EXHIBIT 99.1
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement"), dated December 2,
2002, is made and entered into by and among CHOICEPOINT INC., a Georgia
corporation ("Parent"), CHOICEPOINT SERVICES INC., a Georgia corporation and a
wholly owned subsidiary of Parent ("Buyer"), VITAL CHEK NETWORK, INC., a
Tennessee corporation ("VitalChek"), VITAL CHEK NETWORK OF CANADA, INC., a
Delaware corporation ("VitalChek Canada"), XXXXXXX X. XXXXXXX, H. XXXXXXX
XXXXXXX and XXXXXX X. XXXXXXX (together, the "Principal Stockholders"), and the
other STOCKHOLDERS LISTED ON THE SIGNATURE PAGES HERETO (each a resident of the
State of Tennessee) (each individually, a "Stockholder," and collectively with
the Principal Stockholders, the "Stockholders"). As the context requires,
VitalChek and VitalChek Canada are sometimes referred to herein individually as
a "Company" or together, the "Company").
B A C K G R O U N D
WHEREAS, the Company is engaged in the business of providing (a) remote
ordering services for vital records such as birth certificates, marriage
certificates, divorce certificates and death certificates, (b) remote ordering
services for permits and related documents for the transportation industry, and
(c) remote payment systems for the payment of fines and utility bills and for
acquiring permits and licenses through courts and other governmental agencies in
the United States and Canada (collectively, the "Business");
WHEREAS, the Stockholders desire to sell and Buyer desires to purchase,
on the terms and subject to the conditions set forth in this Agreement, all of
the outstanding capital stock of each of VitalChek (the "VitalChek Shares") and
VitalChek Canada (the "VitalChek Canada Shares," and together with the VitalChek
Shares, the "Shares");
WHEREAS, the Stockholders collectively own all of the outstanding
Shares, which constitute all of the authorized, issued and outstanding shares of
capital stock of VitalChek and VitalChek Canada; and
WHEREAS, the Agreement has an effective date of November 30, 2002 (the
"Effective Date"), with the closing of the transactions contemplated herein on
December 2, 2002 (the "Closing Date").
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties and covenants contained herein, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
ARTICLE I
PURCHASE AND SALE
1.1 PURCHASE AND SALE. Upon the terms and subject to the
conditions of this Agreement, at the Closing (as defined in Section 1.5), Buyer
shall purchase from the Stockholders, and Stockholders shall sell, transfer and
convey to Buyer, all of the Shares.
1.2 PURCHASE PRICE; ALLOCATION; DEBT.
(a) Purchase Price. Subject to adjustment pursuant to
Section 1.8 hereof and the escrow arrangements pursuant to Section 1.7 hereof
and as otherwise provided herein, the purchase price for the Shares (the
"Purchase Price") shall be paid in three installments, as follows:
(i) Initial Cash Payment -- ONE HUNDRED TWENTY MILLION
DOLLARS ($120,000,000) (the "Initial Cash Payment") shall be paid by Buyer to
the Stockholders in cash at Closing, less the Escrow Funds (as defined below),
by wire transfer of immediately available funds;
(ii) Second Cash Payment -- either the March Payment or
the June Payment (each as defined below) (the "Second Cash Payment"); and
(iii) Earnout -- the Earnout as provided in Section 1.4
below.
March Payment. If the Company meets or exceeds the Maximum Performance
Target (as defined below) for the twelve month period from April 1, 2002 through
March 31, 2003 (the "March Year"), FORTY-SEVEN MILLION FIVE HUNDRED THOUSAND
DOLLARS ($47,500,000) shall be paid by Buyer to the Stockholders in cash by wire
transfer of immediately available funds (the "March Payment") as set forth
herein. If the Company does not meet or exceed the Maximum Performance Target
for the March Year, the March Escrow Amount (as defined below) shall be placed
in escrow with the Escrow Agent (the "March Escrow"), to be held in escrow until
the Buyer makes the June Payment (as defined below). The Stockholders shall
receive their applicable pro rata portion of the accrued interest on the amount
of the March Escrow, if any, ultimately included in the June Payment (the "March
Escrow Interest").
June Payment. If the Maximum Performance Target for the March Year is
not met and the March Payment is not therefore made as set forth above, an
amount equal to the June Payment (as defined below) for the twelve month period
from July 1, 2002 through June 30, 2003 (the "June Year") plus the March Escrow
Interest shall be made as set forth herein.
Maximum Payment. The maximum aggregate payment by Buyer pursuant to the
Initial Cash Payment plus the Second Cash Payment is ONE HUNDRED SIXTY-SEVEN
MILLION FIVE HUNDRED THOUSAND DOLLARS ($167,500,000) (the "Maximum Initial
Payment"). The Stockholders shall receive only the March Payment or the June
Payment but not both such payments.
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Payment Procedure. As applicable as set forth herein: (a) the March
Payment shall be made to the Stockholders in cash by wire transfer of
immediately available funds, no later than two (2) business days after receipt
by Buyer of the final audited financial statements for the March Year, (b) the
March Escrow shall be funded by wire transfer of immediately available funds no
later than two (2) business days after receipt by Buyer of the final audited
financial statements for the March Year, and (c) the June Payment shall be made
to the Stockholders in cash by wire transfer of immediately available funds, no
later than two (2) business days after receipt by Buyer of the final audited
financial statements for the June Year. The final March EBITDA and June EBITDA
(both as defined below) shall be calculated and determined by Buyer, with the
cooperation and assistance of the Principal Stockholders. Notwithstanding the
above, the Buyer and the Company shall not cause an audit of the Company for the
March Year to be performed if the Company's EBITDA for such period is reasonably
expected by the Buyer and the Principal Stockholders to not meet the Maximum
Performance Target, and in such event, the March Escrow shall be calculated
based on the final unaudited Financial Statements for the March Year.
Definitions
MAXIMUM PERFORMANCE TARGET: EBITDA equal to $13,889,000.
MARCH ESCROW AMOUNT: (A x B) - C, where:
A = the Company's aggregate EBITDA for the twelve month
period from April 1, 2002 through March 31, 2003 ("March
EBITDA");
B = 12.06; C = $120,000,000.
JUNE PAYMENT: (A x B) - C , where:
A = the Company's aggregate EBITDA for the twelve month
period from July 1, 2002 through June 30, 2003 ("June
EBITDA");
B = 12.06;
C = $120,000,000;
(b) Allocation. The allocation of the Purchase Price shall be as
set forth on Disclosure Schedule ss.1.2(b) hereof, which shall include
allocations of the total Purchase Price as between VitalChek and VitalChek
Canada, or, in the event the 338(h)(10) Election (as defined in herein) is made,
as between the assets of VitalChek and VitalChek Canada.
1.3 [INTENTIONALLY OMITTED]
1.4 EARNOUT. In addition to the Initial Cash Payment and Second
Cash Payment, the Stockholders shall be paid an additional amount of Purchase
Price (if any) as determined in accordance with this Section 1.4 (the
"Earnout"). The Earnout payment shall be calculated based
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on the amount of the Company's EBITDA, as that term is defined below, in
accordance with the further provisions of this Section 1.4.
(a) Definitions. For purposes of this Agreement, the following
terms shall be defined as set forth below:
"EBITDA" - shall mean Operating Income plus Depreciation and
Amortization, all calculated in accordance with GAAP, and calculated in a manner
consistent with the Company's audited financial statements for the 8-month
period ending August 31, 2002, subject to the provisions of Schedule A hereto.
(b) Earnout Calculation. The Stockholders shall receive an Earnout
payment equal to the following percentage of the amounts by which the actual
EBITDA of the Company achieved during an applicable Earnout Period (as defined
below) exceeds the EBITDA Goal (as set forth in (c) below) applicable to such
Earnout Period:
Earnout Period #1 -- 57.00 %
Earnout Period #2 -- 54.00 %
Earnout Period #3 -- 52.48 %
(c) EBITDA Goals. The Earnout payment, if any, shall be calculated
using the Base EBITDA Number (as defined herein) plus annual increases of
20.00%, 21.45% and 21.40% for the respective Earnout Periods (the "EBITDA Target
Increases"). The "Base EBITDA Number" shall be the amount of EBITDA for the
March Year (if the March Payment is made) or the June Year (if the June Payment
is made), as determined pursuant to the Company's audited financial statements
for such applicable period as adjusted by agreement of the parties for certain
Company expenses as set forth on Schedule A. Such audit shall be performed by
Ernst & Young, and the cost of such audit shall be borne by the Buyer. For
example, if the Base EBITDA Number meets exactly the Maximum Performance Target,
the following would apply:
EBITDA Goal Earnout Period (collectively the "Earnout Periods")
$16,666,800 Twelve Month Period Ended June 30, 2003 ("Earnout Period #1")
$20,242,272 Twelve Month Period Ended June 30, 2004 ("Earnout Period #2")
$24,574,603 Twelve Month Period Ended June 30, 2005 ("Earnout Period #3")
(d) Notwithstanding anything herein to the contrary, no Earnout
payment will be made in any Earnout Period to the extent such Earnout payment
would exceed eighty-seven percent (87%) of the Company's Incremental Free Cash
Flow (the "Threshold") for such applicable Earnout Period (the "Cash Flow
Restriction"), provided, that any Earnout that is not paid to Stockholders as a
result of the Cash Flow Restriction herein shall be carried over and applied to
the determination of the Earnout payment in the next following Earnout Period
(but
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such carryover shall not apply in Earnout Period #3). Incremental Free Cash Flow
shall be Free Cash Flow in excess of the Free Cash Flow Target for each Earnout
Period. For example, the Free Cash Flow Targets are defined as follows, assuming
the Maximum Performance Target is met exactly:
Earnout Period #1 -- $10,151,000
Earnout Period #2 -- $11,007,000
Earnout Period #3 -- $13,829,000.
For purposes hereof, the following definitions shall apply: (a) "Free
Cash Flow" shall be defined as Operating Cash Flow, less the increase in all
current assets (less cash and cash equivalents), plus the increase in all
current liabilities, plus the decrease in all current assets (less cash and cash
equivalents), less the decrease in all current liabilities, less all capital
expenditures; (b) "Operating Cash Flow" shall equal Operating Profit Net of
Taxes, plus depreciation expense; (c) "Operating Profit Net of Taxes" shall
equal Adjusted EBITA less a charge for taxes which shall equal 38.4% of EBITA;
and (d) Adjusted EBITA shall equal EBITDA less depreciation expense.
(e) Earnout Payments. Buyer shall pay the Earnout payments to
Stockholders' Representative as follows: (i) the Earnout payment, if any, owed
for Earnout Period #1 shall be paid on or before August 31, 2004; (ii) the
Earnout payment, if any, owed for Earnout Period #2 shall be paid on or before
August 31, 2005; and (iii) the Earnout payment, if any, owed for Earnout Period
#3 shall be paid on or before August 31, 2006. In the event the March Payment is
made as set forth in Section 1.2 above: (a) June 30 in the Earnout Periods above
shall be replaced with March 31, and (b) August 31 in this subsection (d) shall
be replaced with May 31.
(f) No Earnout. In the event that the EBITDA of the Company during
an Earnout Period fails to exceed the EBITDA Goal for the applicable Earnout
Period, then no Earnout shall be earned or payable for that particular Earnout
Period.
(g) Calculation and Confirmation of Earnout. Within forty-five
(45) days after the end of each three calendar month period ("Quarter") during
the Earnout Periods, the Buyer shall prepare and deliver to the Stockholders'
Representative a report setting forth a reasonably detailed calculation of the
Company's EBITDA for such Quarter and the interim portion of that year to date
(the "Quarterly Report"), the first of which shall be for the Quarter ended
March 31, 2003. Alternatively, the Buyer shall have the right to cause the
Company to prepare such Quarterly Reports and the Buyer shall further have the
right to have such Quarterly Reports and the books and records of Company
reviewed by its internal audit staff and/or its independent public accountants.
In such case, all references to the Buyer hereinafter in this subsection (f)
shall apply equally to the Company to the extent the Company renders such
Quarterly Reports. Within forty-five (45) calendar days after each Earnout
Period, the Buyer shall prepare and deliver to the Stockholders' Representative
a certificate (the "Earnout Certificate(s)") setting forth in reasonable detail
a calculation of EBITDA and of the amount of
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the Earnout (the "Earnout Amount(s)"). The Buyer shall consult with the
Stockholders' Representative in connection with the calculation of EBITDA and
the Earnout Amounts and the preparation of the Earnout Certificates, and shall
permit, and shall use reasonable efforts to cause Buyer's internal audit staff
and public accountants to permit, the Stockholders' Representative and his
representatives at the earliest practicable date to review all non-privileged
work papers, schedules and calculations used in the calculation of the Earnout
Amount. Within fifteen (15) calendar days after receipt of an Earnout
Certificate, the Stockholders' Representative shall notify the Buyer in writing
of the Stockholders' Representative agreement or disagreement, as the case may
be, with the Earnout Certificate (the "Initial Objection Notice"), setting out
the basis for any disagreement in reasonable detail. In the event such Initial
Objection Notice is not delivered to the Buyer within the specified time period,
the Earnout Certificate shall be deemed accepted by Stockholders'
Representative. If the Stockholders' Representative disputes the amount of
EBITDA or the Earnout Amount set forth in the Earnout Certificate, then the
Stockholders' Representative and his professional advisors shall have the right,
at Stockholders' Representative's expense, to review the Buyer's calculations of
EBITDA and the Earnout Amount. The Stockholders' Representative shall complete
his review within fifteen (15) calendar days after the date of the Initial
Objection Notice. If the Stockholders' Representative, after such review, still
disagrees with the Buyer's EBITDA or Earnout Amount calculations, the
Stockholders' Representative shall deliver to Buyer a written notice setting
forth the Stockholders' Representative' proposed alternative calculations along
with reasonable detail regarding the basis for such alternative calculations
(together with any authority or documentation supporting its position) and the
aggregate additional Earnout Amount to which Stockholders' Representative
believes the Stockholders are entitled (the "Second Objection Notice"). If the
parties are unable to reach agreement with respect to calculation of EBITDA and
the Earnout Amount within thirty (30) days following Buyer's receipt of the
Second Objection Notice, then the dispute (s) shall be resolved pursuant to
Section 1.4(j) hereof.
