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AGREEMENT AND PLAN OF REORGANIZATION
dated as of August 28, 1997
by and among
XXXXXX-FIELD HEALTH PRODUCTS, INC.,
S.E. (GENE) XXXXX
and
XXXXX XXX
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TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to which it is
attached but is inserted for convenience only.
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ARTICLE I
SALE OF SHARES AND CLOSING
1.01 Purchase and Sale ................................................... 2
1.02 Purchase Price ...................................................... 2
1.03 Closing; Escrow ..................................................... 2
1.04 Balance Sheet Adjustment ............................................ 3
1.05 Accounts Receivable Payment ......................................... 5
1.06 Further Assurances; Post-Closing Cooperation ........................ 6
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
2.01 Corporate Existence and Qualification ............................... 7
2.02 Authority ........................................................... 8
2.03 Capital Stock ....................................................... 8
2.04 Subsidiaries ........................................................ 8
2.05 No Conflicts ........................................................ 9
2.06 Governmental Approvals and Filings .................................. 10
2.07 Books and Records ................................................... 10
2.08 Financial Statements ................................................ 11
2.09 Absence of Changes .................................................. 11
2.10 No Undisclosed Liabilities .......................................... 14
2.11 Taxes ............................................................... 14
2.12 Legal Proceedings ................................................... 14
2.13 Compliance With Laws and Orders ..................................... 15
2.14 Benefit Plans; ERISA ................................................ 15
2.15 Real Property ....................................................... 18
2.16 Tangible Personal Property; Investment Assets ....................... 20
2.17 Intellectual Property Rights ........................................ 20
2.18 Contracts ........................................................... 21
2.19 Licenses ............................................................ 23
2.20 Warranty Claims ..................................................... 23
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2.21 Product Liability Claims ............................................ 23
2.22 Insurance ........................................................... 23
2.23 Affiliate Transactions .............................................. 24
2.24 Employees; Labor Relations .......................................... 24
2.25 Environmental Matters ............................................... 25
2.26 Substantial Customers and Suppliers ................................. 26
2.27 Bank and Brokerage Accounts; Investment Assets ...................... 27
2.28 No Powers of Attorney ............................................... 27
2.29 Inventory ........................................................... 27
2.30 Nature of Purchase; Accredited Investor ............................. 28
2.31 Brokers ............................................................. 28
2.32 Accounting Matters .................................................. 28
2.33 Disclosure .......................................................... 28
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
3.01 Organization ........................................................ 29
3.02 Authority ........................................................... 29
3.03 No Conflicts ........................................................ 29
3.04 Governmental Approvals and Filings .................................. 30
3.05 Legal Proceedings ................................................... 30
3.06 SEC Reports and Financial Statements; No Adverse
Change .......................................................... 30
3.07 Capital Stock ....................................................... 31
3.08 Brokers ............................................................. 31
3.09 Accounting Matters .................................................. 31
ARTICLE IV
COVENANTS OF THE SHAREHOLDERS
4.01 Regulatory and Other Approvals ...................................... 31
4.02 Investigation by Purchaser .......................................... 32
4.03 No Solicitations .................................................... 32
4.04 Conduct of Business ................................................. 33
4.05 Financial Statements and Reports; Filings ........................... 33
4.06 Employee Matters .................................................... 33
4.07 Certain Restrictions ................................................ 34
4.08 Books and Records, etc.; Removal of Property ........................ 35
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4.09 Pooling of Interests; Resale Restrictions ........................... 35
4.10 Fulfillment of Conditions ........................................... 36
ARTICLE V
COVENANTS OF PURCHASER
5.01 Regulatory and Other Approvals ...................................... 36
5.02 Fulfillment of Conditions ........................................... 37
5.03 Listing of Stock .................................................... 37
5.04 Access to Records ................................................... 37
5.05 Pooling of Interests ................................................ 37
5.06 Release of Guarantees ............................................... 38
5.07 Filing of Registration Statement .................................... 38
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ARTICLE VI
CONDITIONS TO OBLIGATION OF PURCHASER
6.01 Representations and Warranties ...................................... 38
6.02 Performance ......................................................... 38
6.03 Shareholders' and Secretaries' Certificates ......................... 38
6.04 Orders and Laws ..................................................... 39
6.05 Regulatory Consents and Approvals ................................... 39
6.06 Third Party Consents ................................................ 39
