shall be determined by dividing the EBIT Percentage actually earned less
the Second Minimum EBIT Percentage by the difference between the Second
Minimum EBIT Percentage and the Second Maximum EBIT Percentage and
multiplying the result by the Target Second Bonus. Under no circumstances
shall the Second Bonus Eligible Employees be entitled to any part of the
Second Bonus if the Buyer's EBIT is less than $3,024,000 or the EBIT
Percentage is less than 11.67%. The maximum amount of the Second Bonus that
may be earned shall be $600,000, regardless of the fact that the Buyer may
exceed the Second Maximum EBIT or the Second Maximum EBIT Percentage.
The EBIT and EBIT Percentages for this Section 1.10 shall be calculated in
accordance with the procedures set forth in Exhibit A for calculating the
Contingent Payments, provided that any resolution of a disputed calculation
reached by the parties thereto shall be binding for the purposes of calculating
the bonuses payable hereunder. The First Bonus and Second Bonus shall be paid
on the same day that the corresponding Contingent Payment is made. Seller
agrees that after the Closing Date it shall not make any further compensatory
payments to those persons listed on either Schedule 1.10(e)(i) or Schedule
------------------- --------
1.10(e)(ii).
-----------
10
SECTION 2. REPRESENTATIONS AND WARRANTIES OF SELLER AND FOUNDERS
-----------------------------------------------------
2.1 Making of Representations and Warranties. As a material inducement to
----------------------------------------
Buyer and Parent to enter into this Agreement and consummate the transactions
contemplated hereby, Seller and each Founder jointly and severally hereby makes
the representations and warranties contained in this Section 2.
2.2 Organization and Qualification; Capital Stock. Seller is a
---------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of New Jersey with full power and authority to own or lease its
properties and to conduct its business in the manner and in the places where
such properties are owned or leased or such business is conducted by it. Seller
is not qualified to do business as a foreign corporation in any jurisdiction, no
such qualifications being necessary, except as set forth on Schedule 2.2 or
------------
where the failure to be so qualified would not have a material adverse effect on
Seller or the Business. All of the issued and outstanding capital stock of
Seller is owned beneficially and of record as set forth in Schedule 2.2, free
------------
and clear of any lien, restrictions or encumbrances, and there are no
outstanding options, warrants, rights, commitments, pre-emptive rights or
agreements of any kind for the issuance or sale of, or outstanding securities
convertible into, any additional stock of any class of Seller. Seller does not
have any subsidiaries or own any securities issued by any other business
organization or governmental authority or any direct or indirect interest in or,
except as provided in Schedule 2.2, control over any corporation, partnership,
------------
limited liability company, joint venture or entity of any kind relating to the
Business conducted by Seller.
2.3 Authority.
---------
(a) The Seller has full power and authority to execute, deliver and
perform this Agreement and each other agreement or instrument contemplated
hereby and the execution and delivery of this Agreement and each other agreement
or instrument contemplated hereby and the performance of all obligations
hereunder and thereunder have been duly authorized by all necessary action of
Seller. This Agreement and the transactions contemplated hereby have been duly
approved by the stockholders of the Seller. This Agreement and each other
agreement, document and instrument executed by Seller pursuant to this Agreement
constitutes, or when executed and delivered will constitute, the valid and
binding obligation of Seller, enforceable in accordance with its terms, subject
to applicable bankruptcy, reorganization, insolvency, moratorium and other
rights affecting creditors' rights generally, and general equitable principles.
The execution, delivery and performance by the Seller of this Agreement and each
other agreement, document and instrument contemplated hereby:
(i) do not and will not violate any provision of Seller's
Articles of Incorporation or By-laws, each as amended or restated to date;
(ii) do not and will not violate any laws of the United States or
any state or other jurisdiction applicable to Seller or require Seller to
obtain any approval, authorization, declaration, consent or waiver of, or
make any filing with or give notice to, any person, entity or public or
governmental authority that has not been obtained, made or given (except
that no representation is made with respect to the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976 ("HSR") except as set forth in Section
2.3(c) below); and
11
(iii) Except as set forth on Schedule 2.3, do not and will not
------------
result in a material breach of, constitute a default under, accelerate any
obligation under, require a consent under or give rise to a right of
termination of any indenture or loan or credit agreement or any other
agreement, contract, instrument, mortgage, lien, lease, permit, license,
authorization, order, writ, judgment, injunction, decree, determination or
arbitration award to which Seller is a party or by which Seller or the
Business or the Subject Assets is bound or affected, or result in the
creation or imposition of any Lien on any of the Subject Assets.
(b) The Founders have full right, authority, power and capacity to
enter into this Agreement and each agreement, document and instrument to be
executed and delivered by them or on their behalf pursuant to or as contemplated
by this Agreement and to carry out the transactions contemplated hereby and
thereby. This Agreement and each agreement, document and instrument executed
and delivered by the Founders pursuant to or contemplated by this Agreement
constitutes, or when executed and delivered will constitute, valid and binding
obligations of the Founders, enforceable in accordance with their respective
terms, except as the same may be limited by bankruptcy, insolvency or
reorganization laws, or other laws relating to or affecting the availability of
the remedy of specific performance or equitable principles of general
application. The execution, delivery and performance by the Founders of this
Agreement and each such agreement, document and instrument:
(i) do not and will not violate any laws of the United States or
any state or other jurisdiction applicable to the Founders or require the
Founders to obtain any approval, consent or waiver of, or make any filing
with, any person or entity (governmental or otherwise) that has not been
obtained, made or given; and
(ii) do not and will not result in a breach of, constitute a
default under, accelerate any obligation under or give rise to a right of
termination of any indenture or loan or credit agreement or any other
agreement, contract, instrument, mortgage, lien, lease, permit,
authorization, order, writ, judgment, injunction, decree, determination or
arbitration award to which any Founder is a party or by which the property
of any Founder is bound or affected, or result in the creation or
imposition of any mortgage, pledge, lien, security interest or other charge
or encumbrance on any of the Subject Assets (except that no representation
is made with respect to HSR except as set forth in Section 2.3(c) below).
(c) With respect to HSR, Founders are the "ultimate parent entity" (as
defined in HSR) of Seller and they do not have total assets for purposes of HSR
(after taking into account the applicable attribution rules of HSR) in excess of
$10 million. For purposes of determining total assets for HSR, Founders'
ownership of Seller is included at the book value of the Seller's assets and
Founders' personal residence and other non-income producing property are
excluded.
2.4 Title to Properties; Liens; Condition of Properties.
---------------------------------------------------
(a) The Subject Assets do not include any real property. Schedule 2.4
------------
sets forth the addresses and uses of all real property that the Seller leases.
Seller owns or has a valid leasehold interest in all of the Subject Assets and
Seller has and is conveying to Buyer hereunder good title to all of its personal
property, tangible and intangible, included in the Subject Assets.
12
Except as set forth on Schedule 2.4 and for Permitted Liens, none of such
------------
property or assets of Seller, tangible or intangible, is subject to any Lien.
Except for Permitted Liens, no financing statement under the Uniform Commercial
Code with respect to any of the Subject Assets is active in any jurisdiction,
and Seller has not signed any such active financing statement or any security
agreement authorizing any secured party thereunder to file any such financing
statement. The Subject Assets and the Excluded Assets listed on Schedule 1.1(b)
---------------
are all of the assets used in the operation of the Business as the same has been
operated prior to the date hereof. The tangible Subject Assets (i) are in
working order (reasonable wear and tear excepted), (ii) have been maintained in
a manner consistent with the needs of the Business, and (iii) to Seller's
Knowledge (as defined in Section 8.6), conform in all material respects with all
applicable state and federal statutes, ordinances, regulations and laws.
(b) Upon delivery to Buyer of the instruments of transfer referred to
in Section 1.5 hereof, Buyer will receive good and valid title or a valid
leasehold interest in all of the Subject Assets, free and clear of all Liens,
except for Permitted Liens.
2.5 Location of Subject Assets. The tangible Subject Assets are located
--------------------------
at Seller's facilities listed on Schedule 2.4.
------------
2.6 Financial Statements; Undisclosed Liabilities.
---------------------------------------------
(a) Seller has previously furnished to Buyer and Parent copies of its
audited financial statements for the fiscal years ended December 31, 1998 and
1999 and the unaudited interim period ending April 30, 2000. Except as
described in Schedule 2.6(a), such financial statements referred to in this
---------------
Section 2.6(a) were prepared in conformity with generally accepted accounting
principles applied on a consistent basis, and fairly and accurately present in
all material respects the financial position of Seller as of the dates thereof
and the results of operations and cash flows of Seller for the periods shown
therein (subject to the absence of footnotes that would be required by generally
accepted accounting principles), and to Seller's Knowledge, are complete,
correct and consistent in all material respects with the books and records of
Seller, except in the case of interim financial statements for normal recurring
and certain non-recurring audit adjustments necessary for a fair presentation of
the financial position and operating results of the Seller for the interim
periods which will not be, in the aggregate, materially adverse and for the
omission of footnotes to said interim financial statements that would be
required by generally accepted accounting principles.
(b) Except as and to the extent reflected or reserved against in the
unaudited balance sheet of Seller at April 30, 2000 contained in the financial
statements referred to in Section 2.6(a) (the "Base Balance Sheet"), incurred in
the ordinary course of business since April 30, 2000, or as listed on Schedule
--------
2.6(b), the Seller does not have and is not subject to any material liability or
------
obligation of any nature, whether accrued, absolute, contingent or otherwise of
the kind that would be required to be disclosed in such financial statements or,
to Seller's Knowledge, any other material liability or obligation.
2.7 Tax Matters. Seller and the Founders have timely and properly filed
-----------
in all material respects all federal, state, local and foreign income, excise
and franchise tax returns, real estate and personal property tax returns, sales
and use tax returns and other tax returns required to be filed
13
in connection with the Business and have paid all Taxes (as defined below) owing
by either of them (whether or not shown on any Tax Return), except Taxes which
have not yet accrued or otherwise become due, for which adequate provision has
been made in the pertinent financial statements referred to in Section 2.6
above. The provision for taxes on the Base Balance Sheet is sufficient as of its
date for the payment of all accrued and unpaid federal, state, county and local
taxes of any nature of Seller relating to the Business, and any applicable taxes
owing to any foreign jurisdiction (collectively, "Taxes"), whether or not
assessed or disputed. All Taxes and other assessments and levies which Seller is
required to withhold or collect have been withheld and collected and have been
paid over or will be paid when due to the proper governmental authorities.
Neither Seller nor Founders have ever received notice of any audit or of any
proposed deficiencies from the Internal Revenue Service or any other taxation
authority in connection with the Business, except as set forth on Schedule 2.7.
------------
Neither the Internal Revenue Service nor any other taxing authority is now
asserting or, to Seller's Knowledge, threatening to assert against the Seller
any deficiency or claim for additional Taxes or interest thereon or penalties in
connection therewith. Seller is and has been since 1990, a "corporation" within
the meaning of the applicable laws of the State of New Jersey. Seller has been a
validly electing S corporation within the meaning of Internal Revenue Code
Sections 1361 and 1362 at all times during its existence.
