Exhibit 2.1
Stock Purchase Agreement
by
U. S. Laboratories Inc., a Delaware corporation ("Buyer")
BTC Laboratories, Inc., a California corporation ("Company")
And
Don L. Bleak and Victoria Y Bleak, Trustees of the Don L. Bleak and
Xxxxxxxx X. Bleak Trust, dated June 24, 1988
and F. L. Franklin (the "Shareholders")
dated
January 3, 2000
Table of Contents
1. PURCHASE AND SALE OF SHARES............................................1
2. PURCHASE PRICE -PAYMENT................................................1
2.1 Purchase Price............................................1
2.2 Payment of Purchase Price.................................1
3. JOINT AND SEVERAL REPRESENTATIONS AND WARRANTIES OF
COMPANY AND SHAREHOLDERS...............................................2
3.1 Corporate.................................................2
3.2 Shareholders..............................................3
3.3 No Violation..............................................4
3.4 Financial Statements......................................4
3.5 Tax Matters...............................................5
3.6 Accounts Receivable.......................................6
3.7 Absence of Certain Changes................................6
3.8 Absence of Undisclosed Liabilities........................7
3.9 No Litigation.............................................7
3.10 Compliance With Laws and Orders...........................8
3.11 Title to and Condition of Properties......................9
3.12 Insurance.................................................10
3.13 Contracts and Commitments.................................11
3.14 Labor Matters.............................................12
3.15 Employee Benefit Plans....................................13
3.16 Employment Compensation...................................16
3.17 Trade Rights..............................................17
3.18 Major Customers and Suppliers.............................17
3.19 Bank Accounts.............................................18
3.20 Affiliates'Relationships to Company.......................18
3.21 No Brokers or Finders.....................................18
3.22 Disclosure................................................18
3.23 Investment Intent.........................................19
4. REPRESENTATIONS AND WARRANTIES OF BUYER................................19
4.1 Corporate.................................................19
4.2 Authority.................................................19
4.3 No Brokers or Finders.....................................19
4.4 Disclosure................................................19
4.5 No Adverse Change.........................................20
4.6 No Litigation.............................................20
4.7 Investment Intent.........................................20
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5. COVENANTS..............................................................20
5.1 Employment Agreement......................................20
5.2 Noncompetition; Confidentiality...........................20
5.3 General Releases..........................................22
5.4 Consents..................................................22
5.5 Other Action..............................................22
5.6 Disclosure Schedule.......................................22
6. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS............................22
6.1 Representations and Warranties True.......................22
6.2 Compliance With Agreement.................................23
6.3 Absence of Litigation.....................................23
6.4 Consents and Approvals....................................23
6.5 Transfer of Assets........................................23
6.6 Estoppel Certificates.....................................23
7. CONDITIONS PRECEDENT TO SHAREHOLDERS'OBLIGATIONS.......................23
7.1 Representations and Warranties True.......................23
7.2 Compliance With Agreement.................................23
7.3 Absence of Litigation.....................................24
7.4 Professional Liability Insurance..........................24
7.5 Consents and Approvals....................................24
8. INDEMNIFICATION........................................................24
8.1 By Shareholders...........................................24
8.2 By Buyer..................................................25
8.3 Indemnification of Third-Party Claims.....................25
8.4 Payment...................................................26
8.5 Insurance Adjustment......................................26
8.6 Indemnification for Environmental Matters.................26
8.7 Limitations on Indemnification............................27
9. CLOSING................................................................28
9.1 Documents to be Delivered by Company and Shareholders.....28
9.2 Documents to be Delivered by Buyer........................29
10. RESOLUTION OF DISPUTES.................................................29
10.1 Arbitration...............................................29
10.2 Arbitrators...............................................30
10.3 Procedures; No Appeal.....................................30
10.4 Authority.................................................30
10.5 Entry of Judgment.........................................30
10.6 Confidentiality...........................................31
10.7 Continued Performance.....................................31
11. MISCELLANEOUS..........................................................31
11.1 Disclosure Schedule.......................................31
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11.2 Further Assurance.........................................31
11.3 Disclosures and Announcements.............................31
11.4 Assignment; Parties in Interest...........................32
11.5 Law Governing Agreement...................................32
11.6 Amendment and Modification................................32
11.7 Notice....................................................32
11.8 Expenses..................................................34
11.9 Entire Agreement..........................................34
11.10 Counterparts..............................................34
11.11 Headings..................................................34
11.12 Glossary of Terms.........................................35
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Disclosure Schedule
Schedule 2.2. (b) - Accounts Receivable
Schedule 3.1. (c) - Foreign Corporation Qualification
Schedule 3.1. (d) - Subsidiaries
Schedule 3.1. (f) - Shareholder List
Schedule 3.3 - Violation, Conflict, Default
Schedule 3.4 - Financial Statements
Schedule 3.5. (b) - Tax Returns (Exceptions to Representations)
Schedule 3.5. (c) - Tax Audits
Schedule 3.5. (d) - Tax, Other
Schedule 3.6 - Accounts Receivable (Aged Schedule)
Schedule 3.7 - Certain Changes
Schedule 3.8 - Off-Balance Sheet Liabilities
Schedule 3.9 - Litigation Matters
Schedule 3.10. (a) - Non-Compliance with Laws
Schedule 3.10. (b) - Licenses and Permits
Schedule 3.10. (c) - Environmental Matters (Exceptions to Representations)
Schedule 3.11 - Liens
Schedule 3.12 - Insurance
Schedule 3.13. (a) - Real Property Leases
Schedule 3.13. (b) - Personal Property Leases
Schedule 3.13. (g) - Collective Bargaining Agreements
Schedule 3.13. (h) - Loan Agreements, etc.
Schedule 3.13. (i) - Guarantees
Schedule 3.13. (k) - Material Contracts
Schedule 3.14 - Labor Matters
Schedule 3.15. (a) - Employee Plans/Agreements
Schedule 3.16 - Employment Compensation
Schedule 3.17 - Trade Rights
Schedule 3.18. (a) - Major Customers
Schedule 3.18. (b) - Major Suppliers
Schedule 3.19 - Bank Accounts
Schedule 3.20. (a) - Contracts with Affiliates
Schedule 3.20. (b) - Affiliate Lease
Schedule 3.20. (c) - Obligations of and to Affiliates
Schedule 4.6 - Buyer Litigation Matters
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Stock Purchase Agreement
This stock purchase agreement (this "Agreement") dated January 3, 2000, by U. S.
Laboratories Inc., a Delaware corporation ("Buyer"), BTC Laboratories, Inc., a
California corporation ("Company"), Don L. Bleak and Xxxxxxxx X. Bleak, Trustees
of the Don L. Bleak and Xxxxxxxx X. Bleak Trust, dated June 24, 1988 and F. L.
Franklin (individually "Shareholder" and together the "Shareholders"), who agree
as follows.
Recitals
A. Company is engaged in the construction inspection and construction materials
engineering and testing laboratory services business (the "Business").
Shareholders own all of the issued and outstanding shares (the "Shares") of
capital stock of Company.
B. Company's facilities consist of approximately 10,000 square feet of office
and laboratory space located at 0000 Xxxxxxx Xxxxxx, Xxxxxxx, XX (the
"Facilities").
C. Buyer desires to purchase the Shares from Shareholders and Shareholders
desire to sell the Shares to Buyer, upon the terms and conditions herein set
forth.
Agreement
1. PURCHASE AND SALE OF SHARES
Subject to the terms and conditions of this Agreement, on the Closing Date (as
hereinafter defined) Shareholders will sell to Buyer and Buyer will purchase
from Shareholders all of the Shares.
2. PURCHASE PRICE - PAYMENT
2.1 Purchase Price.
The purchase price (the "Purchase Price") payable for the Shares is one million
two hundred thousand dollars ($1,200,000). All payments of Purchase Price will
be made for pro rata distribution among the Shareholders in accordance with
their respective shareholdings in the Company.
2.2 Payment of Purchase Price.
The Purchase Price will be paid by Buyer as follows:
2.2.(a) Cash to Shareholders. At the Closing, Buyer will deliver to
the Shareholders the sum of five hundred thousand dollars ($500,000).
2.2.(b) Accounts Receivable. Buyer will pay to Shareholders cash equal
to the collections of accounts receivable and work in progress shown in the
Closing Balance Sheet during the six months immediately following the
Closing
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up to a maximum amount of seven hundred thousand dollars ($700,000).
Buyer's payments will be made as follows: (i) an initial payment of one
hundred fifty thousand dollars ($150,000) made three business days
following the end of the three-month period after this Agreement's date and
(ii) the balance will be paid three business days following the end of the
six-month period after this Agreement's date. Buyer will issue a promissory
note in the form of Exhibit A for payment of Buyer's obligations under this
Section 2.2.(b). If the collections are less than seven hundred thousand
dollars ($700,000), Buyer will offset the Note in the amount of the
shortfall and assign Seller the accounts receivable and work in progress
that have not been collected from the Closing Balance Sheet.
2.2.(c) Minimum Net Asset Value. The Purchase Price will be adjusted
if the Company's Net Asset Value (defined below) as reflected in the Recent
Balance Sheet is less than four hundred seventy three thousand two hundred
sixty nine dollars ($473,269). Buyer will reduce the payment in Section
2.2.(b) by one dollar for each dollar that the Net Asset Value as reflected
in the Closing Balance Sheet (as defined in section 3.4) is less than four
hundred seventy three thousand two hundred sixty nine dollars ($473,269).
Net Asset Value means the Company's total assets less total liabilities as
reflected in the Closing Balance Sheet.
2.2.(d) Method of Payment. All payments under this Section 2.2 will be
made in the form of certified or bank cashier's check payable to the order
of the recipient.
3. JOINT AND SEVERAL REPRESENTATIONS AND WARRANTIES OF COMPANY AND
SHAREHOLDERS
Company and Shareholders, jointly and severally, make the following
representations and warranties to Buyer, each of which is true and correct on
this Agreement's date, and is unaffected by any investigation made by Buyer, or
any knowledge of Buyer other than as specifically disclosed in the Disclosure
Schedule delivered to Buyer at the time of this Agreement's execution and no
later than five (5) business days following this Agreement's execution, and will
survive the Closing of the transactions provided for in this Agreement.
3.1 Corporate.
3.1.(a) Organization. Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of California.
3.1.(b) Corporate Power. Company has all requisite corporate power and
authority to own, operate and lease its properties and to carry on its
business as and where it is now being conducted.
