STOCK PURCHASE AGREEMENT
BY AND AMONG
SSAC, LLC
("BUYER")
AND
TRINITY HEALTHCARE OF WINSTON-SALEM, INC.
("COMPANY")
AND
XXX XXXXXXXX
XXXX XXXXXXX
XXXXX XXXXXX
XXXX XXXXXXX
("SELLERS")
SEPTEMBER 23, 2004
TABLE OF CONTENTS
-----------------
ARTICLE I SALE AND TRANSFER OF SHARES; CLOSING.................................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..............................................2
1.5 Nature of CHC Stock....................................................4
1.6 Closing................................................................4
1.7 Closing Obligations....................................................4
ARTICLE II REPRESENTATIONS AND WARRANTIES OF COMPANY AND SELLERS...............6
2.1 Organization and Good Standing.........................................6
2.2 Authority/Enforceability...............................................6
2.3 No Conflict............................................................6
2.4 Capitalization.........................................................7
2.5 Financial Statements...................................................7
2.6 Books and Records......................................................7
2.7 Title to Properties; Encumbrances......................................7
2.8 Real Property..........................................................8
2.9 Condition and Sufficiency of Assets....................................9
2.10 Accounts Receivable....................................................9
2.11 Inventory..............................................................9
2.12 Taxes.................................................................10
2.13 No Material Adverse Change............................................10
2.14 Employee Benefits.....................................................11
2.15 Compliance with Legal Requirements....................................12
2.16 Governmental Authorizations...........................................12
2.17 Legal Proceedings; Orders.............................................13
2.18 Absence of Certain Changes and Events.................................13
2.19 Contracts; No Defaults................................................14
2.20 Insurance.............................................................16
2.21 Environmental Matters.................................................17
2.22 Employees/Representatives.............................................17
2.23 Labor Relations; Compliance...........................................18
2.24 Intellectual Property.................................................18
2.25 Subsidiaries..........................................................19
2.26 Finders or Broker Fees................................................19
2.27 Competitive Interest..................................................19
2.28 Related Party Transactions............................................19
2.29 Bank Accounts; Business Locations.....................................20
2.30 Name; Prior Transactions..............................................20
2.31 Disclosure............................................................20
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ARTICLE III REPRESENTATIONS AND WARRANTIES OF BUYER...........................20
3.1 Organization and Good Standing........................................20
3.2 Authority; No Conflict................................................20
3.3 Certain Proceedings...................................................21
3.4 Finders or Broker Fees................................................21
ARTICLE IV INDEMNIFICATION, REMEDIES AND POST CLOSING COVENANTS...............21
4.1 Survival; Knowledge...................................................21
4.2 Indemnification and Payment of Damages by Sellers.....................22
4.3 Indemnification and Payment of Damages by Buyer.......................23
4.4 Termination of Obligations of Company.................................23
4.5 Survival of Representations and Warranties............................23
4.6 Indemnification Limitations...........................................23
ARTICLE V DEFINITIONS 24
5.1 "Accounts Receivable".................................................24
5.2 "Agreement"...........................................................24
5.3 "Best Efforts"........................................................24
5.4 "Breach"..............................................................24
5.5 "Buyer's Closing Documents"...........................................24
5.6 "Cash Payment"........................................................24
5.7 "Closing".............................................................24
5.8 "Closing Date"........................................................24
5.9 "Company Assets"......................................................24
5.10 "Consent" or "Consents"...............................................25
5.11 "Contract"............................................................25
5.12 "Damages".............................................................25
5.13 [Intentionally Omitted]...............................................25
5.14 "Employee Benefit Plan"...............................................25
5.15 "Encumbrance".........................................................25
5.16 "Environment".........................................................25
5.17 "Environmental, Health, and Safety Liabilities".......................25
5.18 "Environmental Law"...................................................26
5.19 "ERISA"...............................................................26
5.20 "Exempt Damages"......................................................26
5.21 "Exempt Provisions"...................................................26
5.22 "Facility"............................................................27
5.23 "Fiduciary"...........................................................27
5.24 "Financial Statements"................................................27
5.25 "GAAP"................................................................27
5.26 "Governmental Authorization"..........................................27
5.27 "Governmental Body"...................................................27
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5.28 "Hazardous Activity"..................................................27
5.29 "Hazardous Materials".................................................27
5.30 "Indebtedness"........................................................27
5.31 "Indemnified Persons".................................................27
