Exhibit 10.1
STOCK PURCHASE AGREEMENT
BY AND AMONG
ARCADIA RESOURCES, INC.
("BUYER")
AND
BEACON RESPIRATORY SERVICES, INC.,
BEACON RESPIRATORY SERVICES OF ALABAMA, INC.,
BEACON RESPIRATORY SERVICES OF COLORADO, INC.,
BEACON RESPIRATORY SERVICES OF GEORGIA, INC.
(COLLECTIVLEY "COMPANIES")
AND
XXXXXXX X. IRISH
X. XXXX XXXXXXX
XXXX X. XXXXXX
("SELLERS")
EXECUTION DATE: DECEMBER 22, 2004
EFFECTIVE DATE: JANUARY 1, 2005
TABLE OF CONTENTS
ARTICLE I SALE AND TRANSFER OF SHARES; CLOSING; OTHER MATTERS.............1
1.1 Sale and Purchase of Shares.......................................1
1.2 Purchase Price....................................................1
1.3 Purchase Price Adjustment.........................................2
1.4 Payment of Purchase Price: Deposit................................2
1.5 Nature of the Companies' Stock....................................3
1.6 Closing...........................................................3
1.7 Closing Obligations...............................................3
1.8 Resignation of Officers...........................................4
ARTICLE II REPRESENTATIONS AND WARRANTIES OF COMPANIES AND SELLERS........5
2.1 Organization and Good Standing....................................5
2.2 Authority/Enforceability..........................................5
2.3 No Conflict.......................................................5
2.4 Capitalization....................................................6
2.5 Financial Statements..............................................6
2.6 Books and Records.................................................6
2.7 Title to Properties; Encumbrances.................................6
2.8 Real Property.....................................................7
2.9 Condition and Sufficiency of Assets...............................8
2.10 Accounts Receivable...............................................8
2.11 Inventory.........................................................8
2.12 Taxes.............................................................8
2.13 No Material Adverse Change........................................9
2.14 Employee Benefits.................................................9
2.15 Compliance with Legal Requirements...............................11
2.16 Governmental Authorizations......................................11
2.17 Legal Proceedings; Orders........................................11
2.18 Absence of Certain Changes and Events............................12
2.19 Contracts; No Defaults...........................................13
2.20 Insurance........................................................14
2.21 Environmental Matters............................................15
2.22 Employees/Representatives........................................15
2.23 Labor Relations; Compliance......................................16
2.24 Intellectual Property............................................16
2.25 Subsidiaries.....................................................17
2.26 Finders or Broker Fees...........................................17
2.27 Competitive Interest.............................................17
2.28 Related Party Transactions.......................................17
2.29 Bank Accounts; Business Locations................................17
2.30 Name; Prior Transactions.........................................18
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2.31 Disclosure.......................................................18
ARTICLE III REPRESENTATIONS AND WARRANTIES OF BUYER......................18
3.1 Organization and Good Standing...................................18
3.2 Authority; No Conflict...........................................18
3.3 Certain Proceedings..............................................19
3.4 Finders or Broker Fees...........................................19
ARTICLE IV INDEMNIFICATION, REMEDIES AND POST CLOSING COVENANTS..........19
4.1 Survival; Knowledge..............................................19
4.2 Indemnification and Payment of Damages by Sellers................20
4.3 Indemnification and Payment of Damages by Buyer..................21
4.4 Termination of Obligations of Companies..........................21
4.5 Survival of Representations and Warranties.......................21
4.6 Indemnification Limitations......................................21
4.7 Deposit..........................................................22
ARTICLE V DEFINITIONS 22
5.1 "Accounts Receivable"............................................22
5.2 "Agreement"......................................................22
5.3 "Best Efforts"...................................................22
5.4 "Breach".........................................................22
5.5 "Buyer's Closing Documents"......................................22
5.6 "Cash Payment"...................................................22
5.7 "Closing"........................................................22
5.8 "Closing Date"...................................................23
5.9 "Company Assets".................................................23
5.10 "Consent" or "Consents"..........................................23
5.11 "Contract".......................................................23
5.12 "Damages"........................................................23
5.13 "Effective Date".................................................23
5.14 "Employee Benefit Plan"..........................................23
5.15 "Encumbrance"....................................................23
5.16 "Environment"....................................................23
5.17 "Environmental, Health, and Safety Liabilities"..................24
5.18 "Environmental Law"..............................................24
5.19 "ERISA"..........................................................25
5.20 "Exempt Damages".................................................25
5.21 "Exempt Provisions"..............................................25
5.22 "Facility".......................................................25
5.23 "Fiduciary"......................................................25
5.24 "Financial Statements"...........................................25
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5.25 "GAAP"...........................................................25
5.26 "Governmental Authorization".....................................25
5.27 "Governmental Body"..............................................25
5.28 "Hazardous Activity".............................................25
5.29 "Hazardous Materials"............................................26
5.30 "Indebtedness"...................................................26
5.31 "Indemnified Persons"............................................26
5.32 "Intellectual Property Assets"...................................26
5.33 "Interim Financial Statements"...................................26
5.34 "IRC"............................................................26
5.35 "IRS"............................................................26
5.36 "Knowledge"......................................................26
5.37 "Leased Property"................................................27
5.38 "Legal Requirement"..............................................27
5.39 "Liability"......................................................27
5.40 "Limitation".....................................................27
5.41 "Material Adverse Change (or Effect)"............................27
5.42 "Occupational Safety and Health Law".............................27
5.43 "Order"..........................................................27
5.44 "Ordinary Course of Business"....................................27
5.45 "Organizational Documents".......................................28
5.46 "Person".........................................................28
5.47 "Proceeding".....................................................28
5.48 "Promissory Note"................................................28
5.49 "Purchase Price".................................................28
5.50 "Real Property"..................................................28
5.51 "Records"........................................................28
5.52 "Release"........................................................28
5.53 "Representatives"................................................28
5.54 "Sale Transaction"...............................................28
5.55 "Sellers' Closing Documents".....................................29
5.56 "Sellers' Noncompetition Agreements".............................29
5.57 "Sellers' Releases"..............................................29
5.58 "Shares".........................................................29
5.59 "Tax"............................................................29
5.60 "Tax Return".....................................................29
5.61 "Threat of Release"..............................................29
5.62 "Threatened".....................................................29
5.63 "Workers Compensation Reserve"...................................29
ARTICLE VI GENERAL PROVISIONS...........................................30
6.1 Confidentiality.................................................30
6.2 Expenses........................................................30
6.3 Schedules.......................................................30
6.4 Public Announcements............................................30
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6.5 Arbitration.....................................................31
6.6 Notices.........................................................31
6.7 Certain Taxes...................................................31
6.8 Recoupment......................................................32
6.9 Further Assurances..............................................32
6.10 Waiver..........................................................32
6.11 Entire Agreement and Modification...............................32
6.12 Construction....................................................32
6.13 Assignments; Successors; No Third Party Rights..................33
6.14 Severability....................................................33
6.15 Section Headings................................................33
6.16 Governing Law...................................................33
6.17 Arm's Length Negotiations.......................................33
6.18 Counterparts/Facsimile Signatures...............................33
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is made and entered into this 22nd day of
December, 2004, effective as of January 1, 2005 (the "Effective Date"), by and
among ARCADIA RESOURCES, INC., a Nevada corporation ("Buyer"), BEACON
RESPIRATORY SERVICES, INC., BEACON RESPIRATORY SERVICES OF ALABAMA, INC., BEACON
RESPIRATORY SERVICES OF COLORADO, INC., BEACON RESPIRATORY SERVICES OF GEORGIA,
INC., (individually a "Company" and collectively the "Companies"), and XXXXXXX
X. IRISH, B. XXXX XXXXXXX, Florida residents, and XXXX X. XXXXXX, a Georgia
resident (collectively "Sellers"). Certain other capitalized terms used herein
are defined in Article X and throughout this Agreement.
R E C I T A L S :
A. Sellers own 100% of the issued and outstanding shares (the "Shares")
of capital stock of the Companies.
B. The Companies are engaged in the sale and leasing of durable medical
equipment, including home respiratory and oxygen equipment (the "Business").
C. The facilities of the Companies consist of the Companies' leased
facilities located at Ocala, Florida; Fultondale, Alabama; Denver, Colorado; and
Atlanta, Georgia (collectively the "Facilities").
X. Xxxxxxx desire to sell, and Buyer desires to purchase, all of the
Shares upon the terms and subject to the conditions, representations, warranties
and covenants contained in this Agreement.
X. Xxxxxxx, as owners of all of the Shares, will benefit from the sale
of the Shares to Buyer and are joining in this Agreement as a material
inducement to Buyer and as a condition to Buyer's willingness to enter into this
Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
promises, representations, warranties and covenants herein contained, the
parties agree as follows:
ARTICLE I
SALE AND TRANSFER OF SHARES; CLOSING; OTHER MATTERS
1.1 SALE AND PURCHASE OF SHARES. Subject to the terms and conditions of
this Agreement, at the Closing, effective as of the Effective Date, Sellers will
sell, convey, assign, deliver and transfer the Shares to Buyer, and Buyer will
purchase the Shares from Sellers free and clear of any and all Encumbrances.
1.2 PURCHASE PRICE. The purchase price for the Shares will be One
Million Five Hundred Thousand Dollars ($1,500,000.00), consisting of a payment
of Eight Hundred Eighty Eight Thousand and Thirty Seven Dollars ($888,037.00)
Dollars as set forth herein, plus the assumption of shareholder notes described
in Schedule 1.2(a) in the amount of Two Hundred Fifty Six Thousand Nine Hundred
Sixty Three Dollars ($256,963), plus the assumption of certain leases on rental
equipment described in Schedule 1.2(b) in the amount of Two Hundred Thirty
Thousand Dollars ($230,000), plus the assumption of the accounts payable set
forth in Schedule 1.2(c) in the amount of One Hundred Twenty Five Thousand
Dollars ($125,000), subject to adjustment of the above numbers comprising the
$1,500,000.00 Purchase Price as of
December 31, 2004, and subject to any Purchase Price Adjustment computed
pursuant to Section 1.3 below (the "Purchase Price").
1.3 PURCHASE PRICE ADJUSTMENT. The Purchase Price is subject to
adjustment, as follows:
1.3.1 The Purchase Price has been determined based upon
certain assumptions of the parties relative to Medicare adjusting rates and
related reimbursement issues. The effect of the changes in reimbursement for
calendar year 2005 will be quantified by the parties upon issuance of the new
rates for those products and payors affected, specifically oxygen and nebulizer
medications.
1.3.2 The quantity of patients and/or products which qualify
for Medicare Reimbursement will be based on the average number on rent or sold
to Medicare during the last three (3) months of 2004 to determine the average
monthly units.
1.3.3 The difference between the old rate and the new lower
rate will be multiplied by the average monthly units for the number of months in
2005 affected by the new lower rates to reach a quantified reimbursement change
("QRC").
1.3.4 If the QRC is more than $400,000, there will be no
adjustment to the Purchase Price. If the QRC is less than $400,000, the
difference between $400,000 and the QRC will be paid in equal portions to the
Shareholders. Payment of such amount shall be made upon expiration of one (1)
year from the "Effective Date" hereof.