3.1.(c) Qualification. Company is duly licensed or qualified to do
business as a foreign corporation, and is in good standing, in each
jurisdiction
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where the character of the properties owned or leased by it, or the nature
of its business, makes licensing or qualification necessary. The states in
which Company is licensed or qualified to do business are listed in
Schedule 3.1.(c).
3.1.(d) Subsidiaries. Company does not own any interest in any
corporation, partnership or other entity.
3.1.(e) Corporate Documents, etc. The copies of the Articles of
Incorporation and By-Laws of the Company, including any amendments, which
have been delivered by Shareholders to Buyer are true, correct, and
complete copies of these instruments as presently in effect. The corporate
minute book and stock records of the Company that have been furnished to
Buyer for inspection are true, correct, and complete and accurately reflect
all material corporate action taken by the Company. The directors and
officers of the Company are listed in Schedule 3.1.(e).
3.1.(f) Capitalization of the Company. The authorized capital stock of
the Company consists entirely of 1,000,000 shares of common stock, no par
value. No shares of such capital stock are issued or outstanding except for
295,658 shares of common stock of the Company that are owned of record and
beneficially by Shareholders in the respective numbers set forth in
Schedule 3.1.(f). All shares of capital stock of the Company are validly
issued, fully paid, and nonassessable. Except as set forth on Schedule 3.1.
(f), there are no (a) securities convertible into or exchangeable for any
of the Company's capital stock or other securities, (b) options, warrants,
or other rights to purchase or subscribe to capital stock or other
securities of the Company or securities which are convertible into or
exchangeable for capital stock or other securities of the Company, or (c)
contracts, commitments, agreements, understandings, or arrangements of any
kind relating to the issuance, sale, or transfer of any capital stock or
other equity securities of the Company, any convertible or exchangeable
securities or any options, warrants, or other rights.
3.2 Shareholders.
3.2.(a) Power. Each Shareholder has full power, legal right and
authority to enter into, execute, and deliver this Agreement and the other
agreements, instruments, and documents contemplated hereby (such other
documents sometimes referred to herein as "Ancillary Instruments"), and to
carry out the transactions contemplated hereby.
3.2.(b) Authorization. The execution and delivery of this Agreement
and the Ancillary Instruments, and full performance under these documents,
have been duly authorized by the respective boards of directors, and no
other or further corporate act on the part of any Shareholder is necessary.
3.2.(c) Validity. This Agreement has been duly and validly executed
and delivered by each Shareholder and is, and when executed and delivered
with
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each Ancillary Instrument will be, the legal, valid, and binding obligation
of Shareholder, enforceable in accordance with its terms, except as may be
limited by bankruptcy, insolvency, reorganization or other laws affecting
creditors' rights generally, and by general equitable principles.
3.2.(d) Title. Each Shareholder has, and at Closing Buyer is
receiving, good and marketable title to the Shares to be sold by
Shareholder, free and clear of all Liens (as defined in Section 3.11)
including, without limitation, voting trusts or agreements, proxies,
marital, or community property interests.
3.3 No Violation.
Except as set forth on Schedule 3.3, neither the execution and delivery of this
Agreement or the Ancillary Instruments nor the consummation by Company and
Shareholders of the contemplated transactions (a) will violate any statute, law,
ordinance, rule, or regulation (collectively, "Laws") or any order, writ,
injunction, judgment, plan, or decree (collectively, "Orders") of any court,
arbitrator, department, commission, board, bureau, agency, authority,
instrumentality or other body, whether federal, state, municipal, foreign, or
other (collectively, "Government Entities"), (b) will require any authorization,
consent, approval, exemption, or other action by or notice to any Government
Entity (including, without limitation, under any "plant-closing" or similar
law), or (c) subject to obtaining the consents referred to in Schedule 3.3, will
violate or conflict with, or constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default) under, or will
result in the termination of, or accelerate the performance required by, or
result in the creation of any Lien upon any of the assets of Company (or the
Shares) under, any term or provision of the Articles of Incorporation or By-Laws
of Company or of any contract, commitment, understanding, arrangement,
agreement, or restriction of any kind or character to which Company or any
Shareholder is a party or by which Company or any Shareholder or any of its or
their assets or properties may be bound or affected.
3.4 Financial Statements.
Included as Schedule 3.4 are true and complete copies of the financial
statements of Company consisting of (i) balance sheets of Company as of
September 30, 1999 (the "Recent Balance Sheet"), 1998 and 1997, and the related
statement of income for the years then ended (including the notes contained
therein or annexed thereto), which financial statements have been compiled by
Xxxxxx, Xxxx & Xxxxxxxx, independent accountants for Company for these years.
Company will provide to Buyer its balance sheet as of December 31, 1999 (the
"Closing Balance Sheet"), and the related unaudited statement of income for the
three months ended December 31, 1999, and for the corresponding period of the
prior year (including the notes and schedules contained therein or annexed
thereto), which financial statements have also been compiled by Xxxxxx, Xxxx &
Xxxxxxxx, no later than February 15, 2000. The Recent Balance Sheet has been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis, except for the omission of cash flows. All of the financial
statements (including all notes and schedules contained therein or annexed
thereto) are true, complete and accurate, have been prepared in accordance with
the books and records of
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Company, and fairly present the assets, liabilities and financial position, and
the results of operations of Company as of the dates and for the years and
periods indicated. If requested by Buyer, the Closing Balance Sheet shall also
be prepared in accordance with generally accepted accounting principles applied
on a consistent basis.
3.5 Tax Matters.
3.5.(a) Provision For Taxes. The provision made for taxes on the
Recent Balance Sheet is sufficient for the payment of all federal, state,
foreign, county, local and other income, ad valorem, excise, profits,
franchise, occupation, property, payroll, sales, use, gross receipts and
other taxes (and any interest and penalties) and assessments, whether or
not disputed, at the date of the Recent Balance Sheet and for all prior
years and periods. Since the Recent Balance Sheet, Company has not incurred
any taxes other than taxes incurred in the ordinary course of business
consistent in type and amount with past practices of Company.
3.5.(b) Tax Returns Filed. Except as set forth on Schedule 3.5.(b),
all federal, state, foreign, county, local, and other tax returns required
to be filed by or on behalf of Company have been timely filed and when
filed were true and correct in all material respects, and the taxes shown
as due thereon were paid or adequately accrued. True and complete copies of
all tax returns or reports filed by Company for each of its three (3) most
recent fiscal years have been delivered to Buyer. Company has duly withheld
and paid all taxes which it is required to withhold and pay relating to
salaries and other compensation heretofore paid to the employees of
Company.
3.5.(c) Tax Audits. The federal and state income tax returns of
Company have been audited by the Internal Revenue Service and appropriate
state taxing authorities for the periods and to the extent set forth in
Schedule 3.5.(c), and Company has not received from the Internal Revenue
Service or from the tax authorities of any state, county, local, or other
jurisdiction any notice of underpayment of taxes or other deficiency which
has not been paid nor any objection to any return or report filed by
Company. There are outstanding no agreements or waivers extending the
statutory period of limitations applicable to any tax return or report.
3.5.(d) Other. Except as set forth in Schedule 3.5.(d), since December
31, 1995, Company has not (i) filed any consent or agreement under Section
341(f) of the Internal Revenue Code of 1986, as amended (the "Code"), (ii)
applied for any tax ruling, (iii) entered into a closing agreement with any
taxing authority, (iv) filed an election under Section 338(g) or Section
338(h)(10) of the Code (nor has a deemed election under Section 338(e) of
the Code occurred), (v) made any payments, or been a party to an agreement
(including this Agreement) that under any circumstances could obligate it
to make payments that will not be deductible because of Section 280G of the
Code, or (vi) been a party to any tax allocation or tax sharing agreement.
The Company is not a "United
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States real property holding company" within the meaning of Section 897 of
the Code.
3.6 Accounts Receivable.
Subject to the best knowledge of Company and Shareholders, all accounts
receivable of Company as of December 31, 1999, and as incurred in the normal
course of business since that date, represent arm's length sales actually made
in the ordinary course of business; are collectible in the ordinary course of
business without the necessity of commencing legal proceedings; are subject to
no counterclaim or setoff; and are not in dispute. Schedule 3.6 contains an aged
schedule of accounts receivable as of December 31, 1999.
3.7 Absence of Certain Changes.
Except as set forth in Schedule 3.7, since the Recent Balance Sheet, there has
not been:
3.7.(a) No Adverse Change. Any adverse change in the financial
condition, assets, liabilities, business, prospects, or operations of
Company;
3.7.(b) No Damage. Any loss, damage or destruction, whether covered by
insurance or not, affecting Company's business or properties;
3.7.(c) No Increase in Compensation. Any increase in the compensation,
salaries, or wages payable or to become payable to any employee or agent of
Company (including, without limitation, any increase or change pursuant to
any bonus, pension, profit sharing, retirement or other plan or
commitment), or any bonus, or other employee benefit granted, made or
accrued;
3.7.(d) No Labor Disputes. Any labor dispute or disturbance, other
than routine individual grievances which are not material to the business,
financial condition or results of operations of Company.
3.7.(e) No Commitments. Any commitment or transaction by Company
(including, without limitation, any borrowing or capital expenditure) other
than in the ordinary course of business consistent with past practice;
3.7.(f) No Dividends. Any declaration, setting aside, or payment of
any dividend or any other distribution in respect of Company's capital
stock; any redemption, purchase, or other acquisition by Company of any
capital stock of Company, or any security relating thereto; or any other
payment to any shareholder of Company as a shareholder;
3.7.(g) No Disposition of Property. Any sale, lease, or other transfer
or disposition of any properties or assets of Company, except for the sale
of inventory items in the ordinary course of business;
3.7.(h) No Indebtedness. Any indebtedness for borrowed money incurred,
assumed, or guaranteed by Company;
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3.7.(i) No Liens. Any mortgage, pledge, lien, or encumbrance made on
any of the properties or assets of Company;
3.7.(j) No Amendment of Contracts. Any entering into, amendment, or
termination by Company of any contract, or any waiver of material rights
thereunder, other than in the ordinary course of business;
3.7.(k) Loans and Advances. Any loan or advance by the Company (other
than advances to employees in the ordinary course of business for travel
and entertainment in accordance with past practice) to any person
including, but not limited to, any Affiliate (for purposes of this
Agreement, the term "Affiliate" will mean and include all Shareholders,
directors and officers of Company; the spouse of any such person; any
person who would be the heir or descendant of any such person if he or she
were not living; and any entity in which any of the foregoing has a direct
or indirect interest, except through ownership of less than 5% of the
outstanding shares of any entity whose securities are listed on a national
securities exchange or traded in the national over-the-counter market);
3.7.(l) Credit. Any grant of credit to any customer or distributor on
terms or in amounts more favorable than those that have been extended to
the customer or distributor in the past, any other change in the terms of
any credit extended, or any other change of Company's policies or practices
with respect to the granting of credit; or
3.7.(m) No Unusual Events. Any other event or condition not in the
ordinary course of business of Company.