2.8 Collectibility of Accounts Receivable. All of the accounts receivable
-------------------------------------
of the Seller (less the reserve for bad debts set forth on the Base Balance
Sheet) are valid and enforceable claims, are not subject to set-off or
counterclaim, provided that the foregoing representation is not a guarantee of
collectibility. Seller has no accounts receivable or loans receivable from any
person, firm or corporation which is affiliated with Seller or from any
stockholder, director, officer or employee of Seller or any affiliates thereof.
2.9 Intellectual Property Rights; Employee Restrictions. Except as set
---------------------------------------------------
forth in Schedule 2.9:
------------
(a) To Seller's Knowledge, Seller has exclusive ownership of, with the
right to use, sell, license, dispose of, and bring actions for infringement of,
trade names, copyrights and copyright registrations, service marks, trademarks
and patents (including applications and registrations therefor) and all other
proprietary rights material to the conduct of the Business as presently
conducted or currently contemplated to be conducted, all of which are listed on
Schedule 2.9 (the "Intellectual Property Rights"), provided that no
------------
representation is made with respect to "off the shelf" software used by Seller
that is generally commercially available.
(b) The Business of Seller as presently conducted does not violate any
agreements which Seller has with any third party or, to Seller's Knowledge,
infringe any patent, trademark, copyright or trade secret or, to Seller's
Knowledge, any other Intellectual Property Rights of any third party.
(c) No claim is pending or, to Seller's Knowledge, threatened against
the Seller nor has Seller received any notice or claim from any person asserting
that any of the Seller's present or contemplated activities infringe or may
infringe any Intellectual Property Rights of such person, and Seller is not
aware of any infringement by any other person of any rights of Seller under any
Intellectual Property Rights.
14
(d) Seller has taken all commercially reasonable steps required to
establish and preserve its ownership of all of the Intellectual Property Rights;
each current and former employee of the Seller who is a party to an employment
agreement with Seller has executed an agreement regarding confidentiality and
proprietary information, and, to Seller's Knowledge, none of such employees is
in violation of any agreement or in breach of any agreement or arrangement with
former or present employers relating to proprietary information.
Any registered patents, registered trademarks and registered copyrights
constituting Intellectual Property Rights have been duly registered in, filed in
or issued by the United States Patent and Trademark Office, the United States
Register of Copyrights or corresponding office of other countries identified on
Schedule 2.9, and have been properly maintained and renewed in accordance with
------------
all applicable provisions of law and administrative regulations in the United
States and each such country.
2.10 Business; Compliance with Laws. Seller has all necessary franchises,
------------------------------
permits, licenses and other rights and privileges necessary to permit it to own
its property and to conduct the Business as it is presently conducted, except
for the absence of which, would not have a Material Adverse Effect. To Seller's
Knowledge, Seller is currently and has heretofore been in compliance in all
material respects with all federal, state, local and foreign laws, regulations
and guidelines, including without limitation all laws, regulations and
guidelines of the Food and Drug Administration to the extent applicable. Except
as set forth in Schedule 2.10, none of Seller, the Founders or any former
-------------
subsidiary of any Seller has been: (a) convicted in a criminal proceeding or
named as a subject of a pending criminal proceeding (excluding traffic
violations and other minor offenses); (b) subject to any order, judgment, or
decree (not subsequently reversed, suspended or vacated) of any court of
competent jurisdiction permanently or temporarily enjoining it or him from, or
otherwise imposing limits or conditions on its or his engaging in any
securities, investment advisory, banking, insurance or other type of business or
acting as an officer or director of a public company; (c) found by a court of
competent jurisdiction in a civil action or by the Securities and Exchange
Commission ("SEC") or the Commodity Futures Trading Commission to have violated
any federal or state commodities, securities or unfair trade practices law,
which such judgment or finding has not been subsequently reversed, suspended, or
vacated; or (d) involved in any other type of legal proceeding that would
require the Founders to disclose such involvement under Item 401(f) of SEC
Regulation S-K if the Founders were subject to such Regulation. The Seller is
not subject to or bound by any agreement, judgment, decree or order which may
materially and adversely affect any of the Subject Assets or the business,
prospects or condition (financial or otherwise) of the Business.
2.11 Insurance. Seller has fire, casualty and other insurance policies,
---------
with extended coverage, sufficient in amount to allow it to replace any of its
material properties which might be damaged or destroyed or sufficient to cover
liabilities to which Seller may reasonably become subject, on both a per
occurrence and an aggregate basis, as are appropriate for the Business. There
is no default or event which could give rise to a default under any such policy.
2.12 Transactions with Affiliates. There are no loans, leases, contracts
----------------------------
or other transactions between Seller and any officer, director or stockholder of
Seller or any family member or affiliate of the foregoing persons and there have
been no such transactions within the past
15
three years except for those transactions between the Seller and, in their
capacity as employees of the Seller, any such persons, and those transactions
set forth in Schedule 2.12.
-------------
2.13 Employee Benefit Plans. The Seller does not maintain or contribute to
----------------------
any employee benefit plan, stock option, bonus or incentive plan, severance pay
policy or agreement, deferred compensation agreement, or any similar plan or
agreement (an "Employee Benefit Plan") other than the Employee Benefit Plans
identified in Schedule 2.13. To Seller's Knowledge, the terms and operation of
-------------
each Employee Benefit Plan comply in all material respects with all applicable
laws and regulations relating to such Employee Benefit Plans. There are no
unfunded obligations of Seller under any retirement, pension, profit-sharing,
deferred compensation plan or similar program. The Seller is not required to
make any payments or contributions to any Employee Benefit Plan pursuant to any
collective bargaining agreement or any applicable labor relations law, and all
Employee Benefit Plans are terminable at the discretion of Seller without
liability to the Seller upon or following such termination. The Seller has
never maintained or contributed to any Employee Benefit Plan providing or
promising any health or other nonpension benefits to terminated employees except
with respect to the continuation of group health plan benefits to the extent
authorized by and consistent with 29 U.S.C. (S) 1161 et seq. (commonly known as
"COBRA").
2.14 Hazardous Waste, Etc.
---------------------
(a) Except as set forth in Schedule 2.14 hereto or as would not have a
-------------
Material Adverse Effect, (i) Seller has never generated, transported, used,
stored, treated, disposed of, or managed any Hazardous Waste (as defined below);
(ii) to Seller's Knowledge no Hazardous Material (as defined below) has ever
been or is threatened to be spilled, released, or disposed of at any site
presently or formerly owned, operated, leased, or used by Seller, or has ever
been located in the soil or groundwater at any such site; (iii) to Seller's
Knowledge, no Hazardous Material has ever been transported from any site
presently or formerly owned, or operated, leased, or used by Seller for
treatment, storage, or disposal at any other place; (iv) to Seller's Knowledge
Seller does not presently own, operate, lease, or use, nor has it previously
owned, or previously operated, leased, or used any site on which underground
storage tanks are or were located; and (v) to Seller's Knowledge, no lien has
ever been imposed by any governmental agency on any property, facility,
machinery, or equipment owned, operated, leased, or used by Seller in connection
with the presence of any Hazardous Material.
(b) Except as set forth in Schedule 2.14 hereto or as would not have a
-------------
Material Adverse Effect, (i) Seller does not have any liability under, nor has
it ever violated, any Environmental Law (as defined below); (ii) to Seller's
Knowledge, Seller, any property owned, operated, leased, or used by Seller, and
any facilities and operations thereon, are presently in compliance with all
applicable Environmental Laws; (iii) Seller has never entered into or been
subject to any judgment, consent decree, compliance order, or administrative
order with respect to any environmental or health and safety matter or received
any request for information, notice, demand letter, administrative inquiry, or
formal or informal complaint or claim with respect to any environmental or
health and safety matter or the enforcement of any Environmental Law; and (iv)
Seller has no reason to believe that any of the items enumerated in clause (iii)
of this subsection will be forthcoming.
16
(c) Except as set forth in Schedule 2.14 hereto or as would not have a
-------------
Material Adverse Effect, to Seller's Knowledge, no site owned, operated, leased,
or used by Seller or any of its subsidiaries contains any asbestos or asbestos-
containing material, any polychlorinated biphenyls (PCBs) or equipment
containing PCBs, or any urea formaldehyde foam insulation.
(d) Seller has provided to Buyer copies of all documents, records, and
information in the possession and control of Seller or any of its subsidiaries
concerning any environmental or health and safety matter relevant to Seller or
any of its subsidiaries, whether generated by the Seller, its subsidiaries, or
others, including without limitation, environmental audits, environmental risk
assessments, site assessments, documentation regarding off-site disposal of
Hazardous Materials, spill control plans, and reports, correspondence, permits,
licenses, approvals, consents, and other authorizations related to environmental
or health and safety matters issued by any governmental agency.
(e) For purposes of this Section 2.14, (i) "Hazardous Material" shall
------------
mean and include any hazardous waste, hazardous material, hazardous substance,
petroleum product, oil, toxic substance, pollutant, contaminant, or other
substance which may pose a threat to the environment or to human health or
safety, as defined or regulated under any Environmental Law; (ii) "Hazardous
Waste" shall mean and include any hazardous waste as defined or regulated under
any Environmental Law; (iii) "Environmental Law" shall mean any environmental or
health and safety-related law, regulation, rule, ordinance, or by-law at the
foreign, federal, state, or local level, whether existing as of the date hereof,
previously enforced, or subsequently enacted; and (iv) "Seller" shall mean and
include Seller, each of its subsidiaries and all other entities for whose
conduct the Seller or any of its subsidiaries is or may be held responsible
under any Environmental Law.
2.15 List of Certain Employees, Consultants and Suppliers. Schedule 2.15
---------------------------------------------------- -------------
contains a list of all managers, employees and consultants of Seller who,
individually, have received or are scheduled to receive compensation or payments
for the fiscal year ended December 31, 1999 in excess of $50,000. In each case
such Schedule includes the current job title and aggregate annual compensation
of each such individual. Schedule 2.15 sets forth a list of all suppliers to
-------------
whom Seller made payments aggregating $50,000 or more during the fiscal year
ended December 31, 1999 showing, with respect to each, the name, address and
dollar volume involved. Since December 31, 1999, no supplier has terminated or
reduced its business with Seller or materially and adversely modified its
relationship therewith.
2.16 Employees; Labor Matters. Seller employs approximately 33 full-time
------------------------
employees and 0 part-time employees, has 0 contracts with independent
contractors and to Seller's Knowledge generally enjoys a good employer-employee
relationship. Seller is not delinquent in payments to any of their employees or
independent contractors for any wages, salaries, commissions, bonuses or other
direct compensation for any services performed for them to the date hereof or
amounts required to be reimbursed to such employees or independent contractors.
Upon termination of the employment of any of said employees or independent
contractors who are not under a written contract as disclosed in Schedule 2.16
-------------
hereto, no severance or other payments will become due. Seller does not have
any policy, practice, plan or program of paying severance pay or any form of
severance compensation in connection with the termination of employment or
services. To Seller's Knowledge, Seller is in all material respects, in
compliance with
17
all applicable laws and regulations respecting labor, employment, fair
employment practices, terms and conditions of employment, wages and hours and
federal and state withholding taxes. There are no changes pending, or to
Seller's Knowledge threatened with respect to (including, without limitation,
resignation of) the senior management or key supervisory personnel or
independent contractors of Seller nor has Seller received any notice or
information concerning any prospective change with respect to such senior
management or key supervisory personnel.
