EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement"), made as of this 19th day
of July, 1995, by and among Xxxxxx Chemical Research, Inc, a Delaware
corporation ("XXXXXX"), and the persons identified on Exhibit A, (each a
"Seller" and collectively the "SELLERS ").
WITNESSETH:
WHEREAS, SELLERS own, free and clear of all adverse claims, all of the
issued and outstanding shares of capital stock of XXXXXXX X. XXXXXXX, INC.,
a Massachusetts corporation, ("XXXXXXX"), each Seller owning the number of
shares of such capital stock as is indicated on Exhibit A; and
WHEREAS, XXXXXX wishes to acquire all the issued and outstanding stock
of XXXXXXX; and
WHEREAS, each of the parties to this Agreement desires to make certain
representations, warranties and agreements in connection with the
transactions contemplated hereby and also to prescribe various conditions
thereto;
NOW, THEREFORE, in consideration of the premises, the provisions and
the respective agreements hereinafter set forth, the parties hereto hereby
agree as follows:
ARTICLE I
ACQUISITION AND TRANSFER OF STOCK
Section 1.1 - Definitions. For purposes of this Agreement:
"Accelerated Unit" shall mean a Unit which is unvested immediately
prior to the Closing but which shall vest as a result of the acceleration
provisions contained in the Phantom Plan.
"Accounting Procedures" shall mean the procedures consistent with
GAAP.
"Actual Modified EBITDA" shall mean EBITDA, excluding any compensation
expense incurred to Drs. Xxxxxxx and Xxxxxxx tor non-billable work and
incurred for Xx. Xxxxxxxx, and excluding any XXXXXX corporate general and
administrative expense allocated to XXXXXXX. Compensation tor non-billable
work shall be calculated by taking the annual compensation paid times a
fraction, the numerator of which is the number of hours of non-billable work
and the denominator of which is 975 hours for Xx. Xxxxxxx and 1,170 hours tor
Xx. Xxxxxxx.
"Closing" shall mean the purchase and sale of the XXXXXXX Shares
provided herein.
"Closing Date" shall mean the day of Closing, to be held at the offices
of Sherbume, Powers & Needham, P.C., Xxx Xxxxxx Xxxxxx, Xxxxxx, XX 00000,
commencing at 10:00 a.m. local time on July 19, 1995, or at such other place
or at such other date and time as SELLERS and XXXXXX may mutually agree.
"Closing Date Balance Sheet" shall mean a balance sheet of XXXXXXX as
of June 30, 1995, prepared in accordance with XXXXXXX Accounting Methods and
GAAP, but excluding accruals for the following liabilities: Phantom Stock
Plan, Stay Bonuses and Sale Expenses.
"December Balance Sheet" shall mean the XXXXXXX Balance Sheet as of
December 31, 1994, reviewed by Xxxxx, Mocera & Co., P.C., attached hereto as
Exhibit B.
"Divested Amounts" shall mean any amounts of payments for Phantom
Units or Stay Bonuses forfeited by the intended recipient pursuant to the
terms of the Phantom Proceeds Agreement (or Phantom Plan or Phantom Agreement
or prior employment agreements), as the case may be.
"EBITDA" shall mean earnings before interest, taxes, depreciation and
amortization.
"Effective Time" shall mean 5:00 p.m. Boston time, on the Closing
Date.
"Environmental Laws" - all applicable federal, state, local, foreign
or other statutory and common laws, ordinances, codes, rules, regulations,
guidelines, notices, writs, directives, decrees (including, for example,
consent decrees and administrative orders) judgments, authorizations or
Permits relating to protection of the environment or worker or public health
or safety or imposing liability or standards of conduct concerning any
Hazardous Substance, as any of the foregoing may be amended or supplemented
from time to time.
"Environmental Damages" - all losses, costs, expenses (including
attorney's and expert's fees and expenses), fees, liabilities, obligations,
penalties, fines, actions, claims, litigation, demands, defenses, judgments,
suits, proceedings, and equitable relief sustained by XXXXXXX, its officers,
directors, employees, agents and affiliates arising from or in connection
with protection of the environment or worker or public health or safety or
standards of conduct or liability concerning any Hazardous Substance,
including but not limited to the following:
(a) the manufacture, generation, refining, processing, distribution,
use, reclamation, recycling, containment, storage, treatment, disposal,
receipt, sale, handling, transport or labeling of any Hazardous Substance or
any product, material, substance, chemical or constituent manufactured with,
or which has come into contact with, any Hazardous Substance;
(b) the presence or suspected presence of any Hazardous Substance at,
on, in, under or above any location or real property;
(c) the actual or threatened release, discharge, deposit, injection,
dumping, spilling, migration, leaking, leaching, flowing, emitting, or other
movement of any Hazardous Substance from, at, in, under or to any location or
real property, including the presence or movement of a Hazardous Substance
through or in the air, soil, surface water, groundwater, and building
materials;
(d) the characterization of any part of any real property or location
as a "facility, " as defined in CERCLA, or a term of similar import as
defined in an analogous state statute or regulation, or as a Hazardous
Substance facility, site, storage area, landfill, dump, waste facility
transfer station, or refuse location under any Environmental Law;
(e) any event at any real property or location which constitutes an
actual or threatened "release," as defined in CERCLA or in any other
Environmental Law;
(f) the exposure of any personal or real property, human, flora, fauna,
animal or the environment to a Hazardous Substance, or the contamination or
threatened contamination of such by or with a Hazardous Substance;
(g) the lack of any Permit required under any Environmental Law; or
(h) noncompliance with any such Permit or any Environmental Law.
Without limiting the generality of the foregoing, the definition of
Environmental Damages specifically includes costs of investigation,
inspection, monitoring, testing, cleanup, compliance, response, removal,
remediation, containment, restoration, treatment and disposal, including
reasonable fees and expenses for attorneys, accountants, laboratories,
consultants, engineers, contractors, medical and emergency personnel and
experts.
"Escrow Amount" shall mean the sum of (i) $1,831,642 from the Sellers
and $268,358 from the Unit Holders which shall be held in escrow tor any
Purchase Price Adjustment pursuant to Article VIlI herein; (ii) six percent
(6%) of the Closing Date Amount (which shall be effected by a reduction in
the Series A Notes or the cash payments due Sellers at the Closing, as the
case may be); (iii) six percent (6%) of the Closing Phantom Payment (which
shall be effected by a reduction in the cash payments due the Unit Holders at
the Closing pursuant to the Phantom Proceeds Agreements) which shall be held
in escrow until completion of the Closing Certificate by the parties and
which shall be used for any adjustments and Sellers' obligations required by
Section 1.4(b) and the fund the Sales Expenses to be borne by the Sellers and
Unit Holders pursuant to Section 1.4(b)(i); and (iv) $170,000 which shall be
used to pay the Stay Bonuses.
"Forfeited Unit" shall mean an Accelerated Unit forfeited subsequent
to the Closing by the Unit Holder pursuant to the terms and conditions of the
Phantom Plan.
"Fully Diluted Equity Outstanding" shall mean the sum of all Shares
Outstanding immediately preceding the Closing Date, plus the number of
Phantom Units issued under the Phantom Plan less any Forfeited Units.
"GAAP" shall mean Generally Accepted Accounting Principles in effect
as of the effective date of this Agreement.
"XXXXXX Accounting Methods" shall mean the accounting methods used by
XXXXXX in preparation of its financial reports to the Securities and Exchange
Commission.
"Hazardous Substances" - any material or substance containing,
contaminated by or with, or constituting: (a) any "hazardous substance", as
defined by the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("CERCLA"), as amended from time to time or analogous
state statute or regulation; (b) any "hazardous waste", as defined by the
Resource Conservation and Recovery Act of 1976, as amended, or analogous
state statue or regulation; (c) any petroleum or petroleum product; (d) any
infectious or medical waste; (e) any heavy metal, mono- or poly-chlorinated
biphenyl, urea, formaldehyde, chromium, asbestos, paint or covering
containing lead; (f) any radioactive or nuclear fuel (whether spent or not)
or material or waste or source material of by-product material or transuranic
waste; (g) any chlorofluorocarbon (CFC), halon, hydrochlorofluorocarbon
(HCFC) or any substance currently recognized as ozone-depleting substance; or
(h) any pollutant or contaminant or regulated substance or material or
hazardous, dangerous or toxic chemical, waste, constituent, material or
substance or words of similar import within the meaning of any other
applicable federal, state or-local statute, law, regulation, ordinance or
requirement (including consent decrees and administrative orders) relating to
or imposing liability or standards of conduct concerning any pollutant or
contaminant or regulated substance or material or hazardous, toxic or
dangerous chemical waste, constituent, substance or material, all as amended.
"Irrevocable Unit" shall mean a Unit that is not an Accelerated Unit.
"Net Closing Book Value" shall mean the total assets of XXXXXXX less
the total liabilities of XXXXXXX as reflected on the Closing Date Balance
Sheet, plus $17,500.00.
"Phantom Agreements" shall mean the Phantom Stock Unit Agreements
issued to Xxxxxxx X. Xxxxxx, Xxxxxx X. Xxxxx and Xxxxxx X. Xxxx pursuant to
the terms of the Phantom Plan, in accordance with which each Unit Holder was
awarded 3,000 Phantom Units.
"Phantom Plan" shall mean the Company's Phantom Stock Unit Plan dated
as of January 2, 1993.
"Phantom Proceeds Agreement" shall mean the Phantom Units Proceeds
Agreement dated as of the Closing Date, among XXXXXXX, Xxxxxxx X. Xxxxxx,
Xxxxxx X. Xxxxx and Xxxxxx X. Xxxx, a copy of which is attached hereto as
Exhibit C.
"Phantom Unit Holders" or "Unit Holders" shall mean those persons who,
prior to the Closing, have been awarded Phantom Stock Unit Awards under the
Phantom Plan.
"Proportionate Stock Interest" shall mean with respect to any
Shareholder, the ratio obtained by dividing (x) the number of Shares owned by
such Shareholder immediately preceding the Closing Date divided by (y) the
total number of Shares outstanding as of such date.
"Proportionate Total Interest" shall mean with respect to any
Shareholder or Unit Holder the ratio obtained by dividing, (x) in the case of
a Shareholder, the number of Shares owned by
such Shareholder immediately preceding the Closing Date, or in the case of a
Unit Holder, the number of Units granted to such Unit Holder but less any
Forfeited Units divided by (y) the Fully Diluted Equity Outstanding.
"Sale Expenses" shall mean any expenses incurred or amounts payable by
XXXXXXX in connection with this transaction, including broker's, attorney's,
accountant's and other consultant's fees.
"SELLERS' Cumulative Interest" shall mean the aggregate number of
Shares Outstanding immediately preceding the Closing Date divided by the
Fully Diluted Equity Outstanding.
"Shareholders" shall mean the SELLERS.
"XXXXXXX Accounting Methods" shall mean the accounting methods used by
XXXXXXX in preparation of its December Balance Sheet.
"Unit Holders" shall mean the three individuals to whom Units were
granted pursuant to the Phantom Plan.
"Units" or "Phantom Units" shall mean a phantom stock unit granted to
a Unit Holder pursuant to the terms and conditions of the Phantom Plan. The
term Unit includes the terms "Irrevocable Unit" and "Accelerated Unit."
"Unpaid Unit" shall mean a Unit for which payment is not yet due under
the terms of the Plan, but shall not include Forfeited Units.