3.8 Absence of Undisclosed Liabilities.
Except as specifically disclosed in the Recent Balance Sheet, or in Schedule
3.8, Company does not have any liabilities, commitments, or obligations (secured
or unsecured, and whether accrued, absolute, contingent, direct, indirect or
otherwise) which collectively exceed Five Thousand Dollars ($5,000.00), other
than commercial liabilities and obligations incurred since the date of the
Recent Balance Sheet in the ordinary course of business and consistent with past
practice and none of which has or will have a material adverse effect on the
business, financial condition, or results of operations of Company. Except as
described in the Recent Balance Sheet or in Schedule 3.8, neither Company nor
any Shareholder has knowledge of any basis for the assertion against Company of
any liability and there are no circumstances, conditions, happenings, events, or
arrangements, contractual or otherwise, which may give rise to liabilities,
except commercial liabilities and obligations incurred in the ordinary course of
Company's business and consistent with past practice.
3.9 No Litigation.
Except as set forth in Schedule 3.9 there is no action, suit, arbitration,
proceeding, investigation or inquiry, whether civil, criminal or administrative
("Litigation") pending or, to the best knowledge of the Company or Shareholders,
threatened against Company,
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its directors (in such capacity), its business or any of its assets, nor does
Company or any Shareholder know, or have grounds to know, of any basis for any
Litigation. Schedule 3.9 also identifies all Litigation to which Company or any
of its directors (in such capacity) have been parties since December 31, 1995.
Except as set forth in Schedule 3.9, neither Company nor its business or assets
is subject to any Order of any Government Entity.
3.10 Compliance With Laws and Orders.
3.10.(a) Compliance. Except as set forth in Schedule 3.10.(a), Company
(including each and all of its operations, practices, properties and
assets) is in compliance with all applicable Laws and Orders, including,
without limitation, those applicable to discrimination in employment,
occupational safety and health, trade practices, competition and pricing,
product warranties, zoning, building and sanitation, employment, retirement
and labor relations, product advertising and the Environmental Laws as
defined below. Except as set forth in Schedule 3.10.(a), Company has not
received notice of any violation or alleged violation of, and is subject to
no Liability for past or continuing violation of, any Laws or Orders. All
reports and returns required to be filed by Company with any Government
Entity have been filed, and were accurate and complete when filed. Without
limiting the generality of the foregoing:
(i) The operation of Company's business as it is now conducted
does not, nor does any condition existing at any of the Facilities, in
any manner constitute a nuisance or other tortious interference with
the rights of any person or persons in a manner that gives rise to or
constitutes the grounds for a suit, action, claim, or demand by any
person or persons seeking compensation or damages or seeking to
restrain, enjoin, or otherwise prohibit any aspect of the conduct of
such business or the manner in which it is now conducted.
(ii) Company has made all required payments to its unemployment
compensation reserve accounts with the appropriate governmental
departments of the states where it is required to maintain such
accounts, and each of such accounts has a positive balance.
(iii) Company has made available to Buyer copies of all reports
of Company for the past five (5) years required under the federal
Occupational Safety and Health Act of 1970, as amended, and under all
other applicable health and safety laws and regulations. The
deficiencies, if any, noted on such reports have been corrected.
3.10.(b) Licenses and Permits. Company has all licenses, permits,
approvals, authorizations, and consents of all Government Entities and all
certification organizations required for the conduct of the business (as
presently conducted and as proposed to be conducted) and operation of the
Facilities. All licenses, permits, approvals, authorizations, and consents
are described in Schedule 3.10.(b), are in full force and effect and will
not be affected or made
8
subject to loss, limitation or any obligation to reapply as a result of the
transactions contemplated hereby. Except as set forth in Schedule 3.10. (b)
, Company (including its operations, properties and assets) is and has been
in compliance with all such permits and licenses, approvals, authorizations
and consents.
3.10.(c) Environmental Matters. The applicable Laws relating to
pollution or protection of the environment, including Laws relating to
emissions, discharges, generation, storage, releases, or threatened
releases of pollutants, contaminants, chemicals or industrial, toxic,
hazardous, or petroleum or petroleum-based substances or wastes ("Waste")
into the environment (including, without limitation, ambient air, surface
water, ground water, land surface, or subsurface strata) or otherwise
relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Waste including, without
limitation, the Clean Water Act, the Clean Air Act, the Resource
Conservation and Recovery Act, the Toxic Substances Control Act and the
Comprehensive Environmental Response Compensation Liability Act ("CERCLA"),
as amended, and their state and local counterparts are collectively
referred to as the "Environmental Laws". Without limiting the generality of
the foregoing provisions of this Section 3.10, Company is in full
compliance with all limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules, and timetables
contained in the Environmental Laws or contained in any regulations, code,
plan, order, decree, judgment, injunction, notice, or demand letter issued,
entered, promulgated or approved thereunder. Except as set forth in
Schedule 3.10.(c), there is no Litigation nor any demand, claim, hearing,
or notice of violation pending or threatened against Company relating in
any way to the Environmental Laws or any Order issued, entered,
promulgated, or approved thereunder. Except as set forth in Schedule 3.10.
(c), there are no past or present (or, to the best of Company's and the
Shareholders' knowledge, future) events, conditions, circumstances,
activities, practices, incidents, actions, omissions, or plans that may
interfere with or prevent compliance or continued compliance with the
Environmental Laws or with any Order issued, entered, promulgated or
approved thereunder, or that may give rise to any liability, including,
without limitation, liability under CERCLA or similar state or local Laws,
or otherwise form the basis of any Litigation, hearing, notice of
violation, study or investigation, based on or related to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling, or the emission, discharge, release or threatened release into
the environment, of any Waste.
3.11 Title to and Condition of Properties.
3.11.(a) Marketable Title. Company has good and marketable title to
all of Company's assets, business and properties, including, without
limitation, all such properties (tangible and intangible) reflected in the
Recent Balance Sheet, except for inventory disposed of in the ordinary
course of business since the date of the Recent Balance Sheet, free and
clear of all mortgages, liens, (statutory or
9
otherwise) security interests, claims, pledges, licenses, equities,
options, conditional sales contracts, assessments, levies, easements,
covenants, reservations, restrictions, rights-of-way, exceptions,
limitations, charges or encumbrances of any nature whatsoever
(collectively, "Liens") except those described in Schedule 3.11.(a). Except
as set forth in Schedule 3.11.(a), none of Company's assets, business, or
properties are subject to any restrictions with respect to transferability;
and the Company's title will not be affected in any way by the transactions
contemplated under this Agreement.
3.11.(b) Condition. All property and assets owned or utilized by
Company are in good operating condition and repair, free from any defects
(except minor defects that do not interfere with their use in the conduct
of the normal operations of Company), have been maintained consistent with
the standards generally followed in the industry and as of the Closing, are
sufficient to carry on the business of Company as conducted during the
preceding twelve (12) months. All buildings, plants, and other structures
owned or otherwise utilized by Company are in good condition and repair and
have no structural defects or defects affecting the plumbing, electrical,
sewerage, or heating, ventilating or air conditioning systems.
3.12 Insurance.
Set forth in Schedule 3.12 is a complete and accurate list of all policies of
fire, liability, professional liability, workers compensation, health and other
forms of insurance presently in effect with respect to the business and
properties of Company, true and correct copies of which have been made available
to Buyer. Schedule 3.12 includes, without limitation, the carrier, the
description of coverage, the date of expiration and any pending claims in excess
of $1,000. All these policies are valid, outstanding, and enforceable policies,
and provide insurance coverage for the properties, assets and operations of
Company; and no policy (nor any previous policy) provides for or is subject to
any currently enforceable retroactive rate or premium adjustment, loss sharing
arrangement or other actual or contingent liability arising wholly or partially
out of events arising prior to this Agreement's date. No notice of cancellation
or termination has been received with respect to any policy, and neither Company
nor any Shareholder has knowledge of any act or omission of Company that may
result in cancellation of any policy prior to its scheduled expiration date.
Company has not been refused insurance with respect to any aspect of the
operations of the business nor has its coverage been limited by any insurance
carrier to which it has applied for insurance or with which it has carried
insurance during the last three years. Company has duly and timely made all
claims it has been entitled to make under each policy of insurance. There is no
claim by Company pending under any of these policies as to which coverage has
been questioned, denied, or disputed by the underwriters of these policies, and
neither Company nor any of the Shareholders knows of any basis for denial of any
claim under any policy. Company has not received any written notice from or on
behalf of any insurance carrier issuing any policy that insurance rates therefor
will hereafter be substantially increased (except to the extent that insurance
rates may be increased for all similarly situated risks) or that there will
hereafter be a cancellation or an increase in a deductible (or an increase in
premiums
10
in order to maintain an existing deductible) or nonrenewal of any such policy.
The policies are sufficient in all material respects for compliance by Company
with all requirements of law and with the requirements of all material contracts
to which Company is a party.
3.13 Contracts and Commitments.
3.13.(a) Real Property Leases. Except as set forth in Schedule 3.13.
(a), Company has no leases of real property.
3.13.(b) Personal Property Leases. Except as set forth in Schedule
3.13.(b), Company has no leases of personal property involving
consideration or other expenditure in excess of ten thousand dollars
($10,000).
3.13.(c) Purchase Commitments. Company has no purchase commitments
for supplies that, together with amounts on hand, constitute in excess of
three (3) months normal usage, or which are at an excessive price.
3.13.(d) Sales Commitments. Except as disclosed in Schedule 3.13.(d),
Company has no service contracts or commitments to customers that aggregate
in excess of twenty-five thousand dollars ($25,000) to any one customer (or
group of affiliated customers or distributors). Except as disclosed in
Schedule 3.13.(d), Company has no service contracts or commitments except
those made in the ordinary course of business, at arm's length, and no such
contracts or commitments are for a sales price that would result in a loss
to the Company.