6.07 Estimated Net Book Value ............................................ 39
6.08 Escrow Agreement .................................................... 39
6.09 Pooling Letters ..................................................... 39
6.10 Opinion of Counsel .................................................. 40
6.11 Resignations of Directors and Officers .............................. 40
6.12 Employment Agreements ............................................... 40
6.13 Non-Competition Agreements .......................................... 40
6.14 Proceedings ......................................................... 40
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF THE SHAREHOLDERS
7.01 Representations and Warranties ...................................... 40
7.02 Performance ......................................................... 41
7.03 Officers' Certificates .............................................. 41
7.04 Orders and Laws ..................................................... 41
7.05 Regulatory Consents and Approvals ................................... 41
7.06 Third Party Consents ................................................ 41
7.07 Opinion of Counsel .................................................. 41
7.08 Employment Agreements ............................................... 42
7.09 Non-Competition Agreements .......................................... 42
7.10 Proceedings ......................................................... 42
ARTICLE VIII
SURVIVAL AND INDEMNIFICATION
8.01 Survival of Representations, Warranties,
Covenants and Agreements ........................................ 42
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8.02 Indemnification ..................................................... 43
ARTICLE IX
TERMINATION
9.01 Termination ......................................................... 47
9.02 Effect of Termination ............................................... 48
ARTICLE X
DEFINITIONS
10.01 Definitions ........................................................ 48
ARTICLE XI
MISCELLANEOUS
11.01 Notices ............................................................ 58
11.02 Entire Agreement ................................................... 59
11.03 Expenses ........................................................... 59
11.04 Public Announcements ............................................... 60
11.05 Waiver ............................................................. 60
11.06 Amendment .......................................................... 60
11.07 No Third Party Beneficiary ......................................... 60
11.08 No Assignment; Binding Effect ...................................... 60
11.09 Headings ........................................................... 61
11.10 Invalid Provisions ................................................. 61
11.11 Governing Law ...................................................... 61
11.12 Counterparts ....................................................... 61
EXHIBITS
EXHIBIT A -- Escrow Agreement
EXHIBIT B -- Shareholders' Certificate
EXHIBIT C -- Secretary's Certificate of the Company and
its Subsidiaries
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EXHIBIT D -- Opinion of Counsel to the Shareholders
EXHIBIT E-1 -- Xxxxx Employment Agreement
EXHIBIT E-2 -- Ray Employment Agreement
EXHIBIT F-1 -- Xxxxx Non-Competition Agreement
EXHIBIT F-2 -- Ray Non-Competition Agreement
EXHIBIT G -- Officer's Certificate of Purchaser
EXHIBIT H -- Secretary's Certificate of Purchaser
EXHIBIT I -- Opinion of Counsel to Purchaser
ANNEXES
ANNEX I -- Shareholders
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AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION, dated as of August 28,
1997, is made and entered into by and among Xxxxxx-Field Health Products, Inc.,
a Delaware corporation ("Purchaser"), S.E. (Gene) Xxxxx and Xxxxx Xxx
(collectively, the "Shareholders" and each individually, a "Shareholder").
Capitalized terms not otherwise defined herein have the meanings set forth in
Section 10.01.
W I T N E S S E T H:
WHEREAS, the Shareholders collectively own two thousand one hundred
(2,100) shares of common stock, par value $1.00 per share (the "Company Common
Stock"), of Medical Supplies of America, Inc., a Florida corporation (the
"Company"), constituting all issued and outstanding shares of capital stock of
the Company (such shares being referred to herein as the "Shares");
WHEREAS, the Shareholders and Purchaser desire to effect a business
combination transaction between Purchaser and the Company to be effected by an
exchange of the Shares by the Shareholders for voting common stock of Purchaser
on the terms and subject to the conditions set forth in this Agreement;
WHEREAS, it is intended by the parties that the business combination
between Purchaser and the Company pursuant to this Agreement qualify as a
"pooling of interests" for accounting purposes and as a reorganization under
Section 368(a)(1)(B) of the Code; and
WHEREAS, simultaneously with the execution and delivery of this
Agreement, Purchaser and the Shareholders are entering into a registration
rights agreement (the "Registration Rights Agreement") pursuant to which
Purchaser will, no later than September 4, 1997, file a registration statement
on Form S-3 (the "Registration Statement") registering under the Securities Act
the shares of common stock, par value $.025 per share, of Purchaser ("Purchaser
Common Stock") to be issued to the Shareholders pursuant to this Agreement;
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NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties hereto
adopt this plan of reorganization and agree as follows:
ARTICLE I
SALE OF SHARES AND CLOSING
1.01 Purchase and Sale. The Shareholders agree to sell to Purchaser,
and Purchaser agrees to purchase from the Shareholders, all of the right, title
and interest of the Shareholders in and to the Shares at the Closing on the
terms and subject to the conditions set forth in this Agreement.
1.02 Purchase Price. The aggregate purchase price for the Shares is
$12,900,000 (the "Purchase Price"), payable by delivery at the Closing in the
manner provided in Section 1.03 of a whole number of shares of Purchaser Common
Stock (disregarding fractions) equal to the result obtained by dividing the
Purchase Price by the Per Share Price (the "Purchaser Shares").