5.32 "Intellectual Property Assets"........................................27
5.33 "Interim Financial Statements"........................................28
5.34 "IRC".................................................................28
5.35 "IRS".................................................................28
5.36 "Knowledge"...........................................................28
5.37 "Leased Property".....................................................28
5.38 "Legal Requirement"...................................................28
5.39 "Liability"...........................................................28
5.40 "Limitation"..........................................................28
5.41 "Material Adverse Change (or Effect)".................................28
5.42 "Occupational Safety and Health Law"..................................28
5.43 "Order"...............................................................29
5.44 "Ordinary Course of Business".........................................29
5.45 "Organizational Documents"............................................29
5.46 "Person"..............................................................29
5.47 "Proceeding"..........................................................29
5.48 "Promissory Note".....................................................29
5.49 "Purchase Price"......................................................29
5.50 "Real Property".......................................................29
5.51 "Records".............................................................29
5.52 "Release".............................................................29
5.53 "Representatives".....................................................29
5.54 "Sale Transaction"....................................................30
5.55 "Sellers' Closing Documents"..........................................30
5.56 "Sellers' Noncompetition Agreement"...................................30
5.57 "Sellers' Releases"...................................................30
5.58 "Shares"..............................................................30
5.59 "Tax".................................................................30
5.60 "Tax Return"..........................................................30
5.61 "Threat of Release"...................................................30
5.62 "Threatened"..........................................................30
5.63 "Workers Compensation Reserve"........................................30
ARTICLE VI GENERAL PROVISIONS.................................................31
6.1 Confidentiality.......................................................31
6.2 Expenses..............................................................31
6.3 Schedules.............................................................31
6.4 Public Announcements..................................................31
6.5 Arbitration...........................................................32
6.6 Notices...............................................................32
6.7 Tax Issues............................................................33
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6.8 Recoupment............................................................33
6.9 Further Assurances....................................................33
6.10 Waiver................................................................33
6.11 Entire Agreement and Modification.....................................34
6.12 Construction..........................................................34
6.13 Assignments; Successors; No Third Party Rights........................34
6.14 Severability..........................................................34
6.15 Section Headings......................................................35
6.16 Governing Law.........................................................35
6.17 Arm's Length Negotiations.............................................35
6.18 Counterparts/Facsimile Signatures.....................................35
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is made and entered into effective as of
September 23, 2004, by and among SSAC, LLC, a Florida Limited Liability
Company ("Buyer"), TRINITY HEALTHCARE OF WINSTON-SALEM, INC., a Georgia
corporation ("Company"), and XXX XXXXXXXX, XXXX XXXXXXX, XXXXX XXXXXX AND XXXX
XXXXXXX, Florida, Georgia, North Carolina and North Carolina residents,
respectively ("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 Company.
B. Company is engaged through its subsidiaries in the sale and leasing
of durable medical equipment, including home oxygen equipment (the "Business").
C. The facilities of the Company consist of the Company's leased
corporate headquarters at 0000 Xxxx Xxxxx Xxxxxxxxx, Xxxxxxx Xxxxx, Xxxxx
Xxxxxxxx 00000, 000 Xxxxx Xxx Xxxxxxxxxxx Xxxx, Xxxxx X, Xxxxxxxxxxxx, Xxxxx
Xxxxxxxx 00000, 0000 Xxxxxxx Xxxx, Xxxxxxxx, Xxxxxxx 00000, 000 Xxxxxxxx
Xxxxxxx, 000 Xxxxxxxx, Xxxxxxx 00000, and 0000 Xxxx Xxxxxx Xxxxxx, Xxxxx 000,
Xxxxxxxxxxxx Business Park, Xxxxxxxxxxxx, Xxxxx Xxxxxxxx 00000 (the
"Facilities").
X. Xxxxxxx desires to sell, and Buyer desires to purchase, all of the
Shares upon the terms and subject to the conditions, representations, warrants
and covenants contained in this Agreement.
X. Xxxxxxx, as owners of all of the Shares, will both 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
1.1 SALE AND PURCHASE OF SHARES. Subject to the terms and conditions of
this Agreement, at the Closing Seller will sell, convey, assign, deliver and
transfer the Shares to Buyer, and Buyer will purchase the Shares from Seller
free and clear of any Encumbrances.
1.2 PURCHASE PRICE. The purchase price for the Shares will be Five
Million Four Hundred Thousand and No/100 Dollars ($5,400,000.00), plus
satisfaction of a shareholder loan made by Xxx Xxxxxxxx not to exceed $70,000,
and minus any Purchase Price Adjustment set forth in Section 1.3 below (the
"Purchase Price").
1.3 PURCHASE PRICE ADJUSTMENT. The Purchase Price is subject to
adjustment, as follows:
1.3.1 At the Closing, Buyer and Seller shall mutually determine
the accounts receivable balance of the Company as of the Closing Date
("Closing Date Accounts Receivable Balance").
1.3.2 Buyer will thereafter attempt to collect the accounts
receivable comprising the Closing Date Accounts Receivable Balance in
the ordinary course of Business.
1.3.3 Two Hundred Seventy (270) days after August 31, 2004,
Buyer and Sellers shall determine the amount of the Closing Date
Accounts Receivable Balance which has been collected by the Company
since August 31, 2004 ("270 Day Collection Amount").