3.13.(e) Contracts With Affiliates and Certain Others. Company has no
agreement, understanding, contract or commitment (written or oral) with any
Affiliate or any employee, agent, consultant, distributor, dealer or
franchisee that is not cancelable by Company on notice of not longer than
thirty (30) days without liability, penalty or premium of any nature or
kind whatsoever.
3.13.(f) Powers of Attorney. The Company has not given a power of
attorney, which is currently in effect, to any person, firm or corporation
for any purpose.
3.13.(g) Collective Bargaining Agreements. Except as set forth in
Schedule 3.13.(g), Company is not a party to any collective bargaining
agreements with any unions, guilds, shop committees or other collective
bargaining groups. Copies of all these agreements have been delivered to
Buyer.
3.13.(h) Loan Agreements. Except as set forth in Schedule 3.13.(h),
Company is not obligated under any loan agreement, promissory note, letter
of credit, or other evidence of indebtedness as a signatory, guarantor or
otherwise.
3.13.(i) Guarantees. Except as disclosed on Schedule 3.13.(i), Company
has not guaranteed the payment or performance of any person, firm or
11
corporation, agreed to indemnify any person or act as a surety, or
otherwise agreed to be contingently or secondarily liable for the
obligations of any person.
3.13.(j) Restrictive Agreements. Company is not a party to nor is it
bound by any agreement requiring Company to assign any interest in any
trade secret or proprietary information, or prohibiting or restricting
Company from competing in any business or geographical area or soliciting
customers or otherwise restricting it from carrying on its business
anywhere in the world.
3.13.(k) Other Material Contracts. Company has no lease, contract, or
commitment of any nature involving consideration or other expenditure in
excess of ten thousand dollars ($10,000) or which is otherwise individually
material to the operations of Company, except as explicitly described in
Schedule 3.13.(k) or in any other Schedule.
3.13.(l) No Default. Company is not in default under any lease,
contract or commitment, nor has any event or omission occurred which
through the passage of time or the giving of notice, or both, would
constitute a default thereunder or cause the acceleration of any of
Company's obligations or result in the creation of any Lien on any of the
assets owned, used or occupied by Company. No third party is in default
under any lease, contract or commitment to which Company is a party, nor
has any event or omission occurred which, through the passage of time or
the giving of notice, or both, would constitute a default thereunder or
give rise to an automatic termination, or the right of discretionary
termination, thereof.
3.14 Labor Matters.
Except as set forth in Schedule 3.14, within the last five years Company has not
experienced any labor disputes, union organization attempts or any work stoppage
due to labor disagreements in connection with its business. Except as set forth
in Schedule 3.14, (a) Company is in compliance with all applicable laws
respecting employment and employment practices, terms and conditions of
employment and wages and hours, and is not engaged in any unfair labor practice;
(b) there is no unfair labor practice charge or complaint against Company
pending or threatened; (c) there is no labor strike, dispute, request for
representation, slowdown or stoppage actually pending or threatened against or
affecting Company nor any secondary boycott with respect to products of Company;
(d) no question concerning representation has been raised or is threatened
respecting the employees of Company; (e) no grievance which might have a
material adverse effect on Company, nor any arbitration proceeding arising out
of or under collective bargaining agreements, is pending and no such claim
therefor exists; and (f) there are no administrative charges or court complaints
against Company concerning alleged employment discrimination or other employment
related matters pending or to the best knowledge of the Company and
Shareholders, threatened before the U.S. Equal Employment Opportunity Commission
or any Government Entity.
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3.15 Employee Benefit Plans.
3.15.(a) Disclosure. Schedule 3.15.(a) sets forth all pension, thrift,
savings, profit sharing, retirement, incentive bonus or other bonus,
medical, dental, life, accident insurance, benefit, employee welfare,
disability, group insurance, stock purchase, stock option, stock
appreciation, stock bonus, executive or deferred compensation,
hospitalization and other similar fringe or employee benefit plans,
programs and arrangements, and any employment or consulting contracts,
"golden parachutes," collective bargaining agreements, severance agreements
or plans, vacation and sick leave plans, programs, arrangements and
policies, including, without limitation, all "employee benefit plans" (as
defined in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")), all employee manuals, and all written or
binding oral statements of policies, practices or understandings relating
to employment, which are provided to, for the benefit of, or relate to, any
persons ("Company Employees") employed by Company. The items described in
the foregoing sentence are hereinafter sometimes referred to collectively
as "Employee Plans/Agreements," and each individually as an "Employee
Plan/Agreement." True and correct copies of all the Employee
Plans/Agreements, including all amendments thereto, have heretofore been
provided to Buyer. Each of the Employee Plans/Agreements is identified on
Schedule 3.15.(a), to the extent applicable, as one or more of the
following: an "employee pension benefit plan" (as defined in Section 3(2)
of ERISA), a "defined benefit plan" (as defined in Section 414 of the
Code), an "employee welfare benefit plan" (as defined in Section 3(1) of
ERISA), and/or as a plan intended to be qualified under Section 401 of the
Code. No Employee Plan/Agreement is a "multiemployer plan" (as defined in
Section 4001 of ERISA), and Company has never contributed nor been
obligated to contribute to any such multiemployer plan.
3.15.(b) Terminations, Proceedings, Penalties, etc. With respect to
each employee benefit plan (including, without limitation, the Employee
Plans/Agreements) that is subject to the provisions of Title IV of ERISA
and with respect to which the Company or any of its assets may, directly or
indirectly, be subject to any Liability, contingent or otherwise, or the
imposition of any Lien (whether by reason of the complete or partial
termination of any such plan, the funded status of any such plan, any
"complete withdrawal" (as defined in Section 4203 of ERISA) or "partial
withdrawal" (as defined in Section 4205 of ERISA) by any person from any
such plan, or otherwise):
(i) no such plan has been terminated so as to subject, directly
or indirectly, any assets of Company to any liability, contingent or
otherwise, or the imposition of any lien under Title IV of ERISA;
(ii) no proceeding has been initiated or threatened by any person
(including the Pension Benefit Guaranty Corporation ("PBGC")) to
terminate any such plan;
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(iii) no condition or event currently exists or currently is
expected to occur that could subject, directly or indirectly, any
assets of Company to any liability, contingent or otherwise, or the
imposition of any lien under Title IV of ERISA, whether to the PBGC or
to any other person or otherwise on account of the termination of any
such plan;
(iv) if any such plan were to be terminated as of the Closing
Date, no assets of Company would be subject, directly or indirectly,
to any liability, contingent or otherwise, or the imposition of any
lien under Title IV of ERISA;
(v) no "reportable event" (as defined in Section 4043 of ERISA)
has occurred with respect to any such plan;
(vi) no such plan which is subject to Section 302 of ERISA or
Section 412 of the Code has incurred any "accumulated funding
deficiency" (as defined in Section 302 of ERISA and Section 412 of the
Code, respectively), whether or not waived; and
(vii) no such plan is a multiemployer plan or a plan described in
Section 4064 of ERISA.
3.15.(c) Prohibited Transactions, etc. There have been no "prohibited
transactions" within the meaning of Section 406 or 407 of ERISA or Section
4975 of the Code for which a statutory or administrative exemption does not
exist with respect to any Employee Plan/Agreement, and no event or omission
has occurred in connection with which the Company or any of its assets or
any Employee Plan/Agreement, directly or indirectly, could be subject to
any liability under ERISA, the Code or any other Law or Order applicable to
any Employee Plan/Agreement, or under any agreement, instrument, Law or
Order pursuant to or under which Company has agreed to indemnify or is
required to indemnify any person against liability incurred under any such
Law or Order.
3.15.(d) Full Funding. The funds available under each Employee
Plan/Agreement which is intended to be a funded plan exceed the amounts
required to be paid, or which would be required to be paid if such Employee
Plan/Agreement were terminated, on account of rights vested or accrued as
of the Closing Date (using the actuarial methods and assumptions then used
by Company's actuaries in connection with the funding of such Employee
Plan/Agreement).
3.15.(e) Controlled Group; Affiliated Service Group; Leased Employees.
Company is not and never has been a member of a controlled group of
corporations as defined in Section 414(b) of the Code or in common control
with any unincorporated trade or business as determined under Section
414(c) of the Code. Company is not and never has been a member of an
"affiliated service group" within the meaning of Section 414(m) of the
Code. There are not and
14
never have been any leased employees within the meaning of Section 414(n)
of the Code who perform services for Company, and no individuals are
expected to become leased employees with the passage of time.
3.15.(f) Payments and Compliance. With respect to each Employee
Plan/Agreement, (i) all payments due from Company to date have been made
and all amounts properly accrued to date as liabilities of Company which
have not been paid have been properly recorded on the books of Company and
are reflected in the Recent Balance Sheet; (ii) Company has complied with,
and each such Employee Plan/Agreement conforms in form and operation to,
all applicable laws and regulations, including but not limited to ERISA and
the Code, in all respects and all reports and information relating to such
Employee Plan/Agreement required to be filed with any governmental entity
have been timely filed; (iii) all reports and information relating to each
such Employee Plan/Agreement required to be disclosed or provided to
participants or their beneficiaries have been timely disclosed or provided;
(iv) each such Employee Plan/Agreement which is intended to qualify under
Section 401 of the Code has received a favorable determination letter from
the Internal Revenue Service with respect to such qualification, its
related trust has been determined to be exempt from taxation under Section
501(a) of the Code, and nothing has occurred since the date of such letter
that has or is likely to adversely affect such qualification or exemption;
(iv) there are no actions, suits or claims pending (other than routine
claims for benefits) or threatened with respect to such Employee
Plan/Agreement or against the assets of such Employee Plan/Agreement; and
(v) no Employee Plan/Agreement is a plan which is established and
maintained outside the United States primarily for the benefit of
individuals substantially all of whom are nonresident aliens.
3.15.(g) Post-Retirement Benefits. No Employee Plan/Agreement provides
benefits, including, without limitation, death or medical benefits (whether
or not insured) with respect to current or former Company employees beyond
their retirement or other termination of service other than (i) coverage
mandated by applicable law, (ii) death or retirement benefits under any
Employee Plan/Agreement that is an employee pension benefit plan, (iii)
deferred compensation benefits accrued as liabilities on the books of
Company (including the Recent Balance Sheet), (iv) disability benefits
under any Employee Plan/ Agreement that is an employee welfare benefit plan
and which have been fully provided for by insurance or otherwise or (v)
benefits in the nature of severance pay.