1.03 Closing; Escrow. The closing of the purchase and sale of the
Shares pursuant to this Agreement (the "Closing") will take place at the offices
of Robins, Kaplan, Xxxxxx & Xxxxxx LLP, 2600 One Atlanta Plaza, 950 East Paces
Ferry Road, N.E., Atlanta, Georgia, or at such other place as Purchaser and the
Shareholders mutually agree, at 10:00 A.M. local time, on August 28, 1997, or on
such other date as Purchaser and the Shareholders mutually agree (the "Closing
Date"). At the Closing:
(a) Purchaser will pay the Purchase Price by delivering to each
Shareholder a certificate or certificates representing such Shareholder's pro
rata share (as set forth in Annex I hereto) of the Purchaser Shares, reduced, in
the case of each Shareholder, by such Shareholder's pro rata share of the Escrow
Shares (as defined below);
(b) Purchaser will deliver certificates representing a whole number
of Purchaser Shares (disregarding fractions) equal to the result obtained by
dividing $967,500 by the Per Share
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Price (the "Escrow Shares") to Xxxxxx X. Xxxxxx, as escrow agent (the "Escrow
Agent") under an Escrow Agreement to be entered into on the Closing Date by the
Shareholders, Purchaser and the Escrow Agent substantially in the form of
Exhibit A hereto (the "Escrow Agreement");
(c) the Shareholders will assign and transfer to Purchaser all of
the Shareholders' right, title and interest in and to the Shares by delivering
to Purchaser certificates representing the Shares, in genuine and unaltered
form, duly endorsed in blank or accompanied by duly executed stock powers
endorsed in blank, with requisite stock transfer tax stamps, if any, attached;
and
(d) there shall also be delivered to the Shareholders and Purchaser
the opinions, certificates and other documents and instruments to be delivered
under Articles VI and VII.
1.04 Balance Sheet Adjustment (a) At least ten (10) days prior to
the Closing Date, the Shareholders shall deliver to Purchaser (i) a preliminary
unaudited balance sheet of the Company and its Subsidiaries (the "Pre-Closing
Balance Sheet") which shall (A) be dated as of a date not more than thirty (30)
days prior to the Closing Date, (B) be prepared in accordance with the Books and
Records of the Company and its Subsidiaries and (C) present fairly the
consolidated financial position of the Company and its Subsidiaries as of the
date indicated in accordance with GAAP applied consistently with those
accounting policies and practices used in the preparation of the Financial
Statements and (ii) a certificate of the Shareholders (the "Pre-Closing
Certificate") setting forth thereon the Shareholders' good faith estimate of the
Net Book Value of the Company as of the Closing Date (the "Estimated Net Book
Value"), which shall be derived from and supported by the Pre-Closing Balance
Sheet.
(b) On or about the Closing Date, representatives of the
Shareholders and their independent public accountants (the "Shareholders'
Accountants"), observed by Purchaser and/or Purchaser's independent public
accountants (the "Purchaser's Accountants"), shall conduct a physical count of
the inventory of the Company and its Subsidiaries and shall expeditiously
perform such other procedures with respect to the Company and its Subsidiaries
as are necessary and appropriate to prepare and audit a balance sheet of the
Company and its Subsidiaries as of
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the Closing Date (the "Closing Date Balance Sheet") and the unaudited related
statements of operations and cash flows for the period commencing December 1,
1996 and ending on the Closing Date (together with the Closing Date Balance
Sheet, the "Closing Date Financials"). Purchaser shall provide the Shareholders
and the Shareholders' Accountants with full access at all reasonable times to
the books, records, premises, workpapers and other materials of the Company and
its Subsidiaries and shall furnish the Shareholders with such information and
assistance as the Shareholders may reasonably request in connection with the
preparation of an audit of the Closing Date Financials. The Closing Date
Financials shall (i) be accompanied by the unqualified report of Shareholders'
Accountants with respect to the Closing Date Balance Sheet and a review report
with respect to the other Closing Date Financials, (ii) be prepared in
accordance with the Books and Records of the Company and its Subsidiaries, and
(iii) present fairly the consolidated financial position of the Company and its
Subsidiaries as of the Closing Date and the consolidated results of the
operations of the Company and its Subsidiaries for the applicable period in
accordance with GAAP applied consistently with those accounting policies and
practices used in the preparation of the Financial Statements. Purchaser's
Accountants may participate in and observe the preparation of the Closing Date
Financials. The Shareholders and Shareholders' Accountants shall make all of
their work papers and other relevant documents in connection with the
preparation of the Closing Date Financials available to Purchaser and
Purchaser's Accountants, and shall make the persons in charge of the preparation
of the Closing Date Financials available for reasonable inquiry by Purchaser and
Purchaser's Accountants. Not later than forty-five (45) days following the
Closing Date, the Shareholders shall deliver to Purchaser (i) the Closing Date
Financials and (ii) a certificate of the Shareholders (the "Closing Date
Certificate"), which shall set forth the Net Book Value of the Company as of the
Closing Date (the "Closing Date Net Book Value") as determined from and
supported by the Closing Date Balance Sheet.