(h) Payment. The Earnout, if any, as finally agreed by the parties
pursuant to Section 1.4(g) above shall be paid by Buyer to the Stockholders in
cash by wire transfer of immediately available funds within two (2) business
days following such final determination.
(i) Post Closing Operations. The parties agree that during the
Earnout Periods:
(i) The Company shall be operated as a subsidiary of the
Buyer with separate books and separate financial statements
for the Company.
(ii) The Company shall continue to be operated in the
ordinary course of business in accordance with past business
practices and generally independent of Buyer, subject to
agreed upon annual operating budgets and plans and the general
policies of Buyer.
(iii) Xxxxxxx Xxxxxxx and Xxxxxxx Xxxxxxx, each as a
Co-Founder and General Manager of the Company (the "VitalChek
GMs"), shall have primary management responsibility for the
day to day operations of the Company, in accordance with
Xxxxxxx Xxxxxxx'x Employment Agreement ("Employment
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Agreement") and Xxxxxxx Xxxxxxx'x Consulting Agreement
("Consulting Agreement")
(iv) In the event that neither VitalChek GM is employed or
engaged by the Company, the Stockholders' Representative shall
be provided with reasonable, full and complete access to the
Company's books, budgets (including work papers), contracts,
commitments and records (financial and otherwise), upon
reasonable request with reasonable advance notice, to the
extent reasonably necessary to oversee the interests of the
Stockholders during the Earnout Periods, as set forth in this
Section 1.4.
(v) The Company will continue to be organized so that
each employee reports directly or through another employee of
the Company to the VitalChek GMs, except as otherwise provided
in the Employment Agreement and/or Consulting Agreement.
(vi) During the Earnout Periods, the Buyer, the VitalChek
GMs and the Company's management team shall operate the
Company in the ordinary course of the Company's business, in
accordance with the terms and provisions of this Agreement,
Buyer's policies and procedures, as applicable, and applicable
law and regulations. Any matters which cannot be resolved
between the parties shall be resolved in accordance with the
provisions of Section 1.4(j) below.
(vii) For all intra-company transactions between the
Company and the Buyer or any of its affiliates for the use of
the Company's assets for potential revenue-producing
activities, such companies shall negotiate in good faith on
pricing and other terms, provided, that either company may
elect in its discretion to not consummate any proposed
transaction.
(viii) From the Closing Date through at least the end of
Earnout Period #3, the Company's trade name of VitalChek shall
not be changed, provided, that the Buyer may refer to the
Company as "a ChoicePoint company" and similar variations
thereof.
(j) Sale of Company. In the event that the Company is
sold (whether structured as a sale of assets or equity) to a third party not
affiliated with Buyer prior to the completion of the Earnout Periods, the Buyer
agrees to make the assumption of the Buyer's obligations pursuant to this
Section 1.4 by the purchaser of the Company a condition to the closing of such
transaction, and to guarantee the performance by such purchaser of such
obligation.
(k) Dispute Resolution. The parties acknowledge that in
connection with the conduct of the operations of the Company as that may affect
the Earnout, and in calculating the Earnout Amounts, disputes may arise between
the parties. The parties shall first cooperate and use their mutual good faith
efforts to resolve any such disputes between themselves without the assistance
of others. The parties may voluntarily submit such disputes to mediation before
a
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jointly selected single mediator who shall have thirty (30) days to mediate and
assist the parties to settle the dispute between themselves. The parties shall
have ten (10) days to select the mediator, following notice from one party to
the other that a dispute exists. If the parties choose not to mediate, or such
mediation is not successful, then the dispute will be settled exclusively by
binding arbitration administered by the American Arbitration Association in
Washington, D.C. Such arbitration shall be brought before a sole neutral
arbitrator, who shall be (i) if possible, mutually selected by the parties, (ii)
if possible, familiar with acquisition agreements, earnout matters and related
financial accounting, (iii) a licensed member of the Bar of the state of Georgia
or New York or the District of Columbia, and, (iv) if possible, a retired judge.
The parties shall have twenty (20) days to select the arbitrator. (The
arbitrator shall be a different person than the mediator, if the parties
attempted mediation.) Once the arbitrator is selected, the decision of the
arbitrator shall be made within ninety (90) days thereafter. In connection with
such arbitration, (i) either party shall have the right to have counsel
represent him or it at the arbitration hearing and in pre-arbitration
proceedings; (ii) pre-arbitration discovery shall be permitted in accordance
with the Federal Rules of Civil Procedure, and shall be reasonably limited in
accordance with the directions of the arbitrator; (iii) either party shall have
the right to have a written transcript made of the arbitration proceeding, which
shall be paid for by the party requesting it; (iv) either party shall have the
right to file a post-arbitration brief which shall be considered by the
arbitrator prior to rendering his or her decision; (v) the arbitrator's fees
shall be borne equally by the parties; and (vi) the arbitrator shall have the
right to award costs to the prevailing party. Judgment may be entered on the
arbitrator's award in any court having jurisdiction.
1.5 CLOSING. The closing of the transactions contemplated herein
(the "Closing") shall be held at the offices of Hunton & Xxxxxxxx, Bank of
America Plaza, Suite 4100, 000 Xxxxxxxxx Xx., X.X., Xxxxxxx, Xxxxxxx 00000 at
10:00 a.m. (Atlanta time) on the Closing Date, which Closing shall be effective
as of 11:59 p.m. (Atlanta time) on the Effective Date.
1.6 DELIVERIES AT CLOSING. At the Closing, (a) the Stockholders
and the Company will take the actions and deliver to Buyer each of the actions
and documents and certificates provided in Section 6.2 hereof, and (b) Parent
and Buyer will take the actions and deliver to the Stockholders each of the
actions and documents and certificates provided in Section 6.3 hereof.
1.7 ESCROW ARRANGEMENTS.
(a) Cash Escrow. To secure the Principal Stockholders'
various obligations under Section 1.8 and Article VII, the Principal
Stockholders and Buyer agree to execute and deliver at the Closing the Escrow
Agreement, substantially in the form of Exhibit A hereto (as may be amended, the
"Escrow Agreement"). The Principal Stockholders and Buyer acknowledge and agree
that at Closing, SEVEN MILLION FIVE HUNDRED THOUSAND DOLLARS ($7,500,000) of the
Purchase Price (the "Escrow Funds") shall be delivered to SunTrust Bank in
Atlanta, Georgia as the escrow agent (the "Escrow Agent") under the Escrow
Agreement, to be held by the Escrow Agent in an interest-bearing escrow account
(the "Escrow Account"). The Escrow Funds shall come from the Purchase Price
proceeds of the Principal Stockholders on a pro rata basis. The Escrow Funds
shall be released only as follows, as set forth in the Escrow Agreement: (I)
FIVE MILLION DOLLARS ($5,000,000) (less any pending escrow claims as set forth
in
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the Escrow Agreement) shall be released to the Principal Stockholders upon the
earlier of (a) receipt by Buyer of audited financial statements of the Company
for the fiscal year ended December 31, 2003 (provided, that Buyer in its
discretion may accept unaudited financial statements), or (b) Xxxxx 00, 0000,
(XX) the balance of the Escrow Funds (less any pending escrow claims as set
forth in the Escrow Agreement) shall be released to the Principal Stockholders
two (2) years after the Closing Date, (III) upon and according to joint written
instructions by the Buyer and the Principal Stockholders, or (IV) as otherwise
required under the Escrow Agreement. All interest on Escrow Funds shall be
released only to the Principal Stockholders. Upon release of any principal
Escrow Funds to the Principal Stockholders or Buyer as set forth hereunder and
in the Escrow Agreement ("Principal Escrow Funds"), all accrued interest on such
released Principal Escrow Funds shall be released to the Stockholders'
Representative at such time. The investment of the Escrow Funds shall be
mutually agreed upon in good faith by the Stockholders' Representative and
Buyer, provided that in the event such parties cannot agree upon an investment,
the Escrow Funds shall be invested as initially invested on the Closing Date.
(b) Document Escrow. The Form (as defined in Section 5.4
hereof) shall be placed in escrow with the Escrow Agent, which shall be held in
escrow as set forth in the Escrow Agreement and in Section 5.4 hereof.
1.8 ACCOUNTS RECEIVABLE ADJUSTMENT.
(a) Adjustment. The Principal Stockholders and the
Company have, in Section 2.3(c) hereto, given representations and warranties as
to the collectibility of the Company's accounts receivable (less the allowance
for doubtful accounts, which includes a writeoff of an employee receivable in
the amount of $34,000) set forth on the Company's Reference Balance Sheet (as
defined in Section 2.3) (the "Accounts Receivable"). Within one hundred eighty
(180) calendar days after the Closing Date (the "A/R Collection Period"), Buyer
shall prepare and deliver to the Principal Stockholders a certificate (the "A/R
Certificate") setting forth the final status of its collection of the Accounts
Receivable for the A/R Collection Period. To the extent the Buyer has not
collected any portion of the Accounts Receivable at the end of such period (the
"A/R Shortfall"), the total amount of such A/R Shortfall shall constitute a
reduction in the Purchase Price. Notwithstanding anything herein, neither Buyer
nor either Company shall be required to exercise any extraordinary efforts to
collect the Accounts Receivable, including without limitation litigation or
other similar extraordinary actions, but the Company and Buyer shall utilize
commercially reasonable collection efforts consistent with past practices. Upon
completion of payment of the entire A/R Shortfall by the Principal Stockholders
to Buyer as set forth herein (subject to Section 1.8(b)), Buyer promptly shall
return all uncollected Accounts Receivable ("A/R Balance") to the Principal
Stockholders (the "A/R Turnover"), and any amounts received by Buyer on such
returned Accounts Receivable thereafter shall promptly be remitted to the
Stockholder's Representative for further distribution to the Stockholders. After
expiration of the A/R Collection Period and completion of A/R Turnover, Buyer
will not interfere, burden or delay any efforts by the Principal Stockholders to
collect the A/R Balance, provided that any such collection efforts by the
Principal Stockholders shall be in good faith, commercially reasonable and
consistent with the Company's past practices and shall not damage any
relationship between the Company and its clients or customers. Unless
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a customer specifies otherwise, payments of Accounts Receivable by the Company
from customers after the A/R Turnover shall be applied to Accounts Receivable in
order of origination (applied to oldest accounts first). If the parties agree on
the A/R Certificate, any such A/R Shortfall shall be paid in full to Buyer
within five (5) business days after delivery of the A/R Certificate to the
Principal Stockholders. If the parties disagree on the A/R Certificate, the
provisions of Section 1.8(b) below shall apply.
(b) Dispute Resolution. If the Principal Stockholders dispute the
Buyer's calculations of A/R Shortfall as set forth in Section 1.8(a) above, the
Principal Stockholders and Buyer in good faith shall use their reasonable best
efforts to resolve such dispute(s) directly and within fifteen (15) calendar
days after notice of such dispute(s) is given by the Principal Stockholders. If,
by the end of such period, any such dispute is not resolved, the dispute(s)
shall be submitted for resolution to the Atlanta office of
PricewaterhouseCoopers LLP (the "Accounting Firm"), and the decision of such
firm shall be final, binding and conclusive on the parties with the same effect
as a final judgment. Upon completion of its analysis, the Accounting Firm shall
deliver a reasonably detailed report to the Buyer and the Principal
Stockholders. The costs and expenses of such Accounting Firm shall be borne by
the party with the initial position regarding amounts owed hereunder that is the
farthest away (by Dollar) from the final determination of the Accounting Firm.
Upon such final determination, any A/R Shortfall shall be immediately withdrawn
from the Escrow Account by joint written instructions to the Escrow Agent
executed by Buyer and the Stockholders' Representative, provided that the
Principal Stockholders agree to take all steps and actions necessary to
facilitate such withdrawal on an expedited basis (and in no event more than five
(5) business days), including without limitation executing such joint written
instructions.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PRINCIPAL STOCKHOLDERS AND THE COMPANY
The Principal Stockholders and the Company, jointly and severally,
hereby represent and warrant to Buyer and Parent that except as set forth in the
Disclosure Schedule delivered to Buyer on the date hereof (the "Disclosure
Schedule") (which Disclosure Schedule sets forth, among other information, the
exceptions to the representations and warranties contained in this Article II
under captions referencing the Sections to which such exceptions apply):
2.1 ORGANIZATION AND QUALIFICATION. VitalChek is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Tennessee. VitalChek Canada is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Each of
VitalChek and VitalChek Canada (i) has the requisite corporate and other power
to own its assets and to carry on the Business as now being conducted, and (ii)
is duly qualified as a foreign corporation in good standing in each jurisdiction
in which the conduct of its business requires such qualification, except to the
extent that any failure to so qualify would not have (individually or
collectively) a Material Adverse Effect (as defined in Section 8.1(b) hereof).
Except as set forth on Disclosure Schedule ss. 2.1, neither VitalChek nor
VitalChek Canada owns, directly or indirectly, any capital stock of any
corporation or other ownership interest of any type in the equity of any other
type of entity. Neither VitalChek nor
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VitalChek Canada owns or has any obligation to acquire, any ownership interest
in the equity of any entity of any type or business enterprise.
2.2 AUTHORIZATION; ENFORCEABILITY. The execution, delivery and
performance by VitalChek and VitalChek Canada of this Agreement and all related
agreements and documents contemplated hereby (the "Transaction Documents"), and
the consummation of the transactions contemplated in the applicable Transaction
Documents are within the valid corporate powers of each such entity, and have
been duly authorized by all necessary corporate action by such entities. Each
applicable Transaction Document and all the transactions contemplated therein
constitute (or will constitute when executed) the valid and legally binding
obligations of VitalChek and VitalChek Canada, enforceable against them, as
applicable, in accordance with their respective terms, subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws of general
application affecting the enforcement of creditors' rights generally and the
principles of equity.
2.3 FINANCIAL INFORMATION.
(a) The audited balance sheets and related statements of
income, statements of cash flows and statements of stockholders' equity as of
and for the fiscal years ended December 31, 2000 and December 31, 2001 for
VitalChek and VitalChek Canada, and audited financial statements for VitalChek
for the eight month period ended August 31, 2002 (together, the "Financial
Statements") have been provided to Buyer. The Financial Statements (i) are
complete and correct, (ii) present fairly the financial condition of VitalChek
and VitalChek Canada as of the dates thereof and the results of operations and
cash flows for the periods covered thereby in all material respects, and (iii)
have been prepared in accordance with U.S. generally accepted accounting
principles ("GAAP"), consistently applied. Since August 31, 2002, there has been
no adverse change in the financial condition or results of operations of the
Company, and no adverse event or series of events has occurred that, in each
case has had or could reasonably be expected to have a Material Adverse Effect.