2.17 Customers. Schedule 2.17 set forth each customer of the Seller who
--------- -------------
accounted for more than 5% of the sales of Seller for the fiscal year ended
December 31, 1999 (collectively, the "Customers"). To Seller's Knowledge, the
relationships of Seller with its Customers are good commercial working
relationships. Except to the extent disclosed on Schedule 2.17, since December
-------------
31, 1999 no Customer of Seller has canceled or otherwise terminated its
relationship with Seller, or has during the last twelve months decreased
materially its usage or purchases of the services or products of Seller. Except
to the extent disclosed on Schedule 2.17, no Customer has, to Seller's
-------------
Knowledge, any plan or intention to terminate, to cancel or otherwise materially
and adversely modify its relationship with Seller or to decrease materially its
usage, purchase or distribution of the services or products of Seller.
2.18 Litigation. Except as set forth on Schedule 2.18, there is no
---------- -------------
litigation, claim or governmental, arbitration or other proceeding,
investigation, order or decree pending or in effect or, to Seller's Knowledge,
threatened against Seller relating to or affecting any of the Subject Assets or
the Business, except for those that would not have a Material Adverse Effect.
2.19 Finder's Fee. Except with respect to the obligation of Seller to make
------------
payment to XxXxxxx & Xxxxxxxx for services rendered in connection with this
transaction, Seller has not incurred or become liable for any broker's
commission or finder's fee relating to or in connection with the transactions
contemplated by this Agreement.
2.20 Material Adverse Change. Except as specifically disclosed on
-----------------------
Schedule 2.20 to this Agreement, since December 31, 1999:
-------- ----
(a) there has not been any material adverse change in the business,
results of operations, condition (financial or otherwise) properties,
assets, liabilities or obligations of the Business;
(b) there has not been any damage, destruction or loss (whether or not
covered by insurance), materially and adversely affecting the business,
prospects, results of operations, condition (financial or otherwise),
assets or properties of the Business;
(c) there has not been any change in the relationships of Seller with
respect to its suppliers, distributors, licensees, licensors, customers or
others with whom it has business relationships which would have a material
adverse effect on the Business and Seller does not have knowledge of any
fact or contemplated event which may cause any such material adverse
change.
(d) the Business has been conducted and carried on only in the
ordinary and regular course consistent with past practice;
18
(e) except for compensation paid to Founders as employees, there has
not been any payment made by Seller to the Founders or any affiliate
thereof, including without limitation, any payment by means of a dividend,
distribution, redemption of capital stock or similar payment; and
(f) there has not been any material alteration or change in the
methods of operation employed by the Business.
2.21 Contracts. Except for Contracts and Certificates listed in Schedule
--------- --------
1.1(a)(iv) and Schedule 1.1 (a)(v) (true and complete copies (or, in the case of
----------- -------------------
verbal agreements, written descriptions) of which have been delivered to Buyer),
neither Seller nor the Founders are a party to or subject to any of the
following contracts or agreements, in each case which relates to, or is
necessary in connection with the operation of, the Business:
(a) any contract or agreement which by its terms does not terminate or
is not terminable without penalty by Seller or any successor or assign
within one year after the date hereof;
(b) any contract or agreement for the sale or lease of their products
or services, except orders in the ordinary course of the Business;
(c) any contract with any sales agent or distributor of products or
services of Seller;
(d) any contract containing covenants limiting the freedom of Seller
to compete in any line of business or with any person or entity;
(e) any license agreement (as licensor or licensee);
(f) any indenture, mortgage, promissory note, loan agreement, guaranty
or other agreement or commitment for the borrowing of money and any related
security agreement;
(g) any contract or agreement with any officer, employee, director or
stockholder of Seller or with any affiliate interest; or
(h) any material verbal contract, agreement, arrangement or
understanding with the suppliers or customers of the Business.
All of the Contracts are valid and are in full force and effect and
constitute legal, valid and binding obligations of the Seller enforceable in
accordance with their respective terms, subject to applicable bankruptcy,
reorganization, insolvency, moratorium and other rights affecting creditors'
rights generally, and general equitable principles. To Seller's Knowledge, each
Contract constitutes the legal, valid and binding obligation of each party
thereto, other than Seller, enforceable in accordance with its terms, subject to
applicable bankruptcy, reorganization, insolvency, moratorium and other rights
affecting creditors' rights generally, and general equitable principles. To
Seller's Knowledge, neither Seller nor any other party to any Contract is in
material
19
default in complying with any provisions thereof, and no condition or event or
facts exist which, with notice, lapse of time or both would constitute a
material default thereof on the part of Seller or, to Seller's Knowledge, on the
part of any other party thereto.
2.22 Banking Relations. All of the arrangements which the Seller has with
-----------------
any banking or similar institution are completely and accurately described in
Schedule 2.22 attached hereto, indicating with respect to each of such
-------------
arrangements the type of arrangement maintained (such as checking account,
borrowing arrangements, safe deposit box, etc.) and the person or persons
authorized in respect thereof.
2.23 Securities Law Matters. The Trustees on behalf of the Trust and
----------------------
Seller hereby represent and warrant to the Buyer and Parent, that with respect
to the Seller's receipt of Parent Stock and the Trust's receipt of Parent Stock
upon distribution by the Seller hereunder:
(a) Seller and the Trust are acquiring the Parent Stock for their own
accounts, for investment, and not with a view to any "distribution" thereof
within the meaning of the Securities Act of 1933, as amended (the
"Securities Act"). Seller and the Trust are "accredited investors" as
defined in the Securities Act, are knowledgeable and experienced in the
making of investments of the type involved in the acquisition of the Parent
Stock pursuant to the Agreement, are able to bear the economic risk of loss
of their investment in the Parent, has been granted the opportunity to
investigate the affairs of the Buyer and Parent and to ask questions of
their officers and employees regarding the business, assets, liabilities,
financial condition, cash flow and operations of both Buyer and Parent, and
have availed themselves of such opportunity either directly or through
their authorized representative; the Seller and the Trust acknowledge that
they have made their own independent examination, investigation, analysis
and evaluation of both Buyer and Parent, including their own estimates of
the value of both Buyer's and Parent's business; Seller and the Trust
acknowledge that they have undertaken such due diligence as they have
deemed adequate; and
(b) Seller and the Trust understand that because the shares of Parent
Stock have not been registered under the Securities Act or securities or
"blue sky" laws of any jurisdiction, they cannot dispose of any or all of
the shares of the Parent Stock unless such shares of Parent Stock are
subsequently registered under the Securities Act or exemptions from such
registration are available. Seller and the Trust acknowledge and
understand that they have no right to require Parent to register the Parent
Stock, except as set forth in the attached Registration Rights Agreement.
Seller and the Trust further understand that the Parent may, as a condition
to the transfer of any of the Parent Stock, require that the request for
transfer be accompanied by an opinion of counsel as described below.
Assuming customary broker and seller representation letters are provided
demonstrating compliance with the requirements of Rule 144, Parent agrees
that any opinion required for transfers pursuant to Rule 144 under the
Securities Act will be provided by Parent's counsel at no cost to the
transferor. Seller and the Trust understand that each certificate
representing the Parent Stock will bear a legend in substantially the form
provided below (in addition to any legend required under applicable state
securities laws).
20
THE SHARES REPRESENTED HEREBY HAVE BEEN ACQUIRED BY THE HOLDER NAMED
HEREON FOR HIS OR HER OWN ACCOUNT FOR INVESTMENT; AND SUCH SECURITIES
MAY NOT BE PLEDGED, SOLD OR IN ANY OTHER WAY TRANSFERRED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS IN EFFECT AT THAT TIME, OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT.
Notwithstanding anything herein to the contrary, Buyer and Parent
acknowledge that the Parent Stock received by Seller may be distributed by
Seller to the Trust. Buyer and Parent agree to such distributions based upon
the representations of the Trustees made on behalf of the Trust contained in
this Agreement.
2.24 Disclosure. The representations, warranties and statements made or
----------
contained in this Agreement, in the documents, certificates, filings, Schedules
and Exhibits given or delivered by Seller and Founders pursuant to this
Agreement do not, either individually or when taken together, contain any untrue
statement of a material fact, and do not omit to state a material fact required
to be stated therein or necessary in order to make such representations,
warranties and statements not misleading in light of the circumstances in which
they were made or delivered.
SECTION 3. COVENANTS OF FOUNDERS AND SELLER.
--------------------------------
3.1 Making of Covenants and Agreements. Seller and each Founder hereby
----------------------------------
covenants and agrees as set forth in this Section 3.
3.2 Representation Disclaimer. Seller and Founders agree that neither
-------------------------
Buyer nor Parent shall be deemed to have made to Seller or Founders any
representation or warranty other than those expressly made by either Buyer or
Parent pursuant to Section 4 hereof. Without limiting the generality of the
foregoing, except to the extent expressly set forth in this Agreement, neither
Buyer nor Parent has made any representation or warranty to Seller or Founders
with respect to (i) any projections, estimates or budgets heretofore delivered
to or made available to either Seller or Founders of future revenues, expenses
or expenditures or future results of operations; or (ii) any other information
or documents (financial or otherwise) made available to Seller, Founders, their
counsel, accountants or advisors with respect to Buyer or Parent.
3.3 Non-Use of Trade Names, etc. After the Closing Date, neither Seller,
---------------------------
nor any affiliate of Seller or Founders will for any reason, directly or
indirectly, for itself or any other person, without the written consent of the
Parent and Buyer (a) use any Intellectual Property Rights transferred pursuant
to this Agreement, or (b) use or disclose any Intellectual Property Rights or
any trade secrets, confidential information, know-how, proprietary information
or other intellectual property described in Section 1.1(a)(i) hereof and
transferred pursuant to this Agreement or otherwise arising in connection with
the operation of the Business, except that Seller may use such rights and
information and may disclose such information to Buyer and Parent in connection
with the operation of the Business by Buyer and Parent after the Closing Date
and to the extent that such Intellectual Property
21
Rights become publicly available through no fault of the Seller or the Founders,
or if the Seller is legally compelled to disclose any such Intellectual Property
Rights, provided that the Seller or its affiliates provides prior written notice
of any service of any request to provide such disclosure to the Buyer, and that
Seller cooperates with Buyer to attempt to obtain an appropriate protection
order or other reliable assurances that confidential treatment will be accorded
to such Intellectual Property Rights.