3.15.(h) No Triggering of Obligations. The consummation of the
transactions contemplated by this Agreement will not (i) entitle any
current or former employee of Company to severance pay, unemployment
compensation or any other payment, except as expressly provided in this
Agreement, (ii) accelerate the time of payment or vesting, or increase the
amount of compensation due to any such employee or former employee or (iii)
result in any prohibited transaction
15
described in Section 406 of ERISA or Section 4975 of the Code for which an
exemption is not available.
3.15.(i) Delivery of Documents. There has been made available to
Buyer, with respect to each Employee Plan/Agreement:
(i) a copy of the annual report, if required under ERISA, with
respect to each such Employee Plan/Agreement for the last two years;
(ii) a copy of the summary plan description, together with each
summary of material modifications, required under ERISA with respect
to such Employee Plan/Agreement, all material employee communications
relating to such Employee Plan/Agreement, and, unless the Employee
Plan/Agreement is embodied entirely in an insurance policy to which
Company is a party, a true and complete copy of such Employee
Plan/Agreement;
(iii) if the Employee Plan/Agreement is funded through a trust or
any third party funding vehicle (other than an insurance policy), a
copy of the trust or other funding agreement and the latest financial
statements thereof; and
(iv) the most recent determination letter received from the
Internal Revenue Service with respect to each Employee Plan/Agreement
that is intended to be a "qualified plan" under Section 401 of the
Code.
With respect to each Employee Plan/Agreement for which an annual report has
been filed and made available to Buyer pursuant to clause (i) of this
Section 3.15. (i) , no material adverse change has occurred with respect to
the matters covered by the latest such annual report since the date
thereof.
3.15.(j) Future Commitments. Company has no announced plan or legally
binding commitment to create any additional Employee Plans/Agreements or to
amend or modify any existing Employee Plan/Agreement.
3.16 Employment Compensation.
Schedule 3.16 contains a true and correct list of all employees to whom Company
is paying compensation, including bonuses and incentives, at an annual rate in
excess of twelve thousand Dollars ($12,000) for services rendered or otherwise;
and in the case of salaried employees such list identifies the current annual
rate of compensation for each employee and in the case of hourly or commission
employees identifies certain reasonable ranges of rates and the number of
employees falling within each such range.
16
3.17 Trade Rights.
Schedule 3.17 lists all Trade Rights (as defined below) in which Company now has
any interest, specifying whether such Trade Rights are owned, controlled, used
or held (under license or otherwise) by Company, and also indicating which of
such Trade Rights are registered. All Trade Rights shown as registered in
Schedule 3.17 have been properly registered, all pending registrations and
applications have been properly made and filed and all annuity, maintenance,
renewal and other fees relating to registrations or applications are current. In
order to conduct the business of Company, as such is currently being conducted
or proposed to be conducted, Company does not require any Trade Rights that it
does not already have. Company is not infringing and has not infringed any Trade
Rights of another in the operation of the business of Company, nor is any other
person infringing the Trade Rights of Company. Company has not granted any
license or made any assignment of any Trade Right listed on Schedule 3.17, nor
does Company pay any royalties or other consideration for the right to use any
Trade Rights of others. There is no Litigation pending or threatened to
challenge Company's right, title and interest with respect to its continued use
and right to preclude others from using any Trade Rights of Company. All Trade
Rights of Company are valid, enforceable and in good standing, and there are no
equitable defenses to enforcement based on any act or omission of Company. The
consummation of the transactions contemplated hereby will not alter or impair
any Trade Rights owned or used by Company. As used herein, the term "Trade
Rights" will mean and include: (i) all trademark rights, business identifiers,
trade dress, service marks, trade names and brand names, all registrations
thereof and applications therefor and all goodwill associated with the
foregoing; (ii) all copyrights, copyright registrations and copyright
applications, and all other rights associated with the foregoing and the
underlying works of authorship; (iii) all patents and patent applications, and
all international proprietary rights associated therewith; (iv) all contracts or
agreements granting any right, title, license or privilege under the
intellectual property rights of any third party; (v) all inventions, mask works
and mask work registrations, know-how, discoveries, improvements, designs, trade
secrets, shop and royalty rights, employee covenants and agreements respecting
intellectual property and non-competition and all other types of intellectual
property; and (vi) all claims for infringement or breach of any of the
foregoing.
3.18 Major Customers and Suppliers.
3.18.(a) Major Customers. Schedule 3.18.(a) contains a list of the ten
(10) largest customers of Company for each of the two (2) most recent
fiscal years (determined on the basis of the total dollar amount of net
sales) showing the total dollar amount of net sales to each such customer
during each such year. Neither Company nor any Shareholder has any
knowledge or information of any facts indicating, nor any other reason to
believe, that any of the customers listed on Schedule 3.18.(a) will not
continue to be customers of the business of Company after the Closing.
3.18.(b) Major Suppliers. Schedule 3.18.(b) contains a list of the
five (5) largest suppliers to Company for each of the two (2) most recent
fiscal years
17
(determined on the basis of the total dollar amount of purchases) showing
the total dollar amount of purchases from each such supplier during each
such year. Neither Company nor any Shareholder has any knowledge or
information of any facts indicating, nor any other reason to believe, that
any of the suppliers listed on Schedule 3.18.(b) will not continue to be
suppliers to the business of Company after the Closing and will not
continue to supply the business with substantially the same quantity and
quality of goods at competitive prices.
3.19 Bank Accounts.
Schedule 3.19 sets forth the names and locations of all banks, trust companies,
savings and loan associations and other financial institutions at which the
Company maintains a safe deposit box, lock box or checking, savings, custodial
or other account of any nature, the type and number of each such account and the
signatories therefore, a description of any compensating balance arrangements,
and the names of all persons authorized to draw thereon, make withdrawals
therefrom or have access thereto.
3.20 Affiliates' Relationships to Company.
3.20.(a) Contracts With Affiliates. All leases, contracts, agreements
or other arrangements between Company and any Affiliate are described on
Schedule 3.20.(a).
3.20.(b) No Adverse Interests. Except as described in Schedule
3.20.(b), no Affiliate has any direct or indirect interest in (i) any
entity which does business with Company or is competitive with Company's
business, or (ii) any property, asset or right which is used by Company in
the conduct of its business.
3.20.(c) Obligations. All obligations of any Affiliate to Company, and
all obligations of Company to any Affiliate, are listed on Schedule
3.20.(c).
3.21 No Brokers or Finders.
Neither Company nor any of its directors, officers, employees, Shareholders or
agents have retained, employed or used any broker or finder in connection with
this transaction or in connection with its negotiation except Venture
Management, Inc.
3.22 Disclosure.
No representation or warranty by Company and/or the Shareholders in this
Agreement, nor any statement, certificate, schedule, document or exhibit hereto
furnished or to be furnished by or on behalf of Company or Shareholders pursuant
to this Agreement or in connection with transactions contemplated hereby,
contains or will contain any untrue statement of material fact or omits or will
omit a material fact necessary to make the statements contained therein not
misleading. All statements and information contained in any certificate,
instrument, Disclosure Schedule or document delivered by or on behalf of Company
and/or Shareholders will be deemed representations and warranties by the Company
and the Shareholders.
18
3.23 Investment Intent.
The Notes are being acquired by Shareholders for investment only and not with
the view to resale or other distribution.
4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer makes the following representations and warranties to the Shareholders,
each of which is true and correct on this Agreement's date, and will be
unaffected by any investigation made by Shareholders or any notice to
Shareholders, and will survive the Closing of the transactions provided for
herein.
4.1 Corporate.
4.1.(a) Organization. Buyer is a corporation duly organized, validly
existing and an active corporation under the laws of the State of Delaware.
4.1.(b) Corporate Power. Buyer has all requisite corporate power to enter
into this Agreement and the other documents and instruments to be executed and
delivered by Buyer and to carry out the transactions contemplated hereby and
thereby.
4.2 Authority.
The execution and delivery of this Agreement and the other documents and
instruments to be executed and delivered by Buyer pursuant hereto and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by the Board of Directors of Buyer. No other corporate act or
proceeding on the part of Buyer or its shareholders is necessary to authorize
this Agreement or the other documents and instruments to be executed and
delivered by Buyer pursuant hereto or the consummation of the transactions
contemplated hereby and thereby. This Agreement constitutes, and when executed
and delivered, the other documents and instruments to be executed and delivered
by Buyer pursuant hereto will constitute, valid and binding agreements of Buyer,
enforceable in accordance with their respective terms, except as such may be
limited by bankruptcy, insolvency, reorganization or other laws affecting
creditors' rights generally, and by general equitable principles.
4.3 No Brokers or Finders.
Neither Buyer nor any of its directors, officers, employees or agents have
retained, employed or used any broker or finder in connection with the
transaction provided for herein or in connection with its negotiation.
4.4 Disclosure.
No representation or warranty by Buyer in this Agreement, nor any statement,
certificate, schedule, document or exhibit hereto furnished or to be furnished
by or on behalf of Buyer pursuant to this Agreement or in connection with
transactions contemplated
19
hereby, contains or will contain any untrue statement of material fact or omits
or will omit a material fact necessary to make the statements contained therein
not misleading.
4.5 No Adverse Change.
There has not been any adverse change in the financial condition, assets,
liabilities, business, prospects, or operations of Buyer since its most form
10-QSB as filed with the Securities and Exchange Commission.
4.6 No Litigation.
Except as set forth in Schedule 4.6 there is no action, suit, arbitration,
proceeding, investigation or inquiry, whether civil, criminal or administrative
("Litigation") pending or, to the best knowledge of Buyer, threatened against
Buyer, its directors (in such capacity), its business or any of its assets, nor
does Buyer know, or have grounds to know, of any basis for any Litigation.
Schedule 4.6 also identifies all Litigation to which Buyer has been a party
since December 31, 1995. Except as set forth in Schedule 4.6, neither Buyer nor
its business or assets is subject to any Order of any Government Entity.
4.7 Investment Intent.
The Shares are being acquired by Buyer for investment only and not with the view
to resale or other distribution.
5. COVENANTS
5.1 Employment Agreement.
At the Closing, Shareholders will cause to be delivered to Company an employment
agreement, substantially in the form of Exhibit B hereto, duly executed by F. L.
Franklin and Buyer will cause Company to execute this employment agreement.