(c) Purchaser shall notify the Shareholders in writing within twenty
(20) days following receipt of the Closing Date Certificate if it does not agree
with the Closing Date Net Book Value set forth thereon, in which case the
Shareholders and Shareholders' Accountants, on the one hand, and Purchaser and
Purchaser's Accountants, on the other, will use good faith
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efforts during the ten-day period following the date the Closing Date
Certificate was received by the Shareholders to resolve any differences they may
have as to the Closing Date Net Book Value. Such written notice will identify
with reasonable specificity the calculations with which Purchaser disagrees or
other bases for such disagreement. If the Shareholders and Purchaser cannot
reach agreement during such ten-day period, their disagreements shall be
promptly submitted to an independent, nationally-recognized public accounting
firm jointly selected by Shareholders' Accountants and Purchaser's Accountants
(the "Independent Accountant"), which shall conduct such additional review as is
necessary to resolve the specific disagreements referred to it and, based
thereon, shall determine the Closing Date Net Book Value. The review of the
Independent Accountant will be restricted as to scope to address only those
matters as to which the Shareholders and Purchaser have not reached agreement
pursuant to the preceding sentence. The Independent Accountant's determination
of the Closing Date Net Book Value, which shall be completed as promptly as
practicable but in no event later than thirty (30) days following its selection,
shall be confirmed by the Independent Accountant in writing to, and shall be
final and binding on, each of the Shareholders and Purchaser for purposes of
this Section 1.04.
(d) In the event the Closing Date Net Book Value determined in
accordance with subparagraph (b) or (c) of this Section 1.04, as the case may be
(the "Final Net Book Value"), is less than the $2,276,271 (such difference being
herein referred to as the "Deficiency Amount"), then Purchaser shall, promptly
following the date of determination of the Final Net Book Value (the
"Determination Date"), deliver to the Escrow Agent the Balance Sheet Adjustment
Certificate referred to in the Escrow Agreement, setting forth in the
appropriate place thereon the Deficiency Amount. To the extent the Escrow Shares
are insufficient to pay the Deficiency Amount, the Shareholders shall, within
five (5) days following the Determination Date, pay to Purchaser the amount of
such insufficiency by delivery of shares of Purchaser Common Stock, valued at
the Per Share Price (disregarding fractions).
(e) The fees and expenses of the Independent Accountant shall be
borne equally by Purchaser and the Shareholders.
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1.05 Accounts Receivable Payment (a) On the Closing Date, the
Shareholders shall deliver to Purchaser a certificate (the "Receivables
Certificate"), setting forth in detail (i) the face value of the Accounts
Receivable of the Company and its Subsidiaries as of the close of business on
the day prior to the Closing Date (the "Closing Date Accounts Receivable") and
(ii) the amount of any bad debt reserves with respect to the Closing Date
Accounts Receivable. The face value of the Closing Date Accounts Receivable less
any amounts of such bad debt reserves is herein referred to as the "Net
Receivables Amount".
(b) The Company shall, on and after the Closing Date, use
commercially reasonable efforts to collect the Closing Date Accounts Receivable.
In exercising such efforts, the Company shall have no obligation to use greater
efforts than those used by the Company in the collection of accounts receivable
in the ordinary course of the Company's business. Without limiting the
foregoing, the Company shall have no obligation of any sort to pursue collection
through any form of litigation, arbitration or any other dispute mechanism. The
Company shall consider in good faith, but shall have no obligation to comply
with, a request by the Shareholders that the Company withhold shipments to an
obligor of an unpaid Closing Date Accounts Receivable. If the terms of any
Closing Date Accounts Receivable have been renegotiated after the Closing, such
Closing Date Accounts Receivable shall be deemed fully paid at the total face
amount thereof as it existed prior to the renegotiation. If Closing Date
Accounts Receivable and accounts receivable arising after the Closing are owed
by the same Person, the Company shall credit any payments by that Person in the
order of age of the invoices for those Closing Date Accounts Receivable and
later accounts receivable, with the oldest invoices being credited first.