Section 1.2 - Agreement to Purchase and Sell. Upon the terms and subject to
the conditions set forth in this Agreement and based upon the representations
and warranties made herein by each of the parties to the other, on the
Closing Date, SELLERS shall sell, grant, convey, assign, transfer and deliver
to XXXXXX, and XXXXXX shall purchase and acquire from SELLERS, as a group,
all of the issued and outstanding shares of capital stock of XXXXXXX (the
"Shares"). The exact number of Shares to be sold by SELLERS hereunder is
61,825.02 common shares, $1.00 par value per share. At the Closing, each
Seller shall deliver to XXXXXX certificates evidencing the Shares owned by
such Seller duly endorsed in blank or with stock powers duly executed by such
Seller.
Section 1.3 - Purchase Price. Upon the terms and subject to the conditions
set forth in this Agreement, in reliance upon the representations,
warranties, covenants and agreements of SELLERS contained herein, at the
Closing, each Seller shall sell to XXXXXX and XXXXXX shall purchase from each
Seller all of the Shares owned by such Seller in exchange for the payment to
the Seller of an amount equal to the Purchase Price multiplied by such
SELLER's Proportionate Stock Interest based upon the number of Shares held by
such SELLER and set forth after such SELLER's name in column C of Exhibit X.
XXXXXXX will pay the Irrevocable Phantom Units immediately preceding the
Closing of the transactions contemplated herein. XXXXXX agrees to cause
XXXXXXX, after the Closing, to pay for all Accelerated Phantom Units in
accordance with the terms of the Phantom Proceeds Agreement.
The Purchase Price shall be defined as the sum of the following amounts:
(a) The "Closing Date Amount", which shall be determined as follows:
(i) $4,200,000 in cash or cash equivalent,
(ii) LESS $4,874, representing fifty percent (50%) of any amounts
payable or paid by XXXXXX for a Phase I environmental audit of XXXXXXX,
(iii) LESS $170,000 payable to employees pursuant to "stay bonuses"
included in existing employment agreements (the "Stay Bonuses"),
(iv) LESS the Sale Expenses;
(v) LESS the cost of the Letters of Credit obtained by XXXXXX in
connection with, and as might be required by, this Agreement,
(vi) PLUS $4,390, representing fifty percent (50%) of any amounts
payable or paid by XXXXXXX for any Phase I environmental audit of XXXXXXX.
(vii) PLUS 20.135% of payments made to Phantom Unit Holders
simultaneously with the Closing.
(viii) LESS the "Closing Phantom Payment", which shall be the result of
the foregoing calculations multiplied by a fraction, the numerator of which
is 9,000 [the total number of Phantom Units outstanding] and the
denominator of which is 70,428.47564 [the total number of Shares and
Phantom Units outstanding].
(b) The Net Closing Book Value Adjustment which shall be the difference
between the Net Closing Book Value and $2,011,864, and which shall be
determined in accordance with Section 1.4(b);
(c) The "Earnout", subject to adjustments required by Article VIII,
which, under no circumstances shall exceed, $1,750,000. For purposes of this
Section 1.3(c) only, XXXXXXX shall mean XXXXXX'x wholly-owned subsidiary
acquired as a result of the purchase of the Shares from the SELLERS. The
Earnout shall be determined and paid as follows:
(i) Attached as Exhibit D hereto are projected EBITDA numbers for
XXXXXXX for the five (5) fiscal years beginning May 1, 1995, through April
30, 2000, ("Projected EBITDA") which are based on the August 1994
Confidential Information Memorandum prepared by XXXXXXX and Xxxxxx Xxxxxxx
Incorporated as adjusted to begin on Xxxxxx'x fiscal year beginning May 1,
1995, said adjustment hereby agreed to by the SELLERS.
(ii) For each of its five (5) fiscal years beginning May 1, 1995
through April 30, 2000, XXXXXX will calculate Actual Modified EBITDA for
XXXXXXX using XXXXXX Accounting Methods. The parties agree that the Earnout
for the first fiscal year after the Closing Date will be determined by
prorating the year from the Closing Date to April 30, 1996. This will be
calculated by multiplying Projected EBITDA for the year ended April 30, 1996,
by a fraction, the numerator of which is the number of business days from the
Closing Date until April 30, 1996, and the denominator of which is the total
number of business days in the fiscal year. The parties agree that the
Earnout for the year ended April 30, 2000, shall be based upon a pro rated
year greater than the twelve months calculated by multiplying both Actual
Modified EBITDA and Projected EBITDA for such year by a fraction, the
numerator of which is the sum of the number of business days in such year
plus the number of business days from April 30, 2000 to the 5th Anniversary
of the Closing Date and the denominator of which is the number of business
days in such year.
(iii) To the extent that Actual Modified EBITDA exceeds Projected EBITDA
for any of the scheduled fiscal years, the Earnout for that year shall equal
fifty percent (50%) of the excess. To the extent that Actual Modified EBITDA
is less than Projected EBITDA for any of the scheduled fiscal years, fifty
percent (50%) of the deficit shall be credited against any Earnout which
would otherwise be payable as a result of operations in any subsequent
scheduled fiscal year.
(iv) XXXXXX agrees that it will not (A) sell or otherwise transfer any
of the shares of capital stock of XXXXXXX or (B) sell, transfer or otherwise
dispose of direct or indirect control of XXXXXXX, whether effected by (x)
merger or consolidation of XXXXXXX with or into another entity not controlled
by XXXXXX, (y) the sale or other transfer of any of the shares of capital
stock of XXXXXXX, or (z) permitting the sale or other transfer of all or
substan-tially all of XXXXXXX'X assets to other entities (the "Sale
Transaction") unless the following amount is paid to the SELLERS at the
closing of the Sale Transaction as follows: the lesser of (I) the excess, if
any, of the total sales price in such Sale Transaction over $4,200,000 or
(II) the excess, if any, of $1,750,000 over the amount of any Earnout paid
prior to such closing of the Sale Transaction.
(v) XXXXXX agrees that it will not merge or consolidate XXXXXXX with
or into XXXXXX or an affiliate of XXXXXX unless:
a) The SELLERS' Representative agrees to the merger or consolidation;
or
b) XXXXXX agrees to pay the SELLERS the greater of (i) the Unpaid
Earnout discounted to the date of such merger or consolidation using an
annualized discount rate of 34%; or (ii) subsequent to the closing of the
merger, Actual Modified EBITDA is determined by using the greater of:
XXXXXXX'x Actual Modified EBITDA for the fiscal year prior to the closing of
the merger transaction or the Actual Modified EBITDA of the combined merged
entity. For purposes hereof, the term Unpaid Earnout shall mean the excess,
if any, of $1,750,000 over the amounts of Earnout paid prior to such merger
or consolidation, provided however, for purposes of the foregoing
calculations it will be assumed that such excess amounts would have been due
and payable in equal installments on each April 30 remaining between the date
of such merger or consolidation and the fifth anniversary hereof.
The provisions of Section 1.3(c)(iv) and (v) shall terminate at the end of
the five (5) year Earnout period described above".
(d) The Sale Expenses provided in Section 1.3(a)(iv);
(e) The Tax Benefit amounts payable pursuant to Section 5.5 below and;
(f) The "Divested Amounts", which shall mean any amounts of payments for
Phantom Units or Stay Bonuses forfeited by the intended recipient pursuant to
the terms of the Phantom Proceeds Agreement (or Phantom Plan or Phantom
Agreement), or employment agreements, as the case may be. The proportion of
the Divested Amounts payable to the SELLERS shall equal the SELLERS'
Cumulative Interest thereof and shall be paid to the SELLERS within 10 days
after the applicable forfeiture.
Section 1.4 - Payment of Purchase Price.
(a) The Purchase Price shall be payable as follows:
(i) payment of the Closing Date Amount to the SELLERS on the
Closing Date as follows;
1) $1,831,642 in certified funds which shall be held in escrow by
Norwest Bank Colorado (the "Escrow Agent") according to the Escrow Agreement
substantially in the form attached hereto as Exhibit E for purposes of any
adjustments to the Purchase Price to be made pursuant to Section 8.
2) except tor amounts to be deposited into the Escrow Account, the
balance of the Closing Date Amount shall be paid to the SELLERS in cash or
certified funds, except for Xxxxxxx X. Xxxxxxx and Xxxxxx X. Xxxxxxx who
shall be paid by XXXXXX one-year unconditional, negotiable promissory notes
secured by a Letters of Credit with interest payable at five and fifty-three
one hundredths percent (5.53%) per annum as set forth in Exhibit F (the
"Series A Notes");
(ii) payment of the Net Closing Book Value Adjustment to the SELLERS or
XXXXXX, as the case may be, either out of the Escrow Amount according to the
provisions of Section 1.4(b) if due from the SELLERS or in cash if due from
XXXXXX;
(iii) payment of the Earnout within 95 days after the end of XXXXXX'x
fiscal year in question payable to the SELLERS in accordance with the
SELLERS' Proportionate Total Interest;
(iv) payment of the Sale Expenses in cash or bank cashier's check
against invoices delivered on or before the Closing Date.
(v) payment of the Tax Benefit amounts within 95 days after XXXXXX'x
fiscal year end in which the payment is made;
(vi) payment of the Divested Amounts within ten (10) days after the
applicable forfeiture.
(vii) payment within five days of agreement on the Closing Certificate,
of any balance of funds deducted from 1.4(a)(i)(2) above in accordance with
the Escrow Agreement.
(b) Within sixty days after the Closing Date, XXXXXX and the SELLERS'
Representative shall cause to be prepared the XXXXXXX Closing Date Balance
Sheet. As soon after the Closing Date as practicable, but not more than 90
days after the Closing Date, XXXXXX and the SELLERS' Representative will
agree to a final Closing Date Balance Sheet accompanied by a certificate
signed by each party (the "Closing Certificate") setting forth the Net
Closing Book Value and the amount of any adjustments to the Purchase Price
required by Section 1.2(a)(i).
(i) The Escrow Amount shall be held in an Escrow Account pursuant to
the Escrow Agreement. Any additional Sale Expenses not invoiced on or before
the Closing Date shall be paid out of the
Escrow Amount if invoiced no later than ten days after the Closing Date. All
costs incurred by XXXXXX to determine any adjustment, required by this
Section 1.4, shall be borne by XXXXXX. All costs incurred by the SELLERS and
Unit Holders to determine any adjustment required by this Section 1.4, shall
be shall be deducted and paid from the Escrow Amount prior to any
disbursement to the SELLERS.
(ii) If the Net Closing Book Value is less than $2,011,864, the
difference shall be paid to XXXXXX out of the Escrow Amount based upon the
SELLER' s Proportionate Total Interest immediately in accordance with the
payment provisions for the Closing Date Amount. If the Net Closing Book
Value is greater than $2,011,864, XXXXXX shall pay such excess immediately in
accordance with the payment provisions for the Closing Date Amount. In
either case such payments shall be made, out of the Escrow Amount, upon
agreement by the parties of the Closing Date Balance Sheet and the Closing
Certificate.
(iii) If the parties hereto are unable to agree upon the Closing Date
Balance Sheet or the Closing Certificate within 90 days after the Closing
Date, payments shall be made as to all "agreed upon" issues on said 90th day
and all matters not so resolved shall be submitted to an arbitrator with
accounting expertise mutually acceptable to XXXXXX and the SELLERS'
Representative (the "Arbitrator") for final resolution in accordance solely
and exclusively with this Agreement. Such submission shall be in the form of
written statements of position by the parties, with an opportunity to respond
to such written statements and any requests for statements or information
from the Arbitrator. The Arbitrator shall be directed, by the SELLERS'
Representative and XXXXXX, to make its determination as soon as possible
after the matter in dispute is submitted to it, and such determination shall
be final and binding upon the parties hereto. Any payment to be made as a
consequence of the decision of the Arbitrator shall be made not later than 10
days after the receipt of said decision by each of XXXXXX and the SELLERS'
Representative. The costs and expenses of the Arbitrator shall be shared
equally by XXXXXX and the SELLERS.