5.2 Noncompetition; Confidentiality.
Subject to the Closing, and as an inducement to Buyer to execute this Agreement
and complete the transactions contemplated hereby, and in order to preserve the
goodwill associated with the business of Company being acquired pursuant to this
Agreement, and in addition to and not in limitation of any covenants contained
in any agreement executed and delivered pursuant to Section 5.1 hereof, each
Shareholder hereby covenants as follows:
5.2.(a) Covenant Not to Compete. For a period of five (5) years from
the Closing, no Shareholder will directly or indirectly:
(i) engage in, continue in or carry on any business which
competes with the Business or is substantially similar thereto,
including owning or controlling any financial interest in any
corporation, partnership, firm or other form of business organization
which is so engaged;
20
(ii) consult with, advise or assist in any way, whether or not
for consideration, any corporation, partnership, firm or other
business organization which is now or becomes a competitor of Company
or Buyer in any aspect with respect to the Business, including, but
not limited to, advertising or otherwise endorsing the products of any
such competitor; soliciting customers or otherwise serving as an
intermediary for any such competitor; loaning money or rendering any
other form of financial assistance to or engaging in any form of
business transaction on other than an arm's length basis with any such
competitor;
(iii) offer employment to an employee of Company, without the
prior written consent of Buyer; or
(iv) engage in any practice the purpose of which is to evade the
provisions of this covenant not to compete or to commit any act which
adversely affects the Business;
provided, however, that the foregoing will not prohibit the ownership
of securities of corporations which are listed on a national
securities exchange or traded in the national over-the-counter market
in an amount which will not exceed 5% of the outstanding shares of any
such corporation. The parties agree that the geographic scope of this
covenant not to compete will extend throughout the state of
California. The parties agree that Buyer may sell, assign or otherwise
transfer this covenant not to compete, in whole or in part, to any
person, corporation, firm or entity that purchases all or part of the
business of the Company. In the event a court of competent
jurisdiction determines that the provisions of this covenant not to
compete are excessively broad as to duration, geographical scope or
activity, it is expressly agreed that this covenant not to compete
will be construed so that the remaining provisions will not be
affected, but will remain in full force and effect, and any such over
broad provisions will be deemed, without further action on the part of
any person, to be modified, amended and/or limited, but only to the
extent necessary to render the same valid and enforceable in such
jurisdiction.
5.2.(b) Covenant of Confidentiality. No Shareholder will at any time
for five (5) years subsequent to the Closing, except as explicitly
requested by Buyer, (i) use for any purpose, (ii) disclose to any person,
or (iii) keep or make copies of documents, tapes, discs or programs
containing, any confidential information concerning Company. For purposes
hereof, "confidential information" will mean and include, without
limitation, all Trade Rights in which Company has an interest, all customer
lists and customer information, and all other information concerning
Company's processes, apparatus, equipment, packaging, products, marketing
and distribution methods, not previously disclosed to the public directly
by Company.
5.2.(c) Equitable Relief for Violations. The provisions and
restrictions contained in this Section 5.2 are necessary to protect the
legitimate continuing interests of Buyer in acquiring the Shares, and that
any violation or breach of
21
these provisions will result in irreparable injury to Buyer for which a
remedy at law would be inadequate and that, in addition to any relief at
law which may be available to Buyer for such violation or breach and
regardless of any other provision contained in this Agreement, Buyer will
be entitled to injunctive and other equitable relief as a court may grant
after considering the intent of this Section 5.2.
5.3 General Releases.
At the Closing, each Shareholder will deliver general releases to Buyer, in form
and substance satisfactory to Buyer and its counsel, releasing Company and the
directors, officers, agents and employees of Company from all claims to the
Closing, except (i) as may be described in written contracts disclosed in the
Disclosure Schedule and expressly described and excepted from such releases, and
(ii) in the case of persons who are employees of the Company, compensation for
current periods expressly described and excepted from such releases. These
releases will also contain waivers of any right of contribution or other
recourse against Company with respect to representations, warranties or
covenants made herein by Company.
5.4 Consents.
Company and Shareholders will use commercially reasonable efforts to obtain all
consents necessary for the consummation of the transactions contemplated hereby.
5.5 Other Action.
Company and Shareholders will use commercially reasonable efforts to cause the
fulfillment at the earliest practicable date of all of the conditions to the
parties' obligations to consummate the transactions contemplated in this
Agreement.
5.6 Disclosure Schedule.
Shareholders and Company will have a continuing obligation to promptly notify
Buyer in writing with respect to any matter hereafter arising or discovered
which, if existing or known at the date of this Agreement, would have been
required to be set forth or described in the Disclosure Schedule, but no such
disclosure will cure any breach of any representation or warranty which is
inaccurate.
6. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
Each and every obligation of Buyer to be performed on the Closing will be
subject to the satisfaction prior to or at the Closing of each of the following
conditions:
6.1 Representations and Warranties True.
Each of the representations and warranties made by Shareholders and Company in
this Agreement, and the statements contained in the Disclosure Schedule or in
any instrument, list, certificate or writing delivered by Shareholders or
Company pursuant to this Agreement, are true and correct in all material
respects.
22
6.2 Compliance With Agreement.
Shareholders and Company will have in all material respects performed and
complied with all of their agreements and obligations under this Agreement that
are to be performed or complied with by them prior to or on the Closing,
including the delivery of the closing documents specified in Section 9.1.
6.3 Absence of Litigation.
No Litigation will have been commenced or threatened, and no investigation by
any Government Entity will have been commenced, against Buyer, Company or any of
the affiliates, officers or directors of any of them, with respect to the
transactions contemplated hereby.
6.4 Consents and Approvals.
All approvals, consents, and waivers that are required to effect the
transactions contemplated hereby will have been received, and executed
counterparts will be delivered to Buyer at the Closing.
6.5 Transfer of Assets.
All assets shown on BTC Associates balance sheet of September 30, 1999 as
described in Schedule 6.5 will have been transferred to Company and combined
into the Closing Balance Sheet. This transfer will be evidenced by an Assignment
executed by the partners of BTC Associates, substantially in the form of Exhibit
C.
6.6 Estoppel Certificates.
Company will deliver to Buyer on the Closing an estoppel certificate or status
letter from the landlord under each lease of Real Property, which estoppel
certificate or status letter will certify (i) the lease is valid and in full
force and effect; (ii) the amounts payable by Company under the lease and the
date to which the same have been paid; (iii) whether there are, to the knowledge
of the landlord, any defaults thereunder, and, if so, specifying the nature
thereof; and (iv) a statement that the transactions contemplated by this
Agreement will not constitute a default under the lease.
7. CONDITIONS PRECEDENT TO SHAREHOLDERS' OBLIGATIONS
Each and every obligation of Shareholders to be performed on the Closing will be
subject to the satisfaction at the Closing of the following conditions:
7.1 Representations and Warranties True.
Each of the representations and warranties made by Buyer in this Agreement are
true and correct in all material respects.
7.2 Compliance With Agreement.
Buyer will have in all material respects performed and complied with all of
Buyer's agreements and obligations under this Agreement that are to be performed
or complied
23
with by Buyer prior to or on the Closing, including the delivery of the
closing documents specified in Section 9.2.
7.3 Absence of Litigation.
No Litigation will have been commenced or threatened, and no investigation by
any Government Entity will have been commenced, against Buyer, Company or any of
the affiliates, officers or directors of any of them, with respect to the
transactions contemplated hereby.
7.4 Professional Liability Insurance.
Buyer will obtain professional liability insurance that will retroactively
provide tail coverage for occurrences from January 4, 1997 up to the Closing.
The form of the policy and the carrier shall be reasonably acceptable to the
Shareholders. Until the new policy is in place, Buyer will maintain Company's
current policy or provide equivalent coverage.
7.5 Consents and Approvals.
All approvals, consents, and waivers that are required to effect the
transactions contemplated hereby will have been received, and executed
counterparts will be delivered to Shareholders at the Closing.
8. INDEMNIFICATION
8.1 By Shareholders.
Subject to the terms and conditions of this Section 8, each Shareholder, jointly
and severally, will indemnify, defend and hold harmless Buyer, its directors,
officers, employees and controlled and controlling persons (hereinafter "Buyer's
Affiliates") and the Company from and against all Claims asserted against,
resulting to, imposed upon, or incurred by Buyer, Buyer's Affiliates or the
Company, directly or indirectly, by reason of, arising out of or resulting from
(a) the inaccuracy or breach of any representation or warranty of any
Shareholder or Company contained in or made pursuant to this Agreement
(regardless of whether such breach is deemed "material" for purpose of Section
6.1), or (b) the breach of any covenant of any Shareholder or the Company
contained in this Agreement. Regardless of the foregoing, however, breaches of
representations and warranties contained in Section 3.2 will be subject only to
several indemnification by the respective Shareholders who will have made and
breached these representations and warranties. As used in this Section 8, the
term "Claim" includes (i) all debts, liabilities and obligations; (ii) all
losses, damages (including, without limitation, consequential damages),
judgments, awards, settlements, costs and expenses (including, without
limitation, interest (including prejudgment interest in any litigated matter),
penalties, court costs and attorneys fees and expenses); and (iii) all demands,
claims, suits, actions, costs of investigation, causes of action, proceedings
and assessments, whether or not ultimately determined to be valid.
24
8.2 By Buyer.
Subject to the terms and conditions of this Section 8, Buyer will indemnify,
defend and hold harmless each Shareholder from and against all Claims asserted
against, resulting to, imposed upon or incurred by any such person, directly or
indirectly, by reason of or resulting from (a) the inaccuracy or breach of any
representation or warranty of Buyer contained in or made under this Agreement
(regardless of whether the breach is deemed "material" for purposes of Section
7.1), (b) the breach of any covenant of Buyer contained in this Agreement, or
(c) the operations of Company after the Closing. If F. L. Franklin is
responsible for the Claim in (c) above, then he may not enforce his rights under
this section 8.2.
8.3 Indemnification of Third-Party Claims.
The obligations and liabilities of any party to indemnify any other under this
Section 8 with respect to Claims relating to third parties is subject to the
following terms and conditions:
8.3.(a) Notice and Defense. The party or parties to be indemnified
(whether one or more, the "Indemnified Party") will give the party from
whom indemnification is sought (the "Indemnifying Party") written notice of
any Claim, and the Indemnifying Party will undertake the defense thereof by
representatives chosen by it. Failure to give this notice will not affect
the Indemnifying Party's duty or obligations under this Section 8, unless
the Indemnifying Party is prejudiced by this failure. While the
Indemnifying Party is defending any Claim actively and in good faith, the
Indemnified Party will not settle the Claim. The Indemnified Party will
make available to the Indemnifying Party or its representatives all records
and other materials required by them and in the possession or under the
control of the Indemnified Party, for the use of the Indemnifying Party and
its representatives in defending any Claim, and will in other respects give
reasonable cooperation in the defense.