(c) Not later than the fifth Business Day following the earlier of
(i) the 270th day after the Closing Date and (ii) the date on which Purchaser's
independent auditors issue an audit opinion on Purchaser's consolidated
financial statements for the year ending December 31, 1997, Purchaser shall
provide the Shareholders with a written notice (the "Receivables Notice")
describing in reasonable detail all uncollected Closing Date Accounts
Receivable, if any, and the total face amount thereof. To the extent that total
collections in respect of Closing Date Accounts Receivable are less than the Net
Receivables Amount (the difference between the Net Receivables Amount and the
amount so
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collected being herein referred to as the "Receivables Deficiency"), then within
three (3) Business Days following its delivery of the Receivables Notice,
Purchaser shall sell to the Shareholders, and the Shareholders shall purchase
from Purchaser, all uncollected Closing Date Accounts Receivable for an
aggregate purchase price equal to the Receivables Deficiency. Such aggregate
purchase price shall be payable by delivery of Escrow Shares in accordance with
an Accounts Receivable Certificate provided by Purchaser to the Escrow Agent in
accordance with the Escrow Agreement or, to the extent the Escrow Shares are
insufficient to pay the purchase price for such Closing Date Accounts
Receivable, the Shareholders shall pay to Purchaser the amount of such
insufficiency by delivery of shares of Purchaser Common Stock, valued at the Per
Share Price (disregarding fractions). After such uncollected Closing Date
Accounts Receivable are purchased by the Shareholders, the Company will continue
to make the same efforts to collect such Closing Date Accounts Receivable as are
required of it by paragraph (b) above, and any payments received thereon by the
Company will be remitted within five (5) Business Days to the Shareholders after
deducting any expenses incurred in connection with such collection.
1.06 Further Assurances; Post-Closing Cooperation. The parties agree
(a) to furnish upon request to each other such further information, (b) to
execute and deliver to each other such other documents, and (c) 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 Operative Agreements.
(b) Following the Closing, each party will afford the other party,
its counsel and its accountants, during normal business hours, reasonable access
to the books, records and other data relating to the Business or Condition of
the Company in its possession with respect to periods prior to the Closing and
the right to make copies and extracts therefrom, to the extent that such access
may be reasonably required by the requesting party in connection with (i) the
preparation of Tax Returns, (ii) the determination or enforcement of rights and
obligations under this Agreement, (iii) compliance with the requirements of any
Governmental or Regulatory Authority, (iv) the determination or enforcement of
the rights and obligations of any party to this Agreement or (v) in connection
with any actual or threatened Action or Proceeding. Further, each party agrees
for a period
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extending six (6) years after the Closing Date not to destroy or otherwise
dispose of any such books, records and other data unless such party shall first
offer in writing to surrender such books, records and other data to the other
party and such other party shall not agree in writing to take possession thereof
during the ten (10) day period after such offer is made.
(c) If, in order properly to prepare its Tax Returns, other
documents or reports required to be filed with Governmental or Regulatory
Authorities or its financial statements or to fulfill its obligations hereunder,
it is necessary that a party be furnished with additional information, documents
or records relating to the Business or Condition of the Company not referred to
in paragraph (b) above, and such information, documents or records are in the
possession or control of the other party, such other party shall use its best
efforts to furnish or make available such information, documents or records (or
copies thereof) at the recipient's request, cost and expense. Any information
obtained by the Shareholders in accordance with this paragraph shall be held in
strict confidence by the Shareholders and shall only be used for the intended
purposes.
(d) Notwithstanding anything to the contrary contained in this
Section, if the parties are in an adversarial relationship in litigation or
arbitration, the furnishing of information, documents or records in accordance
with any provision of this Section shall be subject to applicable rules relating
to discovery.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
Each of the Shareholders, jointly and severally, represents and
warrants to Purchaser as follows:
2.01 Corporate Existence and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the Laws
of the State of Florida and has full corporate power and authority carry on its
business as it is now being conducted and to own, lease and operate its
properties and assets. The Company is duly qualified, licensed or admitted to do
business and is in good standing in those jurisdictions specified in Section
2.01 of the Disclosure Schedule, which are the only jurisdictions in which the
ownership, use or leasing of its Assets and Properties, or the conduct or nature
of its business, makes such qualification, licensing or admission necessary,
except for those jurisdictions in which the adverse effects of all such failures
by the Company to be qualified, licensed or admitted and in good standing can in
the aggregate be eliminated without material cost or expense by the Company
becoming qualified or admitted and in good standing. The name of each director
and officer of the Company on the date hereof, and the position with the Company
held by each, are listed in Section 2.01 of the Disclosure Schedule. The Company
has prior to the execution of this Agreement delivered to Purchaser true and
complete copies of the articles of incorporation and by-laws or other comparable
corporate charter documents of the Company as in effect on the date hereof.
2.02 Authority. This Agreement has been duly and validly executed
and delivered by each Shareholder and constitutes, and upon the execution and
delivery by each Shareholder of the Operative Agreements to which such
Shareholder is a party, such Operative Agreements will constitute, legal, valid
and binding obligations of such Shareholder enforceable against such Shareholder
in accordance with their terms.
2.03 Capital Stock. (a) The authorized capital stock of the Company
consists solely of 7,500 shares of Company Common Stock, of which 2,100 shares
are issued and outstanding, no shares are held in treasury and no shares are
reserved for future issuance. All of the issued and outstanding shares of
Company
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Common Stock are duly authorized, validly issued, fully paid and nonassessable.
Except pursuant to this Agreement, there are no outstanding subscriptions,
options, warrants, rights (including "phantom" stock rights), preemptive rights
or other contracts, commitments, understandings or arrangements, including any
right of conversion or exchange under any outstanding security, instrument or
agreement (together, "Options"), obligating the Company to issue or sell any
shares of capital stock of the Company or to grant, extend or enter into any
Option with respect thereto.