1.4 PAYMENT OF PURCHASE PRICE: DEPOSIT. The Purchase Price shall be
payable at the Closing or otherwise and subject to final adjustment as set forth
in Section 1.2, as follows:
1.4.1 The sum of Eight Hundred Eighty Eight Thousand and
Thirty Seven Dollars ($888,037.00), minus the amount of $150,000 to be held by
Buyer for a one-year period pursuant hereto (the "Deposit"), shall be paid by
Buyer to the Sellers on or before January 15, 2005 by bank cashiers or certified
check or by interbank wire transfer, at Buyer's option ("Cash Payment") as
follows:
$246,013 Xxxxxxx X. Irish
$246,012 B. Xxxx Xxxxxxx
$246,012 Xxxx X. Xxxxxx
1.4.2 On or before January 15, 2005, the TOTAL SUM of Fifty
Seven Thousand Five Hundred Seventy Five Dollars ($57,575.00) shall be paid to
B. Xxxx Xxxxxxx by bank cashiers or certified check or interbank wire transfer,
at Buyer's option, in full and final satisfaction of his Shareholder Note.
Twenty-Five Thousand Dollars ($25,000.00) of this total sum shall be paid on or
before January 3, 2005.
1.4.3 On or before January 15, 2005, the TOTAL SUM of Forty
Eight Thousand One Hundred Fourteen Dollars ($48,114.00) shall be paid to Xxxx
X. Xxxxxx by bank cashiers or certified check or interbank wire transfer, at
Buyer's option, in full and final satisfaction of his Shareholder Note.
Twenty-Five Thousand Dollars ($25,000.00) of this total sum shall be paid on or
before January 3, 2005.
1.4.4 At the Closing, Buyer shall provide Xxxxxxx X. Irish a
Promissory Note, effective as of the Effective Date, in the form attached as
Exhibit 1.4.4, in the principal amount of One Hundred Fifty One Thousand Two
Hundred Seventy Four Dollars ($151,274.00), to be paid out
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over the one year period subsequently, with 8% simple interest per annum and
with principal and interest payments made quarterly. Upon any breach by the
Buyer of the Promissory Note, Ms. Irish shall have the Default Remedies under
the note or alternatively may require Buyer to promptly transfer Ms. Irish her
Beacon shares back, without Encumbrances, if such breach is not cured within
fifteen (15) days of such breach. As security for Buyer's obligation under the
Promissory Note, Ms. Irish's Beacon shares shall be held by Xxxx, Xxxxxxx and
Xxxxx, PLC as set forth in the note.
1.4.5 At the Closing, Buyer shall assume those leases on
rental equipment set forth in Schedule 1.2(b) in the amount of Two Hundred
Thirty Thousand Dollars ($230,000.00). Sellers and Buyer shall endeavor to have
all personal guarantees of Sellers removed from such leases immediately after
the Effective Date, and failing such removal by January 31, 2005, such leases
shall be paid off on or before March 31, 2005.
1.4.6 At the Closing, Buyer shall assume those accounts
payable (including accrued payroll and all other accrued expenses) set forth in
Schedule 1.2(c) in the amount of One Hundred Twenty Five Thousand Dollars
($125,000.00).
1.4.7 The Deposit shall be held by Buyer to offset valid
indemnification and other claims of Buyer against the Companies and Sellers
arising from this Agreement and/or any documents executed in connection
herewith. However, no amounts shall be offset against the Deposit unless jointly
agreed to in writing by Buyer and Xxxxxxx Irish or upon presentation of a
non-appealable court order. The amount of the Deposit remaining as of January 1,
2006, shall be paid to the Sellers in equal portions together with four percent
(4%) interest thereon accrued from January 1, 2005 until the date paid. In the
event that any of the remaining amount left in the Deposit as of January 1, 2006
is in dispute, interest shall stop accruing as of the commencement of the
dispute and such disputed amount shall be placed by Buyer in Escrow with a
mutually agreeable third party until the dispute is resolved. As security for
the Deposit, 16.33% of the Beacon Shares sold to Buyer hereunder shall be held
by Xxxx, Xxxxxxx and Xxxxx, PLC, until written evidence that the Deposit plus
interest (less amounts in dispute) has been paid to Sellers, or a final
non-appealable or joint mutual direction of Buyer and Seller is received. During
any time such shares are held by Xxxx, Xxxxxxx and Xxxxx, PLC, Buyer may vote
such shares and otherwise enjoy all incidents of ownership.
1.5 NATURE OF THE COMPANIES' STOCK. Sellers acknowledge that all
stock acquired by Buyer hereunder, being acquired in a private transaction, will
be restricted in nature and the certificates therefor shall contain the
restrictive legend attached as Schedule 1.5 hereof. Such stock may only be sold
as set forth in such restrictive legend.
1.6 CLOSING. The purchase and sale (the "Closing") provided for in
this Agreement will take place at 10:00 a.m. on December 22, 2004, at the
offices of Arcadia Services, Inc., 00000 Xxxxxxx Xxxx Xxxxxxxxx, Xxxxx 000,
Xxxxxxxxxx, Xxxxxxxx 00000, or at such other time and place as the parties may
mutually agree. The Effective Date of the Closing shall be January 1, 2005.
1.7 CLOSING OBLIGATIONS. At the Closing:
1.7.1 Sellers will deliver to Buyer (collectively the
"Sellers' Closing Documents"):
(a) Certificates representing the Shares, duly
endorsed (or accompanied by duly executed stock powers);
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(b) Releases in the form of Exhibit 1.7.1(b)
executed by Sellers indicating Sellers shall release the
Companies from any and all claims, liabilities or obligations
("Sellers' Releases");
(c) Noncompetition agreements in the form of Exhibit
1.7.1(c), executed by Sellers (the "Sellers' Noncompetition
Agreements");
(d) The Consents;
(e) The resignation of Sellers and such other
individuals identified on Schedule 1.7.1(e), as officers,
directors and employees of the Companies, effective as of the
Closing Date, in the form and substance satisfactory to Buyer's
counsel;
(f) A legal opinion from Sellers' counsel in the
form of Exhibit 1.7.1(f);
(g) [INTENTIONALLY OMITTED];
(h) [INTENTIONALLY OMITTED];
(i) [INTENTIONALLY OMITTED];
(j) [INTENTIONALLY OMITTED]; and
(k) 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.
1.7.2 Buyer will deliver to Sellers ("Buyer's Closing
Documents"):
(a) [INTENTIONALLY OMITTED];
(b) The Promissory Note to Xxxxxxx X. Irish;
(c) Incumbency Certificate in the form of Exhibit
1.7.2(c);
(d) The Escrow Agreement;
(e) [INTENTIONALLY OMITTED]; and
(f) All other documents, instruments or writings
required to be delivered to Sellers at or prior to the Closing
pursuant to this Agreement and such other certificates of
authority and documents as Sellers may reasonably request.
1.8 RESIGNATION OF OFFICERS. The officers of the Companies will
provide resignations at the Closing, which resignations shall be effective as of
December 31, 11:59 p.m.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF COMPANIES AND SELLERS
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As a material inducement to Buyer entering into this Agreement and
knowing and acknowledging that Buyer is relying upon the same, the Companies and
Sellers, jointly and severally, hereby make, as of the Effective Date, the
following representations and warranties to Buyer.
2.1 ORGANIZATION AND GOOD STANDING. The Companies are corporations
duly organized, validly existing, and in good standing under the respective laws
of the State of their incorporation (Delaware), with full power and authority to
conduct their business as they are now being conducted, to own, lease and use
the properties and assets that they purport to own, lease or use, and have the
full power and authority to perform all of their material Contracts. The
Companies are duly qualified to do business as foreign corporations and are in
good standing under the laws of each state or other jurisdiction which either
the ownership, leasing or use of the properties owned, leased or used by them,
or the nature of the activities conducted by them, require such qualification.
2.2 AUTHORITY/ENFORCEABILITY. This Agreement constitutes the legal,
valid, and binding obligation of Sellers and the Companies, enforceable against
them in accordance with its terms. Upon the execution and delivery by Sellers of
the Sellers' Closing Documents, the Sellers' Closing Documents will constitute
the legal, valid, and binding obligations of Sellers, enforceable against them
in accordance with their respective terms, except to the extent that such
enforcement may be subject to applicable bankruptcy, insolvency, reorganization,
moratorium, or other similar laws now or hereafter in effect relating to
Creditors' rights generally. Sellers and the Companies have the absolute and
unrestricted right, power, authority, and capacity to execute and deliver this
Agreement and the Sellers' Closing Documents and to perform their respective
obligations under this Agreement and the Sellers' Closing Documents.
2.3 NO CONFLICT. Neither the execution and delivery of this
Agreement nor the consummation or performance of any of the contemplated
transactions hereunder will, directly or indirectly (with or without notice or
lapse of time): (a) contravene, conflict with, result in a violation of or have
any adverse affect upon (i) any provision of the organizational documents of the
Companies, or (ii) any resolution adopted by the Board of Directors or the
stockholders of the Companies; (b) contravene, conflict with, or result in a
violation of, or give any Governmental Body or other Person the right to
challenge any of the transactions contemplated hereunder or to exercise any
remedy or obtain any relief under any Legal Requirement, any Order to which the
Companies or Sellers, or any of the assets owned or used by the Companies, may
be subject; (c) contravene, conflict with, or result in a violation of any of
the terms or requirements of, or give any Governmental Body the right to revoke,
withdraw, suspend, cancel, terminate, or modify, any Governmental Authorization
that is held by the Companies or that otherwise relates to the business of, or
any of the assets owned or used by, the Companies; (d) contravene, conflict
with, or result in a violation or breach of any provision of, or give any Person
the right to declare a default or exercise any remedy under, or to accelerate
the maturity or performance of, or to cancel, terminate, or modify, any
Contract; or (e) result in the imposition or creation of any Encumbrance upon or
with respect to any of the assets owned or used by the Companies. Except as set
forth in Schedule 2.3, neither Sellers nor Companies are or will be required to
give any notice to or obtain any Consent from any Person in connection with the
execution and delivery of this Agreement or the consummation or performance of
any of the transactions contemplated hereunder.
2.4 CAPITALIZATION. The equity securities of the Companies are duly
authorized, validly issued, fully paid and non-assessable, and consist solely of
the equity securities described in Schedule 2.4. At the Closing, the Shares
shall represent all of the issued and outstanding shares of capital stock of the
Companies. Sellers are and will be on the Closing Date, the legal, record and
beneficial owners and holders of the Shares, free and clear of all Encumbrances
except the stock restrictions noted in Schedule 1.5, and shall transfer
ownership and marketable title to the Shares to the Buyer, free of all
Encumbrances (less such stock restrictions) at the Closing. Except for the stock
restrictions noted in Schedule 1.5, there are no Contracts relating to the
issuance, sale, or transfer of any equity securities or other securities of the
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Companies, no Person has any rights to acquire any shares of the capital stock
of the Companies, and there are no options, calls, warrants or other securities
or rights outstanding which relate to, are convertible into or exercisable for
any securities of the Companies. Schedule 2.4 sets forth, with respect to the
Companies, the name, address and federal taxpayer identification number of, and
the number of outstanding Shares legally and beneficially owned by each
shareholder as of the date hereof and the Closing Date.
2.5 FINANCIAL STATEMENTS. Attached hereto as Schedule 2.5 are the
following financial statements of the Companies ("Financial Statements"): (a)
the balance sheet of each of the Companies as of December 31, 2003 and 2002, and
the related statements of income for each of the years then ended, together with
(b) a balance sheet of each of the Companies as of October 31, 2004 and the
related statement of income for the ten (10) months then ended (the "Interim
Financial Statements"). All Financial Statements are true, accurate, complete,
and present the properties, financial condition and results of operations of the
Companies as of the respective dates of and for the periods referred to in such
Financial Statements, all in accordance with and pursuant to GAAP consistently
applied, except as expressly stated in Schedule 2.5.