1.3.4 To the extent that the 270 Day Collection Amount Exceeds
$1,500,000 there shall be no adjustment to the Purchase Price. To the
extent that the 270 Day Collection Amount is less than $1,500,000
("Account Receivable Shortfall"), the Purchase Price shall be adjusted
downward on a dollar for dollar basis in the amount of the Account
Receivable Shortfall.
1.3.5 Any Account Receivable Shortfall shall immediately be
reimbursed to Buyer by Sellers and Buyer shall additionally have the
right to offset any amounts otherwise owing under any Promissory Notes
hereunder or otherwise offset against any stock held in escrow or place
a lien on any Critical Home Care, Inc. ("CHC") stock then held in whole
or in part by Sellers, their heirs, representatives, affiliates and
assigns, provided any such actions shall be done in a manner consistent
with the last sentence of Section 6.8.
1.3.6 The parties agree that when determining the 270 Day
Collection Amount, no write-offs will be taken against payment balance
amounts if material consistent payments have been made during the 270
day Period after Closing.
1.3.7 For purposes of this Section 1.3, all payments received by
the Company on any accounts receivable underlying the Closing Date
Accounts Receivable Balance shall be applied by the Company to the
oldest accounts receivable of the payor.
1.4 PAYMENT OF PURCHASE PRICE. The Purchase Price shall be payable at
the Closing or otherwise, as follows:
1.4.1 The sum of Two Million Five Hundred Thousand Dollars
($2,500,000) shall be paid by Buyer to certain Sellers at Closing by
bank cashiers or certified check or by interbank wire transfer, at
Buyer's option ("Cash Payment") as follows:
$1,667,500 Xxx Xxxxxxxx
$832,500 Xxxx Xxxxxxx
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1.4.2 On or before January 15, 2005, the total sum of Nine
Hundred Seventy Five Thousand Five Hundred Ten Dollars ($975,510) shall
be paid to Xxxxx Xxxxxx and Xxxx Xxxxxxx by bank cashiers or certified
check or interbank wire transfer, at Buyer's option. By no later than
January 8, 2005 Messrs. Xxxxxx and Xxxxxxx will jointly provide written
notice to Buyer of the allocation among them of the Nine Hundred Seventy
Five Thousand Five Hundred Ten Dollars ($975,510) payment. Failing said
notice, Buyer shall have said payment made jointly payable to Messrs.
Xxxxxx and Xxxxxxx. The payment set forth in this Section 1.4.2, subject
to Buyer's rights of recoupment/offset hereunder, is guaranteed by CHC
pursuant to that certain unsecured Guaranty (the "Guaranty") executed by
CHC on even date hereof, and attached as Exhibit 1.4.2.
1.4.3 CHC common stock, with a total value of Seven Hundred
Forty Nine Thousand Seven Hundred Fifty Dollars ($749,750) shall be
provided to Xxx Xxxxxxxx at Closing. The value of such shares of CHC
common stock on a per share basis shall be determined by calculating the
average daily closing price of said stock for the ten (10) business day
period immediately prior to the Closing Date.
1.4.4 CHC common stock, with a total value of One Hundred Sixty
Six Thousand Six Thousand and Five Hundred Dollars ($166,500) shall be
provided to Xxxx Xxxxxxx at Closing. The value of such shares of CHC
common stock on a per share basis shall be determined by calculating the
average daily closing price of said stock for the ten (10) business day
period immediately prior to the Closing Date
1.4.5 CHC common stock, with a total value of Three Hundred
Forty Seven Thousand Five Hundred Dollars ($347,500) shall, on January
15, 2005, be provided to Xxxxx Xxxxxx and Xxxx Xxxxxxx, provided,
however, that of such amount CHC common stock with a total value of Two
Hundred Sixty Thousand Six Hundred and Twenty Five Dollars ($260,625)
shall placed in escrow with counsel for Buyer for a period of one (1)
year from the date thereof pursuant to the Escrow Agreement attached as
Exhibit 1.4.5 and such escrowed stock shall be subject to Buyer's rights
of recoupment/offset hereunder. To the extent not subject to
recoupment/offset, all such CHC shares placed in escrow shall be
provided to Xxxxx Xxxxxx and Xxxx Xxxxxxx on or before January 15, 2006.
By no later than January 8, 2005, Messrs. Xxxxxx and Xxxxxxx will
jointly provide written notice to Buyer of the allocation among them of
the CHC common stock. Failing said notice, Buyer shall have all of such
stock jointly titled in the names of Messrs. Xxxxxx and Xxxxxxx. The
value of such shares of such CHC common stock on a per share basis shall
be determined by calculating the average daily closing price of said
stock for the ten (10) business day period immediately prior to the
Closing Date.