(iv) All amounts to be paid subsequent to the Closing Date pursuant to
Section 1.3(b) shall bear interest from and after the Closing Date, until so
paid, at the rate of seven percent (7%) per annum computed on the basis of a
365-day year and paid for the actual number of days elapsed.
Section 1.5 - Termination. This Agreement may be terminated:
(a) Prior to the Closing Date if XXXXXX and the SELLERS shall so agree
in writing;
(b) Prior to the Closing Date by XXXXXX or the SELLERS, due to a
material misrepresentation, material breach of warranty or failure to comply
in any material respect with any covenant in this Agreement made or caused by
the other party, if not cured within fifteen (15) days of receipt of notice
thereof; or
(c) On July 31, 1995, in the event any material condition to Closing is
not satisfied by that date upon the exercise of reasonable efforts by the
party or parties primarily responsible for such condition, and is not waived
by the other party or parties.
In the event this Agreement shall be terminated pursuant to Section
1.5(a) or Section l.5(c), neither party shall be liable to the other as a
result of such termination. Any termination pursuant to Section 1.5(b) shall
not relieve any party of liability for any such material misrepresentation or
material breach. Notwithstanding the provisions of this Article, if any of
the SELLERS shall fail or refuse to deliver any of the Shares as provided in
Section 1.2, or if any of the SELLERS shall fail or refuse to consummate the
transactions described in this Agreement prior to or on the Closing Date,
such failure or refusal shall not relieve the other SELLERS of any
obligations under this Agreement, and XXXXXX, at its option and without
prejudice to its rights against any such defaulting Seller, may either (I)
acquire the remaining Shares which it is entitled to acquire hereunder or (2)
refuse to make such acquisition and thereby terminate all of its obligations
hereunder. The SELLERS acknowledge that the Shares are unique and otherwise
not available and agree that in addition to any other remedies, XXXXXX may
invoke any equitable remedies to enforce delivery of the Shares hereunder,
including, without limitation, an action or suit for specific performance.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF XXXXXX
XXXXXX hereby represents and warrants to the SELLERS that, except as noted in
the XXXXXX Schedule of Exceptions attached as Exhibit G, hereto:
Section 2.1 - Organization; Good Standing. XXXXXX is a corporation duly
incorporated, validly existing and in good standing under the laws of the
States of Delaware, having all requisite corporate power and authority to
perform its obligations under this Agreement.
Section 2.2 - Authority. XXXXXX has full power and authority to enter into
this Agreement, to perform its obligations under this Agreement and to carry
out the transactions contemplated by this Agreement. This Agreement has been
duly and validly authorized by all necessary corporate action, and
constitutes the valid and legally binding obligation of XXXXXX enforceable in
accordance with its terms except as enforceability thereof may be limited by
bankruptcy, insolvency or other laws affecting creditors rights generally and
except that equitable remedies are within the
discretion of the courts.
Section 2.3 - Financial Statements. XXXXXX has furnished the SELLERS with
its audited financial statements for the three years ended April 30, 1992,
1993 and 1994, and its unaudited financial statements as of January 31, 1995.
Said financial statements, including the related notes and schedules thereto,
are complete and correct in all material respects and present fairly, and in
conformity with generally accepted accounting principles consistently
applied, the financial position of XXXXXX at the dates thereof and the
results of its operations for the periods then ended. XXXXXX has no material
unrecorded liabilities or obligations, secured or unsecured (whether accrued,
absolute, contingent or otherwise), including, without limitation, any tax
liabilities, other than liabilities incurred in the ordinary course of
business since January 31, 1995, that are not properly disclosed in the
financial statements discussed above. Since January 31, 1995 there has not
been any material adverse change in the financial condition, results of
operations, business or prospects of XXXXXX, or any other event or condition
of any character, which individually or in the aggregate has had or
reasonably can be expected to have a material adverse effect on the financial
condition, results of operations, or business of XXXXXX.
Section 2.4 - Absence of Conflicts. Neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated thereby
by XXXXXX will conflict with, result in the breach of, constitute a default
under or accelerate the performance required by, the terms of (i) any law or
any rule or regulation of any governmental agency or authority or any
judgment, order or decree of any court or other governmental agency to which
XXXXXX may be subject, (ii) any contract, agreement or instrument to which
XXXXXX is a party or by which XXXXXX or its properties are bound or
committed, or (iii) the Certificate of Incorporation or Bylaws of XXXXXX, or
constitute an event which with the lapse of time or action by a third party
could result in a default under any of the foregoing or result in the
creation of any lien, charge or encumbrance upon any of the assets or
properties of the XXXXXX.
Section 2.5 - Brokerage. There are no claims for brokerage commissions,
finder's fees or similar compensation arising out of or due to any act of
XXXXXX in connection with the transactions contemplated by this Agreement or
based upon any agreement or arrangement made by or on behalf of XXXXXX in
connection with such transactions.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
The SELLERS hereby jointly and severally, except as indicated below,
represent and warrant to XXXXXX that, except as noted in the XXXXXXX Schedule
of Exceptions attached as Exhibit H hereto:
Section 3.1 - Organization: Good Standing. XXXXXXX is a Massachusetts
corporation duly incorporated, validly existing and in good standing under
the laws of the Commonwealth of Massachusetts. XXXXXXX has delivered to
XXXXXX true and correct copies of XXXXXXX'x Articles of Organization and
Bylaws as in effect on the date hereof, and XXXXXXX is not in violation of
its Articles of Organization or Bylaws. XXXXXXX does not own 5 % or more of
the voting securities of, or have any other interest in, any other entity.
Section 3.2 - Local Compliance. XXXXXXX is not in violation of any
applicable law or regulation in any material respect, or in default with
respect to any order, writ, injunction or decree of any court, or in default
under any order, Permit (as defined in Section 3.18), regulation or demand of
any governmental agency, the effect of which violation or default would be to
materially and adversely affect the financial condition, results of
operations, business or prospects of XXXXXXX taken as a whole. XXXXXXX has
all requisite corporate power and authority to own, lease and operate its
properties and to conduct its business as now being conducted or presently
proposed by XXXXXXX to be conducted in the future. Neither the character of
the property owned or leased by XXXXXXX, nor the nature of its business
activities, nor anything else makes qualification by XXXXXXX as a foreign
corporation necessary in any jurisdiction.
Section 3.3 - Authority. Each of the SELLERS severally represents and
warrants that he has full power and authority to enter into this Agreement,
to perform his obligations under this Agreement and to carry out the
transactions contemplated by this Agreement. The execution and delivery of
this Agreement will not contravene or violate the Articles of Organization or
Bylaws of XXXXXXX. Neither the execution and delivery of this Agreement by
any SELLER nor the consummation of the transactions contemplated hereby will
contravene or violate any regulation or court order which is applicable to
XXXXXXX, or will result in a default under, or require the consent or
approval of any party to, any contract relating to XXXXXXX'x business or its
assets or by which XXXXXXX is a party or otherwise bound, or require XXXXXXX
or any SELLER to notify or obtain any license from any federal, state, local
or other court or governmental agency or body or from any other regulatory
authority. This Agreement constitutes the valid and legally binding
obligation of each SELLER enforceable in accordance with its terms.
Section 3.4 - Capitalization.
(a) The authorized capital stock of XXXXXXX consists of 150,000 shares
of common stock, $1.00 par value per share ("XXXXXXX Common Stock"),
61,428.47564 of which are issued and outstanding (previously defined as the
"Shares"). Each of the SELLERS severally represents and warrants that the
Shares are owned by each of the SELLERS in the respective amounts set forth
opposite their names in column B of Exhibit A, free and clear of all liens.
All of the Shares are duly authorized, validly issued, fully paid and
nonassessable.
(b) Except as set forth in Schedule 3.4, there are no outstanding
debentures, options, warrants, conversion rights, calls or commitments of any
kind obligating XXXXXXX to issue, directly or indirectly, any additional
shares of its capital stock or any instrument convertible into its capital
stock, or any outstanding commitment or obligation to repurchase, reacquire
or redeem any of its outstanding capital stock. XXXXXXX is not a party to or
bound by any contract, indenture, note, debenture, bond or other
security, or any other agreement or instrument pursuant to which its right to
declare or pay dividends on its capital stock is restricted. XXXXXXX'x
capital stock is not subject to any preemptive right of any shareholder.
Section 3.5 - Financial Statements. XXXXXXX and the SELLERS have furnished
XXXXXX with the audited financial statements of XXXXXXX for the year ended
December 31, 1992 and the unaudited financial statements of XXXXXXX for the
years ended December 31, 1993 and 1994. Said financial statements, including
the related notes and schedules thereto, are complete and correct in all
material respects and present fairly, in accordance with generally accepted
accounting principles consistently applied, the financial position of XXXXXXX
at the dates thereof and the results of its operations for the periods then
ended. XXXXXXX has no material unrecorded liabilities or obligations,
secured or unsecured (whether accrued, absolute, contingent or otherwise),
including, without limitation, any tax liabilities, other than liabilities
incurred in the ordinary course of business since December 31, 1994, that are
not properly disclosed in the December financial statement. Since December
31, 1994, there has not been any material adverse change in the financial
condition, results of operations, business or prospects of XXXXXXX, or any
other event or condition of any character, which individually or in the
aggregate has had or reasonably can be expected to have a material adverse
effect on the financial condition, results of operations, or business of
XXXXXXX.
Section 3.6 - Assets. XXXXXXX has good and marketable title to all assets
and properties, whether real or personal, tangible or intangible, which it
purports to own, including, without limitation, all assets and properties
reflected in the December Balance Sheet or acquired subsequent thereto
(except to the extent such assets and properties have been disposed of for
fair value in the ordinary course of business since the date of the December
Balance Sheet), free and clear of all liens, mortgages, security interests,
encumbrances or charges of any kind except: (i) as noted in the December
Balance Sheet or the notes thereto; (ii) statutory liens not yet delinquent;
and (iii) minor defects and irregularities in title and encumbrances which do
not materially impair the use thereof for the purposes for which they are
held. Schedule 3.6 sets forth accurate lists and summary descriptions of all
tangible assets where the value of an individual item exceeds $500 or where
an aggregate of similar items exceeds $500, and of all leases, licenses, and
other contracts to which XXXXXXX is a party or is otherwise bound which
relate in whole or in part to such assets. The assets listed in Schedule 3.6
constitute substantially all of the tangible assets used in or necessary to
the conduct of XXXXXXX'x business.
Section 3.7 - Litigation. No claims have been asserted and no relief has
been sought against XXXXXXX in any pending litigation or governmental
proceedings. To the knowledge of XXXXXXX and each SELLER, XXXXXXX has not
been threatened with such litigation or proceedings and no basis for such
litigation or proceeding exists. XXXXXXX is not subject to any applicable
unsatisfied judgment or award, order, stipulation, writ, injunction or decree
of any court, arbitrator or governmental agency or department having
jurisdiction over it or its properties, business or affairs.