3.4 Non-Disclosure and Non-Competition. Seller and Founders, in order to
----------------------------------
induce Buyer and Parent to enter into this Agreement, each expressly covenants
and agrees that neither Seller nor any of their affiliates will, directly or
indirectly, (a) disclose or furnish to any person, other than Buyer or Parent,
any proprietary information of, or confidential information concerning, the
Business, Seller, Buyer or Parent or any affiliate of Seller, Buyer or Parent
except as required by law; and (b) for a period of three years following the
Closing Date, without the express written consent of the Buyer, directly or
indirectly, anywhere in the United States, engage in any activity which is, or
participate or invest in (other than owning less than 5% of the securities of
any publicly traded company), or provide or facilitate the provision of
financing to, or assist (whether as owner, part-owner, shareholder, partner,
director, officer, trustee, employee, agent or consultant, or in any other
capacity), any business, organization or person other than the Buyer or Parent
(or any affiliate of the Buyer or Parent) whose business, activities, products
or services are competitive with any of the business, activities, products or
services conducted or offered by Seller during any period, which business,
activities, products and services shall include in any event providing
promotional, marketing and education programs or providing other services
currently provided by Seller or contemplated to be provided by Seller. Without
implied limitation, the foregoing covenant shall include, during the three years
following the Closing Date, soliciting or attempting to solicit for or on behalf
of itself or any such competitor the employment of any officer or employee of
the Buyer or Parent or any of their direct and/or indirect subsidiaries,
encouraging for or on behalf of itself or any such competitor any such officer
or employee to terminate his or her relationship or employment with the Buyer or
the Parent or any of their direct or indirect subsidiaries, soliciting for or on
behalf of itself or any such competitor any client of the Buyer or Parent or any
of their direct or indirect subsidiaries and diverting to any person (as
hereinafter defined) any client or business opportunity (which business
opportunity is known to Seller by virtue of Xxxxx Xxxxxxx' employment with
Parent) of the Buyer, the Parent or any of any of their direct or indirect
subsidiaries. Additionally, the Seller and Founders will not disparage the
Buyer or Parent or any of their direct or indirect subsidiaries, the Business,
or the products or services conducted or offered by the Buyer or Parent and
their subsidiaries for a period of three years following the Closing Date.
Buyer and Parent agree, for a period of three years following the Closing Date,
not to disparage the Seller or Founders in any public statements made on behalf
of the Buyer or Parent. In the event that Buyer or Parent defaults in their
obligations to pay any amounts finally determined to be due and payable in
accordance with the provisions of this Agreement and Exhibit A when they are
---------
otherwise due and payable, or otherwise defaults in their material obligations
under this Agreement or the Employment Agreement, and Seller has given written
notice to Parent describing the event giving rise to such default and Buyer and
Parent have not cured such default within thirty days of receipt of such notice,
Seller and Founders shall be relieved of their obligations under Section 3.4 of
this Agreement.
3.5 Payment of Obligations. Subsequent to the Closing, Seller or Founders
----------------------
and shall pay all of the Excluded Liabilities in the ordinary course of business
as they become due. Seller and Founders agree that Seller or Founders shall
maintain sufficient net worth and liquidity after the Closing in order to
satisfy such Excluded Liabilities.
22
3.6 Ongoing Business. Xxxxx Xxxxxxx agrees to operate the Business
----------------
consistent with past practices (except for such reasonable changes as are
approved by Parent) and taking into account the Business as a going concern.
Xxxxx Xxxxxxx covenants not to effectuate changes in the Business which would
have a material adverse effect on the Business as a going concern, where such
changes were made with the intention of enabling the Seller to earn a Contingent
Payment.
3.7 Collection of Assets. Subsequent to the Closing, Buyer and its
--------------------
assignees shall have the right and authority to collect all receivables and
other items transferred and assigned by Seller hereunder and to endorse with the
name of Seller or any of their affiliates any checks received on account of such
receivables or other items, and Seller and Founders agree that they will
promptly transfer or deliver to Buyer and its assignees from time to time, any
cash or other property that they may receive on or after the Closing with
respect to any claims, contracts, licenses, leases, commitments, sales orders,
purchase orders, receivables of any character or any other items included in the
assets transferred to Buyer pursuant to this Agreement.
3.8 Securities Filings. Seller and Founders shall reasonably cooperate
------------------
with Buyer and Parent to permit the Buyer, Parent and their subsidiaries in
accordance with applicable law to promptly prepare and file on or before the due
date or any extension thereof all filings required to be made by Buyer or Parent
with the NASDAQ Stock Market and the SEC, including without limitation, the 8-K
(and related financial statements) required to be filed with the SEC in
connection with the transactions contemplated by this Agreement, and to permit
Parent to include in its filings with the SEC all information which may be
required with respect to Seller and Founders.
3.9 Change of Name. Founders shall cause Seller, on the Closing Date, to
--------------
change its name to a name which does not include the words "Xxxxxx Xxxxx" or is
not otherwise similar to such name, sold to Buyer in accordance with Section
1.1(a)(i).
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT.
--------------------------------------------------
4.1 Making of Representations and Warranties. As a material inducement to
----------------------------------------
Seller and Founders to enter into this Agreement and consummate the transactions
contemplated hereby, Buyer and Parent jointly and severally hereby make the
representations and warranties to Seller and Founders contained in this Section
4.
4.2 Organization of Buyer. Each of Buyer and Parent is a corporation duly
---------------------
organized, validly existing and in good standing under the laws of Delaware with
full corporate power and authority to own or lease its properties and to conduct
its business in the manner and in the places where such properties are owned or
leased or such business is conducted by it. Buyer and Parent are qualified to
do business as a foreign corporation in each jurisdiction in which such
qualification is necessary, except where the failure to be so qualified would
not have a material adverse effect on Buyer and Parent as a whole. Immediately
after the Closing, Buyer will have no material assets or liabilities other than
the Subject Assets and the liabilities assumed from Seller pursuant to this
Agreement. As of the Closing, there exist no liens or encumbrances against
Buyer's assets.
4.3 Authority of Buyer. Buyer and Parent have full corporate power and
------------------
authority to enter into this Agreement and each agreement, document and
instrument to be executed and
23
delivered by Buyer and Parent pursuant to this Agreement and to carry out the
transactions contemplated hereby and thereby. The execution, delivery and
performance by Buyer and Parent of this Agreement and each such other agreement,
document and instrument have been duly authorized by all necessary action of
Buyer and Parent and no other action on the part of Buyer or Parent is required
in connection therewith. This Agreement and each other agreement, document and
instrument executed and delivered by Buyer and Parent pursuant to this Agreement
constitutes, or when executed and delivered will constitute, the valid and
binding obligation of Buyer and Parent enforceable in accordance with its terms.
The execution, delivery and performance by Buyer and Parent of this Agreement
and each agreement, document and instrument contemplated hereby:
(i) do not and will not violate any provision of the
certificate of incorporation or by-laws of Buyer or Parent;
(ii) do not and will not violate any laws of the United States,
or any state or other jurisdiction applicable to Buyer or Parent or
require Buyer or Parent to obtain any approval, consent or waiver of,
or make any filing with or give notice to, any person or entity
(governmental or otherwise) that has not been obtained or given;
(iii) do not and will not result in a breach of, constitute a
default under, accelerate any obligation under, require a consent
under or give rise to a right of termination of any indenture or loan
or credit agreement or any other agreement, contract, instrument,
mortgage, lien, lease, permit, authorization, order, writ, judgment,
injunction, decree, determination or arbitration award, whether
written or oral, to which Buyer or Parent is bound or affected, or
result in the condition or imposition of any Lien on any of the
Subject Assets; and
(iv) to the extent the foregoing representation relates to HSR,
the representation is based solely on Seller's representation
contained in Section 2.3.
4.4 Parent Stock. The unregistered shares of Parent Stock to be issued in
------------
connection with the transactions contemplated by this Agreement, when so issued
upon the Closing or at the time of either Contingent Payment, will be duly and
validly issued, fully paid and non-assessable, free and clear of any and all
liens, encumbrances, charges or claims.
4.5 Business; Compliance with Laws. Buyer and Parent have all necessary
------------------------------
franchises, permits, licenses and other rights and privileges necessary to
permit them to own their property and to conduct the Business as it is presently
conducted, except for those, the absence of which, would not have a Material
Adverse Effect. Buyer and Parent are currently and have heretofore been in
compliance in all material respects with all federal, state, local and foreign
laws, regulations and guidelines, including without limitation all laws,
regulations and guidelines of the Food and Drug Administration, the Federal
Trade Commission, the Federal Communications Commission, the American Medical
Association and the Pharmaceutical Marketing Association, in each case to the
extent applicable. Except as set forth in Schedule 4.5, none of Buyer, Parent
------------
24
or any former subsidiary of Parent has been: (a) convicted in a criminal
proceeding or named as a subject of a pending criminal proceeding; (b) subject
to any order, judgment, or decree (not subsequently reversed, suspended or
vacated) of any court of competent jurisdiction permanently or temporarily
enjoining it from, or otherwise imposing limits or conditions on its or his
engaging in any securities, investment advisory, banking, insurance or other
type of business; or (c) found by a court of competent jurisdiction in a civil
action or by the Securities and Exchange Commission ("SEC") or the Commodity
Futures Trading Commission to have violated any federal or state commodities,
securities or unfair trade practices law, which such judgment or finding has not
been subsequently reversed, suspended, or vacated. The Buyer and Parent are not
subject to or bound by any agreement, judgment, decree or order which may
materially and adversely affect any of their respective assets, business,
prospects or condition (financial or otherwise).
4.6 Litigation. Except as set forth on Schedule 4.6, there is no
---------- ------------
litigation, claim or governmental, arbitration or other proceeding,
investigation, order or decree pending or in effect or, to the knowledge of
Parent or Buyer, threatened against Parent or Buyer, except for those that would
not have a Material Adverse Effect.
4.7 Finder's Fees. Buyer and Parent have not incurred or become liable
-------------
for any broker's commission or finder's fee relating to or in connection with
the transactions contemplated by this Agreement.
4.8 Material Adverse Change. Except as set forth on Schedule 4.8 or in
----------------------- ------------
Parent's public filings with the SEC, since March 31, 2000, (a) there has not
been any material adverse change in the business, results of operations,
condition (financial or otherwise), properties, assets, liabilities or
obligations of Parent that would be required to be disclosed in financial
statements prepared in accordance with GAAP.
4.9 SEC Reports. From January 1, 1999 until the date hereof, Parent's
-----------
forms, reports and documents filed with the SEC (collectively, the "SEC
Reports") have been prepared in accordance with the applicable requirements of
the Securities Act and the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and accurately state all material facts with respect to
finances, operations and management of Parent, as of their respective dates and
do not omit to state any material fact required to be stated therein or
necessary to make the statement therein not misleading in light of the
circumstances in which they were made. The balance sheets (including the
related notes) included in the SEC Reports are complete and correct in all
material respects and fairly present the financial position of Parent as of the
respective dates thereof, and the other related statements (including the
related notes) included therein are complete and correct in all material
respects and fairly present the results of operations and cash flows of Parent
for the respective fiscal periods set forth therein in accordance with generally
accepted accounting principles applied on a consistent basis, except in the case
of interim financial statements for normal recurring and certain non-recurring
audit adjustments necessary for a fair presentation of the financial position
and operating results of Parent for the interim periods which will not be
materially adverse and for the omission of footnotes to said interim financial
statements that would be required by generally accepted accounting principles.
Parent will promptly prepare and file on or before the due date or any extension
thereof all filings required to be made by Parent with the NASDAQ Stock Market
and the SEC, including without limitation, the Form 8-K (and
25
related financial statements) in connection with the transactions contemplated
by this Agreement.