(b) There are no liabilities, debts, obligations or
claims of or against the Company of any nature, absolute, contingent, liquidated
or otherwise, except (i) as and to the extent reflected or reserved against on
the balance sheet of VitalChek as of August 31, 2002 (the "Reference Balance
Sheet"); (ii) as specifically described and identified in Disclosure Schedule
ss. 2.3, or (iii) as incurred since the date of the Reference Balance Sheet in
the ordinary course of business consistent with prior practice that have been
disclosed in detail to Buyer prior to the Closing Date.
(c) The Accounts Receivable arose from bona fide
transactions in the ordinary course of business, have been executed on terms
consistent with past practice, and, except for the amount of any applicable
aggregate reserves for uncollectibility, counterclaims, or setoffs shown on the
Reference Balance Sheet, (i) are good and collectible at the recorded amounts
thereof in the ordinary course of business, to the extent not collected prior to
the date hereof, (ii) are not subject to any counterclaims or setoffs, and (iii)
are not otherwise in dispute. None of the Accounts Receivable have been
factored, pledged, turned over for collection, or assigned to any person or
third party.
11
(d) Except as disclosed on Disclosure Schedule ss. 2.3 or
as otherwise reflected in the Financial Statements, since August 31, 2002, the
Company has not:
(i) borrowed any amount (including advances on
existing credit facilities) or incurred or become subject to any liability in
excess of $20,000 individually or $50,000 in the aggregate, except (i) current
liabilities incurred in the ordinary course of business and (ii) liabilities
under contracts entered into in the ordinary course of business;
(ii) mortgaged, pledged or subjected to any
Encumbrance (as defined herein) any of the Company's assets with a fair market
value in excess of $20,000, except for Permitted Encumbrances;
(iii) sold, assigned or transferred (including,
without limitation, transfers to any employees, affiliates or Stockholders) any
tangible or intangible Company assets with a fair market value in excess of
$20,000 individually or $50,000 in the aggregate;
(iv) made any capital expenditures or commitments
therefor in excess of $20,000 individually, or $50,000 in the aggregate; and
(v) made any change in accounting principles or
practices from those utilized in the preparation of the Financial Statements.
2.4 CAPITALIZATION; TRANSFER OF SHARES.
(a) VitalChek's authorized capital stock consists of
Forty Thousand (40,000) shares of common stock, no par value. VitalChek Canada's
authorized capital stock consists of One Thousand (1,000) shares of common
stock, no par value. Neither VitalChek nor VitalChek Canada has any other
classes, series or types of authorized or outstanding capital stock. Disclosure
Schedule ss. 2.4 sets forth the issued and outstanding Shares of both VitalChek
and VitalChek Canada and identifies the individual owners of all Shares.
(b) Except as set forth on Disclosure Schedule ss.
2.4(b), neither VitalChek nor VitalChek Canada has any outstanding options,
warrants, restricted shares, stock appreciation rights, phantom rights,
agreements, arrangements or commitments or any other rights whatsoever relating
to the issuance, sale or transfer of any equity interests of any type of
VitalChek or VitalChek Canada (whether vested, unvested, contained in a
qualified or nonqualified benefit plan or otherwise), including without
limitation any such interests convertible or exchangeable at any time into any
equity interest of either entity ("Options"). Except as set forth on Disclosure
Schedule ss. 2.4(b), neither VitalChek nor VitalChek Canada owns or has any
obligations to purchase, redeem or otherwise acquire any capital stock or
equity interests whatsoever in any other entity. Upon consummation of the
transactions contemplated herein, Buyer will own 100% of the Shares, which will
constitute 100% of the issued and outstanding capital stock of both VitalChek
and VitalChek Canada.
(c) All issued and outstanding Shares: (a) have been duly
authorized and issued by VitalChek or VitalChek Canada, and (b) were validly
issued and are fully paid and non-assessable. The Shares, when sold, transferred
and delivered to Buyer hereunder, will be
12
duly authorized, validly issued, fully-paid and non-assessable, and will be
sold, transferred and delivered to Buyer in compliance with all applicable
federal and state securities laws.
2.5 CONSENTS AND APPROVALS. Except as set forth on Disclosure
Schedule ss. 2.5 hereto and except for the expiration of the statutory waiting
period (the "H-S-R Approval") under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended (the "H-S-R Act"), the execution, delivery and
performance of the Transaction Documents by the Company, and the consummation of
the transactions contemplated therein by the Company, require no action by or in
respect of the Company, or any filing, notice, approval, consent or
authorization ("Governmental Consent") of any governmental agency, authority,
commission, arbitrator, court or administrative or regulatory authority of any
type (foreign, federal, state or local) ("Governmental Authority"), or with any
other third-party ("Third-Party Consent"), except any Governmental Consent or
Third Party Consent which, if not obtained, would not cause or reasonably be
expected to cause a Material Adverse Effect. Except as set forth on Disclosure
Schedule ss. 2.5, neither the execution, delivery and performance by the Company
of the Transaction Documents, nor the consummation of the transactions
contemplated thereby, will or could reasonably be expected to: (a) violate,
conflict with or result in a breach of (i) the Articles of Incorporation or
Bylaws of either VitalChek or VitalChek Canada (the "Charter Documents"), (ii)
any applicable constitution, statute, law, regulation or rule (foreign, federal,
state or local) of any Governmental Authority ("Law"), or (iii) any order,
judgment, decree, ruling, writ or settlement agreement of any Governmental
Authority or court of law ("Order"), or (b) breach, violate or result in a
default (or give rise to any penalty or give to any third party a right of
termination, cancellation, acceleration or result in the creation of any
Encumbrance) under any of the terms, conditions or provisions of any Material
Contract (as defined in Section 2.12 hereof) to which the Company is a party,
except for purposes of this subsection (b), where such breach, violation or
default would not cause or reasonably be expected to cause a Material Adverse
Effect. The respective Boards of Directors of VitalChek and VitalChek Canada
each has approved this Agreement and all transactions related hereto prior to
the Closing.
2.6 LITIGATION; CLAIMS. Except as set forth on Disclosure Schedule
ss. 2.6 hereto, there are no suits, claims, actions, investigations, informal
objections, complaints or proceedings of any type (collectively, "Actions")
pending (or, to the knowledge of the Company, threatened) against or affecting
the Company, nor is the Company or any of its properties or assets subject to
any Order. There are no Actions pending against the Company before any
Governmental Authority, nor is the Company subject to any Order that will or
could reasonably be expected to prevent, delay or burden the transactions
contemplated by this Agreement. Without limiting the generality of the
foregoing, Disclosure Schedule ss. 2.6 also separately identifies all current,
prior (within the previous 24 months), pending, asserted or threatened disputes
with any Company's existing customers. Except as set forth in Disclosure
Schedule ss. 2.6, no Stockholder has any claims, damages, causes of action or
demands of any kind whatsoever (whether known or unknown, contingent or direct,
liquidated or unliquidated) against the Company.
2.7 COMPLIANCE WITH LAW; PERMITS. Except as set forth on
Disclosure Schedule ss. 2.7 hereto, to the knowledge of the Company, the Company
is in compliance with all applicable Laws, and there are no pending Actions in
respect thereof. The Company has not received any written notice regarding any
violation of any Law from any Governmental Authority or
13
otherwise. Except as set forth on Disclosure Schedule ss. 2.7, the Company has
all permits, approvals, licenses, certificates, authorizations and franchises
from all Governmental Authorities required to conduct the Business as now being
conducted (collectively "Permits"), and is in compliance with all such Permits,
except where the failure to have or to be in compliance with any such Permit
does not cause or could not reasonably be expected to cause a Material Adverse
Effect. To the knowledge of the Company, there are no pending or proposed Laws
that would or could reasonably be expected to have a Material Adverse Effect.
2.8 TAX MATTERS.
(a) VitalChek has duly and properly elected and filed all
applicable forms and taken all required actions with the Internal Revenue
Service ("IRS") ) required to be treated as an S corporation for federal income
tax purposes ("S Election") under Section 1361(a)(1) of the Internal Revenue
Code of 1986, as amended (the "Code") pursuant to an election filed with the IRS
in accordance with Section 1362 of the Code. Such S Election was properly
effected as of January 1, 1995, and has been in effect since such date and is
currently in effect. As of January 1, 1995, and at all times thereafter,
VitalChek has been an S corporation under Section 1361(a)(1) of the Code. At all
times since its inception, VitalChek has had fewer than seventy-five (75) owners
of its equity capital stock. VitalChek Canada has never made an S Election under
the Code.
(b) Except as described on Disclosure Schedule ss.
2.8(b), each of VitalChek and VitalChek Canada, as of the date hereof, has
timely and accurately filed all foreign, federal, state and local tax returns
and reports of all types ("Tax Returns") required to be filed by it prior to
such date, and has timely and accurately paid, or prior to the Closing Date
will timely pay, all Taxes (as defined in this Section 2.8(b)) (other than
Taxes due as a result of a 338(h)(10) Election, which shall be treated as set
forth in Section 5.4 hereof ) that are owed for all periods up to and including
the Closing Date, including, without limitation, all income, property, sales,
excise, intangible, use, franchise, value-added, social security, employment,
withholding, payroll and any other taxes of every type, including all interest,
penalties and additions thereon ("Taxes"), whether disputed or not. All
deposits required to be made by VitalChek and VitalChek Canada with respect to
employees' withholding and other types of Taxes have been duly and timely made.
Except as described on Disclosure Schedule ss. 2.8(b), there are, and on the
Closing Date will be, no unpaid Taxes that have not been accrued and reflected
on the books and Financial Statements of VitalChek or VitalChek Canada, or any
additions to Tax, penalties, or interest payable by the Company or by any other
Person that are or could become an Encumbrance on any asset, or otherwise
adversely affect the Business, properties, assets or financial condition of the
Company. The Balance Sheets contained in the Financial Statements fully and
properly reflect, as of the date thereof, the liabilities of VitalChek and
VitalChek Canada for all accrued Taxes. No assessments or notices of deficiency
or other communications (written or verbal) have been received by the Company
or any Stockholder with respect to any such Tax Return. The federal income tax
liability of VitalChek and VitalChek Canada for all of their respective taxable
years ending prior to and including the taxable year ended December 31, 1998
have been closed as to deficiencies and refund of Taxes by applicable statutes
of limitations. There are no agreements between the Company and any federal,
state or local taxing authority, including, without limitation, the IRS,
waiving or extending any statute of limitations
14
with respect to any Tax Return, and they have not filed any consent under
Section 341(f) of the Code.
(c) The fair market value of the Company at January 1,
1995 was no more than $3,800,000.
(d) None of the transactions contemplated hereby will
result in either Company making or being required to make any "excess parachute
payment" as that term is defined in ss. 280G of the Code.
2.9 ERISA AND RELATED MATTERS.
(a) Disclosure Schedule ss. 2.9(a) lists all deferred
compensation, pension, profit-sharing and retirement plans, and all bonus,
welfare, severance pay and other "employee benefit plans" (as defined in Section
3(3) of ERISA), fringe benefit or stock option plans, including individual
contracts, employee agreements, programs or arrangements, providing the same or
similar benefits, whether or not written, participated in or maintained by each
Company or with respect to which contributions are made or obligations assumed
by each Company in respect of each Company (including health, life insurance and
other benefit plans maintained for former employees or retirees), at any time
between January 1, 1999 and the Closing Date. Said plans or other arrangements
are sometimes collectively referred to in this Agreement as "Benefit Plans."
Copies of all Benefit Plans and related documents, including those setting out
each Company' personnel policies and procedures, and including any insurance
contracts, trust agreements or other arrangements under which benefits are
provided, as currently in effect, and descriptions of any such plan which are
not written have been delivered to Buyer. Each Company has also delivered to
Buyer a copy of the Summary Plan Description, if any, for each of its Benefit
Plans, as well as copies of any other summaries or descriptions of any such
Benefit Plans which have been provided to employees or other beneficiaries
during the current and previous three (3) calendar years.
(b) Except as set forth on Disclosure Schedule ss. 2.9(b)
hereto, each Company has fulfilled its obligations, to the extent applicable,
under the minimum funding requirements of Section 302 of ERISA and Section 412
of the Code, with respect to each "employee benefit plan" (as defined in Section
3(3) of ERISA) appearing in Disclosure Schedule ss. 2.9(b). Each Benefit Plan is
in compliance in all material respects with, and has been administered in all
material respects consistent with, the presently applicable provisions of ERISA,
the Code and state law including but not limited to the satisfaction of all
applicable reporting and disclosure requirements under the Code, ERISA and state
law; each Company has made all payments to all Benefit Plans as required by the
terms of each such plan in accordance, if applicable, with the actuarial and
funding assumptions in effect as for the most recent actuarial valuation of such
plans. Except as disclosed on Disclosure Schedule ss. 2.9(b), all actuarial
valuations and reports relating to said plans required by law or the terms of
the plan have been prepared and a copy of the most recent actuarial valuation
and report for each pension plan, as defined in Section 3(2) of ERISA, has been
provided to Buyer, if applicable, and each Company has filed or caused to be
filed with the IRS annual reports on Form 5500 for each Benefit Plan
attributable to them for all years and periods for which such reports were
required and within the time period required by
15
ERISA and the Code, and copies of such reports for the past three years have
been provided to Buyer. Except as disclosed on Disclosure Schedule ss. 2.9(b),
each Company has funded or will fund each Benefit Plan in which its employees
participate or is otherwise attributable to it in accordance with its terms
through Closing including the payment of applicable premiums on any insurance
contract funding a Benefit Plan for coverage provided through Closing. To the
extent that any annual contribution for the current year is not yet required for
any Benefit Plan as of the Closing Date, each Company shall make a pro rata
contribution to said plan for the period ended at the Closing Date or said
contribution has been accrued on the books of each Company.
(c) Except as set forth on Disclosure Schedule ss. 2.9(c)
hereto, no "prohibited transaction," as defined in Section 406 of ERISA and
Section 4975 of the Code, has occurred in respect of any such Benefit Plan, and
no civil or criminal action brought pursuant to Part 5 of Title I or ERISA is
pending or is threatened in writing or orally against any fiduciary of any such
plan which, in either case, would have a Material Adverse Effect.