Section 3.8 - Taxes. XXXXXXX has (i) filed all federal, state, local and
foreign tax returns of every type and kind required to be filed by it as of
the date of this Agreement, and each such return is complete and accurate in
all material respects; (ii) paid all taxes, assessments and other
governmental charges due or claimed to be due upon it or any of its income,
properties or assets; (iii) not requested an extension for the time of any
such payment (which extension is still in effect); and (iv) established
accruals or reserves as reflected on the December Balance Sheet adequate for
the payment of all federal, state, local and foreign tax liabilities.
XXXXXXX has not received any notice of assessment or deficiency or proposed
assessment from or by the Internal Revenue Service or any other taxing
authority in connection with its tax returns or reports and there is no
pending tax examination of or tax claim asserted against XXXXXXX. True and
complete copies of all federal and state income tax returns filed by XXXXXXX
since December 31, 1992, have been delivered to XXXXXX.
Section 3.9 - Contracts. XXXXXXX is not a party to or bound by, and is not
presently considering entering into, any written or oral (i) employment,
management, consulting, severance or other similar agreements (including
without limitation any collective bargaining contract or union agreement);
(ii) bonus, deferred compensation, profit-sharing, percentage compensation,
service award, incentive, pension, retirement or other compensation plan or
arrangement; (iii) material lease or license with respect to any property,
real or personal, whether as landlord, tenant, licensor or licensee; (iv)
contract or commitment for capital expenditures in excess of $10,000; (v)
contract or option to purchase or sell any real or personal property
otherwise than in the ordinary course of business; or any (vi) material
contract, other than the foregoing, not made in the ordinary course of
business. XXXXXXX has, in all material respects, performed all obligations
required to be performed by it to date and is not in default under, and no
event has occurred which, with the lapse of time or action by a third party,
could result in a default under, any outstanding indenture, mortgage,
contract, lease or other agreement to which XXXXXXX is a party or by which
XXXXXXX is bound, the effect of which default would be to materially and
adversely affect the financial condition, results of operations, business or
prospects of XXXXXXX taken as a whole.
Section 3.10 - Retirement/Benefit Plans.
(a) On or prior to the date hereof, XXXXXXX has provided XXXXXX with
true, complete and accurate copies of all "employee benefit plans" (within
the meaning of Section 3(2) of ERISA) in Schedule 3.10, which are stock
bonus, pension or profit-sharing plans within the meaning of Section 401(a)
of the Code. Each such plan has been duly authorized by XXXXXXX'x board of
directors. Each such plan is qualified in form and operation under Section
401 (a) of the Code and each trust under each such plan is exempt from tax
under Section 501(a) of the Code. No event has occurred that will or could
give rise to disqualification or loss of tax exempt status of any such plan
or trust under such Sections. No event has occurred that will or could
subject any such plans to tax under Section 511 of the Code. Schedule 3.10
also lists all retainer, consulting, retirement, severance, welfare or
incentive plans, agreements or arrangements as well as any plan, agreement or
arrangement providing for "fringe benefits" or perquisites to employees,
officers, directors or agents and all group insurance contracts maintained by
it for its employees and former employees.
(b) Other than as set forth in Schedule 3,10, there are no "employee
benefit plans" as defined in ERISA, sponsored by XXXXXXX or in which XXXXXXX
participates as a participating employer ("XXXXXXX Plans"). With respect to
any such employee benefit plan disclosed, XXXXXXX has made all contributions
thereto which they have accrued on their financial statements and other books
and records as a liability and XXXXXXX has delivered to XXXXXX copies of (I)
all documents evidencing such XXXXXXX Plans, and all amendments thereto, (2)
all reports filed by XXXXXXX or Plan officials with respect to such Plans
with the United States Department of Labor, the IRS and any other federal or
state regulatory agency, (3) all summary plan descriptions, notices and other
reporting and disclosure material furnished to participants in any of such
Plans, (4) all actuarial, accounting and financial reports prepared with
respect to any of such Plans, and (5) all currently effective IRS ruling or
determination letters on any of such Plans.
(c) No XXXXXXX Plans have been partially or completely terminated nor,
to the best of XXXXXXX'x knowledge, has there been any "reportable event," as
that term is defined in Section 4043(b) of ERISA, with respect to a XXXXXXX
Plan since the effective date of ERISA.
(d) XXXXXXX is not now and has never been obligated to contribute to a
pension plan that is a "multiemployer plan," as defined in ERISA.
(e) XXXXXXX has no liability to the Pension Benefit Guaranty
Corporation or the Internal Revenue Service with respect to any XXXXXXX Plan.
(f) No XXXXXXX Plan or trust through which a XXXXXXX Plan is funded,
nor any trustee or administrator thereof, has engaged in a transaction that
might subject the XXXXXXX Plan or trust, or any trustee or administrator
thereof, or any other party dealing with the XXXXXXX Plan or trust, to the
tax or penalty on prohibited transactions imposed by the IRC or to a civil
penalty imposed by ERISA.
(g) No XXXXXXX Plan or trust through which a XXXXXXX Plan is funded has
incurred an "accumulated funding deficiency" within the meaning of Section
412 of the IRC, whether or not waived, since the effective date of Section
412.
(h) There is no action, claim or demand of any kind (other than routine
claims for benefits) which has been brought or, to the knowledge of XXXXXXX
and each of the SELLERS, threatened, against any XXXXXXX Plan or the assets
thereof, or against any fiduciary of any such Plan.
(i) XXXXXXX has filed or caused to be filed on a timely basis each and
every return, report, statement, notice, declaration and other documents
required by any governmental agency with respect to each XXXXXXX Plan.
(j) With respect to each such XXXXXXX Plan which is an "employee
benefit plan" (within the meaning of Section 4975(e)(1) of the Code), there
has occurred no transaction prohibited by Section 406 of ERISA and no
"prohibited transaction" (within the meaning of Section 4975(c) of the Code).
(k) All group health plans of XXXXXXX have been operated in compliance
with the group health plan continuation coverage requirements of Section
162(k) (as in effect immediately prior to the Technical and Miscellaneous
Revenue Act of 1988) and 4980B of the Code to the extent such requirements
are applicable. Except to the extent required under Section 4980B of the
Code, XXXXXXX does not provide health or welfare benefits (through the
purchase of insurance or otherwise) for any retired or former employees.
Section 3.11 - Absence of Conflicts. Neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated hereby
will conflict with, result in the breach of, constitute a default under or
accelerate the performance required by, the terms of (i) any law or any rule
or regulation of any governmental agency or authority or any judgment, order
or decree of any court or other governmental agency to which XXXXXXX may be
subject, (ii) any contract, agreement or instrument to which XXXXXXX is a
party or by which XXXXXXX is bound or committed, or (iii) the Articles of
Organization or Bylaws of XXXXXXX, or constitute an event which with the
lapse of time or action by a third party could result in a default under any
of the foregoing or result in the creation of any lien, charge or encumbrance
upon any of the assets or properties of XXXXXXX or upon any of the stock of
XXXXXXX.
Section 3.12 - Insurance. XXXXXXX has in full force and effect insurance
coverage with reputable insurers, which in respect of amounts, types and
risks insured, is, in XXXXXXX'x reasonable judgment, adequate to protect the
properties and business of XXXXXXX. This insurance is listed on Schedule
3.12 along with a description of all claims in excess of $10,000 for the past
five years (the "policies"). Since January 1, 1994, XXXXXXX has not suffered
any casualty loss or damage to or destruction of its property not covered by
the Policies which has had a material adverse effect upon its financial
position, business or properties. The definition of "Professional Services"
in Xxxxxxx'x Insurance Policy, #4CM18471 with American Empire Surplus Lines
covers all services performed by Xxxxxxx while such Policy was in force.
Xxxxxxx has given prompt notice to its insurers of all claims which should be
made under the Policies.
Section 3.13 - Accounts Receivable. The accounts receivable of XXXXXXX which
are reflected in the December Balance Sheet or are acquired by XXXXXXX prior
to the Closing Date reflect, or will reflect, valid contractual obligations
of its customers, and XXXXXXX has no reason to believe that its accounts
receivable will not be collected in the ordinary course of business (without
resort to litigation or assignment to a collection agency) in an aggregate
amount at least equal to the amount, net of reserves, reflected on the
December Balance Sheet. Schedule 3.13 sets forth an aging report for the
Accounts Receivable as of the Closing Date.
Section 3.14 - Inventories. The inventories of XXXXXXX which are reflected
on the December Balance Sheet or are acquired by XXXXXXX prior to the Closing
Date consist of items which are assigned to a specific back order or which
are usable by XXXXXXX in the ordinary course of its business within one year
after the Closing Date, except where the failure to use such inventories
would not have a material adverse effect on XXXXXXX. The values of obsolete
inventory and inventory of below standard quality, if any, have been written
down to realizable market values or have been written off, or adequate
reserves therefor have been established, on the December Balance Sheet.
Section 3.15 - Patents, Trademarks, Copyrights. Etc. For purposes of this
Section, "Intellectual Property" means (i) all United States and foreign
patents, trademarks, service marks, trade names, copyrights and franchises,
unexpired as of the date hereof, all United States and foreign applications
pending for patents, trademarks, service marks, trade name registrations,
copyright registrations or franchises, all of the foregoing being owned in
whole or in part as noted thereon by XXXXXXX; (ii) all licenses granted by or
to XXXXXXX and all other agreements to which XXXXXXX is a party which relate
in whole or in part to any items of the categories mentioned in clause (i)
above, or to intellectual property, inventions, discoveries, improvements,
processes, formulae, proprietary rights, trade secrets, ideas or other know-
how, whether owned by XXXXXXX or otherwise. XXXXXXX'x Intellectual Property
is listed on Schedule 3.15.
XXXXXXX owns, free and clear of any liens created by XXXXXXX, all
right, title and interest in and to the XXXXXXX Intellectual Property; no
person has a right to receive a royalty with respect to any of the XXXXXXX
Intellectual Property, no intellectual property other than the XXXXXXX
Intellectual Property so listed is required to permit the conduct of business
of XXXXXXX as now conducted without conflict with the rights of others; all
of the XXXXXXX Intellectual Property is valid and in full force and effect,
and, to the best of XXXXXXX'x knowledge, XXXXXXX is not infringing upon, or
otherwise violating the rights of, any third parties in any material respect
with respect to any of the XXXXXXX Intellectual Property, and to the best
knowledge of XXXXXXX, there is no infringement or other adverse claim against
the rights of XXXXXXX with respect to any of the XXXXXXX Intellectual
Property.
Section 3.16 - Customers. No single customer accounted for more than ten
percent (10@) of XXXXXXX'x net sales in any of the three most recent fiscal
years. XXXXXXX believes that its relationship with its suppliers and its
customers are good commercial working relationships and no material supplier
or customer has cancelled or otherwise terminated, or, to the best knowledge
of XXXXXXX or the SELLERS, threatened to cancel or otherwise terminate, its
relationship with XXXXXXX, or, to the best knowledge of XXXXXXX or the
SELLERS, threatened to materially decrease or limit its materials supplied
to, or services purchased from, XXXXXXX, since January 1, 1994.
Section 3.17 - Books and Records. All books of account, minute books, stock
certificate books, stock transfer ledgers and other corporate records of, and
records maintained pursuant to the requirements of governmental authorities
by, XXXXXXX are complete and correctly and accurately present and reflect all
the material transactions entered into by XXXXXXX or to which XXXXXXX is a
party or any other matter which should be set forth in such books and
records.