1.4.6 A promissory note, jointly payable to Xxx Xxxxxxxx and
Xxxx Xxxxxxx, in the aggregate principal amount of Six Hundred Sixty
Thousand Seven Hundred Forty Dollars ($660,740), 55.05% ($363,740.00) of
which shall be payable to Xxx Xxxxxxxx and 44.95% ($297,000.00) of which
shall be payable to Xxxx Xxxxxxx, in the form attached hereto as Exhibit
1.4.6 (the "Promissory Note"). The Promissory Note and all rights of
Xxxxxxxx and Benzine thereunder shall be secured by Buyer pursuant to
the Security Agreement and Financing Statements attached hereto as
Exhibits 1.4.6(a) and 1.4.6(b)
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respectively, but shall be inferior and subordinated to any Liability owed to
and all the rights and interest of Buyer's working capital (including future
increases) and acquisition revolver loans with its primary bank or any
successors ("Buyer's Lender"). The Seller agrees to execute and deliver such
subordination agreement and instruments as may be requested from time to time by
Buyer's Lender and that the Promissory Note shall be in such form and contain
such provisions as are mutually satisfactory to Buyer's Lender and Seller. The
Promissory Note shall be for a term of twenty-one (21) months beginning January
15, 2005 and maturing October 15, 2006, shall bear simple interest at the rate
of 8% per annum commencing January 15, 2005 and shall provide for equal
quarterly payments of principal and interest. Payment pursuant to the Promissory
Note, subject to Buyer's rights of recoupment/offset hereunder, is guaranteed by
CHC pursuant to the Guaranty executed by CHC on even date hereof, and attached
as Exhibit 1.4.2.
1.4.7 At the Closing, the Buyer shall pay Xxx Xxxxxxxx the
amount calculated by taking the amount of any valid documented loans by
Xx. Xxxxxxxx to the Company which are outstanding and subtracting
$50,000, which Xx. Xxxxxxxx has agreed to contribute as additional paid
in capital, with such resulting amount in any event not to exceed
Seventy Thousand Dollars ($70,000). Said payment to Xx. Xxxxxxxx shall
be in full satisfaction of any and all loans made by Xx. Xxxxxxxx to the
Company. Xx. Xxxxxxxx shall execute the release of claims relating to
all such loans, which is attached as Exhibit 1.4.7, in consideration for
said payment amount.
1.5 NATURE OF CHC STOCK. Sellers acknowledge that all CHC stock acquired
by Sellers 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. Notwithstanding the above, CHC shall use best
efforts to cause such CHC stock acquired by Sellers hereunder to be registered
for resale within six (6) months of the date hereof and shall include such stock
on CHC's S-1 Registration Statement currently being evaluated by the SEC.
1.6 CLOSING. The purchase and sale (the "Closing") provided for in this
Agreement will take place at 10:00 a.m. on September 23, 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.
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);
(b) A Release in the form of Exhibit 1.7.1(b) executed
by Sellers indicating Sellers shall release the Company from any
and all claims, liabilities or obligations ("Sellers' Release");
4
(c) Noncompetition Agreements in the form of Exhibit
1.7.1(c), executed by Sellers (the "Sellers Noncompetition
Agreement);
(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 Company, 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) An Encumbancy Certificate in the form of Exhibit
1.7.1(g);
(h) The Escrow Agreement;
(i) 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:
(a) The Cash Payment;
(b) The Promissory Note;
(c) The CHC stock referenced herein;
(d) Encumbancy Certificate in the form of Exhibit
1.7.2(d);
(e) The Guaranty;
(f) The Security Agreement;
(g) The Escrow Agreement;
(h) 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 EMPLOYEE SHARES. As soon as practicable after Closing, the Buyer
shall cause CHC to issue 150,000 shares of CHC common stock to certain employees
of the Company set forth in Schedule 1.8, in satisfaction of liabilities owed
such employees by the Company. Sellers acknowledge that in order to transfer
such CHC shares to said employees, the employees must qualify for an exemption
under federal and state securities laws. Seller shall have the right to enforce
the obligation of Buyer under this Section 1.8.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF COMPANY AND SELLERS
As a material inducement to Buyer entering into this Agreement and
knowing and acknowledging that Buyer is relying upon the same, the Company and
Sellers, jointly and severally, hereby make, as of the Closing Date, the
following representations and warranties to Buyer.
2.1 ORGANIZATION AND GOOD STANDING. The Company is a corporation duly
organized, validly existing, and in good standing under the respective laws of
the State of its incorporation, 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. The Company is duly
qualified to do business as a foreign corporation and is 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 it, or the nature of the
activities conducted by it, require such qualification.
2.2 AUTHORITY/ENFORCEABILITY. This Agreement constitutes the legal,
valid, and binding obligation of Sellers and Company, 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. Sellers and Company 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
Company, or (ii) any resolution adopted by the Board of Directors or the
stockholders of the Company; (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
Company or Sellers, or any of the assets owned or used by the Company, 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 Company or that otherwise relates to the business of, or any
of the assets owned or used by, the Company; (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 Company. Except as set forth in
Schedule 2.3 neither Sellers nor the Company is 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
6
Agreement or the consummation or performance of any of the transactions
contemplated hereunder.