(d) Except as set forth on Disclosure Schedule ss. 2.9(d)
hereto, the IRS has issued a letter for each employee pension benefit plan, as
defined in Section 3(2) of ERISA listed on Disclosure Schedule ss. 2.9(d),
determining that such plan is a qualified plan under Section 401(a) of the Code
and is exempt from United States Federal Income Tax under Section 501(a) of the
Code, and there has been no occurrence since the date of any such determination
letter which has adversely affected such qualification. Neither Company
maintains a plan or arrangement intended to qualify under Section 501(c)(9) of
the Code.
(e) Except as set forth on Disclosure Schedule ss. 2.9(e)
hereto, each Benefit Plan that provides medical benefits has been operated in
material compliance with all requirements of Section 4980B(f) of the Code and
Sections 601 through 608 of ERISA relating to continuation of coverage under
certain circumstances in which coverage would otherwise cease. All former
employees of each Company or other persons entitled to such continuation of
coverage through relationship to said former employees are listed on Disclosure
Schedule ss. 2.9(e).
(f) Except as set forth on Disclosure Schedule ss. 2.9(f)
hereof, neither Company nor any entity that is treated as a single employer with
either Company pursuant to Section 414(b), (c), (m) or (o) of the Code: (i)
currently maintains or contributes to any Benefit Plan that is subject to Title
IV of ERISA, nor (ii) has previously maintained or contributed to any such plan
that has resulted in any material liability or potential material liability for
either Company under said Title IV such that any such liability would have a
Material Adverse Effect. There shall not be as of Closing any outstanding unpaid
minimum funding waiver within the meaning of Section 4.12(d) of the Code.
(g) Attached hereto as a part of Disclosure Schedule
ss. 2.9(g) is a 4-year contribution history indicating the dollar amount
contributed and the level of contribution as a percentage of compensation of
covered participants for each profit sharing plan, stock bonus plan or other
retirement plan to which either Company makes discretionary contributions.
16
(h) Except as set forth on Disclosure Schedule ss. 2.9(h)
hereof, neither Company has ever established nor ever maintained (and does not
currently maintain) any Benefit Plan, plans or programs that provide
post-retirement medical benefits (other than benefits described in Section
2.9(e) hereof and those which are required by law), post employment benefits,
death benefits or other post retirement welfare benefits.
(i) Neither Company nor any employer referred to in
Section 2.9(f) above, maintains, nor has contributed within the past five years
to, any multiemployer plan within the meaning of Sections 3(37) or 4001(a)(3) of
ERISA. No such employer currently has any liability to make withdrawal liability
payments to any multiemployer plan. There is no pending dispute between any such
employer and any multiemployer plan concerning payment of contributions or
payment of withdrawal liability payments.
(j) All Benefit Plans have been operated and administered
in accordance with their respective terms in all material respects and no
materially inconsistent representation or interpretation has been made to any
plan participant. Except as set forth on Disclosure Schedule ss. 2.9(j), no
lawsuit or complaint (including, to the knowledge of the Company, any dispute
that might result in a lawsuit or complaint against, by, or relating to any
Benefit Plan or any fiduciary, as defined in Section 3(21) of ERISA) other than
claims in the ordinary course of a Benefit Plan has been filed or to the
knowledge of the Company is pending with respect to a Benefit Plan.
2.10 INTELLECTUAL PROPERTY. Disclosure Schedule ss. 2.10 hereto
sets forth a complete, true and accurate list of all the following items owned
or licensed by the Company (or any other Person-as defined in ss. 8.1(c) hereof)
and used in the Business within the two (2) years prior to Closing Date: (a)
patents, trademarks, service marks, design marks, copyrights, trade names,
corporate names, trade styles, brand names, logos, Internet website addresses,
URL and Internet domain names (and all applications and requests therefor),
including all applicable registration or serial numbers, countries and
jurisdictions, dates of filing, grant, renewal and expiration, xxxx, class and
all other pertinent information, (b) all trade secrets, know-how, formulae,
proprietary processes and inventions, (c) all computer software programs of
every type, including the related written and other documentation for such
software (except commercially-available, "off the shelf" software programs)
("Software"), and (d) all other tangible materials embodying technology or
intellectual property rights, in all cases whether registered or unregistered,
foreign and domestic, whether owned by or licensed to the Company and whether
such properties are located on the Company's business premises or on the
business premises of any supplier or customer (collectively, the "Intellectual
Property").
Except as set forth on Disclosure Schedule ss. 2.10 hereto:
(a) The Company possesses sole and unencumbered ownership
of or the valid right to use (pursuant to valid license or other agreements) all
the Intellectual Property. All license and other agreements from third parties
for the Company's use of any Intellectual Property are valid and binding on the
Company, and to the knowledge of the Company, are valid and binding on all other
parties thereto, in full force and effect and to the knowledge of the Company
are not infringing or otherwise violating any such agreements;
17
(b) All patent and trademark registrations with any
Governmental Authority have been duly issued and have not been canceled,
abandoned or otherwise terminated; all renewals due through the Closing Date
have been filed, and all applications for patent or trademark registration have
been duly filed and are in process as of the Closing Date;
(c) To the knowledge of the Company, the Company is not
infringing upon the intellectual property rights of any other Person in any
respect. The Company has not received any written notice of infringement upon or
conflict with respect to Intellectual Property of any other Person;
(d) The Company has not received any written notice
challenging or questioning the validity or effectiveness of any Intellectual
Property or any license or agreement held by the Company with respect to any
Intellectual Property;
(e) The Company has not granted any other Person or
entity any rights with respect to any of the Intellectual Property;
(f) The Company has valid rights to sell and distribute
each of the products currently being sold and distributed by it, including
without limitation with respect to the programs and data received from third
parties which are included or embedded in such products pursuant to valid
license agreements; and
(g) To the knowledge of the Company, no Person is using
any Intellectual Property that is confusingly similar to, which infringes upon,
or which violates any Company's rights with respect to the Intellectual
Property.
2.11 REAL PROPERTY. Disclosure Schedule ss. 2.11 hereto sets forth
a complete, true and correct list of all real property owned by the Company
(each an "Owned Real Property"). Disclosure Schedule ss. 2.11 also sets forth
information regarding the location, size and zoning of the Owned Real Property.
The Company has delivered to Buyer the surveys, appraisals, title insurance
policies and other information regarding the Owned Real Property in the
possession of the Company or the Stockholders, and the Company has not received
any notice from any insurance company of any defects or inadequacies in the
Owned Real Property that would materially adversely affect the insurability of
the Owned Real Property or the premiums for the insurance thereof. The Company
has valid, good, marketable fee simple absolute title to the Owned Real
Property, free and clear of any and all claims, interests, liens, mortgages,
security interests, ownership interests, pledges, easements, restrictive
covenants, rights-of-way and any other encumbrances of any type whatsoever
("Encumbrances"), other than (i) Encumbrances that are disclosed on Disclosure
Schedule ss. 2.11, (ii) liens for current Taxes not yet due and payable, (ii)
liens for mechanics, material or laborers arising by operation of law for sums
which are not yet due, (iii) platting, subdivision, zoning, building and other
similar legal requirements, and (iv) easements, restrictive covenants,
rights-of-way, reservations of mineral or oil and gas interests, encroachments
and other similar Encumbrances that are of record, none of which materially
detract from the value of the Owned Real Property subject thereto or impair in
any material respect the operation of the Company's Business (the Encumbrances
described in clauses (i)
18
through (iv) above are referred to collectively as "Permitted Encumbrances").
All Permitted Encumbrances are set forth in Disclosure Schedule ss. 2.11.
Except as set forth on Disclosure Schedule ss. 2.11:
(a) No zoning, building or other federal, state or
municipal law, ordinance, regulation or restriction is violated by the continued
operation, maintenance or use of the Real Property (as defined herein) or any
portion thereof or interest there. The current use of the Real Property with
respect to the Business does not violate any restrictive covenants affecting
such property. There is no Law, including without limitation any Environmental
Law, that would require any expenditure to modify, improve or otherwise amend
any portion of the Real Property to bring it into compliance with any such Law.
(b) There are no eminent domain, condemnation or other
similar proceedings pending or, to the knowledge of the Company, threatened
against or affecting any Real Property or any portion thereof.
(c) There are no Persons in possession of any portion of
the Real Property other than the Company, whether as lessees, tenants at will,
trespassers or otherwise.
(d) Disclosure Schedule ss. 2.11 sets forth a complete,
true and correct list of all real property leased by the Company (each, a
"Leased Real Property, and together with the Owned Real Property, the "Real
Property"). The Company has a valid leasehold interest in the Leased Real
Property, free and clear of all Encumbrances. The lease agreement for the Leased
Real Property (the "Property Lease") constitutes all of the lease or other
agreements between the Company and the landlord/owner of such property. The
Company has good, valid leasehold interest in the Leased Real Property, free and
clear of all Encumbrances. There are no leasing commissions or similar payments
due, arising out of or resulting from or with respect to the Leased Real
Property. The Company has performed each material term, covenant and condition
of the Property Lease that are required to be performed by the Company at or
before the date hereof, and no material event of default exists under the Lease
Agreement.
2.12 CONTRACTS. Disclosure Schedule ss. 2.12 lists all of the
contracts, agreements, licenses, leases, instruments and other contractual
commitments (written and oral) of every type to which the Company is bound
("Contracts"), including without limitation Contracts that are of a type
described below (collectively, the "Material Contracts"):
(a) any Contract for capital expenditures or the
acquisition or construction of fixed assets in excess of $10,000;
(b) any Contract for the purchase, license, lease or sale
of inventory, materials, supplies, equipment, computer hardware, computer
software or other property, assets, or services requiring aggregate future
payments or receipts in excess of $20,000;
(c) any Contract for the purchase, license, sale or
resale of data or information;
19
(d) any Contract for marketing, advertising, joint
marketing, joint advertising and similar arrangements;
(e) any Contract relating to the borrowing of money or
the guaranty of another Person's borrowing of money;
(f) any Contract granting any Person an Encumbrance on
all or any part of its assets;
(g) any Contract granting to any Person a first refusal,
first offer or similar preferential right to purchase or acquire any of the
Shares or the Company's assets ("Assets");
(h) any Contract under which the Company is (x) a lessee
or sublessee of any machinery, equipment, vehicle or other tangible personal
property having an original value (individually or in the aggregate) in excess
of $10,000, or (y) a lessor or lessee of any real property, including without
limitation the Leased Real Property;
(i) any Contract limiting, restricting or prohibiting the
Company from conducting any type of business anywhere in the United States or
elsewhere in the world or any Contract limiting the freedom of the Company to
engage in any line of business or to compete with any other Person;
(j) any joint venture, partnership or similar Contract;
(k) Contracts, singly or in the aggregate, requiring
future payments of $20,000 or more that require the consent of the other party
thereto in connection with the transactions contemplated hereby;
(l) any employment, severance, compensation or similar
Contract with any employee, any Contracts with independent contractors,
consultants or similar arrangements, and any collective bargaining, union or
other arrangement with any labor union; and
(m) any Contract (regardless of Dollar size or value)
with customers of the Company.
True and correct copies of all Material Contracts have been provided to
Buyer. The Material Contracts are in full force and effect as of the date
hereof, and are enforceable against the Company, and to the knowledge of the
Company, enforceable against the other parties thereto in accordance with their
terms, subject to bankruptcy, insolvency and other similar laws affecting the
rights of creditors generally and subject to the exercise of judicial discretion
in accordance with principles of equity. Neither the Company, nor to the
knowledge of the Company, any other party thereto is in violation or default
under terms of any of the Material Contracts, and there exists no occurrence,
event, condition or act which, upon the giving of notice or the lapse of time or
otherwise, could reasonably be expected to result in such a default. Other than
as noted on Disclosure Schedule ss. 2.12, none of the Material Contracts (a) is
subject to cancellation or termination upon consummation of the transactions
contemplated herein, or
20
(b) requires any Governmental Consents or Third-Party Consents prior to the
transfer or assignment thereof.
2.13 TITLE TO ASSETS. Except as set forth on Disclosure Schedule
ss. 2.13 hereto, the Company owns (solely and without any other ownership
interests held by any other Person) good, valid, legal and marketable title to
each of the assets of every type owned by it and/or reflected on its books and
records or Financial Statements and/or used in the operation of the Business,
free and clear of all Encumbrances of every type whatsoever other than Permitted
Encumbrances.
2.14 ENVIRONMENTAL AND SAFETY MATTERS. Except as set forth on
Disclosure Schedule ss. 2.14 hereto, the Company (including without limitation,
the Real Property and all buildings and improvements thereon): (i) is and has
been in compliance with all applicable Environmental Laws (as defined below),
(ii) has not received any request for information or written notice alleging or
otherwise regarding any potential liability, noncompliance or any investigatory
or remedial obligations arising under applicable Environmental Laws, (iii) has
obtained and is in material compliance with all terms and conditions of all
permits, licenses and other authorizations required pursuant to Environmental
Laws, (iv) is not subject to any pending or (to the knowledge of the Company)
threatened judicial or administrative proceeding alleging the violation of or
liability under Environmental Laws, and (v) has no liability under any
Environmental Law. Further, there are no conditions, occurrences or activities
that have given or could reasonably be expected to give rise to liability
against the Company under any Environmental Laws. The transactions contemplated
by this Agreement do not and will not impose any obligations under Environmental
Laws for site investigation, remediation, notice or consent of any Governmental
Authority or third parties or otherwise. Disclosure Schedule ss. 2.14 identifies
all storage tanks on the Real Property and the contents thereof, and identifies
all existing governmental registrations with respect to such storage tanks. For
purposes of this Section 2.14, "Environmental Laws" means all foreign, federal,
state or local statutes, laws, codes, rules, regulations, ordinances, orders,
standards, common law, permits, licenses or requirements (including consent
decrees, judicial decisions and administrative orders) presently in force
pertaining to the protection, preservation, conservation or regulation of the
environment, or imposing requirements relating to public or employee health and
safety, including without limitation the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Resource Conservation and Recovery
Act of 1976, the Emergency Planning and Community Right to Know Act, the Clean
Air Act, the Federal Water Pollution Control Act, the Toxic Substances Control
Act, the Safe Drinking Water Act, and the Occupational Safety and Health Act,
each as amended or reauthorized.