Section 3.18 - Permits. XXXXXXX and its corporate personnel hold all
material certificates, permits, licenses, registrations, consents,
authorizations, approvals, privileges, waivers, exemptions and orders
(collectively, "Permits") including, without limitation, all environmental,
public health or safety Permits, necessary to permit XXXXXXX to own its
properties and to conduct its business pursuant to all laws applicable to the
operation of its business. There is no material violation of any Permit, all
of the Permits are current, valid and in full force and effect, and no action
or claim is pending to suspend, revoke or terminate any Permit or to render
any Permit invalid in any material respect, or to seek any civil penalty for
any alleged violation of any material law, regulation or ordinance.
Section 3.19 - Machinery and Equipment. All of the machinery, equipment and
personal property of XXXXXXX used in the conduct of its business is in good
repair and safe operating condition and is adequate to conduct the business
of XXXXXXX as it is presently being conducted. Schedule 3.19 sets forth a
list of any required capital expenditures for machinery and equipment that
are required by existing contracts.
Section 3.20 - Absence of Adverse Agreements. To the knowledge of XXXXXXX
and the SELLERS, XXXXXXX is not a party to any agreement or instrument or any
judgment, order or decree of any court, or any rule or regulation of any
court or other governmental agency or authority which materially and
adversely affects, or in the future may be reasonably likely to materially
and adversely affect, the financial condition, results of operations,
business or prospects of XXXXXXX.
Section 3.21 - Conduct. Since December 31, 1994, XXXXXXX has not (i) issued
or sold any of its capital stock or any corporate debt obligations; (ii)
granted any options for the purchase of its capital stock; (iii) declared or
set aside or paid any dividend or other distribution in respect of its
capital stock or directly or indirectly purchased, redeemed or otherwise
acquired any shares of such stock; (iv) incurred any obligations or
liabilities (absolute or contingent), except obligations or liabilities
incurred in the ordinary course of business, or mortgaged, pledged or
subjected to any lien or encumbrance (other than statutory liens not yet
delinquent) any of its assets or properties; (v) discharged or satisfied any
lien or encumbrance or paid any obligation or liability (absolute or
contingent), other than current liabilities included on the December Balance
Sheet and current liabilities incurred since the date thereof in the ordinary
course of business; (vi) sold, exchanged or otherwise disposed of any of its
capital assets other than in the ordinary course of business; (vii) made any
general wage or salary increase other than in the ordinary course of
business; (viii) except in the ordinary course of business, entered or agreed
to enter into any agreement or arrangement granting any preferential rights
to purchase any of its assets, properties or rights or requiring the consent
of any party to the transfer and assignment of any such assets, properties or
rights; (ix) made any changes in its Board of Directors or executive officers
or in the compensation thereof; (x) entered into any transaction outside the
ordinary course of its business except as expressly contemplated by this
Agreement; or (xi) contracted or optioned to purchase or sell any real or
personal property otherwise than in the ordinary course of business.
Section 3.22 - Compliance With Law: Permits; Environmental Matters. XXXXXXX
has complied with all applicable statutes, regulations, orders and
restrictions of the United States of America, all states, possessions and
municipalities thereof, and all agencies and instrumentalities of the
foregoing, the failure to comply with which could result in any liability,
penalty or disability material to the conduct of the business of XXXXXXX or
the ownership or operation by XXXXXX of its properties.
(a) The operations, practices, policies and procedures of XXXXXXX, and
its employees have been conducted in compliance with all Environmental Laws
and have not given rise to any Environmental Damages.
(b) There are under applicable Environmental Laws no outstanding
lawsuits, proceedings, actions, investigations, citations, notices of
violations or possible or probable violations of Environmental Laws or
consent orders or other orders or agreements to which XXXXXXX, or any
properties of XXXXXXX, are subject or may become subject. XXXXXXX has set
aside what it believes to be adequate capital reserves to fund all pending
and threatened notices of violations, all as reflected on the December
Balance Sheet.
(c) XXXXXXX has provided XXXXXX with the present location of, and (I)
copies of all permits, notices, filings, surveys, audits, correspondence,
reports and data regarding the past and present presence of all Hazardous
Substances on, at, in, under or above the premises occupied by XXXXXXX during
the last five (5) years; (2) a list of all shipments or other transfers of a
Hazardous Substance from the premises occupied by XXXXXXX during the last
five (5) years to another location or real property (including the date,
Hazardous Substance, quantity, hauler(s), and disposal site(s)), and copies
of manifests for all such shipments or transfers; or (3) copies of all
requests for information, notices of claim, demands or liability, and
notifications that XXXXXXX is or may be potentially responsible with respect
to any investigation, remediation, response, removal, decontamination,
decommission or other corrective action or cleanup of any Hazardous Substance
or any release or threatened release thereof.
(d) There have been no evacuations or known emergencies at the premises
occupied by XXXXXXX in the past year.
(e) XXXXXXX has furnished XXXXXX with (i) copies of all reports,
notices or other documents in XXXXXXX'x files concerning XXXXXXX or its
employees prepared by XXXXXXX during the past five years (A) pursuant to
Title VII of the Civil Rights Act, (B) pursuant to Occupational Safety and
Health Act of 1970, (C) pursuant to workers' compensation statutes, and (D)
pursuant to the National Labor Relations Act or any other labor or employment
law: and copies or complete and accurate summaries of all notices, orders or
other documents or correspondence, written or oral, notifying or indicating
to XXXXXXX that any of the buildings or improvements of XXXXXXX, or the
operation or maintenance thereof as now maintained and operated, contravene
any zoning or building law or ordinance or other administrative regulation or
violate any restrictive covenant or any provision of federal, state or local
law.
Section 3.23 - Disclosure. No representation or warranty by XXXXXXX in this
Agreement or any written statement made to XXXXXX by or on behalf of XXXXXXX
or documents provided by XXXXXXX in connection with this Agreement (including
the XXXXXXX Schedule of Exceptions) contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary to make the statements made not misleading.
Section 3.24 - Brokerage. There are no claims for brokerage commissions,
finder's fees or similar compensation arising out of or due to any act of
XXXXXXX in connection with the transactions contemplated by this Agreement or
based upon any agreement or arrangement made by or on behalf of XXXXXXX in
connection with such transactions except that XXXXXXX has retained Xxxxxx
Xxxxxxx Incorporated. Amounts payable to that organization will be treated
as provided in Section 1.3(a)(iv).
Section 3.25 - Sale Expenses. Exhibit I sets forth a true and complete
estimate of all expenses to be paid by XXXXXXX on or after the Closing in
connection with the transactions contemplated by this Agreement.
Section 3.26 - Additional Information. Schedule 3.26 contains accurate lists
and summary descriptions of the following:
(a) all accounts receivable of XXXXXXX reflected on the December
Balance Sheet, specifying in each case the account debtor, the teak amount of
each receivable, and the age of each receivable.
(b) all accounts payable and accrued expenses of XXXXXXX reflected on
the December Balance Sheet, specifying in each case the payee, the face
amount of each payable, the age of each payable regardless of classification
on the balance sheet account, any defenses, setoffs or counterclaims that may
exist with respect thereto;
(c) the names of all present officers and directors of XXXXXXX;
(d) the names and addresses of every bank and other financial
institution in which XXXXXXX maintains an account (whether checking, savings
or otherwise), lock box or safe deposit box, and the account numbers and
names of the persons having signing authority or other access thereto;
(e) the names of all persons authorized to borrow money or incur or
guarantee indebtedness on behalf of XXXXXXX;
(f) the names of all persons holding powers of attorney from XXXXXXX
and a summary statement of the terms thereof; and
(g) all names under which XXXXXXX has conducted any business or which
it has otherwise used during the last five years.
Where a representation or warranty is given "to the knowledge of the
SELLER or XXXXXXX" or words to similar effect, the term shall be defined to
mean that they have actual knowledge of the facts. Actual knowledge of any
one SELLER shall be attributed to all other SELLERS for purposes of the
Purchase Price adjustment set forth in Article VIII. For purposes of these
representations and warranties, knowledge of XXXXXXX and the XXXXXXX ESOP
shall be defined to mean knowledge of any of the following persons: Xxxxxxx
X. Xxxxxxx, Xxxxx X. Xxxxxxx, Xxxxxx X. Xxxxxxx, Xxxxxxx X. Xxxxxxx, F.
Xxxxxx Xxxxx, Xxxxxxxx X. Xxxxxxx, Xxxxxxx X. Xxxxxx, Xxxxxx X. Xxxxx, and
Xxxxxx X. Xxxx.
ARTICLE IV
COVENANTS OF THE SELLERS AND XXXXXX
Section 4.1 - Consents. Each of the SELLERS and XXXXXX will obtain or cause
to be obtained all consents, approvals and authorizations required by law,
statute, rule, regulation, contract or agreement to be obtained by the
SELLERS or XXXXXX in connection with the consummation of the transactions
contemplated hereby.
Section 4.2 - Maintain Company Business.
(a) From the date hereof to and including the Closing Date, the SELLERS
will use their best efforts consistent with past practices to preserve the
business organization of XXXXXXX intact, to keep available to XXXXXX the
services of the present officers and employees of XXXXXXX, and to preserve
for XXXXXX the good will of the suppliers, customers and others having
business relations with XXXXXXX.
From the date hereof to and including the Closing Date, the SELLERS will
use their best efforts to cause XXXXXXX to continue the operation of its
business in the ordinary course, and to maintain its real property and other
assets, properties and rights in at least as good order and condition as
exists on the date hereof (normal wear and tear excepted), and will not
permit XXXXXXX to:
(i) encumber any of its assets, properties or right or enter into any
transaction or make any contract or commitment relating to its assets,
properties or business, except in the ordinary course of business;
(ii) enter into any employment contract which is not terminable without
cost or other liability to XXXXXXX, or any successor thereof, except for
accrued vacation pay, upon notice of 30 days or less;
(iii) enter into any contract or agreement which involves the
expenditure of over $5,000 except in the ordinary course of business;
(iv) reclassify or change in any manner its outstanding shares of
capital stock or issue or sell any shares of its capital stock or other
securities, or redeem or otherwise acquire, or enter into any contract or
commitment to redeem or otherwise acquire, any shares of capital stock of
XXXXXXX;
(v) make any declaration, payment or distribution of a dividend or any
other payment to any SELLER;
(vi) transfer any assets of XXXXXXX to any SELLER;
(vii) make any payment or distribution to any trustee under any bonus,
pension, profit sharing or retirement plan or incur any obligation to make
any such payment or contribution which is not in accordance with XXXXXXX'x
usual past practice, or make any payment or contribution or incur any
obligation pursuant to or in respect of any other plan, contract or
arrangement providing for any bonus, incentive compensation, pension,
deferred compensation, retirement payment, profit sharing contribution or any
other employee benefit, which is not in accordance with XXXXXXX'x usual past
practice;
(viii) extend credit in excess of $5,000 to any customer who was not a
customer before the date of this Agreement, or depart from normal and
customary trade, discount and credit policies of XXXXXXX;
(ix) guarantee the obligation of any person, firm or corporation,
except by the endorsement of negotiable instruments for deposit or collection
in the ordinary course of business;
(x) purchase or sell any securities for investment;
(xi) amend either its articles of organization or by-laws;
(xii) make any changes in any of its methods of accounting or in any of
its accounting practices;
(xiii) change the banking or safety deposit arrangements of XXXXXXX.
Section 4.3 - Insurance. At any time before the Closing Date; XXXXXXX will,
at XXXXXX'x direction and expense, add, if possible, new coverage or increase
the coverage on, or otherwise amend, any of the insurance policies described
on Schedule 3.12, the extent of such added or increased coverage or the
nature of such amendment being a matter solely in the discretion of XXXXXX.