2.6 BOOKS AND RECORDS. The books of account, accounting records,
minute books, and stock record books, of the Companies (collectively "Records"),
are in all material respects complete, accurate and correct and have been
maintained in accordance with reasonable business practices, except as may be
disclosed in the Financial Statements. All existing Records requested by the
Buyer have been made available to the Buyer for review. The minute books of the
Companies contain accurate and complete records of all meetings held of, and
corporate action taken by, the stockholders, the Board of Directors, and
committees of the Board of Directors of the Companies, and no meeting of any
such stockholders, Board of Directors or committee has been held for which
minutes have not been prepared and maintained in such minute books, except for
any inconsequential and informal meeting which did not have any significant
impact upon the Companies and at which no business of any consequence was
conduced, no actions or resolutions were taken and no liability was incurred. At
the Closing, all Records will be delivered to the Buyer.
2.7 TITLE TO PROPERTIES; ENCUMBRANCES. Except as indicated in
Schedule 2.7, each Company owns and has absolute, good and marketable title to
all of the material properties and assets (whether tangible or intangible)
located in the respective Facility leased or operated by such Company, used in
the business or operations of such Company, or reflected in the books, records
or Financial Statements of such Company, and all material properties and assets
purchased or otherwise acquired by such Company since the date of the Interim
Financial Statements (except for supplies sold since said dates in the Ordinary
Course of Business and consistent with past practice) (collectively "Company
Assets"). All Company Assets of each Company are free and clear of all
Encumbrances, except those Encumbrances described in Schedule 2.7.
2.8 REAL PROPERTY.
2.8.1 Schedule 2.8.1 lists and describes all real property or
interests in real property or interests in real property leased or
subleased to or by the Companies ("Leased Property"). The Sellers have
delivered to the Buyer correct and complete copies of the leases and
subleases listed in Schedule 2.8.1 and with respect to each such lease
and sublease, except as disclosed in Schedule 2.8.1:
(a) Each is legal, valid, binding, enforceable, and
in full force and effect in all material respects and will
continue to be legal, valid, binding, enforceable, and in full
force and effect in all material respects on identical terms
following the consummation of the Contemplated Transactions;
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(b) No Person is in breach or default, and no event
has occurred which, with or without notice or lapse of time,
would constitute a breach or default or permit termination,
modification, or acceleration thereunder;
(c) No Person has repudiated any provision thereof;
(d) There are no disputes, material oral agreements,
or forbearance arrangements in effect as to the lease or
sublease;
(e) With respect to each sublease, the
representations and warranties set forth in subsections (a)
through (e) above are true and correct with respect to the
underlying lease; and
(f) The respective Company has not assigned,
transferred, conveyed, mortgaged, deeded in trust, or encumbered
any interest in the leasehold or subleasehold.
2.8.2 Except as disclosed in Schedule 2.8.2, with respect to
each parcel of Leased Property:
(a) The applicable Company has received all material
Governmental Authorizations required in connection with the use
or operation thereof and such have been operated and maintained
in accordance with material applicable Legal Requirements;
(b) Each is supplied with utilities and other
services necessary for the operation of said Facility in the
Ordinary Course of Business as conducted prior to the Closing;
(c) There are no pending or threatened condemnation
proceedings, or lawsuits or administrative actions relating to
any parcel of Leased Property which could affect the current use
or occupancy thereof;
(d) There are no public improvements which should
have been ordered, threatened, announced or contemplated which
have not been completed, assessed and fully paid for;
(e) There are no parties (other than the applicable
Company) in possession or control of any parcel of Leased
Property, except as disclosed in Schedule 2.8.2; and
(f) Each parcel of Leased Property has vehicular
access to a public road, and access to the Facility provided by
paved public right-of-way with adequate curb cuts available.
2.9 CONDITION AND SUFFICIENCY OF ASSETS. Except as disclosed in
Schedule 2.9, the Facilities and the Company Assets, which are material to the
operations of the Companies, are structurally sound, in good operating condition
and repair, and are adequate for the uses to which they are being put, and none
of such Facilities or the Company Assets are in need of maintenance or repairs
except for ordinary, routine maintenance and repairs that are not material in
nature or cost. All personal property, fixtures, machinery and equipment owned
or used by the Companies, which are material to the operations of the Companies,
are in reasonable operating condition and repair, except as disclosed in
Schedule 2.9. All real property, buildings, plants and structures used by the
Companies are, in all material respects, structurally sound and in good
operating condition, except as disclosed in Schedule 2.9. The Facilities and the
Company Assets
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are sufficient for the continued conduct of the Companies' businesses after the
Closing in substantially the same manner as conducted prior to the Closing.
2.10 ACCOUNTS RECEIVABLE. All accounts receivable, net of allowances
for doubtful accounts, of the Companies that are reflected in the Closing
Financial Statements or in the accounting records of the Companies as of the
Closing Date (collectively the "Accounts Receivable") represent and, at the
Closing, will represent valid obligations arising from sales actually made or
services actually performed in the Ordinary Course of Business. Unless paid
prior to the Closing Date, the Accounts Receivable are and at the Closing will
be current and collectible, in full, subject to no offsets or defenses, except
for the amount of any respective reserves shown in the Closing Financial
Statements (which reserves are adequate and calculated in accordance with GAAP
and past practice and, in the case of the reserves as of the Closing Date, will
not represent a Material Adverse Change in the composition of such Accounts
Receivable in terms of aging). Except to the extent the Companies have set aside
reserves for non-collectible accounts receivable, each of the Accounts
Receivable either has been or will be collected in full, without any set-off,
within two hundred seventy (270) days after the Closing.
2.11 INVENTORY. To the best of Sellers' knowledge, all inventory of
the Companies, whether or not reflected in the Financial Statements, consists of
(i) good quality and reasonable quantity, fully usable and saleable within the
twelve month period following the Closing Date in the ordinary course of
business, (ii) all inventories have been priced at the lower of cost or market
on a first in first out basis in accordance with GAAP, and (iii) the quantities
of each of item of inventory (whether raw materials, work in process, or
finished goods) are not excessive, are reasonable in the present circumstances
of the Companies and meet all current customer specifications. Attached as
Schedule 2.11 is a current inventory listing of the Companies.
2.12 TAXES.
2.12.1 The Companies have filed or caused to be filed, on a
timely basis including lawful extensions, all Tax Returns that are or
were required to be filed by or with respect to it, pursuant to
applicable Legal Requirements. The Companies have paid all Taxes that
have or may have become due pursuant to those Tax Returns, any Legal
Requirement or otherwise, or pursuant to any assessment received by
Sellers or the Companies.
2.12.2 Schedule 2.12.2 contains a complete and current list of
all audits of or adjustments to all Tax Returns of the Companies (or its
predecessors) ending within the four (4) year period immediately
preceding the date of the Interim Financial Statements, including a
reasonably detailed description of the nature, proposed adjustments and
outcome of each audit. Except as described in Schedule 2.12.2, neither
Sellers nor the Companies have given or been requested to give waivers
or extensions (or are or would be subject to a waiver or extension given
by any other Person) of any statute of limitations relating to the
payment of Taxes by the Companies or for which the Companies may be
liable. All deficiencies accrued as a result of such audits have been
paid.
2.12.3 Taxes based on the operations of the Companies have been
reflected on the books and records of the Sellers. The charges,
accruals, and reserves with respect to Taxes in the Financial Statements
of the Sellers for the Companies are correctly determined in accordance
with GAAP. All Taxes that the Companies are or were required by Legal
Requirements to pay, withhold or collect have been duly paid, withheld
or collected and, to the full extent required, have been timely paid to
the proper Governmental Body or other Person. The Companies have no
Liability for Taxes, except for Taxes reserved in their Closing
Financial Statements and accrued in the Ordinary Course of Business
since the date thereof.
8
2.12.4 All Tax Returns filed (or that are included on a
consolidated basis) by the Companies are true, correct, and complete and
exact copies of all Tax Returns filed by the Companies during the three
(3) year period preceding the date hereof have been made available to
the Buyer. There is no tax sharing agreement that will require any
payment by the Companies after the date of this Agreement.
2.12.5 Schedule 2.12.5 describes all tax elections and consents
filed by the Companies with any Governmental Body. The Companies have
never filed any election or consent under IRC Sections 341 or 338.
2.13 NO MATERIAL ADVERSE CHANGE. Since October 31, 2004, there has
not been any Material Adverse Change to the Companies or their assets or
business, and no event has occurred or circumstance exists that may result in a
Material Adverse Change to the Companies.
2.14 EMPLOYEE BENEFITS.
2.14.1 Schedule 2.14.1 describes each Employee Benefit Plan
that the Companies maintain or to which the Companies contribute and
each Employee Benefit Plan that the Companies formerly maintained or to
which the Companies ever contributed in the past three (3) years.
2.14.2 Except as disclosed in Schedule 2.14.2, each Employee
Benefit Plan (and each related trust, insurance contract or fund)
complies in form and in operation in all respects with the applicable
requirements of ERISA, the IRC and all other Legal Requirements and all
required filings, returns, reports and descriptions (including Form 5500
Annual Reports, Summary Annual Reports, PBGC-1's and Summary Plan
Descriptions) have been timely filed or distributed appropriately with
respect to each such Employee Benefit Plan as required by ERISA, the IRC
and all Legal Requirements.
2.14.3 All required contributions (including all employer
contributions and employee salary reduction contributions) have been
paid to each Employee Benefit Plan and all required contributions for
any period ending on or before the Closing Date which are not yet due
have been and shall be accrued and reserved in the Companies' Interim
Financial Statements and books and records. All premiums or other
payments for all periods ending on or before the Closing Date have been
paid, or have been accrued and reserved in the Companies' respective
Interim Financial Statements and books and records with respect to each
such Employee Benefit Plan.
2.14.4 No funding or asset deficiency of any kind exists under
any Employee Benefit Plan.
2.14.5 Except as disclosed in Schedule 2.14.5, Sellers have
made available to Buyer correct and complete copies of all Employee
Benefit Plans, including without limitation, all agreements, plan
documents and summary plan descriptions, the most recent determination
letter received from the IRS, the three (3) most recent Form 5500 Annual
Reports, and all related trust agreements, insurance contracts and other
funding agreements which implement or relate to each Employee Benefit
Plan.
2.14.6 No such Employee Benefit Plan has been completely or
partially terminated or been the subject of a reportable event as to
which notices would be required to be filed with the PBGC within the
past three (3) years. No proceeding by the PBGC to terminate any such
Employee Benefit Plan has been instituted or threatened.
9
2.14.7 To the knowledge of the Sellers and the Companies, there
have been no prohibited transactions with respect to any such Employee
Benefit Plan. No Fiduciary has any Liability for breach of fiduciary
duty or any other failure to act or comply in connection with the
administration or investment of the assets of any such Employee Benefit
Plan. No action, suit, proceeding, complaint, grievance, hearing or
investigation with respect to the administration or the investment of
the assets of any such Employee Benefit Plan (other than routine claims
for benefits) is pending or threatened. Neither the Companies (nor their
employees with responsibility for employee benefits matters) nor the
Sellers have any Knowledge of any basis for any such action, suit,
grievance, complaint, proceeding, hearing or investigation.
2.14.8 The Companies have not incurred, and neither the Sellers
nor the directors and officers (and employees with responsibility for
employee benefits matters) of the Companies have any reason to expect
that the Companies will incur any Liability to the PBGC (other than PBGC
premium payments) or otherwise under Title IV of ERISA (including any
withdrawal Liability) or under the Code with respect to any such
Employee Benefit Plan which is an Employee Benefit Plan.
2.14.9 The Companies do not contribute to, never have
contributed to, and never have been required to contribute to any
Multi-Employer Plan or have any Liability (including withdrawal
Liability) under any Multi-Employer Plan.