2.15 EMPLOYEE RELATIONS. Within the two (2) years prior to the
Closing Date, the Company has not experienced any strike, picketing, boycott,
work stoppage or slowdown or other labor dispute, nor to the knowledge of the
Company, is any such event or any organizing effort threatened against it.
Except as set forth on Disclosure Schedule ss. 2.15 hereto, there is no pending
charge or complaint of unfair labor practice, employment discrimination or
similar matters against the Company relating to the employment of labor, nor
have any such charges or complaints been filed with any Governmental Authority
within two (2) years prior to the date of this Agreement. The Company has
complied with all laws relating to employees, employment
21
and labor, including without limitation provisions thereof relating to wages,
hours, equal opportunity, collective bargaining and the payment of social
security and other taxes. All employees of the Company have executed agreements
regarding confidentiality and non-disclosure. Neither Company currently has or
has ever employed any residents of Canada.
2.16 BUSINESS INSURANCE. Immediately prior to the Effective Date,
the Company had in full force all workers' compensation or similar insurance
required by the laws of any jurisdiction in which any operations of the Company
is conducted. Immediately prior to the Effective Date, the Company had in full
force (i) business interruption insurance, (ii) comprehensive general liability
insurance, (iii) fire and casualty insurance policies and (iv) public liability
insurance as listed on Disclosure Schedule ss. 2.16. Such insurance policies and
plans have been provided to the Buyer, and immediately prior to the Effective
Date were in full force and effect. The Company has not received any written
notice of cancellation of any of such policies. There exists no breach by the
insured under any such policy which gives the insurer the right thereunder to
terminate such policy. All such policies have been paid in full and are
guaranteed cost programs and are not subject to retroactive adjustment.
2.17 DATA. All acquisitions, distributions and uses of data and
other information by the Company in operation of the Business are and have been
in compliance with all applicable Laws.
2.18 SOFTWARE PERFORMANCE. Subject to current industry standards,
the Software performs properly and in conformity with the specifications set
forth in its Documentation. The Software operates without material malfunctions
or design failures, and is free from any material defects, errors and "bugs."
The Software has adequate capability and capacity for the Business as currently
conducted. For purposes of this Section 2.18, "Documentation" means the
functional and design specifications, the object and source code versions, the
programmer and user manuals and other such programmer and operator documentation
related to the Software.
2.19 FCPA. Neither the Company nor any of its officers, directors,
agents, employees or other Persons acting on behalf of the Company has, in the
course of its actions for or on behalf of the Company, used any corporate funds
for any unlawful contribution, gift, entertainment or other unlawful expenses
relating to political activity; made any direct or indirect unlawful payment to
any foreign or domestic government official or employee from corporate funds;
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977, as amended; or made any unlawful bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or domestic
government official or employee.
2.20 BROKERS. No broker, finder, investment banker or any other
third party ("Broker") is entitled to any brokerage, finder's or other fee or
commission from the Company in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of the Company or
any Stockholder. The payment of all fees and expenses of any Broker engaged by
the Stockholders shall be paid by the Stockholders and not the Company, the
Buyer or the Parent.
2.21 INSURANCE POLICIES. The life insurance policies in the names
of Xxxxxxx Xxxxx, Xxxxxxx Xxxxxxx and Xxxxxx Xxxxxxx (the "Insurance Policies")
have been amended to remove the
22
Company's 401(k) Plan as the owner and beneficiary of such policies and for all
other purposes (the "Insurance Policy Amendments").
2.22 DISCLOSURE. No representation or warranty by the Principal
Stockholders or either Company contained in this Agreement or any Disclosure
Schedule hereto, or any certificate of other instrument referred to herein
contains or will contain any untrue statement of a material fact or omits or
will omit to state any material fact which is necessary in order to make the
statements contained herein or therein not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
Each Stockholder, individually as to himself or herself and as to his
or her Shares, hereby represents and warrants to Buyer that:
3.1 AUTHORIZATION; ENFORCEABILITY. The execution, delivery and
performance by each Stockholder of the Transaction Documents and the
consummation of the transactions contemplated thereby, are within each
Stockholder's authority and power. Each Stockholder has the appropriate
individual capacity and authority to enter into and consummate the transactions
contemplated by the Transaction Documents. Each applicable Transaction Document
and the transactions contemplated therein constitutes (or will constitute when
executed) the valid and legally binding obligations of each Stockholder,
enforceable against each Stockholder (as applicable) in accordance with their
respective terms, subject to bankruptcy, insolvency, reorganization, moratorium
or other similar laws of general application affecting the enforcement of
creditors' rights generally and the principles of equity.
3.2 CONSENTS AND APPROVALS. Except as set forth on Disclosure
Schedule ss. 2.5 hereto and except for the H-S-R Approval, the execution,
delivery and performance of the Transaction Documents by Stockholders, and the
consummation of the transactions contemplated therein by Stockholders, require
no action by or in respect of any Stockholder, or any Governmental Consent of
any Governmental Authority or any Third-Party Consent, except any Governmental
Consent or Third Party Consent which, if not obtained, would not cause or
reasonably be expected to cause a Material Adverse Effect. Except as set forth
on Disclosure Schedule ss. 2.5, neither the execution, delivery and performance
by the Stockholders of the Transaction Documents, nor the consummation of the
transactions contemplated thereby, will or could reasonably be expected to: (a)
violate, conflict with or result in a breach of any Charter Document or
applicable Law or Order, or (b) breach, violate or result in a default (or give
rise to any penalty or give to any third party a right of termination,
cancellation, acceleration or result in the creation of any Encumbrance) under
any of the terms, conditions or provisions of any Material Contract to which the
Company is a party, except for purposes of this subsection (b), where such
breach, violation or default would not cause or reasonably be expected to cause
a Material Adverse Effect.
3.3 TITLE TO SHARES. Each Stockholder owns (solely and without any
other ownership or other interests of any type held by any other Person) good,
valid, legal and marketable title to,
23
and ownership and possession of, all of his or her Shares, free and clear of any
and all Encumbrances of every type whatsoever.
3.4 DISCLOSURE. No representation or warranty by the Stockholders
contained in this Agreement or any Schedule hereto, or any certificate of other
instrument referred to herein contains or will contain any untrue statement of a
material fact or omits or will omit to state any material fact which is
necessary in order to make the statements contained herein or therein not
misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER AND PARENT
The Buyer and Parent represent and warrant to the Stockholders as follows:
4.1 ORGANIZATION AND QUALIFICATION. The Buyer and the Parent each
is a corporation duly formed, validly existing and in good standing under the
laws of the State of Georgia. The Buyer and the Parent each has the requisite
corporate power to execute and deliver this Agreement and to carry out the
transactions contemplated hereby.
4.2 AUTHORIZATION. The execution, delivery and performance by the
Buyer and the Parent of this Agreement and the transactions contemplated hereby
are within the corporate powers of the Buyer and the Parent, and have been duly
authorized by all necessary corporate action by the Buyer and the Parent. Each
Transaction Document to which Buyer and the Parent are parties (as applicable)
constitutes a valid and binding obligation of the Buyer and Parent (as
applicable), enforceable against them in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or
other similar laws of general application affecting the enforcement of
creditors' rights generally.
4.3 CONSENTS AND APPROVALS. Except for the H-S-R Approval, the
execution, delivery and performance by the Buyer and the Parent of each
Transaction Document (as applicable) to which it is a party and the consummation
of the transactions contemplated thereby require no action by or in respect of,
or any filing with or notice to, any Governmental Authority which, if not
obtained or made, will prevent, materially delay or materially burden the
transactions contemplated by this Agreement. Neither the execution, delivery and
performance by the Buyer and the Parent of the Transaction Documents, nor the
consummation of the transactions contemplated thereby, will or could reasonably
be expected to violate, conflict with or result in a breach of (i) the Articles
of Incorporation or Bylaws of Buyer or the Parent, (ii) any applicable Law or
Order, or (iii) any material contract to which Buyer or the Parent is a party.
4.4 LITIGATION. There is no litigation pending or (to the
knowledge of Buyer or Parent) threatened that would prevent or delay the
consummation of the transactions contemplated by this Agreement.
4.5 FINANCIAL RESOURCES. Buyer and Parent each have the financial
resources necessary to consummate the transactions contemplated by this
Agreement.
24
4.6 BROKERS. No broker, finder, investment banker or other third
party is entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated hereby based upon arrangements
made by or on behalf of the Buyer.
4.7 INSPECTION; NO OTHER REPRESENTATIONS. Buyer and Parent qualify
as "accredited investors" under Rule 501 and meet the requirements of Rule
506(b)(2)(ii) under the Securities Act of 1933, and have engaged expert
advisors, experienced in the evaluation and purchase of companies such as the
Company as contemplated hereunder. Buyer and Parent acknowledge that the Company
has given Buyer and Parent full access to the key employees and facilities of
the Company, and that the Company and Stockholders have provided documents and
materials relating to the Company and the Business to Buyer in connection with
its due diligence review of the Company. Buyer agrees and acknowledges that it
is acquiring the Shares without reliance upon any express or implied
representations or warranties of any nature, whether in writing, orally or
otherwise, made by or on behalf of or imputed to the Company or its
Stockholders, except (a) as based on documents and materials provided by the
Company and the Stockholders and their representatives to Buyer and its
representatives, and (b) as set forth in this Agreement (including without
limitation the Disclosure Schedule and Exhibits hereto) and the Transaction
Documents. Without limiting the generality of the foregoing, Parent and Buyer
acknowledge that the Company and the Stockholders make no representation or
warranty with respect to any projections, estimates or budgets delivered to or
made available to Parent and Buyer of future revenues, future results of
operations (or any component thereof), future cash flows or future financial
condition (or any component thereof) of the Company or the future business and
operations of the Company, except as expressly set forth in this Agreement
(including without limitation the Disclosure Schedule hereto) and the
Transaction Documents.
4.8 DISCLOSURE. No representation or warranty by the Buyer or
Parent contained in this Agreement, or any certificate of other instrument
referred to herein contains or will contain any untrue statement of a material
fact or omits or will omit to state any material fact which is necessary in
order to make the statements contained herein or therein not misleading.
ARTICLE V
POST-CLOSING COVENANTS
5.1 POST-CLOSING ACTIONS. After the Closing, the parties agree to
cooperate in good faith and use all commercially reasonable best efforts
(including taking actions, executing documents and otherwise) to: (a) secure all
required or advisable Third Party Consents, Governmental Consents and all other
matters in connection with the transfer of the Company to the Buyer that are not
so secured as of the Closing, and (b) terminate and release all mortgages, deeds
of trust and similar Liens on the Owned Real Property, and file or record all
applicable documents to evidence such terminations and releases.
5.2 PUBLIC ANNOUNCEMENTS. The Stockholder's Representative and
Parent shall consult with each other in good faith before issuing any joint or
individual press releases or otherwise making any individual or joint public
statements with respect to this Agreement or the transactions contemplated
hereby; provided, that if Parent is required to issue any press release
25
or make any public announcement regarding the transactions contemplated hereby
pursuant to federal securities laws (in Parent's sole judgment), Parent shall
provide such release or statement to the Stockholder's Representative for review
but Parent may make such release or statement without consent of Stockholder's
Representative.
5.3 EMPLOYEE BENEFITS AND INSURANCE MATTERS.
(a) Existing Company Plans. The Company shall terminate
its adoption of the following insurance programs maintained by separate
sponsoring companies as of the Effective Date: worker's compensation, general
liability insurance, umbrella insurance, Internet errors and omission and
property insurance. The Company's existing employee group welfare benefit plans,
including without limitation the Company's group health insurance ("Company
Plans"), shall not be terminated prior to Closing by the Company and shall
remain in effect as of the Closing, provided, that Buyer may terminate such
Company Plans and substitute participation in the Buyer's or Parent's similar
plans by Company employees after the Closing Date.
(b) Funding of Defined Benefit Retirement Plan. The
Company shall contribute to the Company's Defined Benefit Retirement Plan (the
"Defined Plan") the amount of $157,771, or if greater, the amount certified by
Thornthwaite & Company, Actuaries and Consultants, as constituting the
contribution receivable for the 2002 plan year (the "2002 Contribution"),
provided that such 2002 Contribution shall be included in the calculation of
Working Capital as provided in Section 6.2(g) hereof and the determinations of
EBITDA as provided in Section 1.4 hereof.
(c) Termination Liability with Respect to Defined Benefit
Retirement Plan. Buyer intends to terminate the Defined Plan effective on or
about January 31, 2003 (the "Defined Plan Termination"), and any resulting
liabilities shall not be included in the calculation of Working Capital as
provided in Section 6.2(g) hereof or in the determinations of EBITDA as provided
in Section 1.4 hereof, and shall not be the responsibility of the Stockholders.
(d) Insurance Policies. If required after the Closing
Date, the Principal Stockholders shall cooperate in good faith and use all best
efforts (including taking actions, executing documents and otherwise) to
effectuate the Insurance Policy Amendments. Subsequent to the Closing Date, none
of the Company, the Company's 401(k) Plan, the Buyer and the Parent shall be
responsible for, be required to make or shall make any payments of premiums or
incur other expenses whatsoever in connection with the Insurance Policies or
otherwise on behalf of the owners or beneficiaries of those Insurance Policies.
5.4 TAX ELECTION.
(a) If the Buyer determines that a joint election under
Section 338(h)(10) of the Code with respect to Buyer's purchase of the VitalChek
Shares (the "338(h)(10) Election") will be beneficial to the Buyer, then the
Stockholders and Buyer shall make such a joint election. Each Stockholder shall
execute an IRS Form 8023 (the "Form") and shall deliver such fully-executed Form
to the Escrow Agent at the Closing as set forth in Section 5.4(c) hereof. If the
338(h)(10) Election is to be made, the Buyer shall file such Form in its
discretion as necessary
26
with the appropriate office(s) of the IRS (the "338 Filing"). Each Stockholder
shall provide all information and data required and requested by Buyer for
purposes of making the 338(h)(10) Election and calculation of the Excess Taxes
as set forth in Section 5.4(b) below.