Section 4.4 - Financial Information. The SELLERS shall furnish XXXXXX with
such additional financial and operating data and other information regarding
the operations, business, properties and assets of XXXXXXX, as XXXXXX shall
from time to time reasonably require.
Section 4.5 - Notice of Breach. The SELLERS will immediately give notice to
XXXXXX upon becoming aware of the occurrence of any event or the failure of
any event to occur that results in a breach of any representation or warranty
hereunder by the SELLERS or a failure by the SELLERS to comply with any
covenant, condition or agreement contained herein.
Section 4.6 - Representations. Each of the SELLERS and the XXXXXX (a) will
take all action necessary to render accurate as of the Closing Date their
representations and warranties contained herein, (b) will refrain from taking
any action which would render any such representation or warranty inaccurate
in any material respect as of such time, and (c) will perform or cause to be
satisfied each covenant or condition to be performed or satisfied by them as
contemplated by this Agreement.
Section 4.7 - Best Efforts. Each of the SELLERS and XXXXXX shall use their
best efforts to cause all of the conditions to the obligations of the other
to consummate the transactions contemplated hereby to be met as soon as
practicable after the date of this Agreement.
ARTICLE V
CERTAIN UNDERSTANDINGS AND AGREEMENTS BETWEEN XXXXXX AND THE SELLERS
Section 5.1 - Cooperation; Consents.
(a) XXXXXX and each of the SELLERS agree to cooperate in all actions
necessary or appropriate to effect the transactions contemplated by this
Agreement.
(b) XXXXXX and each of the SELLERS agree to use their reasonable
efforts to obtain as promptly as possible (and in any event prior to the
Closing Date) all consents or waivers, that may be required under any loan or
other agreement to which XXXXXXX or XXXXXX is a party or by which XXXXXXX OR
XXXXXX are bound and such other consents as are necessary or advisable in
connection with the transaction.
Section 5.2 - Access. From and after the date of this Agreement, each party
shall afford to the officers and authorized representatives of the other
party full and free access to the properties, books, contracts, commitments
and records of the disclosing party, at all reasonable times during normal
business hours, and shall furnish such representatives with true and complete
copies of such information concerning the affairs of the party providing such
access as they may reasonably request. Any such information shall be kept
confidential by the representatives of the recipient party except to the
extent where (i) it was public knowledge when received or subsequently became
public knowledge other than by action of the recipient party, (ii) it
hereafter becomes lawfully obtainable from other sources, or (iii) it is
required to be disclosed by the recipient party in any document required to
be filed with any governmental agency or authority.
Section 5.3 - Discussions with Others. Prior to the Closing, the SELLERS
will not solicit or encourage inquiries or proposals, or participate in any
discussion or negotiations leading to any acquisition or purchase of all or
a substantial portion of its assets or stock or any merger or consolidation
with any third party, except to the extent that its Board of Directors
reasonably determines such actions are necessary or required to comply with
applicable law relating to the duty of directors of a company, and the
SELLERS will give XXXXXX prompt notice of any such inquiries or proposals
and, if requested, will confirm in writing all relevant details of any such
inquiry or proposal.
Section 5.4 - Xxxxxxx X. Xxxxxxx Phantom Stock Unit Plan. XXXXXX agrees to
cause XXXXXXX to make the payments to the Phantom Unit Holders required by
the terms of the Phantom Proceeds Agreement. It is the intent of the parties
that, notwithstanding any provision hereof to the contrary, the amounts
ultimately paid to Phantom Unit Holders in respect of each Phantom Unit not
forfeited by them, should equal the amounts paid by Xxxxxx to the SELLERS for
each Share.
Section 5.5 - Sharing of Tax Benefits. The SELLERS and XXXXXX agree that a
tax benefit (the "Tax Benefits") in the form of a compensation expense
deduction may accrue to XXXXXX or XXXXXXX for any payments made to Phantom
Unit Holders or to employees for Stay Bonuses established by employment
agreements which are paid after the Closing Date. XXXXXX agrees to calculate
such tax benefits at the blended maximum statutory federal plus applicable
state tax rates in effect for the tax year in question, on an annual basis in
connection with the payments made, and to pay pro-rata to the SELLERS,and the
Unit Holders, based upon their Proportionate Total Interest, within 95 days
after the end of XXXXXX'x fiscal year in which the payment was made, one-half
of said tax benefit. Such payment shall be made by company check.
Section 5.6 - ESOP. SELLERS shall obtain the resignation of the ESOP
Trustees and the appointment of Xxxxxx nominees as Trustees as of the Closing
Date. All costs of the ESOP after the Closing Date will be administrative
expenses of these Plans and will be paid by the Plans.
Section 5.7 - Stay Bonuses. XXXXXX agrees to hold the amount of stay bonuses
as set forth in the respective employment contracts (approximately $170,000)
in escrow to pay stay bonuses to Messrs. Rolle, Talbott and Piepoli as
provided in their employment agreements. In the event of their termination
prior to receipt of all of the payments, XXXXXX shall pay the amount due to
the SELLERS and the Unit Holders, in accordance with Section 1.4(a)(vi) above
and the Phantom Proceeds Agreement.
Section 5.8 - Press Release. XXXXXX and the SELLERS shall issue a joint
press release concerning this transaction on the Closing Date. The press
release shall be prepared by XXXXXX and reviewed and approved by the SELLERS'
counsel.
Section 5.9 - Professional Services Insurance. XXXXXX agrees to maintain and
keep in force (at not less than the amount in place on the Closing Date) the
professional services liability insurance currently maintained by XXXXXXX
(Policy #4CM18471 with American Empire Surplus Lines) for two years after the
Closing Date.
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF XXXXXX
The obligations of XXXXXX under this Agreement are subject, in the
discretion of XXXXXX, to the satisfaction at or prior to the Closing Date of
each of the following conditions:
Section 6.1 - No Material Adverse Change. There shall not have occurred any
material adverse change since December 31, 1994, in the financial condition,
prospects, business, assets, or results of operations of XXXXXXX.
Section 6.2 - Representations and Warranties True. The representations and
warranties of the SELLERS contained in this Agreement and all information
furnished to XXXXXX in connection with this Agreement (including the XXXXXXX
Schedule of Exceptions) shall have been true and correct when made and shall
be true and correct on and as of the Closing Date with the same force and
effect as if made on the Closing Date, except to the extent affected by the
transactions contemplated hereby, and except as they relate to times other
than the Closing Date.
Section 6.3 - SELLERS' Performance. Each of the obligations of the SELLERS
to be performed on or before the Closing Date pursuant to the terms of this
Agreement (including observance of the covenants set forth in Article IV of
this Agreement) shall have been duly performed in all material respects.
Section 6.4 - No Adverse Litigation. No action, suit or proceeding shall
have been instituted or threatened by or before any court or governmental
agency to restrain or prohibit, or to obtain damages in respect of, or which
is related to or arising out of, this Agreement or the consummation of the
transactions contemplated hereby which the Board of Directors of XXXXXX shall
determine in good faith makes it inadvisable to proceed to Closing under this
Agreement.
Section 6.5 - Opinion of Counsel. XXXXXX shall have received an opinion of
Xxxxxxxxx Xxxxxx & Xxxxxxx, P.C., counsel to the ESOP and Xxxxxxx, dated as
of the Closing Date, in form and substance reasonably satisfactory to XXXXXX
and its counsel and substantially as set forth at Exhibit J.
Section 6.6 - Consents. The SELLERS shall have obtained all required third
party approvals or consents relative to the transactions contemplated by this
Agreement.
Section 6.7 - Phantom Stock Awards. XXXXXXX and each person who has received
a phantom stock unit plan award pursuant to XXXXXXX'x Phantom Stock Unit Plan
dated as of January 2, 1993 shall have entered into a Phantom Stock Proceeds
Agreement in substantially the form attached as Exhibit M hereto.
Section 6.8 - Employment Agreements. XXXXXXX and Xx. Xxxxxxx and Xxxxx
Xxxxxxx shall have entered into new Employment Agreements in substantially
the form attached as Exhibit K hereto. All current employees who have
employment agreements shall have entered into amendments to those agreements.
Section 6.9 - Officers and Directors. Certain of the current corporate
officers and directors of XXXXXXX shall resign as of the Effective Time.
Section 6.10 - Form and Content of Documents. The form and content of all
documents, certificates and other instruments to be delivered by the SELLERS
shall be reasonably satisfactory to XXXXXX and its counsel.
Section 6.11 - XXXXXX'X Review. XXXXXX shall have completed and be satisfied
with its confidential review of the business, management, finances, and
regulatory obligations of XXXXXXX.
Section 6.12 - Resignation of Trustees. The trustees for XXXXXXX'x 401(k)
plan and ESOP shall resign as of the Closing Date and shall be replaced by
XXXXXX designees.
Section 6.13 - Lease. XXXXXXX shall have entered into a lease with The
Hayward Street Limited Partnership with respect to the premises to be
occupied by XXXXXXX after the Closing Date, which lease is acceptable by
XXXXXX.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF THE SELLERS
The obligations of the SELLERS under this Agreement are subject, in
the discretion of XXXXXXX, to the satisfaction at or prior to the Closing
Date of each of the following conditions:
Section 7.1 - No Material Adverse Change. There shall not have occurred any
material adverse change since January 31, 1995, in the financial condition,
prospects, business, assets, or results of operations of XXXXXX.
Section 7.2 - Representations and Warranties True. The representations and
warranties of XXXXXX contained in this Agreement and all information
furnished to XXXXXXX in connection with this Agreement (including the XXXXXX
Schedule of Exceptions) shall have been true and correct when made and shall
be true and correct on and as of the Closing Date with the same force and
effect as if made on the Closing Date, except to the extent affected by the
transactions contemplated hereby, and except as they relate to times other
than the Closing Date.
Section 7.3 - XXXXXX'x Performance. The obligations of XXXXXX to be
performed on or before the Closing Date pursuant to the terms of this
Agreement (including observance of the covenants set forth in Article IV of
this Agreement) shall have been duly performed in all material respects.
Section 7.4 - Certificates. The SELLERS shall have received certified
copies of resolutions of the Boards of Directors of XXXXXX authorizing
execution of this Agreement and approving consummation of the transactions
contemplated there, a certificate executed by the president of XXXXXX to the
effect that all representations and warranties of XXXXXX contained herein or
otherwise made are true and correct in all material respects as of the
Closing Date (if the Closing occurs on a date after the date of this
Agreement), that all corporate action by XXXXXX required to authorize the
Agreement have been taken, and such other certificates or evidence regarding
other matters incident to the transactions contemplated herein as the SELLERS
or their counsel may reasonably request.
Section 7.5 - No Adverse Litigation. No action, suit or proceeding shall
have been instituted or threatened by or before any court or governmental
agency to restrain or prohibit, or to obtain damages in respect of, or which
is related to or arising out of, this Agreement or the consummation of the
transaction which the SELLERS shall determine in good faith makes it
inadvisable to proceed to Closing under this Agreement.
Section 7.6 - Opinion of Counsel. The SELLERS shall have received an opinion
of Xxxxxxxx, Xxxxx & Xxxxxxx, P.C., dated as of the Closing Date, in form and
substance reasonably satisfactory to the SELLERS and their counsel and
substantially in the form as set forth at Exhibit L.
Section 7.7 - Consents. XXXXXX shall have obtained all requisite third party
approvals or consents relative to the transactions contemplated by this
Agreement.