2.14.10 Except as disclosed in Schedule 2.14.10, the Companies
do not maintain, have never maintained, have never contributed, and have
never been required to contribute to any Employee Benefit Plan providing
medical, health or life insurance or other welfare-type benefits for
current or future retired or terminated employees, their spouses or
their dependents.
2.14.11 The Companies have no Liability arising from any
Employee Plan, except for any liability reflected in the Companies'
Interim Financial Statements or as accrued in the Ordinary Course of
Business since the date of such Interim Financial Statements.
2.15 COMPLIANCE WITH LEGAL REQUIREMENTS. Except as set forth in
Schedule 2.15:
2.15.1 The Companies are, and at all times during the last
three (3) years have been, in full compliance with each material Legal
Requirement that is or was applicable to them or to the conduct or
operation of their business or the ownership or use of any of their
assets;
2.15.2 No event has occurred or circumstance exists that (with
or without notice or lapse of time) may constitute or result in a
violation by the Companies under, or a failure on the part of the
Companies to comply with, any material Legal Requirement
2.15.3 Neither Companies nor Sellers have received any notice
or other communication (whether oral or written) from any Governmental
Body or any other Person regarding (i) any actual or, to the Knowledge
of the Companies, alleged violation of, or failure to comply with, any
Legal Requirement, or (ii) any actual or, to the Knowledge of the
Companies, alleged obligation on the part of the Companies to undertake,
or to bear all or any portion of the cost of, any remedial action of any
nature.
2.16 GOVERNMENTAL AUTHORIZATIONS.
2.16.1 Schedule 2.16.1 contains a complete and correct list of
each Governmental Authorization that is held by the Companies or that
otherwise relates to the business of, or to any
10
of the assets owned or used by, the Companies. Each Governmental
Authorization listed or required to be listed in Schedule 2.16.1 is
valid and in full force and effect. The Companies have fully complied
with all conditions and requirements for, or relating to, all
Governmental Authorizations.
2.16.2 The Companies have all material Governmental
Authorizations necessary to permit them to lawfully conduct and operate
their business in the manner as currently conducted, and to permit them
to own and use their assets in the manner in which they are currently
owned and used.
2.16.3 Neither Companies nor Sellers have received any notice
or other communication regarding any actual, or to the Knowledge of the
Companies, alleged (i) violation or failure to comply with any
Governmental Authorization or (ii) revocation, withdrawal, suspension,
cancellation, termination or modification of any material Governmental
Authorization.
2.17 LEGAL PROCEEDINGS; ORDERS.
2.17.1 Except as disclosed in Schedule 2.17.1, there is no
pending Proceeding: (a) that has been commenced by or against the
Companies or that otherwise relates to or may affect the business of, or
any of the assets owned, leased or used by the Companies; or (b) that
challenges, or that may have the effect of preventing, delaying, making
illegal, or otherwise interfering with, any of the transactions
contemplated hereunder. No such Proceeding has been Threatened in
writing, or orally to the Knowledge of the Sellers or the Companies, and
no Proceeding has been terminated (by adjudication, settlement or
otherwise) within the last three (3) years. No event has occurred or
circumstance exists that may reasonably give rise to or serve as a basis
for the commencement of any such Proceeding; and
2.17.2 There is currently no Order to which the Companies,
Sellers or any of the Companies' businesses or any of the assets owned,
leased or used by the Companies, is subject. The Companies have complied
with all Orders to which they, or any of the assets owned or used has
been subject.
2.18 ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as set forth in
Schedule 2.18, since October 31, 2004, the Companies have conducted their
businesses only in the Ordinary Course of Business and there have not been any:
2.18.1 Change in the Companies' authorized or issued capital
stock; grant of any stock option or right to purchase shares of capital
stock of the Companies; issuance of any security convertible into such
capital stock; or declaration or payment of any dividend or other
distribution or payment in respect of shares of capital stock;
2.18.2 Amendment to the Organizational Documents of the
Companies;
2.18.3 Payment of any bonuses to or any increase in any
salaries, wages, benefits or other compensation of any stockholder,
director, officer, employee, agent or Representative of the Companies or
entry into any employment or severance agreement or arrangement, or any
other Contract with such Person except for increases or payments in the
Ordinary Course of Business;
2.18.4 Payment or accrual of any bonuses, commissions or other
distributions to any Sellers or any relative of any Sellers;
11
2.18.5 Adoption of, or increase in the payments to or benefits
under, any Employee Benefit Plan;
2.18.6 Damage to or destruction or loss of any asset or
property of the Companies, whether or not covered by insurance, in
excess of $50,000;
2.18.7 Entry into, termination of, or receipt of notice of
termination of any Contract or transaction outside the Ordinary Course
of Business or which involves a total remaining commitment by or to the
Companies of at least $50,000, other than such actions that would not
reasonably be considered to have a Material Adverse Effect;
2.18.8 Sale, license, lease, or other disposition of any asset
or property of the Companies in excess of $10,000 or imposition of any
Encumbrance on any asset or property of the Companies, except in the
Ordinary Course of Business;
2.18.9 Cancellation, settlement, or waiver of any claims or
rights of or against the Companies in excess of $25,000;
2.18.10 Change in any of the accounting methods or principles
used by the Companies except for any changes necessitated by changes to
GAAP or as required pursuant to this Agreement; or
2.18.11 The entry into any Contract by the Companies to do any
of the foregoing.
2.19 CONTRACTS; NO DEFAULTS.
2.19.1 Schedule 2.19.1 contains a complete and correct list,
and Sellers have made available to Buyer true and complete copies, of:
(a) Each Contract that involves the furnishing or
performance of services, or the delivery, sale, lease or
transfer of goods, materials or products, by the Companies in an
amount or value in excess of $10,000, including, but not limited
to, purchase orders received by the Companies;
(b) Each Contract that involves the furnishing or
performance of services to, or the purchase, lease or receipt of
goods, materials, inventory, supplies, products or other
personal property by the Companies in an amount or value in
excess of $10,000, including, but not limited to, purchase
orders issued by the Companies;
(c) Each lease, rental or occupancy agreement,
license, installment and conditional sale agreement, and other
Contracts affecting the ownership of, leasing of, title to, use
of, or any leasehold or other interest in, any personal property
(except personal property leases and installment and conditional
sales agreements having a value per item or aggregate payments
of less than $50,000);
(d) Each Contract under which the Companies have
created, incurred, assumed or guaranteed any indebtedness for
borrowed money, have incurred any capitalized lease obligation,
or under which any of their tangible or intangible assets, are
Encumbered;
(e) Each licensing agreement or other Contract with
respect to any Intellectual Property Assets, including, without
limitation, agreements with current or former
12
employees, consultants, or contractors regarding the
appropriation or the non-disclosure of any of the Intellectual
Property Assets;
(f) Each profit sharing, stock option, stock
purchase, stock appreciation, deferred compensation, severance,
or other plan, arrangement, contract or Employee Benefit Plan
for the benefit of its current or former directors, officers,
and employees, except for Employee Benefits Plans disclosed in
Schedule 2.15;
(g) Each written agreement for the employment of or
receipt of any services from any Person on a full-time,
part-time, consulting, commission or any other basis, except for
oral agreements of employment that are terminable by the
Companies at will and without any Liability;
(h) Each Contract containing covenants that in any
way purport to restrict the business activity of the Companies
or limit the freedom of the Companies to engage in any line of
business or to compete with any Person;
(i) Each Contract for capital expenditures in excess
of $10,000;
(j) Each warranty, guaranty, or other similar
undertaking extended by the Companies for or with respect to any
Person, except as disclosed in Schedule 2.27;
(k) Each Contract with any employee, officer,
director, shareholder, sales representative, consultant,
distributor, Representative or agent of the Companies;
(l) Each Contract relating to Intellectual Property
Assets;
(m) Each Contract not entered into in the Ordinary
Course of Business;
(n) Each Contract relating to confidentiality or
noncompetition;
2.19.2 Except as set forth in Schedule 2.19.2, the Sellers do
not have any fixed or contingent rights or obligations under any
Contract that relates to the business of, or any of the assets owned or
used by, the Companies.
2.19.3 Except as set forth in Schedule 2.19.3, each Contract is
in full force and effect and is valid and enforceable in accordance with
its terms.
2.19.4 Except as set forth in Schedule 2.19.4, with respect to
each Contract (including, without limitation, those Contracts and
agreements disclosed or required to be disclosed in Schedule 2.19.1):
(a) The Companies are, and at all times have been,
in material compliance with all applicable terms and
requirements of each Contract;
(b) Each other Person that has or had any obligation
or liability under any Contract is, and at all times has been,
in material compliance with all applicable terms and
requirements of such Contract;
(c) No event has occurred or circumstance exists
that (with or without notice or lapse of time) may contravene,
conflict with, or result in a violation or breach of, or give
13
the Companies or other Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, any
Contract; and
(d) The Companies have not given to nor received
from any other Person any notice or other communication (whether
oral or written) regarding any actual or alleged violation or
breach of, default under or termination or cancellation of, any
Contract.
2.19.5 The Contracts relating to the sale, design, manufacture,
or provision of products or services by the Companies have been entered
into in the Ordinary Course of Business and have been entered into
without the commission of any act alone or in concert with any other
Person, or any consideration having been paid or promised, that is or
would be in violation of any Legal Requirement or customer or supplier
requirement, restriction, code or rule of conduct.
2.20 INSURANCE. Schedule 2.20 sets forth a description with respect
to each insurance policy (including policies providing property, casualty,
liability and workers' compensation coverage and bond and surety arrangements)
to which the Companies have been a party, a named insured or otherwise the
beneficiary of coverage at any time within the past three (3) years, including
(a) the name, address and telephone number of the agent; (b) the name of the
insurer, the name of the policyholder, and the name of each covered insured;(c)
the policy number and the period of coverage; (d) the scope (including an
indication of whether the coverage was on a claims made, occurrence or other
basis) and amount (including a description of how deductibles and ceilings are
calculated and operate) of coverage; and (e) a description of any retroactive
premium adjustments or other loss-sharing arrangements. With respect to each
such insurance policy: (i) the policy is legal, valid, binding, enforceable and
in full force and effect; (ii) the policy, as to the Sellers, will continue to
be legal, valid, binding, enforceable and in full force and effect on identical
terms following the consummation of the transaction contemplated hereby; (iii)
neither Companies nor any other Person is in breach or default, and no event has
occurred which, with notice or the lapse of time, would constitute such a breach
or default, or permit termination, modification or acceleration, under the
policy; and (iv) no Person has repudiated any provision thereof. The Companies
have been covered during the past three (3) years by insurance in scope and
amount customary and reasonable for the business in which they have engaged
during such period. Schedule 2.20 describes any self-insurance arrangements
affecting the Companies.
2.21 ENVIRONMENTAL MATTERS. Except as set forth in Schedule 2.21:
2.21.1 The Companies are, and at all times have been, in full
compliance with, and have not been and are not in violation of or liable
under, any Environmental Law and have never engaged in any Hazardous
Activity. Neither Sellers nor the Companies have any basis to expect,
nor has any of them or any other Person for whose conduct they are or
may be held to be responsible, received, any actual or Threatened Order,
notice or other communication from any Governmental Body or Person, or
the current or prior owner or operator of any Facility, of any actual or
potential violation or failure to comply with any Environmental Law, or
of any actual or Threatened obligation to undertake or bear the cost of
any Environmental, Health, and Safety Liabilities with respect to any of
the Facilities or any other properties or assets (whether real,
personal, or mixed) in which Sellers or the Companies have had an
interest, or with respect to any property or Facility at or to which
Hazardous Materials were generated, manufactured, refined, transferred,
imported, used, or processed by Sellers or the Companies or any other
Person for whose conduct they are or may be held responsible.