(b) Excess Taxes. To the extent that any Stockholder is
required to pay any federal, state or local income Taxes in excess of the amount
of such Taxes that would be due if the 338(h)(10) Election had not been made
(the "Excess Taxes"), the Buyer shall reimburse each such Stockholder for such
Excess Taxes including additional Taxes resulting from the payment of Excess
Taxes as provided herein, and the Purchase Price shall be deemed to be adjusted
by such amounts. Attached as Disclosure Schedule ss. 5.4(b) is an estimate of
the amount of such Excess Taxes and a methodology for calculating same. The
Excess Taxes amount shall be estimated as of the Effective Date using the
balances of VitalChek's balance sheet items as of the Effective Date in
accordance with the calculation set forth in Disclosure Schedule ss. 5.4(b)
attached hereto. If the Buyer determines to make the 338(h)(10) Election, an
amount equal to the Excess Taxes so estimated shall be paid by Buyer to the
Stockholders' Representative (the "Excess Tax Payment"), and the Form shall be
released to Buyer from escrow simultaneous with the Excess Tax Payment. Upon
the filing by the Stockholders of their individual respective income Tax
Returns for 2002 ("Individual Returns") and subsequent periods in which a
payment under this Agreement or related agreement is received by a Stockholder,
each Stockholder shall compute his/her respective individual final amount of
Excess Taxes, using his/her actual tax liability incurred ("Final Excess
Taxes"), and within ten (10) business days after filing their respective
Individual Returns, each Stockholder shall deliver to Buyer a notarized written
statement ("Written Tax Statement") setting forth his/her Final Excess Taxes,
which shall include reasonable detail regarding calculation and determination
of such Final Excess Taxes, provided, that the Written Tax Statements must be
delivered to Buyer regardless of whether such Final Excess Taxes amount is
greater or less than the original Excess Tax Payment. Within ten (10) business
days after receipt of each Written Tax Statement, and if Buyer does not dispute
such Written Tax Statement: (a) if the Final Excess Taxes exceeds the Excess
Tax Payment (the "Upside Difference"), Buyer shall promptly pay the applicable
Stockholder an amount equal to the Upside Difference, and (b) if the Final
Excess Taxes is less than the Excess Tax Payment (the "Downside Difference"),
the applicable Stockholder shall promptly pay Buyer an amount equal to the
Downside Difference. If the Buyer disputes any individual Written Tax
Statement, the Buyer and applicable Stockholder shall cooperate and communicate
in good faith to resolve the dispute. Notwithstanding anything to the contrary
in this Agreement, Buyer shall be liable for all Taxes incurred by the Company
resulting from the 338(h)(10) Election, including, but not limited to, Taxes
imposed under Code Section 1374 and related state and local provisions,
transfer Taxes and state and local corporate income and franchise Taxes.
(c) Escrow Arrangements. The fully-executed Form shall be
delivered to the Escrow Agent at Closing, and shall be held in escrow by the
Escrow Agent as set forth in this Section 5.4(c) and the Escrow Agreement. The
Form shall be held in escrow by the Escrow Agent until the earlier of: (a) the
date the Form is released pursuant to joint written instructions or as otherwise
allowed under the Escrow Agreement, or (b) one (1) year after the Closing Date,
at which time the Form shall be released to the Stockholders' Representative if
not previously released as set forth herein. The Form shall be released
immediately to Buyer simultaneous with payment of the Excess Tax Payment as set
forth in Section 5.4(b). The parties to this Agreement
27
agree to cooperate in good faith and promptly take all actions (including
without limitation, execution of joint written instructions to the Escrow Agent)
necessary to facilitate the release of the Form from the Escrow Account, as set
forth in this Section 5.4.
(d) Indemnification. If the IRS audits any Tax Return of
any Stockholder after the Closing Date (the "Audit") and if pursuant to such
Audit a final determination is made that any Stockholder's Excess Taxes are
greater or less than the Excess Taxes previously paid by such Stockholder (the
"Original Excess Tax Amount") for such taxable period (the "Revised Excess Tax
Amount"), then: (i) if such Revised Excess Tax Amount is greater than the
Original Excess Tax Amount, the Buyer shall promptly pay such Stockholder(s) an
amount equal to all additional Excess Taxes paid by the Stockholder(s), and (ii)
if such Revised Excess Tax Amount is less than the Original Excess Tax Amount (a
"Refund"), such Stockholder(s) shall promptly pay the Buyer an amount equal to
the Refund amount.
(e) Tax Proceedings. The Stockholders shall control any
proceedings or audit of their own Tax Returns, except the Stockholders shall
permit the Buyer or Parent, at Buyer's or Parent's election, to control and
conduct the portion of any tax proceeding, whether administrative or judicial,
that relates to federal, state or local Taxes for which the Buyer or Parent is
or may be liable pursuant to this Section 5.4 ("Indemnifiable Tax Proceedings"),
subject to Buyer acknowledging to the Stockholders in writing its liability
under this Section 5.4 for such Taxes. If Buyer elects to control the
Indemnifiable Tax Proceeding, Buyer shall exercise good faith in such control,
and Buyer shall keep the Stockholders informed of the status of any such
proceeding and shall advise the Stockholders of any material developments with
respect to such proceeding. The Stockholders shall provide to Buyer or its
agents any written authorization required to permit the Buyer and its agents to
control and conduct any such Indemnifiable Tax Proceeding. The Buyer shall
provide to the Stockholders and their representatives an opportunity to be
present at any hearings, conferences, meetings, trial and other discussions with
any tax authorities relating to any such Indemnifiable Tax Proceeding. The Buyer
shall have no authority to, and shall not address, discuss, compromise or settle
with any taxing authority any Tax issue or claim that may affect, in any way,
the tax liability of a Stockholder for which the Stockholder is not entitled to
payment pursuant to this Section 5.4. The Buyer shall also not compromise or
settle any Tax issue for which Buyer or Parent is liable under this Section 5.4
without the written consent of the Stockholders which, if withheld, eliminates
Buyer's obligation under Section 5.4(d). Notwithstanding Buyer's election to
control the Indemnifiable Tax Proceedings, the Stockholders may, at any time
after the Buyer so elects, assume control of the Indemnifiable Tax Proceedings
which, if the Stockholders so assume, eliminates Buyer's obligation under
Section 5.4(d).
5.5 COMPANY TAX RETURN. The Principal Stockholders shall prepare
or cause to be prepared and filed at the Stockholders' expense all Tax Returns
for the Company (e.g., IRS Form 1120S, Schedule K-1 (1120S)) ("Pre-Closing Tax
Returns") for the Company's taxable year ending the day before the Closing Date
or as of the end of the Closing Date, as appropriate and shall pay all Taxes due
thereon, except to the extent accrued by the Buyer as of the Closing Date (the
"Pre-Closing Taxes"), provided, that the Principal Stockholders shall provide
Buyer with a reasonable opportunity and length of time to review such
Pre-Closing Tax Returns prior to filing, and provided further, that if the Buyer
determines to make the 338(h)(10) Election, the Buyer
28
may revise, to the extent permitted by law, such proposed Pre-Closing Tax
Returns to the extent the provisions thereof affect the 338(h)(10) Election (in
Buyer's reasonable judgment) ("338-Related Changes"). The Stockholders shall be
responsible for all Pre-Closing Taxes as determined in the Pre-Closing Tax
Returns, except as provided in Section 5.4(b). Each such Tax Return shall be
based on the same tax accounting methods and elections as used for the Company's
taxable year immediately preceding the year of such tax return, except as
otherwise required by law or as agreed upon by Buyer and the Stockholders. The
Buyer shall provide the Stockholders or the Stockholders' Representative
reasonable access to the applicable books and records of the Company and the
applicable accountant work papers (to the extent such work papers are available
or such accounting firm consents to such review) reasonably required in
connection with the preparation of such Tax Returns. A photocopy of each such
proposed Tax Return shall be furnished to the Buyer at least 30 calendar days
before the due date (including any extensions) for filing the Tax Return.
5.6 VITALCHEK OFFICES. Unless the Principal Stockholders and Buyer
jointly agree that it would be in the best interests of the Company to move its
principal executive and operational offices ("Offices") outside of the greater
Nashville, Tennessee area ("Nashville"), Buyer and Parent shall cause the
Company to retain its Offices in or around Nashville at least until June 30,
2006.
5.7 RIGHT OF FIRST REFUSAL. For a period of three (3) years
following the Closing, if Buyer or Parent (or any affiliate thereof): (a)
considers selling all or any portion of the Owned Real Property ("Offered
Property") to any Person not affiliated with Parent, or (b) has a bona fide
third party offer to sell the Offered Property to any Person not affiliated with
Parent, the Principal Stockholders shall be given reasonable advance written
notice of such matter, and in the case of (b) above shall have the right to
purchase such Offered Property on the same terms. The parties shall cooperate
and communicate in good faith in carrying out the terms of this provision.
5.8 MISCELLANEOUS. The suites at the sports facilities of
Vanderbilt University and University of Tennessee previously utilized by the
Company shall not be obligations of the Company, Parent or Buyer after the
Closing Date.
ARTICLE VI
CONDITIONS TO CLOSING
6.1 CONDITIONS TO EACH PARTY'S OBLIGATION.The respective
obligations of each party to effect the transactions contemplated hereby are
subject to the satisfaction or waiver prior to the Closing Date of the following
conditions:
(a) No Legal Prohibition. No statute, rule, regulation or
order shall be enacted, promulgated, entered or enforced by any court or
governmental authority which would prohibit consummation by such party of the
transactions contemplated hereby; and
29
(b) No Injunction. Such party shall not be prohibited by
any order, ruling, consent, decree, judgment or injunction of a court or
regulatory agency of competent jurisdiction from consummating the transactions
contemplated hereby.
6.2 CONDITIONS TO OBLIGATION OF THE BUYER. The obligation of the
Buyer to effect the transactions contemplated hereby shall be subject to the
satisfaction or waiver, prior to or at the Closing, of the following conditions:
(a) Representations, Warranties and Covenants. Except as
expressly contemplated by this Agreement, the representations and warranties of
each Company and the Stockholders contained in this Agreement shall be true and
correct in all material respects (except representations and warranties
qualified as to materiality or knowledge, which shall be true and correct in all
respects) on and as of the Closing Date with the same force and effect as though
made on and as of the Closing Date. Each Company and each Stockholder shall have
performed and complied with all applicable covenants and agreements required by
this Agreement to be performed or complied with by it or him/her on or prior to
the Closing Date.
(b) Approvals. All Governmental Consents (including
without limitation the H-S-R Approval) and Third-Party Consents set forth on
Disclosure Schedule ss. 2.5 and ss. 5.2 shall have been obtained in form and
substance reasonably satisfactory to the Buyer.
(c) Existing Indebtedness. The Company shall not have any
outstanding indebtedness on the Closing Date, except trade payables, in each
case only if and to the extent such items are reflected in the Financial
Statements or disclosed in Disclosure Schedule ss. 6.2(c).
(d) Approvals of Boards of Directors. The Board of
Directors of VitalChek and VitalChek Canada and the Board of Directors of Buyer
each must approve this Agreement and the transactions contemplated hereby.
(e) Absence of Adverse Changes. Since the date of the
Reference Balance Sheet, the Company shall not have suffered any Material
Adverse Effect in its Business, operations, assets, financial condition, results
of operations or prospects;
(f) Delivery of Documents. On the Closing Date, the
Stockholders and the Company (as applicable) shall have executed, as required,
and delivered to Buyer all of the following:
(i) Stock Purchase Agreement: this Agreement;
(ii) Stock Certificates: the certificates for all
of the Shares, together with required instruments of conveyance including
executed stock powers and similar instruments required to convey, transfer,
assign and deliver the same to Buyer, endorsed in blank or with an executed
blank transfer power attached, and with all necessary transfer tax stamps
attached thereto;
(iii) Escrow Agreement: the Escrow Agreement;
30
(iv) Officer's Certificates: a certificate of the
Chief Executive Officer and the Chief Financial Officer of each of VitalChek and
VitalChek Canada substantially in the form of Exhibit B
hereto;
(v) Secretary's Certificates: a certificate of
the corporate Secretary of each of VitalChek and VitalChek Canada substantially
in the form set forth in Exhibit C attached hereto, dated the Closing Date,
attaching and certifying: (a) the incumbency of each Company's executive
officers, (b) each Company's Articles of Incorporation (certified also by the
Secretary of State of Tennessee and Delaware, as applicable, together with a
current good standing certificate), (c) each Company's Bylaws, and (d) the
resolutions of the each Company's Board of Directors properly authorizing the
transactions contemplated by this Agreement;
(vi) Consents: all written Third Party Consents
and Governmental Consents;
(vii) Intellectual Property Assignment: an
assignment and release agreement by certain persons selected by Buyer to provide
for assignment and release of any and all intellectual property rights related
to the Assets and the Business to the Company, substantially in the form set
forth in Exhibit D hereto;
(viii) Legal Opinion: a legal opinion from Xxxxx
Xxxxxxx LLP to Buyer, in the form attached as Exhibit E hereto;
(ix) Covenant Not to Compete: a Covenant Not to
Compete from certain of the Stockholders, substantially in the form set forth in
Exhibit F hereto;
(x) Employment and Consulting Agreements: the
employment agreements between VitalChek and Xxxxxxx X. Xxxxxxx, Xxxxxx X.
Xxxxxxx, Xxxxxxx X. Xxxxx, Xxxxxxx X. Xxxxx, H. Xxxxxx Xxxxxx III, Xxxxx X.
Xxxxxxxx, J. Xxxx Xxxx, Xxxxx Xxxx, Xxxxx Xxxxx, T. Xxxxxxx Xxxxxxxxxx and
Xxxxxxxxxxx Xxxxxxxxx, and the consulting agreement between Buyer and H. Xxxxxxx
Xxxxxxx (the "Key Officer Employment and Consulting Agreements");
(xi) Resignations: resignations of all officers
and directors of VitalChek and VitalChek Canada;
(xii) Stock Minute Books: all original record
books, minute books, stock ledgers, seals and all other records of VitalChek and
VitalChek Canada;
(xiii) Tax Elections: the Form and all other
documents, elections, agreements, opinions and instruments related to the
338(h)(10) Election (as set forth in Sections 2.8 and 5.4 hereof) and as
required under the Code;
(xiv) Stock Restriction Agreement; Stock
Restriction and Redemption Agreement: all documents necessary to evidence and
provide for the waiver and/or termination of the Stock Restriction Agreement
dated August 1, 1988 and Stock Restriction and Redemption Agreement dated August
23, 1996;
31
(xv) Trustee Replacement: resolutions of
VitalChek's Board of Directors authorizing and directing the replacement of the
current trustees under the Company's Defined Benefit Plan with Xxxx Xxxx, which
resolution shall be effective as of the Effective Date, and resignation of the
current trustees of the Defined Benefit Plan, effective as of the Effective
Date; and
(xvi) Other Instruments: all other documents,
certificates and instruments as shall be required to transfer and vest
effective, good, valid and marketable title in the Shares to Buyer as
contemplated by this Agreement, and otherwise as may be reasonably requested by
Buyer.