4.10 Disclosure. To Parent's and Buyer's knowledge, the representations,
----------
warranties and statements made or contained in this Agreement, in the
certificates, Schedules and Exhibits given or delivered by Buyer pursuant to
this Agreement do not, either individually or when taken together, contain any
untrue statement of a material fact, and do not omit to state a material fact
required to be stated therein or necessary in order to make such statements
therein not misleading in light of the circumstances in which they were made.
SECTION 5. COVENANTS OF BUYER AND PARENT.
-----------------------------
5.1 Operation of Buyer. Following the Closing, Xxxxx Xxxxxxx will use
------------------
reasonable efforts to operate the Buyer in a manner consistent with the
Transition Plan. Xxxxx Xxxxxxx will be provided operational control of Buyer
during the period beginning on the Closing Date and ending on June 30, 2002,
subject, however, to Parent's oversight with respect to financial and
operational controls. Such operational control and oversight shall be exercised
through the mechanism of the monthly Executive Committee meetings, as described
below, in which Xxxxx Xxxxxxx shall have the right to participate.
Notwithstanding any other provisions of this Agreement, Xxxxx Xxxxxxx shall not
terminate any employee listed on Exhibit 1 of the Transition Plan for reasons
other than cause, without the prior written consent of Parent, which consent
shall not be unreasonably withheld. Until June 30, 2002, Parent agrees, except
for charges for direct expenses actually incurred by Buyer, and those costs
borne by Parent that directly relate to the operation of Buyer and which have
been approved by the affirmative vote of Xxxxx Xxxxxxx through the Executive
Committee process, not to charge Buyer for any additional corporate overhead
costs. Parent also agrees not to add any business to or incur any costs in
Buyer during this period without the consent of Xxxxx Xxxxxxx, which consent
will not be unreasonably withheld. Parent further agrees that, during this
period, Buyer will be permitted to employ, at a minimum, a staff equivalent in
job title and annual compensation to that set forth on Schedule 1.10, unless
-------------
Xxxxx Xxxxxxx and Parent mutually agree in good faith, to reduce or increase the
number of employees in a manner consistent with the needs of the business.
Notwithstanding the foregoing, it is understood that if any employee listed on
Schedule 1.10 is replaced by a newly hired employee, such newly hired employee
-------------
will be compensated on no more favorable terms than Parent's current policies
for persons of like position without Parent's consent unless the compensation is
no higher than that which was paid to the replaced employee. In considering the
reasonableness of withholding consent in any of such situations, the parties
acknowledge that the purchase price for the Subject Assets, including the
Contingent Payment set forth on Exhibit A, is based upon EBIT (as defined in
---------
Exhibit A), and Xxxxx Xxxxxxx' reasonable belief of the significance of the
impact of any proposed action on Buyer's EBIT shall be considered when deciding
the reasonableness of withholding consent. Buyer, Parent, Seller and Founders
acknowledge that the purchase price for the Subject Assets is based upon an EBIT
calculation and it is the intention of all of such parties that Xxxxx Xxxxxxx
will be granted operational control of Buyer throughout the period ending on
June 30, 2002, subject, however, to the following provisions. In no case shall
this Section be deemed an authorization for Buyer to incur any borrowed
indebtedness or leases without the authorization of Parent. Parent shall
provide the Buyer with or arrange for such financing as the Buyer may require to
conduct its operations, as mutually agreed by Parent and Xxxxx Xxxxxxx pursuant
to monthly Executive Committee reviews of the operations of the Buyer, but at a
minimum at levels sufficient to allow the Buyer to conduct its
26
operations in the ordinary course. In connection with said monthly reviews,
Buyer shall provide Parent with monthly reports on the operational and financial
condition of the Buyer. The review of the operational and financial conditions
of Buyer shall not be limited to the monthly Executive Committee meetings. Xxxxx
Xxxxxxx shall have the ability to raise specific concerns about the Buyer to the
management of Parent whenever he deems it necessary. Notwithstanding the
foregoing, Parent shall be entitled to exercise financial and operational
control of Buyer to the extent necessary to prevent the operations of Buyer from
contradicting in any significant way generally applicable policies of Parent or
otherwise causing significant harm to Parent's reasonable interests; provided,
however, that Parent shall not be authorized to take any such action unless
Parent first provides Xxxxx Xxxxxxx with written notice thereof and Xxxxx
Xxxxxxx fails to promptly take appropriate action within 30 days to remedy the
situation. Based on Parent's knowledge of Seller's past practices, the continued
operation of the Business as it has been operated by Seller in the past or as
required by the Transition Plan, will not violate any generally applicable
policies of Parent which would cause Parent to exercise the control provided to
it in the preceding sentence.
5.2 Guaranty. Parent hereby unconditionally guarantees to Seller and
--------
Founders the prompt and full discharge by Buyer of all of Buyer's obligations
under this Agreement and all other agreements entered into in connection with
this Agreement in accordance with their respective terms. Parent hereby agrees
that, if Buyer fails to perform and discharge promptly all such obligations and
liabilities in accordance with such terms, Parent will forthwith, upon demand,
perform and discharge the same. Parent hereby agrees to provide Buyer with the
funds necessary, if any, to enable Buyer to pay all of its obligations under
this Agreement and all other agreements entered into in accordance with this
Agreement, at the time such payments shall become due and payable.
5.3 Representation Disclaimer. Buyer and Parent agree that neither Seller
-------------------------
nor Founders shall be deemed to have made to Buyer or Parent any representation
or warranty other than those expressly made by either Seller or Founders
pursuant to Section 2 hereof. Without limiting the generality of the foregoing,
except to the extent expressly set forth in this Agreement, neither Seller nor
Founders have made any representation or warranty to Buyer or Parent with
respect to (i) any projections, estimates or budgets heretofore delivered to or
made available to either Buyer or Parent of future revenues, expenses or
expenditures or future results of operations; or (ii) any other information or
documents (financial or otherwise) made available to Buyer, Parent, their
counsel, accountants or advisors with respect to Seller and Founders.
5.4 Stock Options. On the Closing Date, a pool of 200,000 stock options
-------------
for Parent's common stock will be made available to the employees of Seller, as
mutually selected by Seller and Buyer, such employees being set forth on
Schedule 5.4.
------------
SECTION 6. SURVIVAL OF WARRANTIES.
----------------------
6.1 Survival of Warranties. All representations, warranties, agreements,
----------------------
covenants and obligations herein or in any Schedule or Exhibit to this Agreement
or any certificate or other document specifically required to be delivered under
this Agreement by any party incident to the transactions contemplated hereby are
material, shall be deemed to have been relied upon by the parties receiving the
same; provided, however, that all such representations and warranties shall,
except as otherwise specifically provided herein, survive until the twenty month
anniversary of the
27
Closing Date (subject to the provisions of Sections 7.1 and 7.2 hereof)
regardless of any investigation and shall not merge into the performance of any
obligation by any party hereto; and provided further, however, that the
representations and warranties shall expire on the same dates and to the extent
that the rights to indemnification with respect thereto under Section 7 shall
expire.
SECTION 7. INDEMNIFICATION.
---------------
7.1 Indemnification by Founders.
---------------------------
(a) Seller, the Trust and each Founder, jointly and severally, agree
to defend, indemnify and hold Buyer, Parent and their respective subsidiaries
and affiliates and persons serving as officers, directors, partners or employees
thereof and any person who controls any of them within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act (individually a "Buyer
Indemnified Party" and collectively the "Buyer Indemnified Parties") harmless
from and against any and all Claims (as defined in Section 1.2 hereof), whether
or not arising out of third-party claims and including all reasonable amounts
paid in investigation, defense or settlement of the foregoing, which may be
sustained or suffered by any of them based upon, arising out of, by reason of or
otherwise in respect of or in connection with:
(i) any inaccuracy in or breach of any representation or
warranty made by Seller or Founders in this Agreement, or in any Schedule
or Exhibit to this Agreement or any certificate or other document delivered
pursuant to this Agreement (collectively, "Buyer Representation and
Warranty Claims");
(ii) any breach of any covenant or agreement made by Seller or
Founders in this Agreement or in any Schedule or Exhibit to this Agreement
or any certificate or other document delivered pursuant to this Agreement,
except for the Employment Agreement;
(iii) any Claim relating to any business, operations or
activities of Seller other than the Business;
(iv) any Claim relating to Taxes for any period ending on or
prior to the Closing Date, except for accrued payroll taxes for the payroll
period ending on the Closing Date; and
(v) any liability of Seller other than the Ordinary Course
Liabilities.
The rights of Buyer Indemnified Parties to recover indemnification in
respect of any Claim arising under clause (ii), (iii), (iv), or (v) of this
Section 7.1(a) shall not be limited by the fact that such Claim may also
constitute a Buyer Representation and Warranty Claim.
(b) The rights of Buyer Indemnified Parties to recover indemnification
under this Section 7.1 shall be subject to the following limitations:
(i) No indemnification shall be payable by Seller or Founders
with respect to Buyer Representation and Warranty Claims unless the total
of all amounts
28
payable by Seller and Founders, taken as a whole, pursuant to this Section
7.1 shall exceed $100,000 in the aggregate, whereupon the total amount of
such Claims shall be recoverable in accordance with the terms thereof;
provided, however, that such $100,000 limitation shall not apply with
respect to Claims involving fraud or intentional misrepresentation and
provided further that any claim brought under Sections 7.1(a)(ii),
7.1(a)(iii), 7.1(a)(iv) or 7.1(a)(v) above shall not be subject to such
limitation notwithstanding that they are also Buyer Representation and
Warranty Claims; and
(ii) All rights to indemnification with respect to Buyer
Representation and Warranty Claims shall expire on the twenty month
anniversary of the Closing Date, except that Buyer Representation and
Warranty Claims relating to or involving fraud or Tax matters shall survive
until and shall expire on the date three months after the termination of
the applicable statute of limitations relating thereto. Notwithstanding
the preceding sentence, if on or prior to the twenty month anniversary of
the Closing Date a specific state of facts shall have become known which
may give rise to a claim for indemnification under Section 7.1(a)(i) and a
Buyer Indemnified Party shall have given written notice of such facts known
by such Buyer Indemnified Party at such time to Seller and Founders, then
the right to indemnification with respect thereto shall remain in effect
without regard to when such matter shall be finally determined and disposed
of. The limitations herein with respect to Buyer Representation and
Warranty Claims shall not limit the rights of any Buyer Indemnified Party
with respect to any Claims arising under Sections 7.1(a)(ii), 7.1(a)(iii),
7.1(a)(iv) or 7.1(a)(v); and
(iii) Notwithstanding anything contained in this Section 7.1 to
the contrary, Seller and Founders shall not be required to indemnify Buyer
Indemnified Parties with respect to Buyer Representation and Warranty
Claims in an aggregate amount in excess of $7,500,000 ( the "Indemnity
Cap"), except with respect to claims relating to or involving fraud or Tax
matters, as to which no such limit shall apply.