8.3.(b) Failure to Defend. If the Indemnifying Party, within a
reasonable time after notice of any Claim, fails to defend the Claim
actively and in good faith, the Indemnified Party will (upon further
notice) have the right to undertake the defense, compromise or settlement
of the Claim or consent to the entry of a judgment with respect to the
Claim, on behalf of and for the account and risk of the Indemnifying Party,
and the Indemnifying Party will thereafter have no right to challenge the
Indemnified Party's defense, compromise, settlement or consent to judgment.
8.3.(c) Indemnified Party's Rights. Notwithstanding anything in this
Section 8.3, (i) if there is a reasonable probability that a Claim may
materially and adversely affect the Indemnified Party other than as a
result of money damages or other money payments, the Indemnified Party will
have the right to defend, compromise or settle the Claim, and (ii) the
Indemnifying Party will not, without the written consent of the Indemnified
Party, settle or compromise any Claim or consent to the entry of any
judgment which does not include as an unconditional
25
term thereof the giving by the claimant or the plaintiff to the Indemnified
Party of a release from all Liability in respect of such Claim.
8.4 Payment.
The Indemnifying Party will promptly pay the Indemnified Party any amount due
under this Section 8, which payment may be accomplished in whole or in part, at
the option of the Indemnified Party, by the Indemnified Party setting off any
amount owed to the Indemnifying Party by the Indemnified Party. If set-off is
made by an Indemnified Party in satisfaction or partial satisfaction of an
indemnity obligation under this Section 8 that is disputed by the Indemnifying
Party, upon a subsequent determination by final judgment not subject to appeal
that all or a portion of such indemnity obligation was not owed to the
Indemnified Party, the Indemnified Party will pay the Indemnifying Party the
amount that was set off and not owed together with interest from the date of
set-off until the date of the payment at an annual rate equal to the average
annual rate in effect as of the date of the set-off, on those three maturities
of United States Treasury obligations having a remaining life, as of the date,
closest to the period from the date of the set-off to the date of such judgment.
Upon judgment, determination, settlement or compromise of any third party Claim,
the Indemnifying Party will pay promptly on behalf of the Indemnified Party,
and/or to the Indemnified Party in reimbursement of any amount theretofore
required to be paid by it, the amount so determined by judgment, determination,
settlement or compromise and all other Claims of the Indemnified Party with
respect thereto, unless in the case of a judgment an appeal is made from the
judgment. If the Indemnifying Party desires to appeal from an adverse judgment,
then the Indemnifying Party will post and pay the cost of the security or bond
to stay execution of the judgment pending appeal. Upon the payment in full by
the Indemnifying Party of such amounts, the Indemnifying Party will succeed to
the rights of such Indemnified Party, to the extent not waived in settlement,
against the third party who made such third party Claim. Buyer may not set-off
any payments owed under the employment agreement with F.L. Franklin.
8.5 Insurance Adjustment.
The indemnification obligation of an Indemnifying Party will be adjusted so as
to give effect to any insurance that is collectible by the Indemnified Party
with respect to the Claim or the underlying factors under any applicable policy,
net of any directly related premium increases for continuation of the insurance
coverage.
8.6 Indemnification for Environmental Matters.
Without limiting the generality of the foregoing, each Shareholder, jointly and
severally, agrees to indemnify, reimburse, hold harmless and defend Buyer,
Buyer's affiliates and Company for, from, and against all Claims asserted
against, imposed on, or incurred by any person, directly or indirectly, in
connection with any pollution, threat to the environment, or exposure to, or
manufacture, processing, distribution, use, treatment, generation, transport or
handling, disposal, emission, discharge, storage or release of Waste that (A) is
related in any way to Company's or any previous owner's or operator's ownership,
operation or occupancy of the business, properties and assets owned or used
26
by Company, and (B) in whole or in part occurred, existed, arose out of
conditions or circumstances that existed, or was caused on or before the
Closing.
8.7 Limitations on Indemnification.
Except for any willful or knowing breach or misrepresentation, as to which
claims may be brought without limitation as to time or amount:
8.7.(a) Time Limitation. No claim or action will be brought under this
Section 8 for breach of a representation or warranty after the lapse of two
(2) years following the Closing. Regardless of the foregoing, however, or
any other provision of this Agreement:
(i) There will be no time limitation on claims on actions brought
for breach of any representation or warranty made by Shareholders or
Company in or under Sections 3.1, 3.2, and 3.11(a) and Shareholders
hereby waive all applicable statutory limitation periods with respect
thereto.
(ii) Any claim or action brought for breach of any representation
or warranty made by Shareholders in or pursuant to Sections 3.5 or
3.10(c) may be brought at any time until the underlying obligation is
barred by the applicable period of limitation under federal and state
laws relating thereto (as such period may be extended by waiver).
(iii) Any claim made by a party hereunder by a demand for
arbitration in accordance with Section 10 hereof for breach of a
representation or warranty prior to the termination of the survival
period for such claim will be preserved despite the subsequent
termination of such survival period.
(iv) If any act, omission, disclosure or failure to disclosure
forms the basis for a claim for breach of more than one representation
or warranty, and such claims have different periods of survival
hereunder, the termination of the survival period of one claim will
not affect a party's right to make a claim based on the breach of
representation or warranty still surviving.
8.7.(b) Amount Limitation. An Indemnified Party will not be
entitled to indemnification under this Section 8 for breach of a
representation or warranty except to the extent that the aggregate
amount of the Indemnifying Party's indemnification obligations to the
Indemnified Party pursuant to this Section 8 (but for this Section
8.7.(b)) exceeds thirty-five thousand dollars ($35,000)
27
8.8 No Waiver.
The closing of the transactions contemplated by this Agreement will not
constitute a waiver by any party of its rights to indemnification, regardless of
whether the party seeking indemnification has knowledge of the breach,
violation, or failure of condition constituting the basis of the Claim at or
before the Closing.
9. CLOSING
The closing of this transaction ("xxx Xxxxxxx") will take place on January 3,
2000 or at any other time and place as agreed to by the parties.
9.1 Documents to be Delivered by Company and Shareholders.
At the Closing, Company and Shareholders will deliver to Buyer the following
documents, in each case duly executed or otherwise in proper form:
9.1.(a) Stock Certificate(s). A stock certificate or certificates
representing the Shares, duly endorsed for transfer or with duly executed
stock powers attached.
9.1.(b) Compliance Certificate. A certificate signed by each
Shareholder that each of the representations and warranties made by
Shareholders and the Company in this Agreement is true and correct in all
material respects, and that Company and Shareholders have performed and
complied with all of Company's and Shareholders' obligations under this
Agreement which are to be performed or complied with on or prior to
Closing.
9.1.(c) Employment Agreement. The employment agreement referred to in
Section 5.1, duly executed by the person referred to in that Section.
9.1.(d) Certified Resolutions. Certified copies of the resolutions of
the Board of Directors of Company authorizing and approving this Agreement
and the consummation of the transactions contemplated by this Agreement.
9.1.(e) Articles; By-Laws. A copy of the By-Laws of Company certified
by the secretary of Company, and a copy of the Articles of Incorporation of
Company certified by the Secretary of State of the state of incorporation
of Company.
9.1.(f) General Releases. The General Releases referred to in Section
5.3, duly executed by the persons referred to in that Section.
9.1.(g) Resignation. The resignation of Don L. Bleak as an officer and
director of the Company, effective as of the Closing and in form
satisfactory to Buyer's counsel.
9.1.(h) Assignment and Consent. The Assignment of BTC Associates of
all its assets to Company concurrently with the Closing.
28
9.1.(i) Other Documents. All other documents, instruments or writings
required to be delivered to Buyer at or prior to the Closing pursuant to
this Agreement and such other certificates of authority and documents as
Buyer may reasonably request.
9.2 Documents to be Delivered by Buyer.
At the Closing, Buyer will deliver to Shareholders the following documents, in
each case duly executed or otherwise in proper form:
9.2.(a) Cash Purchase Price. To Shareholders, certified or bank
cashier's checks (or wire transfer) as required by Section 2.2, a
certified or bank cashier's check (or wire transfer) as required by
Section 2.2.
9.2.(b) Compliance Certificate. A certificate signed by the chief
executive officer of Buyer that the representations and warranties
made by Buyer in this Agreement are true and correct, and that Buyer
has performed and complied with all of Buyer's obligations under this
Agreement that are to be performed or complied with on or prior to the
Closing.
9.2.(c) Certified Resolutions. A certified copy of the
resolutions of the Board of Directors of Buyer authorizing and
approving this Agreement and the consummation of the transactions
contemplated by this Agreement.
9.2.(d) Other Documents. All other documents, instruments or
writings required to be delivered to Company at or prior to the
Closing pursuant to this Agreement and such other certificates of
authority and documents as Company may reasonably request.
9.2.(e) Employment Agreement. The employment agreement referred
to in Section 5.1, duly executed by Company.
9.2.(f) Note. The note referred to in Section 2.2.(b), duly
executed by Buyer.
10. RESOLUTION OF DISPUTES
10.1 Arbitration.
Any dispute, controversy or claim arising out of or relating to this Agreement
or any contract or agreement entered into pursuant hereto or the performance by
the parties of its or their terms will be settled by binding arbitration held in
Ventura, California in accordance with the Commercial Arbitration Rules of the
American Arbitration Association then in effect, except as specifically
otherwise provided in this Section 10. Notwithstanding the foregoing, Buyer may,
in its discretion, apply to a court of competent jurisdiction for equitable
relief from any violation or threatened violation of the covenants of any
Shareholder under Section 5.2 of this Agreement, or any covenants
29
not to compete contained in any Employment and Noncompetition Agreement
delivered pursuant to Section 5.1 hereof.
10.2 Arbitrators.
If the matter in controversy (exclusive of attorney fees and expenses) will
appear, as at the time of the demand for arbitration, to exceed fifty thousand
dollars ($50,000), then the panel to be appointed will consist of three neutral
arbitrators; otherwise, one neutral arbitrator.