(g) Working Capital Position. The Working Capital (as
defined herein) of the Company as of the Closing Date shall be no less than Two
Million Four Hundred Thirty-Five Thousands Dollars ($2,435,000). For purposes
hereof, "Working Capital" shall be calculated as follows: current assets
(including but not limited to cash, cash equivalents, marketable securities and
accounts receivable no greater than 90 days old) less current liabilities
(including the amount set forth in Section 5.3(b) hereof, but excluding the
amounts set forth in Section 5.3(c) hereof), as of the Closing Date, prepared in
accordance with GAAP. Buyer shall determine the Working Capital (with good faith
cooperation from the Company and the Stockholders) prior to the Closing Date.
(h) Receipt of Financial Statements. Receipt by Buyer of
the Financial Statements of the Company, prepared by Ernst & Young.
6.3 CONDITIONS TO OBLIGATION OF STOCKHOLDERS. The obligation of
the Stockholders and the Company to effect the transactions contemplated hereby
shall be subject to the satisfaction or waiver, prior to or at the Closing, of
the following conditions:
(a) Representations, Warranties and Covenants. Except as
expressly contemplated by this Agreement, the representations and warranties of
the Buyer and Parent contained in this Agreement shall be true and correct in
all material respects (except representations and warranties qualified as to
materiality or knowledge, which shall be true and correct in all respects) on
and as of the Closing Date with the same force and effect as though made on and
as of the Closing Date. The Buyer and Parent shall have performed and complied
with all covenants and agreements required by this Agreement to be performed or
complied with by the Buyer and Parent on or prior to the Closing Date.
(b) Approvals. All Governmental Consents and Third Party
Consents set forth on Disclosure Schedule ss. 2.5 shall have been obtained in
form and substance reasonably satisfactory to the Stockholders.
(c) Delivery of Documents and Payment of Purchase Price.
On the Closing Date, Buyer and Parent (as applicable) shall have executed, as
required, and delivered to Stockholders all of the following:
(i) Stock Purchase Agreement: this Agreement;
32
(ii) Escrow Agreement: the Escrow Agreement;
(iii) Officer's Certificates: a certificate of the
General Counsel and Secretary of Buyer and Parent substantially in the form of
Exhibit G hereto;
(iv) Secretary's Certificate: a certificate of
Buyer's Secretary substantially in the form set forth in Exhibit H attached
hereto, dated the Closing Date, attaching and certifying: (1) the incumbency of
certain of Buyer's officers, and (2) the resolutions of the Buyer's Board of
Directors properly authorizing the transactions contemplated by this Agreement;
(v) Employment and Consulting Agreements: the
Key Officer Employment and Consulting Agreements; and
(vi) Payment of Purchase Price: the Purchase
Price shall have been paid and funded as set forth herein.
(vii) Legal Opinion: a legal opinion from Hunton &
Xxxxxxxx to the Stockholders and the Company, in the form attached as Exhibit I
hereto.
ARTICLE VII
INDEMNIFICATION
7.1 INDEMNIFICATION BY PRINCIPAL STOCKHOLDERS. The Principal
Stockholders hereby agree to jointly and severally defend, indemnify and hold
harmless Buyer, Parent and their respective directors, officers, employees,
agents, successors, assigns and affiliates (collectively, the "Buyer Indemnified
Parties") from and against any and all claims, losses, liabilities, damages,
deficiencies, assessments, judgments, actions, suits, proceedings, demands,
costs and expenses, including reasonable attorneys' fees (both those incurred in
connection with the defense or prosecution of the indemnifiable claim and those
incurred in connection with the enforcement of this Article VII) (a "Buyer Loss"
or collectively, "Buyer Losses"), directly or indirectly caused by, resulting
from or arising out of:
(a) any misrepresentation or breach of any
representations or warranties under this Agreement or any certificate or
instrument delivered in connection herewith by the Company or any Stockholder;
(b) any breach or failure by the Company or any
Stockholder to perform or otherwise fulfill any covenant, undertaking, agreement
or obligation hereunder; or
(c) fraud or intentional misrepresentation;
provided, however, that if any Buyer Loss shall be asserted in respect of which
a Buyer Indemnified Party proposes to demand indemnification hereunder ("Buyer
Indemnified Claims"), Buyer or such other Buyer Indemnified Party shall notify
the Stockholders' Representative thereof; provided further, however, that the
failure to so notify the Stockholders' Representative
33
shall not reduce or affect their obligations with respect thereto except to the
extent that the Principal Stockholders are prejudiced thereby. Subject to
liability therefor, at their own respective costs, the Principal Stockholders
(through the Stockholders' Representative) shall have the right promptly upon
receipt of such notice to participate in the defense, compromise or settlement
of any such Buyer Indemnified Claims (provided that any compromise or settlement
must be reasonably approved in writing by both parties, in good faith reasonable
cooperation, which approval shall not be unreasonably withheld or delayed),
including, at its own expense, employment of counsel reasonably satisfactory to
Buyer; provided, however, that if the Principal Stockholders (through the
Stockholders' Representative) shall have exercised their respective rights to
join in such defense, Buyer may, in its sole discretion and at its expense,
employ counsel to represent it separately (in addition to counsel employed by
the Principal Stockholders) in any such matter. In all such matters, the
Principal Stockholders and Buyer (and their respective legal counsel) shall
cooperate in good faith in such defense, compromise or settlement. If a bona
fide, firm written offer to such Principal Stockholders is made to settle any
Buyer Indemnified Claim (a "Buyer Settlement Offer"), such Principal
Stockholders promptly shall provide Buyer with full written details of such
Buyer Settlement Offer. If the Buyer Settlement Offer: (x) is bona fide and
reasonable in the good faith judgment of both parties and does not propose that
any amounts are to be paid or other consideration is to be given by or on behalf
of Buyer, (y) the Principal Stockholders propose to accept such Buyer Settlement
Offer, and (z) Buyer refuses to consent to such Buyer Settlement Offer, then (i)
the Principal Stockholders shall be excused from, and the Buyer shall be solely
responsible for, all further defense of such third party claim, demand, action
or proceeding; (ii) the maximum liability of the Principal Stockholders relating
to such Buyer Indemnified Claim shall be the amount of the proposed Buyer
Settlement Offer (subject to Section 7.3(b) hereof), and (iii) Buyer shall pay
all attorneys' fees and legal costs and expenses incurred by Buyer after
rejection of such Stockholder Settlement Offer.
7.2 INDEMNIFICATION BY BUYER AND PARENT. Buyer and Parent hereby
agree to defend, indemnify and hold harmless the Stockholders (collectively,
"Seller Indemnified Parties") from and against any and all claims, losses,
liabilities, damages, deficiencies, assessments, judgments, costs and expenses,
including reasonable attorneys' fees (both those incurred in connection with the
defense or prosecution of the indemnifiable claim and those incurred in
connection with the enforcement of this Article VII) ("Seller Loss" and
collectively, "Seller Losses"), directly or indirectly resulting from or arising
out of:
(a) any misrepresentation or breach of any
representations or warranties under this Agreement or any certificate or
instrument delivered in connection herewith by Buyer;
(b) any breach or failure by the Buyer or Parent to
perform or otherwise fulfill any covenant, undertaking, agreement or obligation
hereunder;
(c) fraud or intentional misrepresentation;
provided, however, that if any claim, liability, demand, assessment, action,
suit or proceeding shall be asserted in respect of which a Seller Indemnified
Party proposes to demand indemnification ("Seller Indemnified Claims"),
Stockholder or such other Seller Indemnitee shall
34
notify Buyer thereof; provided further, however, that the failure to so notify
Buyer shall not reduce or affect Buyer's obligations with respect thereto except
to the extent that Buyer is prejudiced thereby. Subject to rights of or duties
to any insurer or other third Person having liability therefor, Buyer shall have
the right promptly upon receipt of such notice to participate in the defense,
compromise or settlement of any such Seller Indemnified Claims (provided that
any compromise or settlement must be reasonably approved in writing by both
parties, in good faith reasonable cooperation, which approval shall not be
unreasonably withheld or delayed), including, at its own expense, employment of
counsel reasonably satisfactory to Buyer; provided, however, that if Buyer shall
have exercised its right to participate in such actions as set forth above, the
Stockholder may, in its sole discretion and at its expense, employ counsel to
represent it (in addition to counsel employed by Buyer) in any such matter, and
in such event counsel selected by Buyer shall be required to cooperate with such
counsel of such Stockholder in such defense, compromise or settlement. If a bona
fide, firm written offer to the Buyer is made to settle any Seller Indemnified
Claim (a "Seller Settlement Offer"), the Buyer promptly shall provide the
Principal Stockholders with full written details of such Buyer Settlement Offer.
If the Seller Settlement Offer (x) is bona fide and reasonable in the good faith
judgment of both parties and does not propose that any amounts are to be paid or
other consideration is to be given by or on behalf of Principal Stockholders,
(y) the Buyer proposes to accept such Seller Settlement Offer, and (z) Principal
Stockholders refuse to consent to such Seller Settlement Offer, then (i) the
Buyer shall be excused from, and the Principal Stockholders shall be solely
responsible for, all further defense of such third party claim, demand, action
or proceeding; (ii) the maximum liability of the Buyer relating to such Seller
Indemnified Claim shall be the amount of the proposed Seller Settlement Offer,
and (iii) Buyer shall pay all attorneys' fees and legal costs and expenses
incurred by Buyer after rejection of such Seller Settlement Offer.
7.3 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
(a) The covenants and agreements contained in Article V
of this Agreement ("Covenants") shall survive the Closing Date without
limitation. The representations and warranties in Articles II, III and IV and
elsewhere contained herein (the "Representations") shall survive the Closing
Date for a period of twenty-four (24) months (the "Survival Period"), except (a)
the Representations contained in Sections 2.1, 2.2, 2.4, 2.8, 2.9, 2.14 and 3.1
(collectively, the "Class I Representations") shall survive for the Survival
Period or until any applicable statute of limitations expires, whichever is
longer, and (b) the Representations contained in Sections 2.13 and 3.3 shall
survive the Closing indefinitely. A Buyer Indemnified Party's or Seller
Indemnified Party's claim for indemnification under Section 7.1 or 7.2 for a
breach of any Representations shall be made on or prior to the date, if any, on
which the survival period for such Representation expires, it being understood
that claims made on or prior to such expiration date shall survive such
expiration date and claims made after such expiration date shall be barred.
(b) Limitations on Indemnification. Notwithstanding
anything in this Article VII to the contrary, the Principal Stockholders shall
not be liable under the indemnity provisions of Section 7.1 hereof in any
instance and in the aggregate until such time as the liability under such
section exceeds Five Hundred Thousand Dollars ($500,000) (the "Basket"), in
which event the Principal Stockholders shall be liable to the Buyer for all
amounts in excess of
35
the Basket, provided that notwithstanding the above, the Principal Stockholders
shall be liable for the entire amount of any indemnifiable claim that causes the
Basket amount to be exceeded, provided further, that the Basket shall not be
applicable to any and all Buyer Loss resulting from breaches of any Class I
Representations or Sections 2.13 or 3.3. Notwithstanding the above, the
Principal Stockholders' indemnification obligations under Article VII for
breaches of Representations shall be limited to an amount equal to Forty Million
Dollars ($40,000,000) (the "Cap"), provided, that the Cap shall not be
applicable to breaches of any Class I Representations or Sections 2.13 or 3.3.
This Section 7.3 and the Basket and the Cap shall not be applicable to
indemnification obligations based on breaches of any of the Covenants in Article
V hereof. No party shall be liable under Article VII hereof for incidental,
indirect, special or consequential damages, or for lost profits or lost
opportunity costs.
7.4 DISPUTE RESOLUTION; REMEDIES. In the event of a
dispute between the Buyer and the Principal Stockholders with respect to any
Escrow Claim or the Escrow Document (each as defined in the Escrow Agreement) or
otherwise with respect to any proposed release of the Escrow Funds or Escrow
Documents thereunder (as set forth in Section 1.7(a) hereof and in the Escrow
Agreement), such parties agree to attempt to resolve such dispute through good
faith communication and cooperation for a period of ten (10) calendar days (the
"Resolution Period"). If such dispute cannot be resolved during the Resolution
Period, the parties may pursue all available legal and equitable remedies as
provided in this Agreement. The provisions of this Article VII (together with
any applicable equitable relief, including injunctions) shall constitute the
exclusive remedy for the breach or alleged breach of covenants, agreements,
representations or warranties set forth in this Agreement or in the other
Transaction Documents, as set forth in this Article VII.
ARTICLE VIII
GENERAL PROVISIONS
8.1 RULES OF CONSTRUCTION.
(a) Knowledge. Where a representation or warranty is
stated to be based on the "knowledge of the Company" or any similar phrase, such
phrase shall mean the actual knowledge, without investigation, of: Xxxxxxx X.
Xxxxxxx, H. Xxxxxxx Xxxxxxx, Xxxxxx X. Xxxxxxx, Xxxxxxx X. Xxxxx, Xxxxxxx X.
Xxxxx, H. Xxxxxx Xxxxxx III, Xxxxx X. Xxxxxxxx, J. Xxxx Xxxx, Xxxxx Xxxx, Xxxxx
Xxxxx, T. Xxxxxxx Xxxxxxxxxx and/or Xxxxxxxxxxx Xxxxxxxxx, each in their
capacities as stockholders, officers, employees and/or directors of the Company
(as applicable).
(b) Material Adverse Effect. "Material Adverse Effect"
shall mean a material adverse effect on the assets, business, properties,
operations, financial condition, results of operations, liabilities or prospects
of the Business or the Company in any respect, either within the vital records
division of the Company itself or the Company taken as a whole.
(c) Person. "Person" shall mean any individual person,
corporation, general or limited partnership, limited liability company or any
other entity or association.