7.2 Indemnification by Buyer and Parent.
-----------------------------------
(a) Buyer and Parent jointly and severally (subject to subsection (b)
of this Section 7.2) agree to defend, indemnify and hold Seller and Founders and
persons serving as officers, directors, stockholders, managers or employees
thereof (individually a "Seller Indemnified Party" and collectively the "Seller
Indemnified Parties") harmless from and against any and all Claims, whether or
not arising out of third-party claims and including all reasonable amounts paid
in investigation, defense or settlement of the foregoing, which may be sustained
or suffered by any of them based upon, arising out of, by reason of or otherwise
in respect of or in connection with:
(i) any inaccuracy in or breach of any representation or warranty
made by Buyer or Parent in this Agreement or in any Schedule or Exhibit to
this Agreement or any certificate or other document delivered in connection
with the consummation of the transactions contemplated by this Agreement
(collectively, "Seller Representation and Warranty Claims");
29
(ii) any breach of any covenant or agreement made by Buyer or
Parent in this Agreement or in any Schedule or Exhibit to this Agreement or
any certificate or other document delivered in connection with the
consummation of the transactions contemplated by this Agreement;
(iii) any Claim relating to the operations and assets of the
Business which arises in connection with or on the basis of events, acts,
omissions, conditions or any other state of facts occurring or coming into
existence after the Closing Date (including without limitation, any Claim
relating to or associated with the operation of the Business after the
Closing Date);
(iv) any Claim relating to Taxes for any period after the
Closing Date; and
(v) the non-performance or nonpayment of the Ordinary Course
Liabilities assumed by Buyer hereunder as they become due, in accordance
with their respective terms.
The rights of Seller Indemnified Parties to recover indemnification in
respect of any Claim arising under clause (ii), (iii), (iv) or (v) of this
Section 7.2(a) shall not be limited by the fact that such Claim may also
constitute a Seller Representation and Warranty Claim.
(b) The rights of Seller Indemnified Parties to recover
indemnification under this Section 7.2 shall be subject to the following
limitations:
(i) No indemnification shall be payable by Buyer or Parent with
respect to Seller Representation and Warranty Claims unless the total of
all amounts payable by Buyer and Parent taken as a whole pursuant to this
Section 7.2 shall exceed $100,000 in the aggregate, whereupon the total
amount of such Claims shall be recoverable in accordance with the terms
thereof; provided, however, that such $100,000 limitation shall not apply
with respect to Claims involving fraud or intentional misrepresentation and
provided further that any claim brought under Sections 7.2(a)(ii),
7.2(a)(iii), 7.2(a)(iv) or 7.2(a)(v) above shall not be subject to such
limitation if they are also Seller Representation and Warranty Claims.
(ii) All rights to indemnification with respect to Seller
Representation and Warranty Claims shall expire on the twenty month
anniversary of the Closing Date, except that Seller Representation and
Warranty Claims relating to or involving fraud or Tax matters shall survive
until and shall expire on the date three months after the termination of
the applicable statute of limitations relating thereto. Notwithstanding
the preceding sentence, if on or prior to the twenty month anniversary of
the Closing Date a specific state of facts shall have become known which
may give rise to a claim for indemnification under Section 7.2(a)(i) and a
Seller Indemnified Party shall have given written notice of such facts
known by such Seller Indemnified Party at such time to Buyer, then the
right to indemnification with respect thereto shall remain in effect
without regard to when such matter shall be finally determined and disposed
of. The limitations herein with respect to Seller Representation and
Warranty Claims shall not limit the rights of any Seller
30
Indemnified Party with respect to any Claims arising under Section
7.2(a)(ii), 7.2(a)(iii) 7.2(a)(iv) or 7.2(a)(v); and
(iii) Notwithstanding anything contained in this Section 7.2 to
the contrary, Buyer and Parent shall not be required to indemnify Seller
Indemnified Parties with respect to Seller Representation and Warranty
Claims in an aggregate amount in excess of the Indemnity Cap, except with
respect to claims relating to or involving fraud or Tax matters, as to
which no such limit shall apply.
7.3 Notice; Defense of Claims.
-------------------------
(a) Notice of Claims. Promptly after receipt by an indemnified party
----------------
of notice of any claim, liability or expense to which the indemnification
obligations hereunder would apply, the indemnified party shall give notice
thereof in writing to the indemnifying party, but the omission to so notify the
indemnifying party promptly will not relieve the indemnifying party from any
liability except to the extent that the indemnifying party shall have been
prejudiced as a result of the failure or delay in giving such notice. Such
notice shall state the information then available regarding the amount and
nature of such claim, liability or expense and shall specify the provision or
provisions of this Agreement under which the liability or obligation is
asserted.
(b) Third Party Claims. With respect to third party claims, if within
------------------
twenty days after receiving the notice described in clause (a) above the
indemnifying party gives (i) written notice to the indemnified party stating
that (A) it would be liable under the provisions hereof for indemnity in the
amount of such claim if such claim were successful and (B) that it disputes and
intends to defend against such claim, liability or expense at its own cost and
expense and (ii) provides reasonable assurance to the indemnified party that
such claim will be promptly paid in full if required, then counsel for the
defense shall be selected by the indemnifying party (subject to the consent of
the indemnified party which consent shall not be unreasonably withheld) and the
indemnifying party shall not be required to make any payment with respect to
such claim, liability or expense as long as the indemnifying party is conducting
a good faith and diligent defense at its own expense or the payment is required
in accordance with any settlement or adjudication in accordance with the
provisions of this Section 7.3; provided, however, that the assumption of
defense of any such matters by the indemnifying party shall relate solely to the
claim, liability or expense that is subject or potentially subject to
indemnification. The indemnifying party shall have the right, with the consent
of the indemnified party, which consent shall not be unreasonably withheld, to
settle all indemnifiable matters related to claims by third parties which are
susceptible to being settled provided the indemnifying party's obligation to
indemnify the indemnified party therefor will be fully satisfied and such
settlement does not involve the establishment of any material obligations or
limitations applicable to the indemnified party. The indemnifying party shall
keep the indemnified party apprised of the status of the claim, liability or
expense and any resulting suit, proceeding or enforcement action, shall furnish
the indemnified party with all documents and information that the indemnified
party shall reasonably request and shall consult with the indemnified party
prior to acting on major matters, including settlement discussions.
Notwithstanding anything herein stated, the indemnified party shall at all times
have the right to fully participate in such defense at its own expense directly
or through counsel; provided, however, if the named parties to the action or
proceeding include both the indemnifying party and the indemnified party and
representation of both parties by the same counsel would be
31
inappropriate under applicable standards of professional conduct, the expense of
separate counsel for the indemnified party shall be paid by the indemnifying
party. If no such notice of intent to dispute and defend is given by the
indemnifying party, or if such diligent good faith defense is not being or
ceases to be conducted, the indemnified party shall, at the expense of the
indemnifying party, undertake the defense of (with counsel selected by the
indemnified party), and shall have the right to compromise or settle (exercising
reasonable business judgment), such claim, liability or expense. In that case or
event, the indemnified party shall keep the indemnifying party apprised of the
status of the claim, liability or expense and any resulting suit, proceeding or
enforcement action, shall furnish the indemnifying party with all documents and
information that the indemnifying party shall reasonably request and shall
consult with the indemnifying party prior to acting on major matters, including
settlement discussions. If such claim, liability or expense is one that by its
nature cannot be defended solely by the indemnifying party, then the indemnified
party shall make available all information and assistance that the indemnifying
party may reasonably request and shall cooperate with the indemnifying party in
such defense.
(c) Non-Third Party Claims. With respect to non-third party claims,
----------------------
if within twenty days after receiving the notice described in clause (a) above
the indemnifying party does not give written notice to the indemnified party
that it contests such indemnity, the amount of indemnity payable for such claim
shall be as set forth in the indemnified party's notice. If the indemnifying
party provides written notice to the indemnified party within such twenty day
period that it contests such indemnity, the matter shall be resolved by
arbitration in accordance with Section 8.11 hereof.
7.4 Sole Remedy. Following the Closing, the parties agree that, except
-----------
for the availability of injunctive or other equitable relief and claims relating
to fraud or intentional misrepresentation, the rights to indemnification under
this Section 7 shall be exclusive of all rights of indemnification or other
remedies that any Seller Indemnified Party or Buyer Indemnified Party would
otherwise have in connection with the transactions contemplated by this
Agreement.
7.5 Satisfaction of Indemnification Obligations. In order to satisfy the
-------------------------------------------
indemnification obligations set forth in Section 7.1 above, a Buyer Indemnified
Party shall have the right (in addition to collecting directly from the Seller
and the Founders) to set off its indemnification claims against the Contingent
Payments (whether or not then due and payable) by depositing the amount of such
claims in an interest bearing escrow account with a mutually agreed third party
until a final determination is made with respect to the merit of such
indemnification claims pursuant to Section 8.11.
SECTION 8. MISCELLANEOUS.
-------------
8.1 Law Governing. This Agreement shall be construed under and governed
-------------
by the laws of the State of New Jersey without regard to the conflicts of laws
provisions thereof.
8.2 Notices. All communications, notices and consents provided for herein
-------
shall be in writing and be given in person, by facsimile (with request for
assurance of receipt in a manner typical with respect to such communications) or
by mail, and shall become effective (a) on delivery if given in person, (b) on
the date of transmission if sent by facsimile, or (c) four business days after
32
being deposited in the United States mails, with proper postage, for first-class
registered or certified mail, prepaid.
Notices shall be addressed as follows:
If to Buyer or Parent:
---------------------
Boron, XxXxxx & Associates, Inc.
00-00 Xxxxx 000 Xxxxx
Xxxx Xxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxx, President and COO
Facsimile Number: (000) 000-0000
With a copy to:
--------------
Xxxxxxx, Procter & Xxxx XXX
Xxxxxxxx Xxxxx
Xxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxxx, Esq.
Facsimile Number: (000) 000-0000
If to Seller or Founders:
------------------------
Xxxxx Xxxxxxx
00000 Xxxxxx Xxxxx
Xxxxxxxxx, XX 00000
With a copy to:
--------------
Xxxxxxx & Xxxxxx LLP
000 Xxxxx Xxxxxx - 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxx Xxxxxx, Esq.
Facsimile Number: (000) 000-0000
provided, however, that if any party shall have designated a different address
by notice to the others in accordance with this Section 8.2, then to the last
address so designated.
8.3 Prior Agreements Superseded. This Agreement supersedes all prior
---------------------------
understandings and agreements among the parties relating to the subject matter
hereof, including without limitation the letter of intent dated April 3, 2000
among Parent, Seller and Xxxxx Xxxxxxx.
8.4 Assignability. This Agreement shall not be assignable by any party,
-------------
except by Buyer and Parent to an affiliate of Parent (which assignment shall not
relieve Buyer or Parent of any of their obligations hereunder), without the
prior written consent of the other parties hereto. This Agreement (including
without limitation the provisions of Section 7) shall be binding upon and
enforceable by, and shall inure to the benefit of, the parties hereto and their
respective successors,
33
heirs, executors, administrators and permitted assigns. Notwithstanding the
foregoing, Seller may authorize the Buyer in writing, to distribute its rights
to receive all or a portion of the consideration payable hereunder to the
stockholders of Seller.
8.5 Captions and Gender. The captions in this Agreement are for
-------------------
convenience only and shall not affect the construction or interpretation of any
term or provision hereof. The use in this Agreement of the masculine pronoun in
reference to a party hereto shall be deemed to include the feminine or neuter
pronoun, as the context may require.