2.4 CAPITALIZATION. The equity securities of the Company 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
Company. 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,
and shall transfer ownership and marketable title to the Shares to the Buyer,
free of all Encumbrances at the Closing. There are no Contracts relating to the
issuance, sale, or transfer of any equity securities or other securities of the
Company, no Person has any rights to acquire any shares of the capital stock of
the Company, 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 Company. Schedule 2.4 sets forth, with respect to the Company,
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 Company ("Financial Statements"): (a) the
balance sheet of the Company 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 the Company as of July 31, 2004 and the related statement of
income for the month then ended (the "Interim Financial Statements"). All
Financial Statements are true, accurate, complete, and present the properties,
financial condition and results of operations of Company 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. There has been no Material Adverse Change to the
financial condition reflected in the Financial Statements of the Company from
July 31, 2004, through and including the date of Closing.
2.6 BOOKS AND RECORDS. The books of account, accounting records, minute
books, and stock record books, of the Company(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 Company 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 Company, 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 Company 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, the Company owns and has absolute, good and marketable title to all of the
material properties and assets (whether tangible or intangible) located in the
Facility leased or operated by the Company, used in the business or operations
of the Company, or reflected in the books, records or Financial
7
Statements of the Company, and all material properties and assets purchased or
otherwise acquired by the 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 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 Company ("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;
(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 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 Company has received all material Governmental
Authorizations required in connection with the use or operation thereof
and 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;
8
(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 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 Facility and the Company Assets, which are material to the operations
of the Company, 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
Facility 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 Company, which are material to the operations of the Company, are in
reasonable operating condition and repair, except as disclosed in Schedule 2.9.
All real property, buildings, plants and structures used by the Company are, in
all material respects, structurally sound and in good operating condition,
except as disclosed in Schedule 2.9. The Facility and the Company Assets are
sufficient for the continued conduct of the Company's business 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 Company that are reflected in the accounting records
of the Company 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 equal
to an amount not less than One Million Five Hundred Thousand ($1,500,000)
Dollars 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). Subject to such
stated reserves, 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 August 31, 2004.
2.11 INVENTORY. All inventory of the Company, 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
9
materials, work in process, or finished goods) are not excessive, are reasonable
in the present circumstances of the Company and meet all current customer
specifications. Attached as Schedule 2.11 is a current inventory listing of the
Company.
2.12 TAXES.
2.12.1 The Company has 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 Company has 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
Company.
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 Company (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 Company 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 Company or for which the Company 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 Company 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 Company are correctly determined in accordance
with GAAP. All Taxes that the Company is or was 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 Company has no
Liability for Taxes, except for Taxes reserved in its Closing Financial
Statements and accrued in the Ordinary Court of Business since the date
thereof.
2.12.4 All Tax Returns filed (or that are included on a
consolidated basis) by the Company are true, correct, and complete and
exact copies of all Tax Returns filed by the Company during the four (4)
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 Company after the date of this Agreement.
2.12.5 Schedule 2.12.5 describes all tax elections and consents
filed by the Company with any Governmental Body. The Company has never
filed any election or consent under IRC Sections 341 or 338.
2.13 NO MATERIAL ADVERSE CHANGE. Since March 31, 2004, there has not
been any Material Adverse Change to the Company or its assets or business, and
no event has occurred or circumstance exists that may result in a Material
Adverse Change to the Company.
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2.14 EMPLOYEE BENEFITS.
2.14.1 Schedule 2.14.1 describes each Employee Benefit Plan that
the Company maintains or to which the Company contributes AND EACH
EMPLOYEE BENEFIT PLAN THAT THE COMPANY FORMERLY MAINTAINED OR TO WHICH
THE COMPANY 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 Company's 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 Company's 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 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.
2.14.7 To the knowledge of the Sellers and the Company, 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 Company (nor their
employees with responsibility for employee benefits matters) nor the
11
Sellers have any Knowledge of any basis for any such action, suit,
grievance, complaint, proceeding, hearing or investigation.
2.14.8 The Company has not incurred, and neither the Sellers nor
the directors and officers (and employees with responsibility for
employee benefits matters) of the Company has any reason to expect that
the Company 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 Company does not contribute to, never has contributed
to, and never has been required to contribute to any Multi-Employer Plan
or has any Liability (including withdrawal Liability) under any
Multi-Employer Plan.