36
(d) Headings. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
(e) Severability. If any provision of this Agreement, or
the application thereof to any Person, place or circumstance, shall be held by a
court of competent jurisdiction to be illegal, invalid, unenforceable or void,
then such provision shall be enforced to the extent that it is not illegal,
invalid, unenforceable or void, and the remainder of this Agreement, as well as
such provision as applied to other Persons, places or circumstances, shall
remain in full force and effect.
8.2 NOTICES. All notices, demands, or other communications to be
given or delivered under or by reason of the provisions of this Agreement will
be in writing and shall be deemed to have been duly given or delivered when (i)
delivered personally, (ii) sent by telephone facsimile transmission or (iii)
sent via a nationally recognized overnight courier to the recipient for next
business day delivery. Such notices, demands and other communications will be
sent to the address indicated below:
If to the Company or the Stockholders: with a copy to:
Vital Chek Network, Inc. Xxxxx Xxxxxxx LLP
0000 Xxxxxxx Xxxx 1251 Avenue of the Americas
Xxxxxxxxx, Xxxxxxxxx 00000 Xxx Xxxx, Xxx Xxxx 00000
Attention: H. Xxxxxxx Xxxxxxx Attention: Xxxxxxx Hirschbeg, Esq.
Facsimile: 000-000-0000 Facsimile 000-000-0000
If to the Buyer or Parent: with a copy to:
ChoicePoint Services Inc. Hunton & Xxxxxxxx
c/o ChoicePoint Inc. Bank of America Plaza--Suite 4100
1000 Xxxxxxxx Dr. 000 Xxxxxxxxx Xx., XX
Xxxxxxxxxx, XX 00000 Xxxxxxx, Xxxxxxx 00000-0000
Attention: J. Xxxxxxx xx Xxxxx, General Counsel Attention: Xxxxxx X. Xxxxxxx
Facsimile: 000-000-0000 Facsimile: 000-000-0000
or to such other address as any party may specify by notice given to the other
party in accordance with this Section 9.2. The date of giving any such notice
shall be (i) the date of hand delivery, (ii) the date sent by telephone
facsimile if a business day or the first business day thereafter or (iii) the
business day after delivery to the overnight courier service.
8.3 GOVERNING LAW. The internal law, without regard to conflicts
of laws principles, of the State of Georgia will govern all questions concerning
the construction, validity and interpretation of this Agreement and the
performance of the obligations imposed by this Agreement. Except as otherwise
provided in this Agreement, and to the extent permitted by law, the parties
hereto agree that all actions or proceedings arising in connection with this
Agreement shall be tried and litigated only in the State and Federal courts
located in the State of Georgia. The parties, to the extent they may legally do
so, waive any right each may have to assert the doctrine of forum non conveniens
or to object to venue to the extent any proceeding is brought in
37
accordance with this section and stipulate that the State and Federal Courts
located in the State of Georgia shall have in personam jurisdiction and venue
over such party for the purpose of litigating any such dispute, controversy, or
proceeding arising out of or related to this Agreement. To the extent permitted
by law, service of process, sufficient for personal jurisdiction in any action
hereunder may be made by registered or certified mail, return receipt requested,
to its address indicated in this Agreement. Each party hereto agrees that any
final judgment rendered against it/him in any action or proceeding shall be
conclusive as to the subject of such final judgment and may be enforced in other
jurisdictions in any manner provided by law.
8.4 ENTIRE AGREEMENT. This Agreement (including attached exhibits
and schedules) and the Mutual Non-Disclosure and Limited Use Agreement, dated as
of March 1, 2002, by and between Parent and the Company constitute the entire
agreement among the parties with respect to the subject matter of this Agreement
and supersede any prior agreement or understanding, whether written and oral,
among the parties or between any of them with respect to the subject matter of
this Agreement. There are no representations, warranties, covenants, promises or
undertakings, other than those expressly set forth or referred to herein.
8.5 AMENDMENT; WAIVER. This Agreement may be amended, modified or
waived only by a written agreement signed by Parent, Buyer, the Company and the
Stockholders' Representative. With regard to any power, remedy or right provided
in this Agreement or otherwise available to any party, (i) no waiver or
extension of time shall be effective unless expressly contained in a writing
signed by the waiving party, (ii) no waiver, alteration, modification or
impairment shall be implied by reason of any previous waiver, extension of time,
delay or omission in exercise or other indulgence (and any such waiver shall be
effective only as to the specific waiver given), and (iii) waiver by any party
of the time for performance of any act or condition hereunder does not
constitute a waiver of the act or condition itself.
8.6 ASSIGNABILITY. Neither the rights nor the obligations of any
party to this Agreement may be transferred or assigned by any party without the
prior written consent of all other parties, provided that Buyer may assign all
or any of its rights or obligations hereunder to any affiliate of the Buyer but
in such case neither Parent nor Buyer shall be relieved of its obligations
hereunder. Any purported assignment of this Agreement or any of the rights and
obligations hereunder shall be null, void and of no effect.
8.7 BINDING EFFECT. This Agreement shall be binding upon and shall
inure to the benefit of the parties and their respective successors and, if
applicable, permitted assigns.
8.8 THIRD-PARTY BENEFICIARIES. Each party intends that this
Agreement shall not benefit or create any right or cause of action in any Person
other than the parties hereto.
8.9 COUNTERPARTS. This Agreement may be executed in one or more
counterparts and by facsimile, each of which shall constitute an original but
when taken together shall constitute but one instrument.
38
8.10 EXPENSES. Each party to this Agreement shall bear all of its
own expenses in connection with the execution, delivery and performance of this
Agreement and the transactions contemplated hereby, including without limitation
all fees and expenses of its agents, representatives, counsel and accountants,
provided that (i) all expenses of the Stockholders and the Company prior to the
Closing shall be borne by such persons, (ii) the Buyer shall pay the filing fees
associated with the filing requirements of the H-S-R Act, and (iii) Buyer shall
pay the costs and expenses of the audits of the Company by Ernst & Young LLP.
8.11 CERTAIN TAXES. Except as provided in Section 5.4 hereof, all
transfer, documentary, sales, use, stamp, registration and other such Taxes and
fees (including any penalties and interest) incurred in connection with this
Agreement (including any Tax imposed in other states, subdivisions or under
foreign law) shall be paid by the party obligated under applicable local law to
pay such Taxes.
8.12 STOCKHOLDERS' REPRESENTATIVE.
(a) By executing and delivering this Agreement, each
Stockholder hereby irrevocably makes, constitutes and appoints H. Xxxxxxx
Xxxxxxx his or her true and lawful agent and attorney-in-fact (the
"Stockholders' Representative") with full power and authority (except as
provided below) to act hereunder in his sole discretion, individually, or
through a duly appointed successor attorney-in-fact, all as hereinafter
provided, in the name of and for and on behalf of the each Stockholder, as fully
as could each such Stockholder if present and acting in person, with respect to
all matters in connection with the consummation of the transactions contemplated
by this Agreement, the sale of the Shares to the Buyer, and the exercise or
waiver of any right and performance of any obligation of the Stockholders in
connection therewith, including, but not limited to, the right, power and
authority to:
(i) amend this Agreement and take all actions as
may be necessary or deemed to be desirable by the Stockholders' Representative
on behalf of the Stockholders, with respect to this Agreement and the
consummation of the transactions contemplated hereby, including, without
limitation, the execution and delivery of certificates, consents, waivers, and
notices on behalf of the Stockholders;
(ii) determine whether the Buyer has performed
its obligations hereunder and whether the conditions to the Stockholders'
obligation to close set forth in Section 6.3 of this Agreement have been
satisfied and to waive any conditions to Closing in his sole discretion;
(iii) retain legal counsel, as appropriate, in
connection with any and all matters referred to herein to represent the
Stockholders in connection with the transactions referred to in this Agreement;
and
(iv) take or cause to be taken any and all
further actions, and execute and deliver or cause to be executed and delivered,
any and all such agreements, instruments, documents, certificates and stock
powers, with such changes as the Stockholders' Representative in his sole
discretion may approve (such approval to be evidenced conclusively by his
signature
39
to this Agreement) as may be necessary or deemed to be desirable by the
Stockholders' Representative, to effectuate, implement and otherwise carry out
the transactions contemplated by this Agreement.
(b) By their execution of this Agreement, each
Stockholder also agrees that:
(i) the Buyer shall be able to rely conclusively
on the instructions given, and decisions made, and other actions taken by the
Stockholders' Representative under this Agreement, and no party under this
Agreement shall have any cause of action against the Buyer for any action taken
by the Buyer in reliance upon the instructions or decisions of the Stockholders'
Representative;
(ii) No Stockholder shall have any cause of
action against the Stockholders' Representative for any action taken, decision
made or instruction given by the Stockholders' Representative under this
Agreement, except for fraud by the Stockholders' Representative;
(iii) the provisions of this Section 8.12 are
independent and severable, are irrevocable and coupled with an interest and
shall be enforceable under all circumstances unless prohibited by law;
(iv) the provisions of this Section 8.12 shall be
binding upon and inure to any successor in interest to or permitted assigns of
any Stockholder; and
(v) the authority of the Stockholders'
Representative and any substitute or attorney-in-fact for such Stockholders'
Representative shall survive the Closing and any death or legal disability of
any Stockholder as a power coupled with an interest.
[signatures on following page]
40
IN WITNESS WHEREOF, the parties have caused this Stock Purchase
Agreement to be duly executed as an instrument under seal on the date first
written above.
CHOICEPOINT SERVICES INC.
By: /s/ Xxxx X. Curling
-----------------------------------------
Name: Xxxx X. Curling
Title: President and Chief Operating Officer
CHOICEPOINT INC.
By: /s/ Xxxx X. Curling
-----------------------------------------
Name: Xxxx X. Curling
Title: President and Chief Operating Officer
VITAL CHEK NETWORK, INC.
By: /s/ H. Xxxxxxx Xxxxxxx
-----------------------------------------
Name: H. Xxxxxxx Xxxxxxx
Title: President
VITAL CHEK NETWORK OF CANADA, INC.
By: /s/ H. Xxxxxxx Xxxxxxx
-----------------------------------------
Name: H. Xxxxxxx Xxxxxxx
Title: President
[Stockholder Signatures on Following Page]
41
VITAL CHEK NETWORK, INC.:
STOCKHOLDER STOCKHOLDER
Signature: /s/ Xxxxxxx X. Xxxxxxx Signature: /s/ Xxxxx Xxxxxxx
--------------------------------------- ---------------------------------------
Name: Xxxxxxx X. Xxxxxxx Name: Xxxxx Xxxxxxx
STOCKHOLDER STOCKHOLDER
Signature: /s/ H. Xxxxxxx Xxxxxxx Signature: /s/ Xxxx Xxxxxxxxxx
--------------------------------------- ---------------------------------------
Name: H. Xxxxxxx Xxxxxxx Name: Xxxx Xxxxxxxxxx
STOCKHOLDER STOCKHOLDER
Signature: /s/ Xxxxxxx Xxxxxxx Signature: /s/ Xxxxxx Xxxxxxxxxx
--------------------------------------- ---------------------------------------
Name: Xxxxxxx Xxxxxxx Name: Xxxxxx Xxxxxxxxxx
STOCKHOLDER STOCKHOLDER
Signature: /s/ Xxxxx Xxxxxxx Signature: /s/ Xxxxx Xxxxxxxxxx
--------------------------------------- ---------------------------------------
Name: Xxxxx Xxxxxxx Name: Xxxxx Xxxxxxxxxx
STOCKHOLDER STOCKHOLDER
Signature: /s/ Xxx Xxxxxxx Signature: /s/ Xxxxxxx X. Xxxxx
--------------------------------------- ---------------------------------------
Name: Xxx Xxxxxxx Name: Xxxxxxx X. Xxxxx
STOCKHOLDER STOCKHOLDER
Signature: /s/ Xxxxxx X. Xxxxxxx Signature: /s/ H. Xxxxxx Xxxxxx, III
--------------------------------------- ---------------------------------------
Name: Xxxxxx X. Xxxxxxx Name: H. Xxxxxx Xxxxxx, III
STOCKHOLDER STOCKHOLDER
Signature: /s/ Xxxxx Xxxxxxx Signature: /s/ Xxxx X. Xxxxx
--------------------------------------- ---------------------------------------
Name: Xxxxx Xxxxxxx Name: Xxxx X. Xxxxx
STOCKHOLDER STOCKHOLDER
Signature: /s/ J. Xxxx Xxxx Signature: /s/ Xxxxx Xxxxx
--------------------------------------- ---------------------------------------
Name: J. Xxxx Xxxx Name: Xxxxx Xxxxx
STOCKHOLDER STOCKHOLDER
Signature: /s/ Xxxxx Xxxx Signature: /s/ Xxxxxxx Xxxxxxxx
--------------------------------------- ---------------------------------------
Name: Xxxxx Xxxx Name: Xxxxxxx Xxxxxxxx
STOCKHOLDER STOCKHOLDER
Signature: /s/ Xxxxx Xxxxxxxxx Signature: /s/ T. Xxxxxxx Xxxxxxxxxx
--------------------------------------- ---------------------------------------
Name: Xxxxx Xxxxxxxxx Name: T. Xxxxxxx Xxxxxxxxxx
STOCKHOLDER
Signature: /s/ Xxxxx X. Xxxxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxxxx
VITAL CHEK NETWORK OF CANADA, INC.:
STOCKHOLDER
Signature: /s/ Xxxxxxx X. Xxxxxxx
---------------------------------------
Name: Xxxxxxx X. Xxxxxxx
STOCKHOLDER
Signature: /s/ H. Xxxxxxx Xxxxxxx
---------------------------------------
Name: H. Xxxxxxx Xxxxxxx
[Signature Page to
Stock Purchase Agreement]
42
EXHIBITS
Exhibit A Form of Escrow Agreement
Exhibit B Form of Company Officer's Certificate
Exhibit C Form of Company Secretary's Certificate
Exhibit D Form of IP Transfer and Assignment Agreement
Exhibit E Form of Xxxxx Xxxxxxx LLP Legal Opinion
Exhibit F Form of Covenant Not to Compete
Exhibit G Form of Buyer Officer's Certificate
Exhibit H Form of Buyer Secretary's Certificate
Exhibit I Form of Hunton & Xxxxxxxx Legal Opinion
Schedules and Exhibits intentionally omitted but will be provided upon request.