2.21.2 There are no pending, potential or Threatened claims or
Encumbrances arising under or pursuant to any Environmental Law, or any
Environmental, Health and Safety Liabilities,
14
with respect to or affecting the Facilities or any other properties and
assets (whether real, personal, or mixed) in which Sellers or the
Companies have ever used, possessed or occupied, or ever had any
interest in.
2.21.3 Neither Sellers nor the Companies, nor any other Person
for whose conduct they are or may be held responsible, have any
Environmental, Health and Safety Liabilities.
2.22 EMPLOYEES/REPRESENTATIVES.
2.22.1 Schedule 2.22.1 contains a complete and accurate list of
the following information for each employee of the Companies, including
each employee on leave of absence or layoff status: (a) name; (b) date
of hire, (c) job title; (d) current compensation and bonus paid or
payable; (e) vacation accrued; (f) service credited for purposes of
vesting and eligibility to participate under any Employee Benefit Plan
and (g) all other unpaid compensation, bonus and overtime pay, accrued
or payable for any period prior to the Closing.
2.22.2 To the Sellers' Knowledge, no employee, officer or
director of the Companies is a party to, or is otherwise bound by any
confidentiality, noncompetition, proprietary rights or similar
agreements or arrangements, between such employee, officer or director
and any other Person.
2.22.3 Schedule 2.22.3 also contains a complete and accurate
list of the following information for each retired employee or director
of the Companies, or their dependents, receiving benefits or eligible to
receive benefits in the future: (a) name, (b) benefit, (c) payment
option election, (d) retiree medical insurance coverage, (e) retiree
life insurance coverage, and (f) other benefits.
2.22.4 Schedule 2.22.4 lists each current sales representative,
commissioned salesperson, consultant or other agent or representative of
the Companies ("Representatives") and all former Representatives
terminated within the last 3 years and to which the Companies owe any
Liability, along with a complete description of the compensation or
Liability payable to such Representatives and all Contracts relating
thereto, and Sellers have made available to Buyer a true and complete
copy of each such Contract and/or all amendments thereto.
2.22.5 Except for any written resignations expressly required
by this Agreement, to Sellers' Knowledge, no Representative, director,
or officer, of the Companies intends to terminate or materially alter
his employment or other business relationship with the Companies.
Neither Sellers nor Companies have received any notice of termination or
resignation from any current director, officer or Representative of the
Companies.
2.23 LABOR RELATIONS; COMPLIANCE. Except as set forth in Schedule
2.23, the Companies have not been nor are a party to any collective bargaining
or other labor Contract. There has not been, there is not presently pending or
existing, and there is not Threatened, any Proceeding against or affecting the
Companies relating to the alleged violation of any Legal Requirement pertaining
to labor relations or employment matters, including any charge or complaint
filed by an employee with the National Labor Relations Board, the Equal
Employment Opportunity Commission, or any comparable Governmental Body or other
labor or employment dispute against or affecting the Companies or their
premises. The Companies have complied in all material respects with all Legal
Requirements relating to employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, benefits, the payment of social
security and similar taxes, and occupational safety and health. The Companies
are not liable for the payment of any compensation, damages, taxes, fines,
penalties, or other amounts, however designated, for failure to comply with any
of the foregoing or other Legal Requirements.
15
2.24 INTELLECTUAL PROPERTY.
2.24.1 Schedule 2.24.1 contains a complete and accurate list
(including, without limitation, any royalties paid or payable or
received by the Companies), of all Contracts regarding Intellectual
Property Assets and Sellers have made available a true and complete copy
of each such Contract and any amendments thereto to the Buyer.
2.24.2 The Intellectual Property Assets are all those necessary
for the operation of the Companies' businesses as they are currently
conducted and as they have been conducted during the three (3) year
period prior to the date hereof.
2.24.3 OWNERSHIP.
(a) Schedule 2.24.3 contains a complete and accurate
list of all Intellectual Property Assets. The Companies are the
owners of all right, title, and interest in and to each of the
Intellectual Property Assets, free and clear of all Encumbrances
and the Companies have the sole and undiminished right to the
use of the Intellectual Property Assets without any Liability
for royalties or other payments to a third party, except as
disclosed on Schedule 2.24.3.
(b) All of the issued Patents, Marks and Copyrights
are properly filed and registered, are currently in compliance
with all Legal Requirements (including payment of filing,
examination, and maintenance fees and proofs of working or use),
are valid and enforceable, and are not subject to any
challenges, violations, infringement claims, maintenance fees,
royalty fees, Taxes or Proceedings or Liabilities, except as
described in Schedule 2.24.3.
(c) None of the products manufactured or sold, nor
any process or know-how used, by the Companies infringes or is
alleged to infringe any patent, proprietary or other right of
any other Person.
(d) Sellers and the Companies have taken reasonable
precautions to protect the secrecy, confidentiality, and value
of their Trade Secrets.
2.25 SUBSIDIARIES. Except as disclosed in Schedule 2.25, the
Companies do not nor have ever owned, directly or indirectly, any equity, profit
or other interest in any subsidiary or other Person within the past three (3)
years.
2.26 FINDERS OR BROKER FEES. There are no broker commissions, finders
fees or other payments of like nature payable to any Person in connection with
the transactions contemplated herein, and in no event will Buyer or the
Companies have any Liability for any fee or commission including, but not
limited to, any finders, originators or brokers fee in connection with the
transactions contemplated hereby.
2.27 COMPETITIVE INTEREST. Neither the Sellers nor any officers,
directors or, to the Knowledge of the Sellers and the Companies, any other
employees of the Companies, own, directly or indirectly, any interests or have
any business or enterprise which is a competitor or potential competitor of the
Companies (excluding any of such individuals owning less than five percent (5%)
of any public company).
16
2.28 RELATED PARTY TRANSACTIONS. Except as disclosed on Schedule
2.28, all of the transactions by the Companies have been conducted on an arms
length basis. No portions of the sales or other ongoing business relationships
of the Companies are dependent upon any familial relationship of Sellers or of
any of the officers, directors or other employees of the Companies. The
Companies have not engaged in any purchase, lease, sale or other transaction
involving any Sellers, any officer, director, employee or Representative of the
Companies, any of their respective representatives, or any Person owned or
controlled, in whole or in part, by any such parties, within the last three (3)
years. The Companies have no outstanding loan or other advances, directly or
indirectly, to or from any of the Sellers, any officer, director or employee or
Representative of the Companies, any affiliate or relative of Sellers or any
entity in which either Sellers or the Companies have a direct or indirect
interest.
2.29 BANK ACCOUNTS; BUSINESS LOCATIONS. Schedule 2.29 sets forth all
accounts or deposits of the Companies with any bank, broker, depository
institution or other Person, and the names of all Persons authorized to withdraw
funds from each such account. As of the date hereof, the Companies have no
office or place of business other than those identified in Schedule 2.29.
2.30 NAME; PRIOR TRANSACTIONS. All names under which the Companies do
business as the date hereof are specified on Schedule 2.30. Except as set forth
on Schedule 2.30, the Companies have not changed their name or used any assumed
or fictitious name, or been the surviving entity in a merger, acquired any
business or changed its principal place of business or chief executive office,
within the past five (5) years.
2.31 DISCLOSURE.
2.31.1 No representation or warranty of Sellers in this
Agreement and no statements in the Schedules omits to state any fact
necessary to make the statements herein or therein, in light of the
circumstances in which they were made, not misleading.
2.31.2 No notice given pursuant to this Agreement or otherwise
will contain any untrue statement or omit to state a material fact
necessary to make the statements therein or in this Agreement, in light
of the circumstances in which they were made, not misleading.
2.31.3 There is no fact known to any Sellers or the Companies
that has specific application to any Sellers or the Companies (other
than general economic or industry conditions) and that may have a
Material Adverse Effect on the assets, business, prospects, financial
condition, or operations of the Companies that has not been set forth in
this Agreement or the Schedules.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
As a material inducement of Sellers entering into this Agreement and
knowing and acknowledging that Sellers are relying upon the same, Buyer hereby
makes, as of the Closing Date, the following representations and warranties to
Sellers:
3.1 ORGANIZATION AND GOOD STANDING. Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Nevada, with full power and authority to conduct its business as it is now being
conducted, to own, lease and use the properties and assets that it purports to
own, lease or use, and has the full power and authority to perform all of its
material Contracts.
3.2 AUTHORITY; NO CONFLICT.
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3.2.1 This Agreement constitutes the legal, valid, and binding
obligation of Buyer, enforceable against it in accordance with its
terms. Upon the execution and delivery by Buyer of the "Buyer's Closing
Documents", the Buyer's Closing Documents will constitute the legal,
valid, and binding obligations of Buyer, enforceable against Buyer in
accordance with their respective terms, except to the extent that such
enforcement may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium, or other similar laws now or hereafter in
effect relating to creditors' rights generally. Buyer has the absolute
and unrestricted right, power, and authority to execute and deliver this
Agreement and the Buyer's Closing Documents and to perform its
obligations under this Agreement and the Buyer's Closing Documents.
3.2.2 Except as set forth in Schedule 3.2.2, neither the
execution and delivery of this Agreement by Buyer, nor the consummation
or performance of any of the transactions contemplated hereunder by
Buyer will give any Person the right to prevent, delay, or otherwise
interfere with any of the transactions pursuant to:
(a) Any provision of Buyer's Organizational
Documents;
(b) Any resolution adopted by the board of directors
or the stockholders of Buyer;
(c) Any Legal Requirement or Order to which Buyer
may be subject; or
(d) Any Contract to which Buyer is a party or by
which Buyer may be bound.
Except as set forth in Schedule 3.2.2, Buyer is not and will not be
required to obtain any Consent from any Person in connection with the
execution and delivery of this Agreement or the consummation or
performance of any of the transactions contemplated hereunder.
3.3 CERTAIN PROCEEDINGS. There is no pending Proceeding that has
been commenced against Buyer and that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
transactions contemplated hereunder. To Buyer's Knowledge, no such Proceeding
has been Threatened.
3.4 FINDERS OR BROKER FEES. There are no broker commissions, finders
fees or other payments of like nature payable to any Person in connection with
the transactions contemplated hereunder, and in no event will Buyer have any
Liability for any fee or commission including, but not limited to, any finders,
originators or brokers fee in connection with the transactions contemplated
hereby.
ARTICLE IV
INDEMNIFICATION, REMEDIES AND POST CLOSING COVENANTS
4.1 SURVIVAL; KNOWLEDGE. Except as otherwise provided in Sections
4.4 and 4.5 hereof, all representations, warranties, covenants, and obligations
in this Agreement, the Schedules, the supplements to the Schedules, and any
certificate or document delivered pursuant to this Agreement will survive the
Closing and continue in perpetuity and in full force and effect thereafter. The
right to indemnification, payment of Damages (as hereinafter defined) or other
remedy
18
based on such representations, warranties, covenants, and obligations will not
be affected by any investigation conducted with respect to, or any Knowledge
acquired (or capable of being acquired) at any time, whether before or after the
execution and delivery of this Agreement or the Closing Date, with respect to
the accuracy or inaccuracy of or compliance with, any such representation,
warranty, covenant, or obligation. The waiver of any condition based on the
accuracy of any representation or warranty, or on the performance of or
compliance with any covenant or obligation, will not affect the right to
indemnification, payment of Damages, or other remedy based on such
representations, warranties, covenants, and obligations. Notwithstanding any
Knowledge or facts determined by the Buyer, the Buyer shall have the right to
fully rely on the representations, warranties, covenants and agreements of the
Sellers contained in this Agreement and in any other documents or papers
delivered in connection herewith. Each representation, warranty, covenant and
agreement of the Sellers contained in this Agreement is independent of each
other representation, warranty, covenant and agreement.