2.14.10 Except as disclosed in Schedule 2.14.11, the Company
does not maintain, has ever maintained, has never contributed, and has
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 Company has no Liability arising from any Employee
Plan, except for any liability reflected in the Company's 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 Company is, and at all times during the last three
(3) years has been, in full compliance with each material Legal
Requirement that is or was applicable to it or to the conduct or
operation of its business or the ownership or use of any of its 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 Company under, or a failure on the part of the Company
to comply with, any Legal Requirement
2.15.3 Neither Company 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
Company, alleged violation of, or failure to comply with, any Legal
Requirement, or (ii) any actual or, to the Knowledge of the Company,
alleged obligation on the part of the Company 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 Company or that
otherwise relates to the business of, or to any of the assets owned or
used by, the Company. Each Governmental Authorization listed or required
to be listed in Schedule 2.16.1 is valid and in full force and effect.
The
12
Company has fully complied with all conditions and requirements for, or
relating to, all Governmental Authorizations.
2.16.2 The Company has all material Governmental Authorizations
necessary to permit it to lawfully conduct and operate its business in
the manner as currently conducted, and to permit it to own and use its
assets in the manner in which they are currently owned and used.
2.16.3 Neither Company nor Sellers have received any notice or
other communication regarding any actual, or to the Knowledge of the
Company, 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, there is no pending
Proceeding: (a) that has been commenced by or against the Company or
that otherwise relates to or may affect the business of, or any of the
assets owned, leased or used by the Company; 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 Company, 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 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 Company, Sellers
or any of the Company's businesses or any of the assets owned, leased or
used by the Company, is subject. The Company has complied with all
Orders to which it, 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 March 31, 2004, the Company has conducted its business only
in the Ordinary Course of Business and there has not been any:
2.18.1 Change in the Company's authorized or issued capital
stock; grant of any stock option or right to purchase shares of capital
stock of the Company; 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 Company;
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 Company 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;
13
2.18.4 Payment or accrual of any bonuses, commissions or other
distributions to any Sellers or any relative of any Sellers;
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 Company, 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
Company 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 Company in excess of $10,000 or imposition of any
Encumbrance on any asset or property of the Company, except in the
Ordinary Course of Business;
2.18.9 Cancellation, settlement, or waiver of any claims or
rights of or against the Company in excess of $25,000;
2.18.10 Change in any of the accounting methods or principles
used by the Company 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 Company 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 Company in an
amount or value in excess of $10,000, including, but not limited
to, purchase orders received by the Company;
(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 Company in an amount or value in excess
of $10,000, including, but not limited to, purchase orders
issued by the Company;
(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 $10,000);
14
(d) Each Contract under which the Company has created,
incurred, assumed or guaranteed any indebtedness for borrowed
money, has incurred any capitalized lease obligation, or under
which any of its tangible or intangible assets, are Encumbered
other than such contracts relating to an obligation of less than
$10,000 or involving payments of less than $10,000 in the
aggregate;
(e) Each licensing agreement or other Contract with
respect to any Intellectual Property Assets, including, without
limitation, agreements with current or former 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 Company
at will and without any Liability;
(h) Each Contract containing covenants that in any way
purport to restrict the business activity of the Company or
limit the freedom of the Company 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 Company 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 Company;
(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 Company.
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.
15
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 Company is, and at all times has 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
the Company 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 Company has 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 Company 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 Company has 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 Company 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 Company has
been covered during the past three (3) years by insurance in scope and
16
amount customary and reasonable for the business in which it has engaged during
such period. Schedule 2.20 describes any self-insurance arrangements affecting
the Company.
2.21 ENVIRONMENTAL MATTERS. Except as set forth in Schedule 2.21:
2.21.1 The Company is, and at all times has been, in full
compliance with, and has not been and is not in violation of or liable
under, any Environmental Law and has never engaged in any Hazardous
Activity. Neither Sellers nor the Company 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 the
Facility or any other properties or assets (whether real, personal, or
mixed) in which Sellers or the Company has 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 Company 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, with respect to or
affecting the Facility or any other properties and assets (whether real,
personal, or mixed) in which Sellers or the Company have ever used,
possessed or occupied, or ever had any interest in.
2.21.3 Neither Sellers nor the Company, nor any other Person for
whose conduct they are or may be held responsible, has 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 Company, 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 Company is a party to, or is otherwise bound by, any
agreement or arrangement, including any confidentiality, noncompetition,
or proprietary rights agreement, 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 Company, or their dependents, receiving benefits or eligible to
receive benefits in the future: (a) name, (b) benefit, (c)
17
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 Company ("Representatives") and all former Representatives
terminated within the last 3 years and to which the Company owes 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 Company intends to terminate or materially alter his
employment or other business relationship with the Company. Neither
Sellers nor Company has received any notice of termination or
resignation from any current director, officer or Representative of the
Company.
2.23 LABOR RELATIONS; COMPLIANCE. Except as set forth in Schedule 2.23,
the Company has not been nor is 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 Company
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 Company or its premises. The Company
has 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 Company is 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.