Section 7.8 - Phantom Stock Awards. XXXXXXX and each person who has received
a phantom stock unit plan award pursuant to XXXXXXX'x Phantom Stock Unit Plan
dated as of January 2, 1993 shall have entered into a Phantom Stock Proceeds
Agreement in substantially the form attached as Exhibit M hereto.
Section 7.9 - Employment Agreements. XXXXXX and Xx. Xxxxxxx and Xxx. Xxxxxxx
shall have entered into Employment Agreements in substantially the form
attached as Exhibit N hereto.
Section 7.10 - Consulting Agreement. XXXXXX and Xx. Xxxxxxx shall have
entered into a Consulting Agreement in substantially the form attached as
Exhibit M hereto.
ARTICLE VIII
PURCHASE PRICE ADJUSTMENT
Section 8.1 - Claims by the XXXXXX GROUP.
(a) The Purchase Price shall be adjusted downward for any and all
Buyer's Damages (as defined in Section 8.1 (b)) in the manner and to the
extent set forth in this Section 8.1.
(b) The term "Buyer's Damages " shall mean all losses, costs, expenses
(including reasonable attorney's fees and expenses), fees, liabilities and
damages sustained by HAUSER, SHUSTER, or any affiliates and the officers,
directors, employees and agents thereof, (the "XXXXXX GROUP") prior to any
reimbursement therefor:
(i) arising from any breach of a representation or warranty of the
SELLERS contained in or made pursuant to this Agreement or in any
certificate, instrument or agreement delivered to XXXXXX pursuant to or in
connection with this Agreement; or
(ii) resulting from a default in the performance of any of the
covenants or obligations that the SELLERS are required to perform under this
Agreement.
(iii) arising from the following litigation or contracts and all matters
which are the subject of such litigation or contracts (the "Listed Claims"):
a) Providence Washington Insurance Co and Merchants Car Leasing
Corp. v. Xxxxxxx X. Xxxx and Xxxxxxx X. Xxxxxxx, Inc.; Civil Action No. 93-
2931-I;
b) In Re: Xxxxxx Pharmaceutical, Inc., "Albuterol" Products Liability
Litigation, NDL Docket No. 1013 in the United States District Court tor the
District of Wyoming;
c) In Re: Xxxxxx Pharmaceutical, Inc., "Securities Litigation", United
States District Court, District of Massachusetts. 94 Civ. 11984 (Wgy);
d) Xxxxxx X. Xxxxxxx v. Xxxxxxx X. Xxxxxxx, Inc., Commonwealth of
Massachusetts Commission Against Discrimination. Docket No: 94-BEM-1466;
e) any alleged or threatened claim made by Texaco for worked
performed by Xxxxxxx on its behalf;
f) Letter of Indemnification dated June 13, 1994, between XXXXXXX
and Xxxxxx Xxxxxxx Incorporated.
g) Penalty imposed by the IRS or Department of Labor for failing to
include an independent certified accountant ' s report with the Form 5500 for
calendar 1993.
(c) The right of the XXXXXX GROUP to a Purchase Price adjustment under
this Agreement for Buyer's Damages is subject to the condition that the
SELLERS shall have received a Purchase Price Adjustment Claim (as defined in
Section 8.5) on or before the respective anniversary dates set forth in
Section 8.3(b).
(d) The XXXXXX GROUP shall not be entitled to make a claim against the
XXXXXXX ESOP or its participants for a breach of a representation or warranty
set forth in Section 3.10. For claims arising under Section 3.10, the
SELLERS (other than the ESOP) shall be liable pro-rata but only to the extent
of their Proportionate Total Interest multiplied by the amount of such claim
and subject to the provisions of Section 8.3.
(e) Notwithstanding anything herein to the contrary, with respect to
any Purchase Price Adjustment Claim made pursuant to Section 8.1 (b)(iii)
that is timely made on or before the respective anniversary date set forth in
Section 8.3(b)(iii), the adjustment amount due to XXXXXX and payment to
SELLERS from the Escrow Amount shall be tolled until judgment is rendered or
settlement of the issue is reached in the subject litigation.
(f) Notwithstanding any provision hereof to the contrary, the
adjustment to the Purchase Price with respect to any SELLER for Buyer's
Damages shall not exceed such SELLER'S Proportionate Total Interest
multiplied by the amount of such Buyers Damages.
(g) The right of the XXXXXX GROUP to make a claim against the
XXXXXXX ESOP or its participants shall, in all events, be reduced to the
extent that the XXXXXXX ESOP makes distributions for the benefit of
participants and beneficiaries entitled to payment.
Section 8.2. - Claims by the SELLERS.
(a) The Purchase Price shall be adjusted upward for any and all
SELLERS' Damages (as defined in Section 8.2(b)) in the manner and to the
extent set forth in this Section 8.2.
(b) The term "SELLERS' Damages" shall mean all losses, costs, expenses
(including reasonable attorney's fees and expenses), fees, liabilities and
damages sustained by any of the SELLERS prior to any reimbursement therefor:
(i) arising from any breach of a representation or warranty of XXXXXX
contained in or made pursuant to this Agreement or in any certificate,
instrument or agreement delivered to the SELLERS pursuant to or in connection
with this Agreement; or
(ii) resulting from a default in the performance of any of the
covenants or obligations that XXXXXX is required to perform under this
Agreement.
(c) The right of the SELLERS to a Purchase Price adjustment under this
Agreement for SELLERS' Damages is subject to the condition that XXXXXX shall
have received a Purchase Price Adjustment Claim (as defined in Section 8.6)
on or before the first anniversary of the Closing Date as provided in Section
8.3(b) (the "Claims Termination Date").
Section 8.3 - Adjustment Limits.
(a) Except as otherwise set forth in this Section 8.3, no Purchase
Price adjustment shall be made by the parties based upon any claim of BUYER'S
DAMAGES OR SELLERS' DAMAGES, as the case may be until:
(i) any single claim, (after deducting insurance proceeds and third
party recoveries paid to or for the benefit of the injured party) shall
exceed Twenty Five Thousand Dollars ($25,000); or
(ii) any two or more claims (after deducting insurance proceeds and
third party recoveries paid to or for the benefit of the injured party) shall
total, in the aggregate Fifty Thousand Dollars ($50,000).
For purposes of this section, the deductible amounts set forth in
Sections 8.3(a)(i)and (ii) shall be deemed the "Deductibles". Only the
amount of such claims of the injured party in excess of the Deductibles shall
be subject to adjustment in accordance with the terms of either Section 8.1
or 8.2 hereof.
Notwithstanding the foregoing, claims pursuant to Section 8.1 (b)(iii)
shall not be subject to the Deductibles limitation (but shall be included in
the calculation of the aggregate payments made by the paying party under
Section 8.1 or 8.2, as applicable, for purpose of determining whether the
paying party has paid the Maximum Damages as defined in Section 8.3(b)
below).
(b) The parties' respective obligations to adjust the Purchase Price
under Sections 8.1 and 8.2 hereof shall apply only to Purchase Price
Adjustment Claims aggregating up to the Maximum Damages shown which are made
on or before the following anniversaries of the Closing Date:
(i) the fifth (5th) anniversary, with respect to all BUYER'S DAMAGES
involving environmental claims up to $4,200,000, plus the Earnout provided in
Section 1.2(b);
(ii) the third (3rd) anniversary, with respect to all BUYER'S DAMAGES
involving ERISA claims up to $4,200,000, plus the Earnout provided in Section
1.2(b);
(iii) the second (2nd) anniversary, with respect to all BUYER'S DAMAGES
involving the Listed Claims up to $2,100,000, plus the Earnout provided in
Section 1.2(b);
(iv) the first (lst) anniversary, with respect to all other claims for
BUYER'S DAMAGES or SELLERS' DAMAGES up to $2,100,000, plus the Earnout
provided in Section 1.2(b).
(c) The Parties hereto intend that the literal provisions of Section
8.3(a) and (b) shall give effect to the terms of the following table:
LIABILITY TERM LIMIT CAP DEDUCTIBLE
5 YEARS $4,200,000 $50,000/$25,000 $50,000/$25,000
+ Earnout
3 YEARS $4,200,000 $50,000/$25,000 $50,000/$25,000
+ Earnout
2 YEARS $2,100,000 NONE NONE
+ Earnout
I YEAR $2,100,000 $50,000/$25,000 $50,000/$25,000
+ Earnout
The parties agree that the "CAP" and "DEDUCTIBLE" numbers for the various
categories set forth in the table above are also aggregate CAP and DEDUCTIBLE
numbers for all such categories of liabilities such that the total
DEDUCTIBLES for all categories is $50,000 or
$25,000 as the case may be and the total CAP for all categories is equal to
$4,200,000 plus the Earnout provided however, that aggregate cap for claims
in the above categories of "Listed
Claims" and "All Others" shall be $2,100,000 plus the Earnout.
(d) SELLERS shall in no event be liable for damages in excess of the
actual damages suffered by the XXXXXX GROUP as a result of the act,
circumstance, or condition for which a Purchase Price adjustment is sought,
net of any tax benefits realized by the XXXXXX GROUP as a result of the
BUYER'S' DAMAGES for which a claim is made. XXXXXX shall in no event be
liable for damages in excess of the actual damages suffered by the SELLERS as
a result of the act, circumstance, or condition for which a Purchase Price
adjustment is sought, net of any tax benefits realized by the SELLERS as a
result of the SELLERS' DAMAGES for which a claim is made.
Section 8.4 - Sole and Exclusive Remedy. The adjustment provisions set forth
in the Section 8 shall be the party's sole and exclusive remedy against the
other party hereto; provided however that, each party shall retain all
remedies at law or in equity in the event of any willful misconduct or
fraudulent act committed by the other party hereto in connection with the
terms of this Agreement.
Section 8.5 - Procedures for Adjustment by the XXXXXX GROUP.
(a) As used in this section, the term "SELLERS" shall mean the SELLERS'
Representative as set forth in Section 8.8.
(b) A claim for a Purchase Price adjustment hereunder ("Purchase Price
Adjustment Claim") shall be made by the XXXXXX GROUP by delivery of a written
declaration to the SELLERS and the SELLERS' Representative requesting an
adjustment of the Purchase Price and specifying the basis on which such
adjustment is sought in reasonable detail (and shall attach relevant
documentation related to the Adjustment Claim) and the amount of asserted
damages or losses.
(c) The SELLER'S Representative shall have forty-five (45) days to
object to such Purchase Price Adjustment Claim made by XXXXXX by delivery of
a written notice of such objection to XXXXXX specifying in reasonable detail
the basis for such objection. Failure to timely so object shall constitute a
final and binding acceptance of the Purchase Price Adjustment Claim by the
SELLERS and the SELLERS' Representative. The Purchase Price Adjustment Claim
shall be satisfied in accordance with the provisions of this Section. XXXXXX
may submit the matter to arbitration if:
1) an objection is timely interposed by the SELLERS' Representative and
the dispute is not resolved within twenty (20) business days from the date
XXXXXX receives an objection.
2) the parties agree to the adjustment but the SELLERS'
Representative has not caused payment to be made to XXXXXX within ten (10)
business days after expiration of the period to object.
The arbitration shall be governed by the procedures set forth in Section
9.12.
(d) Upon determination of the amount of Buyer's Damages, whether by
agreement by XXXXXX and the SELLERS' Representative or by an arbitration
award;
(i) the Escrow Agent shall pay XXXXXX the cash equivalent of such
Buyer's Damages multiplied by the respective SELLER'S PROPORTIONATE TOTAL
INTEREST, to the extent that they exceed the applicable DEDUCTIBLE, if any,
or, if the escrow has been released, SELLERS shall pay the BUYER'S DAMAGES
multiplied by the SELLER'S PROPORTIONATE TOTAL INTEREST to XXXXXX within ten
(10) days of the date of agreement or arbitration award, as the case may be.