4.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS. Subject to
the limitations of Section 4.6 hereof and the survival period set forth in
Section 4.5 hereof, Sellers will indemnify, defend and hold harmless Buyer, the
Companies and their respective representatives, stockholders, controlling
Persons, and affiliates (collectively the "Indemnified Persons") for, and will
pay to the Indemnified Persons the amount of, any loss, Liability, claim,
damage, expense (including costs of investigation, defense and reasonable
attorneys' fees) or diminution of value, whether or not involving a third-party
claim (collectively "Damages"), arising, directly or indirectly, from or in
connection with:
4.2.1 Any Breach of any representation or warranty made by
Sellers in this Agreement, the Schedules, the supplements to the
Schedules, or any other certificate or document delivered by Sellers
pursuant to this Agreement;
4.2.2 Any Breach of any covenant or obligation of Sellers or
Companies in this Agreement;
4.2.3 Any Liability or claim for workers compensation benefits
by or for any of the employees or Representatives of the Companies
arising from or related to any occurrence during any period prior to or
including the Closing Date, except to the extent fully covered and paid
for by insurance;
4.2.4 Any Liability or claim for any Tax which relates to any
period prior to or including the Closing Date and not reserved in the
Closing Financial Statements:
4.2.5 Any Environmental, Health and Safety Liabilities, or
other Liabilities in any way arising from or allegedly arising from (i)
any Hazardous Activity conducted or allegedly conducted with respect to
any Facility or the operation of the Companies prior to the Closing,
(ii) any Hazardous Material that was (a) present on or before the
Closing on or at any Facility, the Environment at any Facility or any
other property now or formerly owned, used or relating in any way to the
operations or activities of the Companies; or (b) Released or allegedly
Released by Sellers, the Companies or any other Person for whose conduct
they are or may be held responsible, at any time on or prior to the
Closing. Buyer will be entitled to control any Cleanup and related
Proceeding;
4.2.6 Any claim by any Person for brokerage or finder's fees
or commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such Person with Sellers
or the Companies (or any Person acting on their behalf) in connection
with any of the transactions contemplated hereunder or any other
transaction;
4.2.7 Reliance by Buyer on any books or records of the
Companies or the reliance by Buyer on any information furnished by
Sellers or the Companies or any of the directors or officers of the
Companies, to Buyer, to the extent any of such information should prove
to be incorrect or false;
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4.2.8 Any Liability or claim for health, life or other
insurance benefits, or any other employee benefits or claims by or for
any of the employees or Representatives of the Companies arising from or
relating to any occurrence during any period prior to or including the
Closing Date, except to the extent fully covered and paid for by
insurance or reflected on the Closing Financial Statements;
4.2.9 Any Liability or claim arising from the services,
treatment, employment or termination of any employee, agent or
Representative of the Companies on or prior to the Closing Date or
reflected on the Closing Financial Statements;
4.2.10 Any Liability arising from any Breach, violation or
noncompliance with any material Legal Requirement prior to the Closing.
4.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER. Subject to the
limitations of Section 4.6 hereof, and the Survival Period set forth in Section
4.5 hereof, Buyer will indemnify, defend and hold harmless Sellers, and will pay
to Sellers the amount of any Damages arising, directly or indirectly, from or in
connection with (a) any Breach of any representation or warranty made by Buyer
in this Agreement or in any certificate delivered by Buyer pursuant to this
Agreement, or (b) any Breach by Buyer of any covenant or obligation of Buyer in
this Agreement, or (c) any claim originating subsequent to the Effective Date
and arising from the operation of the respective businesses of the Companies
after the Effective Date, or (d) any claim arising from the failure of Buyer to
pay, when due, any obligation being assumed by Buyer pursuant to this Agreement.
4.4 TERMINATION OF OBLIGATIONS OF COMPANIES. Notwithstanding
anything contained in this Agreement to the contrary, all of the
representations, warranties, covenants, agreements and obligations of the
Companies shall terminate at the Closing and shall thereafter be of no further
force and effect. Sellers hereby waive and release any present or future cause
of action or claim against the Companies arising in any way out of this
Agreement or any representations, warranties, covenants or obligations of the
Companies hereunder, whether for contribution, indemnity or otherwise.
4.5 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of the Sellers contained in this Agreement shall
survive the Closing and continue in full force and effect for a period of two
(2) years thereafter, except for the representations and warranties contained in
Sections 2.12 and 2.21 (the "Limited Exempt Provisions"), which shall survive
the Closing and continue in full force and effect thereafter for the applicable
statute of limitations and, except for the representations and warranties
contained in Sections 2.1, 2.2, 2.4, 2.7, 2.8 and 2.26 ("Exempt Provisions")
which shall survive the Closing and continue in full force and effect forever
thereafter in perpetuity. All representations and warranties of the Buyer under
this Agreement, shall survive the Closing and continue for a period of two (2)
years thereafter.
4.6 INDEMNIFICATION LIMITATIONS. Except for the "Exempt Damages" (as
hereinafter defined), Sellers shall not have any obligation to indemnify, defend
and hold the Buyer harmless from and against any Damages until the Buyer has
suffered Damages, other than Exempt Damages, in excess of $15,000 (the "Floor"),
after which point the Sellers will be obligated to indemnify, defend and hold
the Buyer harmless from and against all Damages suffered going back to the first
dollar. For purposes of this Agreement, the "Exempt Damages" shall mean Damages
arising out of (i) any intentional Breach, misrepresentation, concealment or
fraud by the Sellers, (ii) any Breach in any of the Limited Exempt Provisions or
Exempt Provisions, and/or (iii) any Damages suffered by the Buyer or the
Companies arising, directly or indirectly, from or in connection with the items
referred to in Sections 4.2.3, 4.2.4, and 4.2.10 of this Agreement.
Notwithstanding anything contained herein to the contrary, it is expressly
agreed that the Exempt Damages shall not be subject to the Floor. Furthermore,
the Exempt Damages
20
shall not be subject to the "Limitation" (as hereinafter defined). Except as
otherwise provided herein, the maximum aggregate liability of the Sellers for
indemnification under this Article IV shall be limited to $1,500,000 (the
"Limitation").
4.7 DEPOSIT. The Deposit being held in Escrow shall be utilized by
Buyer to satisfy valid indemnification claims and other obligations of Sellers
or the Companies hereunder, as set forth more thoroughly herein.
ARTICLE V
DEFINITIONS
For purposes of this Agreement, the following terms have the following
meanings:
5.1 "Accounts Receivable" shall have the meaning as set forth in
Section 2.10 of this Agreement.
5.2 "Agreement" shall mean this Stock Purchase Agreement and all
exhibits and schedules referenced herein.
5.3 "Best Efforts" shall mean the efforts that a prudent Person
desirous of achieving a result would use in similar circumstances to ensure that
such result is achieved as expeditiously as possible.
5.4 "Breach" shall mean a breach of a representation, warranty,
covenant, obligation, or other provision of this Agreement, any Schedule or any
instrument delivered pursuant to this Agreement and will be deemed to have
occurred if there is or has been (a) any inaccuracy in, failure or breach of, or
any failure to perform or comply with, such representation, warranty, covenant,
obligation, or other provision, whether material or otherwise or (b) any claim
by any Person or other occurrence or circumstance that is or was inconsistent
with such representation, warranty, covenant, obligation or other provision.
5.5 "Buyer's Closing Documents" shall have the meaning as set forth
in Section 1.7.2 of this Agreement.
5.6 "Cash Payment" shall have the meaning as set forth in Section
1.4.1 of this Agreement.
5.7 "Closing" shall have the meaning as set forth in Section 1.6 of
this Agreement.
5.8 "Closing Date" shall mean the date and time as of which the
Closing actually takes place.
5.9 "Company Assets" shall have the meaning as set forth in Section
2.7 of this Agreement.
5.10 "Consent" or "Consents" shall mean any approval, consent,
ratification, waiver, or other authorization (including, without limitation, any
Governmental Authorization) of any Person (i) listed in Schedule 2.3, and (ii)
required to be obtained in order to consummate the Contemplated Transactions.
5.11 "Contract" shall mean any agreement (or group of related
agreements), contract, obligation, option, commitment, promise or understanding
(whether written or oral and whether expressed or implied) (a) under which the
Companies have or may acquire any rights, (b) under which the Companies have or
may become subject to any obligation or Liability, (c) by which the Companies or
any of the assets owned or used by them are or may become bound, or (d) which
may relate to, establish or restrict any rights or obligations affecting the
Shares or any present or future securities of the Companies.
21
5.12 "Damages" shall have the meaning as set forth in Section 4.2 of
this Agreement.
5.13 "Effective Date" shall have the meaning as set forth in the
opening paragraph of this Agreement.
5.14 "Employee Benefit Plan" shall mean any qualified and/or
non-qualified fringe benefit, disability, health, medical, life insurance,
supplemental compensation, incentive, wage continuation, retirement, pension,
profit sharing, bonus, deferred compensation, stock ownership or other plan,
trust, policy or arrangement involving any past, present or future employee,
consultant, representative, or agent of the Companies, including without
limitation any plan, program or arrangement defined in or relevant to any
provision of ERISA.
5.15 "Encumbrance" shall mean any charge, claim, community property
or dower interest, mortgage, equitable interest, lien, option, pledge, security
interest, right of first refusal, contract, Liability or restriction of any
kind, including any restriction on use, voting, transfer, receipt of income, or
exercise of any other attribute of ownership.
5.16 "Environment" shall mean any soil, land surface or subsurface
strata, surface waters (including, without limitation, navigable waters, ocean
waters, streams, ponds, drainage basins, and wetlands), ground waters, drinking
water supply, stream, sediments, ambient air (including indoor air), plant and
animal life, and any other environmental medium or natural resource.
5.17 "Environmental, Health, and Safety Liabilities" shall mean any
cost, damage, expense, Liability, obligation, or other responsibility arising
from or under Environmental Law or Occupational Safety and Health Law including,
without limitation, any costs, damage, financial responsibility, expenses,
liabilities, obligations or other Liability for, arising out of or relating to:
5.17.1 The Environment;
5.17.2 The presence, generation, use, handling, transport,
recycling, reclamation, disposal, treatment, storage or release of any
Hazardous Material;
5.17.3 Any environmental, health, or safety matters or
conditions (including on-site or off-site contamination, occupational
safety and health, and regulation of chemical substances or products);
5.17.4 Fines, penalties, judgments, awards, settlements, legal
or administrative Proceedings, damages, losses, claims, demands and
response, investigative, remedial and inspection costs and expenses
arising under Environmental Law or Occupational Safety and Health Law;
5.17.5 Any Environmental Law or Occupational Safety and Health
Law for cleanup costs or corrective action, including any investigation,
cleanup, removal, containment, or other remediation or response actions
("Cleanup") required by any applicable Environmental Law or any
Occupational Safety and Health Law (whether or not such Cleanup has been
required or requested by any Governmental Body or any other Person) and
for any natural resource damages; and/or
5.17.6 Any other compliance, corrective, investigative, or
remedial measures required under any Environmental Law or any
Occupational Safety and Health Law.
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The terms "removal," "remedial," and "response action," include,
without limitation, the types of activities covered by the United States
Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C.
ss. 9601 et seq., as amended ("CERCLA").