10.3 Procedures; No Appeal.
The arbitrator(s) will allow such discovery as the arbitrator(s) determine
appropriate under the circumstances and will resolve the dispute as
expeditiously as practicable, and if reasonably practicable, within 120 days
after the selection of the arbitrator(s). The arbitrator(s) will give the
parties written notice of the decision, with the reasons therefor set out, and
will have 30 days thereafter to reconsider and modify such decision if any party
so requests within 10 days after the decision. Thereafter, the decision of the
arbitrator(s) will be final, binding, and nonappealable with respect to all
persons, including (without limitation) persons who have failed or refused to
participate in the arbitration process.
10.4 Authority.
The arbitrator(s) will have authority to award relief under legal or equitable
principles, including interim or preliminary relief, and to allocate
responsibility for the costs of the arbitration and to award recovery of
attorneys fees and expenses in such manner as is determined to be appropriate by
the arbitrator(s).
10.5 Entry of Judgment.
Judgment upon the award rendered by the arbitrator(s) may be entered in any
court having in personam and subject matter jurisdiction. Buyer and each
Shareholder hereby submit to the in personam jurisdiction of the Federal and
State courts in California for the purpose of confirming any such award and
entering judgment thereon.
30
10.6 Confidentiality.
All proceedings under this Section 10, and all evidence given or
discovered pursuant hereto, will be maintained in confidence by all
parties.
10.7 Continued Performance.
The fact that the dispute resolution procedures specified in this
Section 10 will have been or may be invoked will not excuse any party from
performing its obligations under this Agreement and during the pendency of
any such procedure all parties will continue to perform their respective
obligations in good faith, subject to any rights to terminate this
Agreement that may be available to any party and to the right of setoff
provided in Section 8.4 hereof.
11. MISCELLANEOUS
11.1 Disclosure Schedule.
The Schedules have been compiled in a bound volume (the "Disclosure Schedule"),
executed by Shareholders and dated and delivered to Buyer on the this
Agreement's date and five (5) business days following this Agreement's
execution. Information set forth in the Disclosure Schedule specifically refers
to the section of this Agreement to which information is responsive and
information will not be deemed to have been disclosed with respect to any other
section of this Agreement or for any other purpose. The Disclosure Schedule
includes a table of contents and/or index to all of the information and
documents contained therein. The Disclosure Schedule will not vary, change, or
alter the language of the representations and warranties contained in this
Agreement and, if the language in the Disclosure Schedule does not conform in
every respect to the language of the representations and warranties, the
language in the Disclosure Schedule will be disregarded and be of no force or
effect.
11.2 Further Assurance.
From time to time, at the other party's request and without further
consideration, Buyer, Company and Shareholders will execute and deliver to the
requesting party documents and take other action as the requesting party may
reasonably request in order to consummate more effectively the transactions
contemplated hereby.
11.3 Disclosures and Announcements.
Announcements concerning the transactions provided for in this Agreement by
Buyer, Company, or Shareholders will be subject to the approval of the other
parties in all essential respects, except that approval of the Shareholders or
Company will not be required as to any statements and other information which
Buyer may submit to the Securities and Exchange Commission, the Nasdaq Stock
Market, Inc. or Buyer's stockholders or be required to make under any rule or
regulation of the Securities and Exchange Commission or Nasdaq, or otherwise
required by law.
31
11.4 Assignment; Parties in Interest.
11.4.(a) Assignment. Except as expressly provided herein, the rights
and obligations of a party hereunder may not be assigned, transferred or
encumbered without the prior written consent of the other parties.
Notwithstanding the foregoing, Buyer may, without consent of any other
party, cause one or more subsidiaries of Buyer to carry out all or part of
the transactions contemplated hereby; provided, however, that Buyer will,
nevertheless, remain liable for all of its obligations, and those of any
such subsidiary, to Shareholders hereunder.
11.4.(b) Parties in Interest. This Agreement will be binding upon,
inure to the benefit of, and be enforceable by the respective successors
and permitted assigns of the parties hereto. Nothing contained herein will
be deemed to confer upon any other person any right or remedy under or by
reason of this Agreement.
11.5 Law Governing Agreement.
This Agreement may not be modified or terminated orally, and will be construed
and interpreted according to the internal laws of the State of California,
excluding any choice of law rules that may direct the application of the laws of
another jurisdiction. Venue shall be in the Superior Court of Ventura County.
11.6 Amendment and Modification.
Buyer and Shareholders may amend, modify and supplement this Agreement in such
manner as may be agreed upon in writing between Buyer and Shareholders.
11.7 Notice.
All notices, requests, demands and other communications hereunder will be given
in writing and will be: (a) personally delivered; (b) sent by telecopier,
facsimile transmission or other electronic means of transmitting written
documents; or (c) sent to the parties at their respective addresses indicated
herein by registered or certified U.S. mail, return receipt requested and
postage prepaid, or by private overnight mail courier service. The respective
addresses to be used for all such notices, demands or requests are as follows:
(a) If to Buyer, to:
U. S. Laboratories Inc.
0000 Xxxxxx Xxxxx, Xxxxx 00
Xxx Xxxxx, XX 00000
Attention: President
Facsimile: 000 000 0000
32
(with a copy to)
Xxxxx & Xxxxxxx
000 Xxxx Xxxxxxxx, Xxxxx 0000
Xxx Xxxxx, Xxxxxxxxxx 00000
Facsimile: 000 000 0000
or to such other person or address as Buyer will furnish to Shareholders in
writing.
(b) If to Shareholders:
Don L. Bleak
000 Xxxxx Xxxx Xxxx
Xxxx, XX 00000
F.L. Franklin
0000 Xxxx Xxxxxx
Xxxxxxx, XX 00000
(with a copy to)
Xxxx X. Xxxxx, Esq.
Xxxxxxx Uritz, A Professional Corporation
000 Xxxxx Xxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Facsimile: (000) 000-0000
(c) If to Company, to:
BTC Laboratories, Inc.
0000 Xxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: F.L. Franklin
In addition, any notice to Company given prior to Closing will also be given in
the same manner to Shareholders; and any notice to Company given after Closing
will also be given in the same manner to Buyer.
If personally delivered, such communication will be deemed delivered upon actual
receipt; if electronically transmitted pursuant to this paragraph, such
communication will be deemed delivered the next business day after transmission
(and sender will bear the burden of proof of delivery); if sent by overnight
courier pursuant to this paragraph, such communication will be deemed delivered
upon receipt; and if sent by U.S. mail pursuant to this paragraph, such
communication will be deemed delivered as of the date of delivery indicated on
the receipt issued by the relevant postal service, or, if the addressee fails or
refuses to accept delivery, as of the date of such failure or refusal. Any party
to
33
this Agreement may change its address for the purposes of this Agreement by
giving notice thereof in accordance with this Section.
11.8 Expenses.
Regardless of whether or not the transactions contemplated hereby are
consummated:
11.8.(a) Brokerage. Except as to Venture Management, Inc., who will be
compensated by Shareholders, Shareholders and Buyer each represent and
warrant to each other that there is no broker involved or in any way
connected with this Agreement's transactions on their behalf respectively
(and Shareholders represent and warrant that there is no broker involved on
behalf of Company) and each will hold the other harmless from and against
all other claims for brokerage commissions or finder's fees in connection
with the execution of this Agreement or its transactions.
11.8.(b) Expenses to be Paid by Shareholders. Shareholders will pay,
and will indemnify, defend, and hold Buyer and Company harmless from and
against any sales, use, excise, transfer or other similar tax imposed with
respect to the transactions provided for in this Agreement, and any
interest or penalties related thereto.
11.8.(c) Other. Except as otherwise provided herein, each of the
parties will bear its own expenses and the expenses of its counsel and
other agents in connection with the transactions contemplated hereby.
11.8.(d) Costs of Litigation or Arbitration. The parties agree that
(subject to the discretion, in an arbitration proceeding, of the arbitrator
as set forth in Section 10.4) the prevailing party in any action brought
with respect to or to enforce any right or remedy under this Agreement will
be entitled to recover from the other party or parties all reasonable costs
and expenses of any nature whatsoever incurred by the prevailing party in
connection with such action, including without limitation attorneys' fees
and prejudgment interest.
11.9 Entire Agreement.
This instrument embodies the entire agreement between the parties hereto with
respect to the transactions contemplated herein, and there have been and are no
agreements, representations or warranties between the parties other than those
set forth or provided for herein.
11.10 Counterparts.
This Agreement may be executed in one or more counterparts, each of which will
be deemed an original, but all of which together will constitute one and the
same instrument.
11.11 Headings.
The headings in this Agreement are inserted for convenience only and will not
constitute a part hereof.
34
11.12 Glossary of Terms.
The following sets forth the location of definitions of capitalized terms
defined in the body of this Agreement:
Affiliate - Section 3.7. (k)
Ancillary Instruments - Section 3.2. (a)
Buyer's Affiliates - Section 8.1
CERCLA - Section 3.10. (c)
Claim - Section 8.1
Closing Balance Sheet - 3.4
Closing - Preamble to Section 9
Code - Section 3.5. (d)
Company Employees" - Section 3.15. (a)
Disclosure Schedule - Section 11
Employee Plans/Agreement(s) - Section 3.15. (a)
Environmental Laws - Section 3.10. (c)
ERISA - Section 3.15. (a)
Government Entities - Section 3.3
Indemnified Party - Section 8.3. (a)
Indemnifying Party - Section 8.3. (a)
Laws - Section 3.3
Lien - Section 3.11. (a)
Litigation - Section 3.9
Orders - Section 3.3
PBGC - Section 3.15. (b) (ii)
Purchase Price - Section 2.1
Recent Balance Sheet - Section 3.4
Trade Rights - Section 3.17
Waste - Section 3.10. (c)
Where any group or category of items or matters is defined collectively in the
plural number, any item or matter within such definition may be referred to
using such defined term in the singular number.
35
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and
year first above written.
Buyer Company
By:/s/ Xxxxxx Xxxxxx By:/s/ Don L. Bleak
----------------- ----------------
Xxxxxx Xxxxxx, Vice President Don L. Bleak, President
Shareholders
/s/ Don L. Bleak
----------------
Don L. Bleak, Trustee of the Don L. Bleak and
Xxxxxxxx X. Bleak Trust, dated June 24, 1988
Xxxxxxxx X. Bleak
-----------------
Xxxxxxxx X. Bleak,Trustee of the Don L. Bleak
and Xxxxxxxx X. Bleak Trust, dated June 24,
1988
/s/ F. L. Franklin
------------------
F. L. Franklin
36