BUYER's in excess of the CAP established in Section 8.3 DAMAGES can be offset
against the EARNOUT.
(ii) Such payment shall be paid by the SELLERS to XXXXXX according
to their respective Proportionate Total Interest.
Section 8.6 - Procedures for Adjustment by the SELLERS.
(a) As used in this section, the term "SELLERS" shall mean the SELLERS'
Representative as set forth in Section 8.8.
(b) A claim for a purchase price adjustment hereunder ("Purchase Price
Adjustment Claim") shall be made by the SELLERS by delivery of a written
declaration signed by the SELLERS' Representative to XXXXXX requesting an
adjustment of the Purchase Price and specifying the basis on which such
adjustment is sought in reasonable detail (and shall attach relevant
documentation related to the Purchase Price Adjustment Claim) and the amount
of asserted damages or losses.
(c) XXXXXX shall have forty-five (45) days to object to such Purchase
Price Adjustment Claim made by the SELLERS by delivery of a written notice of
such objection to the SELLERS' Representative specifying in reasonable detail
the basis for such objection. Failure to timely so object shall constitute
a final and binding acceptance of the Purchase Price Adjustment Claim by
XXXXXX. The Purchase Price Adjustment Claim shall be satisfied in accordance
with the provisions of this Section. The SELLERS' Representative may submit
the matter to arbitration if:
1) an objection is timely interposed by XXXXXX and the dispute is not
resolved within twenty (20) business days from the date XXXXXX receives an
objection.
2) the parties agree to the adjustment but XXXXXX has not caused
payment to be made to the SELLERS within ten (10) business days after
expiration of the period to object;
The arbitration shall be governed by the procedures set forth in Section
9.12.
(d) Upon determination of the amount of SELLERS' DAMAGES, whether by
agreement by XXXXXX and the SELLERS' Representative or by an arbitration
award, XXXXXX shall promptly pay SELLERS DAMAGES to the SELLERS, pro rata
based upon each SELLERS Proportion Total Interest.
Section 8.7 - Local Proceedings.
(a) If any claim is made, suit or proceeding is instituted against a
party ("Claimant") which, if prosecuted successfully, would be a matter for
which they are entitled to a Purchase Price Adjustment from another party
("Recipient") under this Agreement (a "Third Party Claim"), the obligations
and liabilities of the parties hereunder with respect to such Third Party
Claim shall be subject to the terms and conditions of this Section 8.7.
(b) Claimant shall give Recipient written notice of any such claim
promptly after receipt by Claimant of notice thereof, and Recipient will
undertake the defense thereof by representatives of its own choosing
reasonably acceptable to Claimant. If Recipient fails or refuses to
undertake the defense of such Third Party Claim within ten (10) days after
written notice of such claim has been given to Recipient by Claimant,
Claimant shall have the right to undertake the defense, compromise and
settlement of such Third Party Claim with counsel of its own choosing.
Recipient and Claimant shall cooperate with each other in all reasonable
respects in connection with the defense of any Third Party Claim, including
making available records relating to such claim and furnishing employees of
Claimant as may be reasonably necessary for the preparation of the defense of
any such Third Party Claim or for testimony as witnesses in any proceeding
relating to such claim. Unless Recipient has failed to fulfill its
obligations under this Section 8, no settlements by Claimant of a Third Party
Claim shall be made without the prior written consent by or on behalf of
Recipient, which consent shall not be unreasonably withheld or delayed. If
Recipient has assumed the defense of a Third Party Claim as contemplated
herein, no settlement of such Third Party Claim may be made by Recipient
without the prior written consent by or on behalf of Claimant, which consent
shall not be unreasonably withheld or delayed.
(c) If the amount of BUYER'S or SELLERS' Damages paid, at any time
subsequent to such payment, shall be reduced by any recovery, settlement or
otherwise, the amount of such reduction, less any expense incurred by the
party receiving such recovery in connection therewith, promptly shall be
repaid to the Recipient.
(d) The SELLERS and XXXXXX shall consult and use their best efforts to
cooperate in resolving questions regarding Buyer' s Damages or SELLERS'
Damages.
(e) For purposes of this Section 8.7, the Recipient or Claimant as
applied to the SELLERS shall mean the SELLERS acting by and through the
SELLERS' Representative.
Section 8.8 - SELLERS' Representative. The SELLERS shall irrevocably make,
constitute and appoint Xxxxxxx X. Xxxxxxx as their agent (the "SELLERS'
Representative") and authorize and empower him to fulfill the role of
SELLERS' Representative hereunder pursuant to the SELLERS' Representative
Power of Attorney attached hereto as Exhibit N.
Section 8.9 - Service of Process. Each SELLER irrevocably consents to the
service of any process, pleading, notices or other papers by the mailing of
the copies thereof by registered, certified or first class mail, postage
prepaid, to the SELLERS' address set forth herein, or permitted under
Delaware law.
Section 8.10 - For purposes of this Article VIII, the term (i) SELLERS shall
include the Shareholders and the Unit Holders, (ii) Purchase Price shall
include amounts paid or to be paid to the Unit Holders pursuant to the
Phantom Proceeds Agreement and (iii) Series A Notes shall include the "Notes"
as defined in the Phantom Proceeds Agreement.
ARTICLE IX
MISCELLANEOUS PROVISIONS
Section 9.1 - Expenses. Whether or not the transactions contemplated hereby
shall be consummated, XXXXXX and the SELLERS agree to pay their respective
costs and fees, including legal fees, incurred in connection with this
transaction, unless specifically agreed to in writing to the contrary. Such
costs and fees incurred or paid by XXXXXXX or the SELLERS shall be treated as
provided in Section 1.3(a)(i).
Section 9.2 - Survival of Representations and Warranties. The
representations and warranties contained herein and made by or on behalf of
XXXXXX and the SELLERS shall expire on the Claims Termination Date. All
representations and warranties contained herein shall be effective
notwithstanding any examination or investigation made by or on behalf of any
party at any time. All statements contained in any certificate, schedule or
other instrument (including XXXXXX Schedule of Exceptions and the SELLERS
Schedule of Exceptions) delivered by or on behalf of any party pursuant
hereto or in connection with the transactions contemplated herein shall
constitute representations and warranties by such party hereunder.
Section 9.3 - Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be delivered by hand
or by certified mail, postage prepaid:
(a) If to XXXXXX, at the address set forth below:
Xxxxxxx X. Xxxxxxxx, Ph.D.
Senior Vice President
XXXXXX CHEMICAL RESEARCH, INC.
0000 Xxxxxxx Xxxxxxxxx
Xxxxxxx, XX 00000
With a copy to:
Xxxxxx X. Xxxxxxxxx, Esq.
XXXXXXXX, XXXXX & XXXXXXX, P.C.
0000 Xxxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
(b) If to the SELLERS, at the addresses set forth on Exhibit A and if
to the SELLERS' Representative:
Xxxxxxx X. Xxxxxxx
0 Xxxxxxx Xxxx
Xxxxx, XX 00000
with a copy to:
Xxxxx X. Xxxxxx, Esq.
XXXXXXXXX XXXXXX & XXXXXXX, P.C.
Xxx Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Any notice or other communication so addressed and so delivered shall be
deemed to have been received on the date of delivery, or if mailed, by United
States mail, certified, return receipt requested, on the earlier of delivery
or the third day following mailing.
Section 9.4 - Governing Law. This Agreement shall be construed in accordance
with and governed by the laws of the State of Delaware.
Section 9.5 - Waiver and Modification. A party may only waive the failure of
another party to comply with any of such party's obligations, agreements or
conditions as set forth herein expressly in writing. To the extent permitted
by law, this Agreement may be amended or modified in whole or in part by an
agreement in writing executed on behalf of the parties hereto at any time.
Section 9.6 - Entire Agreement; Severability. This Agreement, and the
Exhibits thereto, embody the entire agreement between the parties with
respect to the transaction, and this Agreement shall not be affected by
reference to any other document. The invalidity or lack of enforceability of
any provision of this Agreement shall not affect the validity and continuing
effectiveness of any other provision.
Section 9.7 - Successors and Assigns. The rights and obligations of the
parties hereto shall inure to the benefit of, and shall be binding upon, the
successors and assigns of each of them. No party may assign or transfer its
rights or obligations under this Agreement without the prior written consent
of the other party except that XXXXXX may (without such consent) assign or
transfer its rights or obligations to any successor to its business through
merger, consolidation, sale of substantially all of its assets or otherwise.
Section 9.8 - Counterparts. This Agreement may be executed simultaneously in
several identical counterparts, each of which shall be deemed an original but
all of which together shall constitute one and the same instrument.
Section 9.9 - Headings. The headings of the Articles and Sections of this
Agreement have been inserted for convenience of reference only and shall not
be deemed to be a part of such document.
Section 9.10 - Changed Circumstances. Until the Effective Time, the SELLERS
shall have a continuing obligation hereunder to notify XXXXXX promptly if
they discover that any of their representations or warranties contained
herein or in any document delivered in connection herewith was not true and
correct on and as of the respective dates thereof, and XXXXXX shall have a
continuing obligation to notify the SELLERS promptly if it discovers that any
of its representations and warranties contained herein or in any document
delivered in connection herewith was not true and correct on and as of the
respective dates thereof.
Section 9.11 - Cumulative Rights: No Waiver. Each and every right granted to
any party hereunder, or under any other document delivered in connection
herewith, and each and every right allowed it by law or equity, shall be
cumulative and may be exercised from time to time. No failure on the part of
any party to exercise, and no delay in exercising (except where a specific
time period is specified) any right shall operate as a waiver thereof, nor
shall any single or partial exercise by any party of any right preclude any
other future exercise thereof or the exercise of any other right. No
investigation, review or audit by either party of the other prior to or after
the date hereof shall estop or prevent either party from exercising any right
hereunder or be deemed to be a waiver of any such right.
Section 9.12 - Arbitration. Any controversy or claim arising out of or
relating to this Agreement shall be settled by arbitration, as follows:
(i) Such arbitration shall be conducted in accordance with the
Commercial Arbitration Rules of the American Arbitration Association
(the "AAA") as then in effect. There shall be a single arbitrator who shall
be designated as provided in the arbitration rules of the AAA. The decision
of the arbitrator may be entered and enforced in any court of competent
jurisdiction.
(ii) The parties shall be entitled to discovery in accordance with
Federal Rules of Civil Procedure.
(iii) All such arbitration proceedings shall take place in Chicago,
Illinois.
(iv) All fees, costs and expenses payable to the arbitrator shall be
divided equally between the parties. The prevailing party in any such
proceeding shall be awarded its reasonable costs and expenses incurred in
connection with the arbitration (including attorneys' fees).
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first written above.
XXXXXX CHEMICAL RESEARCH, INC.
By:___________________________
Xxxx X. Xxxxx
Chief Executive Officer
SELLERS:
/Xxxxxxx X. Shuster___________
Xxxxxxx X. Xxxxxxx
/Xxxxxx X. Katz_______________
Xxxxxx X. Xxxx
/Xxxxxx X. Bierman____________
Xxxxxx X. Xxxxxxx
/Xxx X. Plexico_______________
Xxx X. Xxxxxxx
XXXXXXX X. XXXXXXX EMPLOYEE STOCK
OWNERSHIP PLAN
By:/Xxxxx X. Bingham__________
Xxxxx X. Xxxxxxx, Trustee