5.18 "Environmental Law" shall mean any Legal Requirement that
governs, regulates, requires or relates to: (a) advising appropriate
authorities, employees, and the public of intended or actual releases of
pollutants or hazardous substances or materials, violations of discharge limits,
or other prohibitions and of the commencements of activities, such as resource
extraction or construction, that could have significant impact on the
Environment; (b) preventing or reducing to acceptable levels the release of
pollutants or Hazardous Materials into the Environment; (c) reducing the
quantities, preventing the Release, or minimizing the hazardous characteristics
of wastes that are generated; (d) assuring that products are designed,
formulated, packaged, and used so that they do not present unreasonable risks to
human health or the Environment when used or disposed of; (e) protecting
resources, species, or ecological amenities; (f) reducing to acceptable levels
the risks inherent in the transportation of Hazardous Materials, pollutants,
oil, or other potentially harmful substances; (g) cleaning up pollutants that
have been released, preventing the Threat of Release, or paying the costs of
such clean up or prevention; (h) making responsible parties pay private parties,
or groups of them, for damages done to their health or the Environment, or
permitting self-appointed representatives of the public interest to recover for
injuries done to public assets; (i) Hazardous Activities, Hazardous Materials,
pollutants, petroleum products, oil, asbestos or other potentially harmful
substances; or (j) the protection of the health, safety and welfare of the
public, water health and safety and pollution and/or protection of the
Environment.
5.19 "ERISA" shall mean the Employee Retirement Income Security Act
of 1974 or any successor law, and regulations and rules issued pursuant to that
Act or any successor law.
5.20 "Exempt Damages" shall have the same meaning as set forth in
Section 4.6.
5.21 "Exempt Provisions" shall have the same meaning as set forth in
Section 4.5.
5.22 "Facility" shall mean any real property, leaseholds, or other
interests currently or formerly owned, operated or managed by the Companies and
any buildings, plants, structures, or equipment (including motor vehicles)
currently owned or operated by the Companies.
5.23 "Fiduciary" shall have the meaning as defined in ERISA ss.3(21).
5.24 "Financial Statements" shall have the meaning set forth in
Section 2.5.
5.25 "GAAP" shall mean United States generally accepted accounting
principles, consistently applied.
5.26 "Governmental Authorization" shall mean any approval, consent,
license, permit, waiver, or other authorization issued, granted, given, or
otherwise made available by or under the authority of any Governmental Body or
pursuant to any Legal Requirement.
5.27 "Governmental Body" shall mean any: (a) federal, state, local,
municipal, foreign, or other government; or (b) governmental or
quasi-governmental authority of any nature, including without limitation, (i)
any governmental agency, branch, department, official, or entity, (ii) any
court, judicial authority or other tribunal, and (iii) any arbitration body or
tribunal;
5.28 "Hazardous Activity" shall mean the distribution, generation,
handling, importing, management, manufacturing, processing, production,
refinement, Release, storage, transfer, transportation,
23
treatment, or use of Hazardous Materials in, on, under, about, or from the
Facility or any part thereof into the Environment, and/or any other act,
business, operation, or action that poses a risk of illness or property damage
or diminution in value of any property resulting from Hazardous Materials.
5.29 "Hazardous Materials" shall mean any waste or other substance
that is listed, regulated, defined, designated, or classified under, or
otherwise determined to be, hazardous, radioactive, toxic, or a pollutant or a
contaminant pursuant to, any Environmental Law and shall include materials or
equipment containing polychlorinated biphenals or asbestos in any form.
5.30 "Indebtedness" of the Companies means all Liabilities, and all
interest, fees, prepayment penalties, cancellation charges and other costs and
charges relating thereto, of the Companies, except for current liabilities and
intercompany payables, including without limitation, all Liabilities which (i)
in accordance with GAAP should be classified upon a balance sheet as
indebtedness; (ii) are for borrowed money or purchase money financing; (iii) are
secured by any Lien or other charge upon any property or assets; (iv) are
created or arise under any conditional sale or other title retention agreement
with respect to any property; and/or (v) arise under any capitalized leases (as
defined under GAAP).
5.31 "Indemnified Persons" shall have the meaning as set forth in
Section 4.2 of this Agreement.
5.32 "Intellectual Property Assets" shall include the following
assets: (a) the Companies' name, all fictional business names, trade names,
registered and unregistered trademarks ("Marks"), service marks and
applications; (b) all patents, patent applications, and inventions and
discoveries that may be patentable ("Patents"); (c) all copyrights in both
published works and unpublished works ("Copyrights"); and (d) all know-how,
trade secrets, confidential information, customer lists, software, technical
information, data, process technology, plans, drawings, and blue prints, owned,
used or licensed by the Companies, or otherwise referenced in or affected by any
Contract ("Trade Secrets").
5.33 "Interim Financial Statements" shall have the meaning as set
forth in Section 2.5 of this Agreement.
5.34 "IRC" shall mean the Internal Revenue Code of 1986 or any
successor law, and all U. S. Treasury regulations and rulings issued by the IRS
or any Governmental Authority pursuant to the Internal Revenue Code or any
successor law.
5.35 "IRS" shall mean the United States Internal Revenue Service or
any successor agency, and the United States Department of the Treasury.
5.36 "Knowledge" of any Person shall be deemed to include a
particular fact or other matter if: (a) such Person is actually aware of such
fact or other matter; or (b) a reasonable Person could be expected to discover
or otherwise become aware of such fact or other matter in the course of
conducting a reasonable investigation concerning the existence of such fact or
other matter. A Person other than an individual will be deemed to have
"Knowledge" of a particular fact or other matter if any individual who is
serving as a director, officer, partner, executor, or trustee of such Person (or
in any similar capacity) and has Knowledge of such fact or other matter.
5.37 "Leased Property" shall have the meaning as set forth in Section
2.8.2 of this Agreement.
5.38 "Legal Requirement" shall mean any federal, state, local,
municipal, foreign, international, multinational, or other administrative order,
constitution, law, operational memorandum, guidance documents, policy, charter,
ordinance, rule, code, principle of common law, case, decision,
24
regulation, statute, or treaty including, without limitation, Environmental
Laws, Occupational Safety and Health Laws, Orders, ERISA and the IRC.
5.39 "Liability" shall mean any liability or obligation whether known
or unknown, foreseeable or unforeseeable, whether asserted or unasserted,
whether absolute or contingent, whether accrued or unaccrued, whether liquidated
or unliquidated, and whether due or to become due.
5.40 "Limitation" shall have the meaning set forth in Section 4.6 of
this Agreement.
5.41 "Material Adverse Change (or Effect)" means a change (or
effect), in the condition (financial or otherwise), properties, assets,
liabilities, rights, obligations, business or prospects of any Person which
change (or effect), individually or in the aggregate, is materially adverse to
such condition, properties, assets, liabilities, rights, obligations, business
or prospects of such Person.
5.42 "Occupational Safety and Health Law" shall mean any Legal
Requirement which governs, regulates or relates to safety and health conditions
or is designed to provide safe and healthful working conditions and to reduce
occupational safety and health hazards, and any program, whether governmental or
private (including those promulgated or sponsored by industry associations and
insurance companies), designed to provide safe and healthful working conditions.
5.43 "Order" shall mean any award, decision, injunction, judgment,
order, ruling, subpoena, or verdict entered, issued, made, or rendered by any
court, administrative agency, or other Governmental Body or by any arbitrator.
5.44 "Ordinary Course of Business" shall mean an action taken by a
Person that is consistent with the past practices of such Person and is taken in
the ordinary course of the normal day-to-day operations of such Person and such
action is similar in nature and magnitude to actions customarily taken, without
any authorization by the board of directors (or by any Person or group of
Persons exercising similar authority), in the ordinary course of the normal
day-to-day operations of other Persons that are in the same line of business as
such Person.
5.45 "Organizational Documents" shall mean the articles or
certificates of incorporation and the bylaws of a corporation including any
amendments thereto or restatements thereof, and all resolutions of the Board of
Directors and stockholders of such corporation.
5.46 "Person" shall mean any individual, corporation, general or
limited partnership, limited liability company, joint venture, estate, trust,
association, organization, labor union, or other entity or Governmental Body.
5.47 "Proceeding" shall mean any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal, administrative,
investigative, or informal) commenced, brought, conducted, or heard by or
before, or otherwise involving, any Governmental Body or arbitrator or Person.
5.48 "Promissory Note" shall have the meaning as set forth in the
Section 1.4.4 of this Agreement.
5.49 "Purchase Price" shall have the meaning as set forth in the
Section 1.2 of this Agreement.
5.50 "Real Property" shall have the meaning as set forth in Section
2.8 of this Agreement.
25
5.51 "Records" shall have the meaning as set forth in Section 2.6 of
this Agreement.
5.52 "Release" shall mean any spilling, leaking, emitting,
discharging, depositing, escaping, leaching, dumping, or other releasing into
the Environment, whether intentional or unintentional.
5.53 "Representatives" shall have the meaning as set forth in Section
2.22.4 of this Agreement.
5.54 "Sale Transaction" shall mean any transaction or series of
transactions involving the sale of the business or assets (other than sales of
inventory in the Ordinary Course of Business) of the Companies, or any of the
Shares or any equity interest or capital stock of the Companies, or any merger,
consolidation, joint venture, partnership, shares exchange, reorganization,
business combination, or similar transaction involving the Companies.
5.55 "Sellers' Closing Documents" shall have the meaning as set forth
in the Section 1.7.1 of this Agreement.
5.56 "Sellers' Noncompetition Agreements" shall have the meaning as
set forth in the Section 1.7.1(c) of this Agreement.
5.57 "Sellers' Releases" shall have the meaning as set forth in the
Section 1.7.1 (b) of this Agreement.
5.58 "Shares"shall have the meaning set forth in the recitals to this
Agreement.
5.59 "Tax" shall mean any federal, state, local or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under IRC
ss.59(A)), customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated or other tax, assessment or charge by a Governmental Body of
any kind whatsoever, including any interest, penalty or addition thereto,
whether disputed or not.
5.60 "Tax Return" shall mean any return (including any information
return), report, statement, schedule, notice, form, or other document or
information filed with or submitted to, or required to be filed with or
submitted to, any Governmental Body in connection with the determination,
assessment, collection, or payment of any Tax or in connection with the
administration, implementation, or enforcement of or compliance with any Legal
Requirement relating to any Tax.
5.61 "Threat of Release" shall mean a reasonable possibility of a
Release that may require action in order to prevent or mitigate damage to the
Environment that may result from such Release.
5.62 "Threatened" shall mean a claim, Proceeding, dispute, action, or
other matter if any demand or statement has been made (orally or in writing) or
any notice has been given (orally or in writing), or if any other event has
occurred or any other circumstances exist, that would lead a prudent Person to
conclude that such a claim, Proceeding, dispute, action, or other matter may be
asserted, commenced, taken, or otherwise pursued in the future.
5.63 "Workers Compensation Reserve" shall mean all Liabilities for
workers' compensation claims of the Companies the date of occurrence of which is
on or prior to the Closing Date.
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ARTICLE VI
GENERAL PROVISIONS
6.1 CONFIDENTIALITY. Given that Buyer is publicly traded, among
other reasons, the Sellers will maintain and hold in confidence and not disclose
any information concerning the business and affairs of the Companies that are
not already generally available to the public and is not otherwise used in the
business of Sellers ("Confidential Information"), refrain from using any
Confidential Information except in connection with this Agreement, and deliver
promptly to the Buyer or destroy, at the request and option of the Buyer, all
tangible embodiments (and all copies) of the Confidential Information which are
in its possession. In the event that Sellers are requested or required (by oral
question or request for information or documents in any legal Proceeding,
interrogatory, subpoena, civil investigative demand, or similar process) to
disclose any Confidential Information, such party will notify the Buyer promptly
of the request or requirement so that the Buyer may seek an appropriate
protective order or waive compliance with the provisions of this Section. If, in
the absence of a protective order or the receipt of a waiver hereunder, any of
the aforementioned parties is, on the written advice of counsel, compelled to
disclose any Confidential Information to any tribunal or else stand liable for
contempt, such party may without liability hereunder, disclose that portion of
the Confidential Information which such party is required to disclose.