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 Company), 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 Company's business as it is currently conducted
and as it has 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 Company is the
owner of all right, title, and interest in and to each of the
Intellectual
18
Property Assets, free and clear of all Encumbrances and the
Company has 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 Company infringes or is alleged
to infringe any patent, proprietary or other right of any other
Person.
(d) Sellers and the Company 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 Company
does not nor has 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. Except the fee to be paid to Xxxxxxx &
Associates, Inc. by Sellers hereunder, 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 Company
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 Company, any other
employees of the Company, own, directly or indirectly, any interests or have any
business or enterprise which is a competitor or potential competitor of the
Company (excluding any non-management employees owning less than five percent
(5%) of any public company).
2.28 RELATED PARTY TRANSACTIONS. Except as disclosed on Schedule 2.28,
all of the transactions by the Company have been conducted on an arms length
basis. No portions of the sales or other ongoing business relationships of the
Company are dependent upon any familial relationship of Sellers or of any of the
officers, directors or other employees of the Company. Except as disclosed in
Schedule 2.28, the Company has not engaged in any purchase, lease, sale or other
transaction involving any Sellers, any officer, director, employee or
Representative of the Company, 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. Except as disclosed in Schedule 2.28, the Company has 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 Company,
any affiliate or relative of Sellers or any entity in which either Sellers or
the Company have a direct or indirect interest.
19
2.29 BANK ACCOUNTS; BUSINESS LOCATIONS. Schedule 2.29 sets forth all
accounts or deposits of the Company 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 Company has no office
or place of business other than those identified in Schedule 2.29.
2.30 NAME; PRIOR TRANSACTIONS. All names under which the Company does
business as the date hereof are specified on Schedule 2.30. Except as set forth
on Schedule 2.30, the Company has not changed its 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 of the Sellers or the
Company that has specific application to any Seller or the Company
(other than general economic or industry conditions) and that may have a
Material Adverse Affect on the assets, business, prospects, financial
condition, or operations of the Company 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 limited liability company
duly organized, validly existing, and in good standing under the laws of the
State of Florida.
3.2 AUTHORITY; NO CONFLICT.
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 Promissory Note
(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 its respective terms. 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.
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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. Except any fee paid by Sellers to Xxxxxxx &
Associates, Inc., 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 or the Company
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, the certificate
delivered pursuant to Section 1.7.1(g), and any other 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
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,
21
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 or 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, Sellers will indemnify, defend and hold
harmless Buyer, the Company 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
Company 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 Company 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 the
Facility or the operation of the Company prior to the Closing, (ii) any
Hazardous Material that was (a) present on or before the Closing on or
at the Facility, the Environment at the Facility or any other property
now or formerly owned, used or relating in any way to the operations or
activities of the Company; or (b) Released or allegedly Released by
Sellers, the Company 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 Company (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 Company
or the reliance by Buyer on any information furnished by Sellers or the
Company or any of the directors or officers of the Company, 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 Company 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 Company on or prior to the Closing Date or
reflected on the Closing Financial Statements;
4.2.10 The failure of Sellers to reimburse Buyer for any
Delinquent Accounts Receivable pursuant to Section 1.3.5 of this
Agreement;
4.2.11 Any agreements, contracts, negotiations or other dealings
by Sellers or the Company with any Person concerning the sale, transfer
or reorganization of the stock, assets or business of the Company;
4.2.12 Any Liability arising from any Breach, violation or
noncompliance with any Legal Requirement prior to the Closing.
4.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER. Buyer will
indemnify 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.
4.4 TERMINATION OF OBLIGATIONS OF COMPANY. Notwithstanding anything
contained in this Agreement to the contrary, all of the representations,
warranties, covenants, agreements and obligations of the Company 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 Company arising in any way out of this Agreement or any representations,
warranties, covenants or obligations of the Company 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 $10,000 (the "Floor"),
after which point the Sellers will be obligated to
23
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 Company arising, directly or indirectly, from or in
connection with the items referred to in Sections 4.2.3, 4.2.4, 4.2.11, or
4.2.13 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 shall not be subject to the
"Limitation" (as hereinafter defined). Except as otherwise provided herein, the
maximum liability of the Sellers for indemnification under this Article IV shall
be limited to $5,500,000 (the "Limitation").
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 3.2.1 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.
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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
Company has or may acquire any rights, (b) under which the Company has or may
become subject to any obligation or Liability, (c) by which the Company or any
of the assets owned or used by it is 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 Company.
5.12 "DAMAGES" shall have the meaning as set forth in Section 4.2 of
this Agreement.
5.13 [INTENTIONALLY OMITTED]
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 Company, 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);
25
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.
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.
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5.22 "FACILITY" shall mean any real property, leaseholds, or other
interests currently or formerly owned, operated or managed by the Company and
any buildings, plants, structures, or equipment (including motor vehicles)
currently or formerly owned or operated by the Company.