(b) Except as disclosed in Section 2.03 of the Disclosure Schedule,
there are no outstanding contractual obligations of the Company to repurchase,
redeem or otherwise acquire any shares of Company Common Stock or to provide
funds to, or make any investment (in the form of a loan, capital contribution or
otherwise) in, any other Person.
(c) Set forth on Annex I hereto is the number of shares of Company
Common Stock held by each Shareholder on the date hereof. All such shares are,
and will be on the Closing Date, owned by such Shareholder, beneficially and of
record, free and clear of all Liens, and none of which shares are, nor will they
be on the Closing Date, subject to any voting arrangements or proxies.
(d) The delivery of a certificate or certificates at the Closing
representing the Shares in the manner provided in Section 1.03 will transfer to
Purchaser good and valid title to the Shares, free and clear of all Liens.
2.04 Subsidiaries. (a) Section 2.04 of the Disclosure Schedule lists
the name of each Subsidiary of the Company and all lines of business in which
each Subsidiary is participating or engaged. Each Subsidiary is a corporation
duly organized, validly existing and in good standing under the Laws of its
jurisdiction of incorporation identified in Section 2.04 of the Disclosure
Schedule, and has full corporate power and authority to conduct its business as
and to the extent now conducted and to own, use and lease its Assets and
Properties. Each Subsidiary is duly qualified, licensed or admitted to do
business and is in good standing in those jurisdictions specified in Section
2.04 of the Disclosure Schedule, which are the only jurisdictions in which the
ownership, use or leasing of such Subsidiary's Assets
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and Properties, or the conduct or nature of its business, makes such
qualification, licensing or admission necessary, except for those jurisdictions
in which the adverse effects of all such failures by the Company and the
Subsidiaries to be qualified, licensed or admitted and in good standing can in
the aggregate be eliminated without material cost or expense by the Company or a
Subsidiary, as the case may be, becoming qualified, licensed or admitted and in
good standing. Section 2.04 of the Disclosure Schedule lists for each Subsidiary
the amount of its authorized capital stock, the amount of its outstanding
capital stock and the record owners of such outstanding capital stock. Except as
disclosed in Section 2.04 of the Disclosure Schedule, all of the outstanding
shares of capital stock of each Subsidiary have been duly authorized and validly
issued, are fully paid and nonassessable, and are owned, beneficially and of
record, by the Company or Subsidiaries wholly owned by the Company free and
clear of all Liens. Except as disclosed in Section 2.04 of the Disclosure
Schedule, there are no outstanding Options with respect to any Subsidiary. The
name of each director and officer of each Subsidiary on the date hereof, and the
position with such Subsidiary held by each, are listed in Section 2.04 of the
Disclosure Schedule. The Company has prior to the execution of this Agreement
delivered to Purchaser true and complete copies of the certificate or articles
of incorporation and by-laws (or other comparable corporate charter documents)
of each of the Subsidiaries as in effect on the date hereof.
(b) Except for the Subsidiaries, the Company does not own, directly
or through the Subsidiaries, any capital stock of or other equity interest in
any other Person.
2.05 No Conflicts. The execution and delivery by each Shareholder of
this Agreement does not, and the execution and delivery by such Shareholder of
the Operative Agreements to which such Shareholder is a party, the performance
by such Shareholder of its obligations under this Agreement and such Operative
Agreements and the consummation of the transactions contemplated hereby and
thereby, will not:
(a) conflict with or result in a violation or breach of any of the
terms, conditions or provisions of the articles of incorporation or by-laws (or
other comparable corporate charter documents) of the Company;
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(b) subject to obtaining the consents, approvals and actions, making
the filings and giving the notices disclosed in Section 2.06 of the Disclosure
Schedule, conflict with or result in a violation or breach of any term or
provision of any Law or Order applicable to either Shareholder, the Company or
any of its Subsidiaries or any of their respective Assets and Properties (other
than such conflicts, violations or breaches which could not in the aggregate
reasonably be expected to adversely affect the validity or enforceability of
this Agreement or any of such Operative Agreements or to have a material adverse
effect on the Business or Condition of the Company); or
(c) except as disclosed in Section 2.05 of the Disclosure Schedule
or as could not, individually or in the aggregate, reasonably be expected to be
materially adverse to the Business or Condition of the Company or adversely
affect the ability of Seller to consummate the transactions contemplated hereby
or by any such Operative Agreements or to perform its obligations hereunder or
thereunder, (i) conflict with or result in a violation or breach of, (ii)
constitute (with or without notice or lapse of time or both) a default under,
(iii) require the Company or such Shareholder to obtain any consent, approval or
action of, make any filing with or give any notice to any Person as a result or
under the terms of, or (iv) result in the creation or imposition of any Lien
upon the Company or any of its Subsidiaries or such Shareholder or any of their
respective Assets and Properties under, any Contract or License to which the
Company or any of its Subsidiaries or such Shareholder is a party or by which
any of their respective Assets and Properties is bound.