8.6 Certain Definitions. For purposes of this Agreement, the term:
-------------------
(a) "affiliate" of a person shall mean a person that directly or
indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, the first mentioned person;
(b) "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the
management policies of a person, whether through the ownership of stock, as
trustee, partner or executor, by contract or credit arrangement or
otherwise;
(c) "knowledge" means, after due inquiry, actual knowledge, the
conscious awareness of facts or other information of such person;
(d) "Material Adverse Effect" means, a material adverse effect on the
business, results of operations, condition (financial or otherwise)
properties, assets, liabilities or obligations of the Business;
(e) "person" means an individual, corporation, partnership,
association, limited liability company, trust or any unincorporated
organization;
(f) "Seller's Knowledge" means such knowledge as the Founders, Xxxx
Xxxxxxxxxx, Xxxx Xxxxxxx, Xxxxxx Xxxxxxx or Xxxxxx Xxxxx has or reasonably
ought to have
34
in the prudent exercise of their duties.
(g) "subsidiary" of a person means any corporation more than 50
percent of whose outstanding voting securities, or any partnership, joint
venture or other entity more than 50 percent of whose total equity
interest, is directly or indirectly owned by such person.
8.7 Execution in Counterparts. For the convenience of the parties and to
-------------------------
facilitate execution, this Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same document.
8.8 Amendments; Waivers. This Agreement may not be amended or modified,
-------------------
compliance with any condition or covenant set forth herein may not be waived and
the consent to any action may not be given, except by a writing duly and validly
executed by Parent, Seller and the Founders. No delay on the part of any party
in exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of any party of any such right, power
or privilege, or any single or partial exercise of any such right, power or
privilege, preclude any further exercise thereof or the exercise of any other
such right, power or privilege.
8.9 Severability. Each of the provisions contained in this Agreement
------------
shall be severable and the unenforceability of one shall not affect the
enforceability of any other provision or the remainder of this Agreement.
8.10 Publicity and Disclosures. Except as required by law or the rules
-------------------------
and regulations of the SEC or any state securities commission, or applicable
NASDAQ listing requirements, neither Buyer or Parent on the one hand, or Seller
or Founders, on the other hand, shall make any public disclosure regarding the
transaction contemplated hereby without the prior written consent of Seller or
the Buyer, respectively, which consent shall not be unreasonably withheld.
8.11 Dispute Resolution. Except with respect to matters as to which
------------------
injunctive relief is being sought, in the event of a dispute between the parties
concerning their respective rights and obligations under this Agreement, or the
breach, termination, negotiation, or validity hereof and/or the rights or
obligations of the parties arising out of or relating to this Agreement or the
breach, termination, negotiation or validity thereof, in any case that the
parties are unable to resolve amicably between themselves within thirty days of
proper notice from one party to another, such dispute shall be settled by
arbitration in the State of New Jersey in an expedited manner in accordance with
the Commercial Rules of the American Arbitration Association by a duly
registered arbitrator to be selected jointly by the parties. The decision of
the arbitrator shall be final and binding upon the parties. Each of the parties
consents to the jurisdiction of the courts of New Jersey for the purposes of
enforcing the dispute resolution provisions of this Section 8.11. Each party
further irrevocably waives any objection to proceeding before the American
Arbitration
35
Association based upon lack of personal jurisdiction or to the laying of venue
and further irrevocably and unconditionally waives and agrees not to make a
claim in any court that dispute resolution before the American Arbitration
Association has been brought in an inconvenient forum. Each of the parties
hereto agrees that its or his submission to jurisdiction is made for the express
benefit of the other parties hereto.
8.12 Expenses. Buyer, Seller and Founders shall each bear their own
--------
expenses in connection with the negotiation and performance of this Agreement
and the transactions contemplated hereby. All transfer, excise or other taxes
payable by any party to this Agreement to any jurisdiction by reason of the sale
and transfer of the Subject Assets pursuant to this Agreement, if any (excluding
any such taxes arising solely from the identity or location of Buyer or any
affiliate of Buyer), shall be borne equally by Seller and Buyer.
36
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first set forth above by their duly authorized
representatives.
BUYER:
-----
BLPAS ACQUISITION CORP.
By: /s/ Xxxxxx X. Xxxxxxx
---------------------
Name:Xxxxxx X. Xxxxxxx
Title: Secretary
PARENT:
------
BORON, XXXXXX & ASSOCIATES, INC.
By: /s/ Xxxxxx X. Xxxxxxx
---------------------
Name: Xxxxxx X. Xxxxxxx
Title: President and COO
SELLER:
------
XXXXXX XXXXX, INC.
By: /s/ Xxxxx Xxxxxxx
-----------------
Name: Xxxxx Xxxxxxx
Title: President
FOUNDERS, INDIVIDUALLY:
----------------------
/s/ Xxxxx Xxxxxxx
-----------------
Xxxxx Xxxxxxx
/s/ Xxxxxxx Xxxxxxx
-------------------
Xxxxxxx Xxxxxxx
XXXXXXX FAMILY TRUST
--------------------
By: /s/ Xxxxx Xxxxxxx
-----------------
Name: Xxxxx Xxxxxxx
Title: Trustee
S-1
and
---
By: /s/ Xxxxxxx Xxxxxxx
-------------------
Name: Xxxxxxx Xxxxxxx
Title: Trustee
S-2
EXHIBIT A
---------
Contingent Payments
The Contingent Payments described in Section 1.3(e) of the attached Asset
Purchase Agreement shall be made by Buyer to Seller, in the following amounts of
cash and Parent Stock: (i) $3,000,000 in cash (or a proportional share thereof
as described below) and (ii) and the number of shares of Parent Stock determined
by dividing $1,500,000 by the Market Value of a share of Parent Stock (or a
proportional share thereof as described below). For purposes of this Exhibit A:
(a) "Market Value" shall mean the average Closing Price of Parent Stock over the
twenty trading day period beginning on the Twenty-second trading day preceding
the final day of a Contingency Period (as defined below) and ending on the third
trading day preceding the last day of the same Contingency Period; (b) the
"Closing Price" of Parent Stock on any date of determination means the closing
sale price (or, if no closing sale price is reported, the last reported sale
price) of such security on the Nasdaq National Market on such date.
First Contingent Payment
------------------------
The first Contingent Payment shall be made by Buyer to Seller, in the
amount of Four Million Five Hundred Thousand Dollars ($4,500,000, the " First
Target Contingent Payment"), comprised of cash and Parent Stock as described
above if: (a) the EBIT (as defined below) achieved by the Buyer in the period
beginning on July 1, 2000 and ending on June 30, 2001 (the "First Contingency
Period"), is $2,520,000 (the " First EBIT Target"); and (b) the EBIT Percentage
(as defined below) achieved by Buyer in the First Contingency Period is at least
11.67% (the "First EBIT Percentage Target"). Additionally, Buyer shall receive
credit in the calculation of EBIT and EBIT Percentage for the First Contingency
Period for the revenues and gross profits generated from those projects listed
on Schedule 1 to this Exhibit A, which revenues and profits are generated on or
----------
after the Closing Date but before July 1, 2000 . Based on the EBIT and EBIT
Percentage earned by the Buyer during the First Contingency Period, the amount
of the first Contingent Payment may be reduced to 80% of the First Target
Contingent Payment (80% x $4,500,000 = $3,600,000) or increased up to 120% of
the First Target Contingent Payment (120% x $4,500,000 = $5,400,000). For each
dollar of EBIT earned above 80% of the First EBIT Target, the Seller shall earn
the corresponding proportional share of the First Target Contingent Payment up
to 120%, provided that the corresponding EBIT Percentage is achieved. In the
event the EBIT Percentage is not achieved at its equivalent EBIT amount, the
first Contingent Payment will be based on the lower of the EBIT or the EBIT
Percentage achieved. Under no circumstances shall the Seller be entitled to any
part of the first Contingent Payment if the EBIT is less than 80% of the First
EBIT Target ($2,520,000 x 80% = $2,016,000) or the EBIT Percentage is less than
80% of the First EBIT Percentage Target (11.67% x 80% = 9.33%). The maximum
amount of the Contingent Payment Seller can earn during the First Contingency
Period is $5,400,000.
The following examples are for purposes of illustration only:
A. If during the First Contingency Period the Buyer achieves 90% (.90 x
$2,520,000 = $2,268,000) of its EBIT Target and achieves 90% of its
EBIT Percentage Target (.90 x
A-1
11.67% =10.50%), Buyer shall pay to the Seller a Contingent Payment of
90% of $4,500,000 (.90 x $4,500,000 = $4,050,000).
B. If during the First Contingency Period the Buyer achieves 90% (.90 x
$2,520,000 = $2,268,000) of its EBIT Target and achieves 85% of its
EBIT Percentage Target (.85 x 11.67% =9.92%), Buyer shall pay to the
Seller a Contingent Payment of 85% of $4,500,000 (.85 x $4,500,000 =
$3,825,000).
C. If during the First Contingency Period the Buyer achieves 90% (.90 x
$2,520,000 = $2,268,000) of its EBIT Target and achieves 79% of its
EBIT Percentage Target (.79 x 11.67% =9.22%), Buyer shall not pay to
Seller any of the first Contingent Payment.
D. If during the First Contingency Period the Buyer achieves 110% (1.10 x
$2,520,000 = $2,772,000) of its EBIT Target and achieves 120% of its
EBIT Percentage Target (1.20 x 11.67% =14.00%), Buyer shall pay to the
Seller a Contingent Payment of 110% of $4,500,000 (1.10 x $4,500,000 =
$4,950,000).
E. If during the First Contingency Period the Buyer achieves 125% (1.25 x
$2,520,000 = $3,150,000) of its EBIT Target and achieves 125% of its
EBIT Percentage Target (1.25 x 11.67% =14.59%), Buyer shall pay to the
Seller a Contingent Payment of 120% of $4,500,000 (1.20 x $4,500,000 =
$5,400,000).
Second Contingent Payment
-------------------------
The second Contingent Payment shall be made by Buyer to Seller, in the
amount of Four Million Five Hundred Thousand Dollars ($4,500,000, the "Second
Target Contingent Payment"), comprised of cash and Parent Stock as described
above if: (a) the EBIT (as defined below) achieved by the Buyer in the period
beginning on July 1, 2001 and ending on June 30, 2002 (the "Second Contingency
Period"), is $3,024,000 (the "Second EBIT Target"); and (b) the EBIT Percentage
achieved by Buyer in the Second Contingency Period is at least 11.67% (the
"Second EBIT Percentage Target"). Based on the EBIT and EBIT Percentage earned
by the Buyer during the Second Contingency Period, the amount of the second
Contingent Payment may be reduced to 80% of the Second Target Contingent Payment
(80% x $4,500,000 = $3,600,000) or increased up to 120% of the Second Target
Contingent Payment (120% x $4,500,000 = $5,400,000). For each dollar of EBIT
earned above 80% of the Second EBIT Target, the Seller shall earn the
corresponding proportional share of the Second Target Contingent Payment up to
120%, provided that the corresponding EBIT Percentage is achieved. In the event
the EBIT Percentage is not achieved at its equivalent EBIT amount, the second
Contingent Payment will be based on the lower of the EBIT or the EBIT Percentage
achieved. Under no circumstances shall the Seller be entitled to any part of
the second Contingent Payment if the EBIT is less than 80% of the Second EBIT
Target ($3,024,000 x 80% = $2,419,200) or the EBIT Percentage is less than 80%
of the Second EBIT Percentage Target (11.67% x 80% = 9.33%). The maximum amount
of the Contingent Payment Seller can earn during the Second Contingency Period
is $5,400,000.