6.2 EXPENSES. Except as otherwise expressly provided in this
Agreement, the Sellers, on the one hand, and the Buyer, on the other hand, shall
bear their own respective expenses incurred in connection with the preparation,
execution, and performance of this Agreement and the Contemplated Transactions,
including, but not limited to fees and expenses of agents, representatives,
investment bankers, advisors, consultants, legal counsel, and accountants
(collectively "Transaction Costs"). Without limiting the generality of the
foregoing, Sellers agree that the Companies shall not bear any Transaction
Costs, other than the time and direct expenses of employees of the Companies,
and that the Sellers (and not the Companies) shall pay all costs, fees and
expenses for services rendered by legal counsel to the Sellers or the Companies
in any way relating to this Agreement or the transactions contemplated
hereunder. In the event of termination of this Agreement, the obligation of each
party to pay its own expenses will be subject to any rights of such party
arising from a Breach of this Agreement by another party.
6.3 SCHEDULES. The Schedules are numbered to correspond to the
various sections of this Agreement relating to the representations and
warranties contained in this Agreement and certain other information called for
by this Agreement. Unless otherwise specified, no disclosure made in any
particular Schedule shall be deemed made in any other Schedule unless expressly
made therein.
6.4 PUBLIC ANNOUNCEMENTS. Any public announcement or similar
publicity with respect to this Agreement or the transactions contemplated
hereunder will be issued, if at all, at such time and in such manner as
determined by Buyer. Unless consented to by each party hereto in advance or
required by Legal Requirements prior to the Closing, all parties shall keep this
Agreement strictly confidential and may not make any disclosure of this
Agreement to any Person. Sellers and Buyer will consult with each other
concerning the means by which the Companies' employees, customers, and suppliers
and others having dealings with the Companies will be informed of the
transactions contemplated hereunder, and Buyer will have the right to be present
for any such communication.
6.5 ARBITRATION. Any and all disputes, controversies or claims
arising out of or relating to this Agreement shall be resolved exclusively and
conclusively by binding arbitration in accordance with the rules of the American
Arbitration Association. Such arbitration shall be held at the office of the
American Arbitration Association located in Southfield, Michigan. Any award or
decision as a result of such arbitration shall be final and binding upon the
parties, shall not be subject to appeal and shall be enforceable by entry of a
judgment by any court of competent jurisdiction.
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6.6 NOTICES. All notices, consents, waivers, and other
communications under this Agreement must be in writing and will be deemed to
have been duly given when (a) delivered by hand (with written confirmation of
receipt), (b) sent by facsimile (with written confirmation of receipt), provided
that a copy is mailed by registered mail, return receipt requested, (c) when
received by the addressee, if sent by a nationally recognized overnight delivery
service (receipt requested), or (d) two (2) business days following the deposit
of same in the U.S. mail, in each case to the appropriate addresses and
telecopier numbers set forth below (or to such other addresses and telecopier
numbers as a party may designate by notice to the other parties):
Sellers: Xxxxxxx X. Irish
0000 Xxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Fax No. (000) 000-0000
With a copy to: Xxxxxx X. Xxxxxx, P.L.
c/o Xxxxxxxxx, Xxxxxx & Xxxxxx, P.A.
0000 Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Fax No. (000) 000-0000
Buyer: Arcadia Resources, Inc.
00000 Xxxxxxx Xxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxxx X. Xxxxxxx
Fax No. (000) 000-0000
With a copy to: Xxxx, Xxxxxxx and Xxxxx, PLC
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxx X. Xxxx, Esq.
Fax No. (000) 000-0000
6.7 CERTAIN TAXES. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement and the transactions
Contemplated herein, shall be paid by Sellers when due, and Sellers will, at
their own expense, file all necessary Tax Returns and other documentation with
respect to all such transfer, documentary, sales, use, stamp, registration and
other Taxes and fees.
6.8 RECOUPMENT. Sellers hereby agree and acknowledge that in the
event that any amount is or becomes due or payable by Sellers to the Buyer or
the Companies as Damages or otherwise, the Buyer shall have the option (but not
obligation) to elect to reduce, on a dollar-for-dollar basis, any amount owed,
due or payable to Sellers under this Agreement, under the Deposit, or otherwise,
by any such amount, due or payable to Buyer or the Companies, which recoupment
may be applied against one or more payments due, and/or treated as a prepayment
of principal due under the Deposit, or otherwise, as the Buyer or the Companies
may elect from time to time. This elective right of setoff shall be cumulative
and in addition to any and all additional remedies to which Buyer or the
Companies may be entitled at law or in equity.
6.9 FURTHER ASSURANCES. The parties agree (i) to furnish upon
request to each other such further information, (ii) to execute and deliver to
each other such other documents, and (iii) to do such
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other acts and things, all as the other party may reasonably request for the
purpose of carrying out the intent of this Agreement and the documents referred
to in this Agreement.
6.10 WAIVER. The rights and remedies of the parties to this Agreement
are cumulative and not alternative. Neither the failure nor any delay by any
party in exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right, power,
or privilege will preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (a) no claim or right arising out of
this Agreement or the documents referred to in this Agreement can be discharged,
in whole or in part, by a waiver or renunciation of the claim or right, unless
done so in writing signed by the party asserting such claim or right; (b) no
waiver that may be given by a party will be applicable except in the specific
instance for which it is given; and (c) no notice to or demand on one party will
be deemed to be a waiver of any obligation of such party or of the right of the
party giving such notice or demand to take further action without notice or
demand as provided in this Agreement or the documents referred to in this
Agreement.
6.11 ENTIRE AGREEMENT AND MODIFICATION. This Agreement supersedes all
prior agreements between the parties with respect to its subject matter and
constitutes (along with the documents referred to in this Agreement) a complete
and exclusive statement of the terms of the agreement between the parties with
respect to its subject matter. This Agreement may not be amended except by a
written agreement executed by the party to be charged with the amendment.
6.12 CONSTRUCTION. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumptions or burden of proof
shall arise favoring or disfavoring any party by virtue of the authoring of any
of the provisions of this Agreement. Any reference to any federal, state, local
or foreign statute of law shall be deemed and also referred to all rules and
regulations promulgated thereunder, unless the context expressly provides
otherwise. The word "including" shall mean including without limitation. All
words used in this Agreement will be construed to be of such gender or number as
the circumstances may require. If any party has Breached any representation,
warranty or covenant contained in this Agreement, the fact that such party may
not have Breached another representation, warranty or covenant contained in this
Agreement which also relates to the same or similar subject matter shall not
detract from or mitigate the fact that the party is in breach of the first
representation, warranty or covenant (regardless of the relative levels of
specificity among such various representations, warranties or covenants). In the
event of any inconsistency between the statements in the body of this Agreement
and those in the Schedules, the statements in the body of this Agreement will
control.
6.13 ASSIGNMENTS; SUCCESSORS; NO THIRD PARTY RIGHTS. No party may
assign any of its rights under this Agreement without the prior consent of the
other parties, except that Buyer may assign any of its rights under this
Agreement to any subsidiary, parent or affiliate of Buyer. Subject to the
preceding sentence, this Agreement will apply to, be binding in all respects
upon, and inure to the benefit of the successors and permitted assigns of the
parties. Nothing contained in this Agreement will be construed to give any
Person other than the parties to this Agreement (and their successors and
assigns) and those Persons expressly identified herein as receiving or obtaining
rights or benefits hereunder, any legal or equitable right, remedy, or claim
under or with respect to this Agreement or any provision of this Agreement.
6.14 SEVERABILITY. If any provision of this Agreement is held invalid
or unenforceable by any court of competent jurisdiction or arbitrator, the other
provisions of this Agreement will remain in full
29
force and effect. Any provision of this Agreement held invalid or unenforceable
only in part or degree will remain in full force and effect to the extent not
held invalid or unenforceable.
6.15 SECTION HEADINGS. The headings of Sections in this Agreement are
provided for convenience only and will not affect its construction or
interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement.
6.16 GOVERNING LAW. This Agreement will be governed by the internal
laws of the State of Michigan without regard to conflicts of laws principles.
6.17 ARM'S LENGTH NEGOTIATIONS. Each party herein expressly represents and
warrants to all other parties hereto that (a) before executing this Agreement,
said party has fully informed itself of the terms, contents, conditions and
effects of this Agreement, (b) said party has relied solely and completely upon
its own judgment in executing this Agreement, (c) said party has had the
opportunity to seek and has obtained the advice of counsel before executing this
Agreement, (d) said party has acted voluntarily and of its own free will and
executing this Agreement, (e) said party is not acting under duress, whether
economic or physical, in executing this Agreement, and (f) this Agreement is the
result of arm's length negotiations conducted by and among the parties and their
respective counsel.
6.18 COUNTERPARTS/FACSIMILE SIGNATURES. This Agreement may be
executed in one or more counterparts, each of which will be deemed to be an
original of this Agreement and all of which, when taken together, will be deemed
to constitute one and the same agreement. A facsimile signature of any party
shall be immediately binding upon such party and have the same legal effect as a
original signature of such party.
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IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement effective as of the date first written above.
WITNESSES: BUYER:
ARCADIA RESOURCES, INC.,
A NEVADA CORPORATION
/s/ Xxxxxxxx Xxxxxxxx By: /s/ Xxxx X. Xxxxxxx, XX
---------------------------------- -------------------------------------
Its: CEO/Chairman
------------------------------------
COMPANIES:
BEACON RESPIRATORY SERVICES, INC.,
/s/ Xxxxx X. Xxxxxx By: /s/ Xxxxxxx X. Irish
---------------------------------- -------------------------------------
Xxxxxxx X. Irish
Its: PRESIDENT
------------------------------------
BEACON RESPIRATORY SERVICES OF
ALABAMA, INC.,
/s/ Xxxxx X. Xxxxxx By: /s/ Xxxxxxx X. Irish
---------------------------------- -------------------------------------
Xxxxxxx X. Irish
Its: PRESIDENT
------------------------------------
BEACON RESPIRATORY SERVICES OF
COLORADO, INC.,
/s/ Xxxxx X. Xxxxxx By: /s/ Xxxxxxx X. Irish
---------------------------------- -------------------------------------
Xxxxxxx X. Irish
Its: PRESIDENT
------------------------------------
BEACON RESPIRATORY SERVICES OF
GEORGIA, INC.,
/s/ Xxxxx X. Xxxxxx By: /s/ Xxxxxxx X. Irish
---------------------------------- -------------------------------------
Xxxxxxx X. Irish
Its: PRESIDENT
------------------------------------
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SELLERS:
/s/ Xxxxx X. Xxxxxx /s/ Xxxxxxx X. Irish
---------------------------------- ---------------------------------------
Xxxxxxx X. Irish
/s/ Xxxxxx Xxxxxx /s/ B. Xxxx Xxxxxxx
--------------------------------- ---------------------------------------
B. Xxxx Xxxxxxx
/s/ Xxxxx Xxxxxxxx /s/ Xxxx X. Xxxxxx
---------------------------------- ---------------------------------------
Xxxx X. Xxxxxx
32