2.06 Governmental Approvals and Filings. Except as disclosed in
Section 2.06 of the Disclosure Schedule, no consent, approval or action of,
filing with or notice to any Governmental or Regulatory Authority on the part of
the Company or any of its Subsidiaries or either Shareholder is required in
connection with the execution, delivery and performance of this Agreement or the
Operative Agreements or the consummation of the transactions contemplated hereby
or thereby.
2.07 Books and Records. Except as disclosed in Section 2.07 of the
Disclosure Schedule, the minute books and other similar records of the Company
and its Subsidiaries as made available to Purchaser prior to the execution of
this Agreement
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contain a true and complete record, in all material respects, of all action
taken at all meetings and by all written consents in lieu of meetings of the
shareholders, the board of directors and committees of the board of directors of
the Company and its Subsidiaries. The stock transfer ledgers and other similar
records of the Company and its Subsidiaries as made available to Purchaser prior
to the execution of this Agreement accurately reflect all record transfers prior
to the execution of this Agreement in the capital stock of the Company and its
Subsidiaries. Except as set forth in Section 2.07 of the Disclosure Schedule,
the Company and its Subsidiaries do not have any of their Books and Records
recorded, stored, maintained, operated or otherwise wholly or partly dependent
upon or held by any means (including any electronic, mechanical or photographic
process, whether computerized or not) which (including all means of access
thereto and therefrom) are not under the exclusive ownership and direct control
of the Company and its Subsidiaries.
2.08 Financial Statements. Prior to the execution of this Agreement,
the Company has delivered to Purchaser true and complete copies of the following
financial statements:
(a) the audited balance sheets of the Company and its consolidated
Subsidiaries as of November 30, 1994, 1995 and 1996, and the related audited
consolidated statements of operations, stockholders' equity and cash flows for
each of the fiscal years then ended, together with a true and correct copy of
the report on such audited information by Hyatt, Imler, Xxx & Xxxxxx, P.C., and
all letters from such accountants with respect to the results of such audits;
and
(b) the unaudited balance sheet of the Company and its consolidated
Subsidiaries as of May 31, 1997, and the related unaudited consolidated
statement of operations, stockholders' equity and cash flows for the portion of
the fiscal year then ended.
Except as set forth in the notes thereto or as disclosed in Section 2.08 of the
Disclosure Schedule, the Financial Statements (i) were prepared in accordance
with GAAP, (ii) fairly present the financial condition and results of operations
of the Company and its Subsidiaries as of the respective dates thereof and for
the respective periods covered thereby and (iii) were compiled from the Books
and Records of the Company and its Subsidiaries
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regularly maintained by management and used to prepare the financial statements
of the Company in accordance with the principles stated therein. The Company and
its Subsidiaries have maintained its Books and Records in a manner sufficient to
permit the preparation of financial statements in accordance with GAAP. The
Company has no Subsidiaries whose financial condition and results of operations
are not consolidated with those of the Company and its other Subsidiaries for
purposes of the Financial Statements.
2.09 Absence of Changes. Except for the execution and delivery of
this Agreement and the transactions to take place pursuant hereto on or prior to
the Closing Date, since November 30, 1996 there has not been any material
adverse change, or any event or development which, individually or together with
other such events, could reasonably be expected to result in a material adverse
change, in the Business or Condition of the Company. Without limiting the
foregoing, except as disclosed in Section 2.09 of the Disclosure Schedule, there
has not occurred since November 30, 1996:
(i) any declaration, setting aside or payment of any dividend or
other distribution in respect of the capital stock of the Company, or any
direct or indirect redemption, purchase or other acquisition by the
Company of any such capital stock of or any Option with respect to the
Company;
(ii) any authorization, issuance, sale or other disposition by the
Company of any shares of capital stock of or Option with respect to the
Company, or any modification or amendment of any right of any holder of
any outstanding shares of capital stock of or Option with respect to the
Company;
(iii) (x) any increase in the salary, wages or other compensation of
any officer or consultant of the Company or any of its Subsidiaries whose
annual salary is, or after giving effect to such change would be, $20,000,
or more; (y) any establishment or modification of (A) targets, goals,
pools or similar provisions in respect of any fiscal year under any
Benefit Plan, employment-related Contract or other employee compensation
arrangement or (B) salary ranges, increase guidelines or similar
provisions in respect of any Benefit Plan, employment-related Contract or
other employee
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compensation arrangement; or (z) any adoption, entering into or becoming
bound by any Benefit Plan, employment-related Contract or collective
bargaining agreement, or amendment, modification or termination (partial
or complete) of any Benefit Plan, employment-related Contract or