The following examples are for purposes of illustration only:
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A. If during the Second Contingency Period the Buyer achieves 90% (.90 x
$3,024,000 = $2,721,600) of its EBIT Target and achieves 90% of its
EBIT Percentage Target (.90 x 11.67% =10.50%), Buyer shall pay to the
Seller a Contingent Payment of 90% of $4,500,000 (.90 x $4,500,000 =
$4,050,000).
B. If during the Second Contingency Period the Buyer achieves 90% (.90 x
$3,024,000 = $2,721,600) of its EBIT Target and achieves 85% of its
EBIT Percentage Target (.85 x 11.67% =9.92%), Buyer shall pay to the
Seller a Contingent Payment of 85% of $4,500,000 (.85 x $4,500,000 =
$3,825,000).
C. If during the Second Contingency Period the Buyer achieves 90% (.90 x
$3,024,000 = $2,721,600) of its EBIT Target and achieves 79% of its
EBIT Percentage Target (.79 x 11.67% =9.22%), Buyer shall not pay to
Seller any of the second Contingent Payment.
D. If during the Second Contingency Period the Buyer achieves 110% (1.10
x $3,024,000 = $3,326,400) of its EBIT Target and achieves 120% of its
EBIT Percentage Target (1.20 x 11.67% =14.00%), Buyer shall pay to the
Seller a Contingent Payment of 110% of $4,500,000 (1.10 x $4,500,000 =
$4,950,000).
E. If during the Second Contingency Period the Buyer achieves 125% (1.25
x $3,024,000 = $3,780,000) of its EBIT Target and achieves 125% of its
EBIT Percentage Target (1.25 x 11.67% =14.59%), Buyer shall pay to the
Seller a Contingent Payment of 120% of $4,500,000 (1.20 x $4,500,000 =
$5,400,000).
For purposes of this Exhibit A, "EBIT" shall mean earnings before interest
---------
and taxes as determined in accordance with GAAP, however, EBIT shall exclude:
(i) amortization costs and transaction expenses of the Buyer or Parent related
to this transaction; (ii) any indirect corporate allocations; (iii) the Bonus
Payments set forth in Section 1.10(e); and (iv) any severance payments made to
any of Buyer's employees, including those listed on Exhibit 1 to the Transition
Plan, if the termination of an employee is made pursuant to a corporate
restructuring or reorganization initiated by the Parent. EBIT will include: (x)
the costs of Xxxxx Xxxxxxx' employment and related costs thereto(with the bonus
costs being limited to 35% as provided in the Employment Agreement); (y) any
severance payments made to any of Buyer's employees, including those listed on
Exhibit 1 to the Transition Plan, if the termination of an employee is made in
the ordinary course of business initiated by Xxxxx Xxxxxxx or someone under his
direction; and (z) as mutually agreed by Xxxxx Xxxxxxx and Parent, costs borne
by the Parent which are directly related to the operation of the Buyer. "EBIT
Percentage" shall mean EBIT divided by revenues as determined in accordance with
GAAP.
Except as may be mutually agreed to by Buyer and Seller, revenue and
earnings shall be recognized by Buyer in accordance with Parent's revenue
recognition policy and generally accepted accounting principles as applied by
Parent, consistent with its past practices. Parent's determination of if and to
what extent the Contingent Payments have been earned, including whether revenue
has been collected and recognized and is attributable to the Buyer, and the
appropriate EBIT Percentage for a Contingency Period, will be made by the
Parent's auditors, who shall conduct an audit of Buyer immediately following the
end of each Contingency Period. Parent's auditors shall make their
determinations in accordance with generally accepted
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accounting principles as applied by Parent consistent with its past practice.
Subject to Seller's right to dispute the matter, Parent may claim as a defense
to or an offset against the payment of a Contingent Payment, the economic effect
on the Business from any changes Parent believes constitutes a breach of the
covenant set forth in Section 3.6 of the Agreement. A written copy of the
audited results of the Buyer shall be given to Seller. Parent agrees to make its
financial statements and any supporting information relevant to its auditors'
determination of a Contingent Payment available to auditors employed by Seller
or Founders. Auditors employed by Xxxxx Xxxxxxx shall also be afforded access to
Parent's auditors' work papers, audit programs and other documents upon the
execution of a standard release provided by Parent's auditors.
Parent shall notify Seller of its determination of a Contingent Payment
due, if any, not later than 75 days from the last day of a Contingency Period.
If Seller does not object to Parent's determination of a Contingent Payment,
Parent shall make such payment within 10 days of the notification. In the event
Seller objects to Parent's determination, Seller (or its successors) shall
notify Parent in writing of such objection within the 20 day period following
the delivery of Parent's determination, stating in such written objection the
reasons therefor and setting forth Seller's calculation of the Contingent
Payment. Upon receipt by Parent of such written objection, (i) Parent shall pay
to the Seller, within 10 days, the undisputed portion of the Contingent Payment
due, if any, and (ii) the parties shall attempt to resolve the disagreement
concerning the amount of the Contingent Payment through negotiation. If Seller
and Parent cannot resolve such disagreement concerning the Contingent Payment
within 30 days following the end of the foregoing 10 day period, the parties
shall submit the matter for resolution pursuant to Section 8.11. Prior to
commencing such dispute resolution, Parent shall deposit the amount in dispute
in an interest bearing escrow account with a mutually agreed third party until a
final determination is made with respect to any additional amount due to the
Seller.
Change of Control
-----------------
A "Change of Control" shall mean the occurrence of any of (a) the sale of
all or substantially all of the assets of the Parent and its subsidiaries or of
the Buyer to an unrelated person or entity; (b) a merger, reorganization or
consolidation in which the holders of the Parent's or Buyer's outstanding voting
power immediately prior to such transaction do not own a majority of the
outstanding voting power of the surviving or resulting entity immediately upon
completion of such transaction and where in the case of the Buyer, the majority
holders of such voting power are unrelated persons or entities; (c) the sale of
all or substantially all of the outstanding stock of the Parent to an unrelated
person or entity in which the holders of the Parent's outstanding voting power
immediately prior to such transaction do not own a majority of the outstanding
voting power of the surviving or resulting entity immediately upon completion of
such transaction; (d) the sale of all or substantially all of the outstanding
stock of the Buyer to an unrelated person or entity in which the holders of the
Buyer's outstanding voting power immediately prior to such transaction do not
own a majority of the outstanding voting power of the surviving or resulting
entity immediately upon completion of such transaction; or (e) any other
transaction or series of transactions where the owners of the Parent's or
Buyer's outstanding voting power immediately prior to such transaction do not
own a majority of the outstanding voting power of the surviving or resulting
entity immediately upon completion of such transaction, except in the case of
the Buyer, where such holder is an affiliate of Parent. Schedule 2 to this
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Exhibit A contains a comprehensive and complete list of all events (each a
"Listed
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Event" and collectively, the "Listed Events") that, if any one or more
of the Listed Events were to occur after a Change of Control, such occurrence
could potentially adversely and materially affect Seller's ability to earn
either or both Contingent Payments. If a Change of Control occurs prior to June
30, 2002, and if one or more of the Listed Events shall occur after such Change
of Control, Parent and Seller shall mutually agree upon a neutral third party
decision maker, who shall determine, based on the facts and circumstances,
whether the occurrence of the Listed Event would be reasonably likely to have a
material adverse effect on Seller's ability to earn any unpaid Contingent
Payment. Such neutral third party shall have experience or knowledge of
outsource marketing and medical education services to the pharmaceuticals
industry. In the event Parent and Seller cannot agree on a third party decision
maker within 10 days of notification of the occurrence of a Listed Event
triggering these provisions, each party shall submit the name and professional
qualifications of its selection to an arbitrator selected pursuant to Section
8.11 within 10 days. Notwithstanding the procedures in Section 8.11 to the
contrary, each party shall have 10 business days to review the independence and
qualifications of the other party's candidate, and then all parties shall appear
in a promptly scheduled arbitration proceeding. The arbitrator shall then
select the one candidate considered by such arbitrator to be the most neutral
and qualified. The neutral third party shall make its determination within 7
days by applying the foregoing standard. The third party's decision shall be
the final determination and be binding upon the Buyer and Seller. If the third
party decides that the occurrence of a Listed Event would be reasonably likely
to have a material adverse effect on Seller's ability to earn a Contingent
Payment, any Contingent Payment for which its corresponding Contingency Period
has not yet expired shall become earned, due and payable within 30 days of such
decision. If such payment shall become due prior to June 30, 2001, the
Contingent Payment made in connection with this Change of Control provision
shall be in the amount of $9,000,000, payable in stock and cash as provided
above with the stock valued during the 20 day period prior to the final decision
of the neutral third party. If such payment shall become due after June 30,
2001, but prior to June 30, 2002, the Contingent Payment made in connection with
this Change of Control provision shall be in the amount of $4,500,000, payable
in stock and cash as provided above. In the event the neutral third party
decides that the occurrence of a Listed Event will not materially adversely
affect the ability to earn the Contingent Payments, no payment shall be due
unless they are otherwise earned as provided above. All parties to this
Agreement agree that no event other than those listed on Schedule 1 shall be
deemed capable of having an adverse material effect on Seller's ability to earn
a Contingent Payment, and under no circumstances whatsoever shall any Contingent
Payment be accelerated for any reason, event or occurrence not listed on
Schedule 1, except that such Contingent Payments may be accelerated in
accordance with the provisions of Employment Termination as provided for below.
----------------------
Employment Termination
----------------------
If Xxxxx Xxxxxxx is terminated pursuant to Section 6(e) of the Employment
Agreement;
(i) prior to final day of the First Contingency Period, Seller
may elect to receive a payment of (a) $9,000,000 which shall be paid
within 30 days of such termination or (b) elect to receive a payment
of the sum of $4,500,000 and the actual Contingent Payment earned for
the First Contingency Period, such payment to be made in accordance
with the terms of payment for a completed First Contingency Period, as
set forth above; or
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(ii) prior to the final day of the Second Contingency Period, but
after the final day of the First Contingency Period, Seller may
elect to receive a payment of (a) $4,500,000 which shall be paid
within 30 days of such termination or (b) elect to receive the
Contingent Payment actually earned during the Second Contingency
Period, such payment to be made in accordance with the terms of
payment for a completed Second Contingency Period, as set forth above.
The election provided to Seller in (i) or (ii) above must be made by the
Seller within 10 days of his termination under Section 6(e) of the Employment
Agreement. Payment of the amounts due under (i) or (ii) above shall be in full
satisfaction of the Contingent Payments. Any payment made in satisfaction of the
Contingent Payments under (i) or (ii) above shall be paid in both stock and cash
as set forth above.
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