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, 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 Company means all Liabilities, and all
interest, fees, prepayment penalties, cancellation charges and other costs and
charges relating thereto, of the Company, 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 Company's 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
27
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 Company, 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
2.8.1 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, 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
28
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 1.4.5 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.
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.
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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 Company, or any of the
Shares or any equity interest or capital stock of the Company, or any merger,
consolidation, joint venture, partnership, shares exchange, reorganization,
business combination, or similar transaction involving the Company.
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 AGREEMENT" shall have the meaning as set
forth in the Section 1.7.1(d) 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 Company 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 a certain affiliate of 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
Company and the Buyer that is 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, the
parties agree that the Company shall pay (a) up to $7,500 in Transactions Costs
relating to legal fees incurred by the Company, (b) all Transaction Costs
relating to accounting fees incurred by the Company (but not the Sellers), and
(c) the time and direct expenses of employees of the Company, and that the
Sellers (and not the Company) shall pay all other costs, fees and expenses for
services rendered by legal counsel and/ the accounting firm to the Sellers or
the Company 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
31
Company's employees, customers, and suppliers and others having dealings with
the Company 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, other than those arising out of or
relating to Promissory Note, the Guaranty or the Security 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.
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) three (3) 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: c/o Xxx Xxxxxxxx
0000 Xxxxxxx Xxxxxx Xxxx., Xx.000
Xxxxxx Xxxxxxx, Xxxxxxx 00000
With a copy to: Smith, Hawkins, Xxxxxxxxxxxxx & Xxxxxx, LLP
000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxx, Xxxxxxx 00000-0000
Attn: J. Xxxx Xxxxxxx, Xx., Esq.
Fax No. (000) 000-0000
Buyer: SSAC, LLC
00000 Xxxxxxx Xxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxx X. Xxxxxxx, XX
Fax No. (000) 000-0000
With a copy to: Xxxx, Xxxxxxx and Xxxxx, PLC
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attn: Xxxx X. Xxxx, Esq.
Fax No. (000) 000-0000
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6.7 TAX ISSUES.
6.7.1 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 such Taxes and fees which are
required to be filed or paid by the Sellers.
6.7.2 TAX RETURNS. Sellers shall cause Company (at the Company's
sole cost and expense) to file a stub period tax return for the period
of January 1, 2004 through the Closing, and prior to filing such return
shall provide such proposed stub period return to Buyer for its review
and approval. For any period subsequent to Closing, Buyer shall cause
the Company's tax returns to be prepared.
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
Company as Damages or otherwise, the Buyer shall have the option (but not
obligation) to offset any amount owing against any CHC stock held in escrow or
otherwise to place a lien on any of Sellers' CHC stock, or Buyer may further
elect to reduce, on a dollar-for-dollar basis, any amount owed, due or payable
to Sellers under this Agreement, under the Promissory Note or otherwise, by any
such amount, due or payable to Buyer or the Company, which recoupment may be
applied against one or more payments due, and/or treated as a prepayment of
principal due under the Promissory Note, or otherwise, as the Buyer or the
Company 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 Company may be entitled at law or in equity. CHC's Guaranty hereunder shall
likewise be subject to the offset/recoupment rights hereunder. Notwithstanding
anything contained herein to the contrary, each of the Seller's respective
liability for offset/recoupment under this Agreement for any one item shall be
limited to an amount equal to the total offset/recoupment to which the Buyer is
entitled under this Agreement multiplied by a percentage which is equal to the
percentage of the total Shares owned by such Seller immediately prior to the
Closing.
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 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
33
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; provided, however, that the confidentiality
provisions contained within the Letter of Intent by and among the parties dated
June 24, 2004 shall continue in full force and effect. 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 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.
34
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 Florida 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.
[SIGNATURES ON NEXT PAGE]
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IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
WITNESSES: BUYER:
SSAC, LLC,
A FLORIDA LIMITED LIABILITY COMPANY
/s/ Xxxxx X. Xxx By: /s/ Xxxx X. Xxxxxxx, XX
--------------------------- --------------------------------------------
Xxxxx X. Xxx
Its: President
-------------------------------------------
COMPANY:
TRINITY HEALTHCARE OF WINSTON-SALEM, INC.,
A GEORGIA CORPORATION
By: Xxx Xxxxxxxx
--------------------------- --------------------------------------------
Its: CEO
-------------------------------------------
SELLERS:
/s/ Xxx Xxxxxxxx
-----------------------------------------------
Xxx Xxxxxxxx
/s/ Xxxx Xxxxxxx
-----------------------------------------------
Xxxx Xxxxxxx
/s/ Xxxxx Xxxxxx
-----------------------------------------------
Xxxxx Xxxxxx
/s/ Xxxx Xxxxxxx
-----------------------------------------------
Xxxx Xxxxxxx
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