collective bargaining agreement, except to the extent required by
applicable Law and, in the event compliance with legal requirements
presented options, only to the extent the option which the Company
reasonably believed to be the least costly was chosen;
(iv) (A) incurrences by the Company or any of its Subsidiaries of
Indebtedness in an aggregate principal amount exceeding $50,000 (net of
any amounts discharged during such period), or (B) any voluntary purchase,
cancellation, prepayment or complete or partial discharge in advance of a
scheduled payment date with respect to, or waiver of any right of the
Company or any of its Subsidiaries under, any Indebtedness of or owing to
the Company or any of its Subsidiaries;
(v) any physical damage, destruction or other casualty loss (whether
or not covered by insurance) affecting any of the plant, real or personal
property or equipment of the Company or any of its Subsidiaries in an
aggregate amount exceeding $50,000;
(vi) any material change in (x) any pricing, investment, accounting,
financial reporting, inventory, credit, allowance or Tax practice or
policy of the Company or any of its Subsidiaries or (y) any method of
calculating any bad debt, contingency or other reserve of the Company or
any of its Subsidiaries for accounting, financial reporting or Tax
purposes or any change in the fiscal year of the Company;
(vii) capital expenditures or commitments for additions to property,
plant or equipment of the Company or any of its Subsidiaries constituting
capital assets in an aggregate amount exceeding $50,000;
(viii) any write-off or write-down of or any determination to write
off or write down any of the Assets and
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Properties of the Company or any of its Subsidiaries in an aggregate
amount exceeding $50,000;
(ix) any acquisition or disposition of, or incurrence of a Lien
(other than a Permitted Lien) on, any Assets and Properties of the Company
or any of its Subsidiaries, other than sales of inventory in the ordinary
course of business consistent with past practice and other than
dispositions of obsolete inventory consistent with past practice;
(x) any entering into, material amendment, material modification,
termination (partial or complete) or granting of a waiver under or giving
any consent with respect to (A) any Contract which is required (or had it
been in effect on the date hereof would have been required) to be
disclosed in the Disclosure Schedule pursuant to Section 2.18(a) or (B)
any License held by the Company or any of its Subsidiaries;
(xi) any (x) amendment of the certificate or articles of
incorporation or by-laws (or other comparable corporate charter documents)
of the Company or any of its Subsidiaries, (y) recapitalization,
reorganization, liquidation or dissolution of the Company or any of its
Subsidiaries or (z) merger or other business combination involving the
Company or any of its Subsidiaries and any other Person;
(xii) any commencement or termination by the Company or any of its
Subsidiaries of any line of business;
(xiii) any transaction by the Company or any of its Subsidiaries
with either Shareholder or any Affiliate of such Shareholder (other than
the Company and its Subsidiaries) (A) outside the ordinary course of
business consistent with past practice or (B) other than on an
arm's-length basis, other than pursuant to any Contract disclosed pursuant
to Section 2.18(a)(vii) of the Disclosure Schedule;
(xiv) any material adverse change in net sales, costs of goods sold
or collection of Accounts Receivable;
(xv) any entering into of a Contract to do or engage in any of the
foregoing after the date hereof; or
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(xvi) any other material transaction involving or material
development affecting the Company or any of its Subsidiaries outside the
ordinary course of business consistent with past practice.
2.10 No Undisclosed Liabilities. Except as reflected or reserved
against in the 1996 Base Balance Sheet or as disclosed in Section 2.10 of the
Disclosure Schedule or any other Section of the Disclosure Schedule, there are
no Liabilities against, relating to or affecting the Company or any of its
Subsidiaries or any of their respective Assets and Properties, other than
Liabilities (i) incurred in the ordinary course of business consistent with past
practice or (ii) which, individually or in the aggregate, are not material to
the Business or Condition of the Company.
2.11 Taxes. Except as set forth on Section 2.11 of the Disclosure
Schedule, no claim for any Tax due from or assessed against the Company or any
of its Subsidiaries is being contested by the Company or any of its
Subsidiaries, no Tax Returns or reports of the Company or any of its
Subsidiaries have been audited by any tax authority, and neither the Company nor
any of its Subsidiaries has received any notice of assessment or other
adjustment from any tax authority. There are no pending Tax examinations of or
Tax claims, including, but not limited to, withholding claims asserted against
the Company or any of its Subsidiaries or any of their respective Assets and
Properties, there are no Tax liens on any of the Assets and Properties of the
Company or any of its Subsidiaries, there are no agreements, waivers or other
arrangements providing an extension of time with respect to the assessment of
any Tax against the Company or any of its Subsidiaries, nor are there any Tax
proceedings now pending or, to the Knowledge of the Shareholders, threatened
against the Company or any of its Subsidiaries. The Company and its Subsidiaries
have made all deposits required by Law to be made with respect to employees'
withholding and other employment Taxes, including without limitation the portion
of such deposits relating to Taxes imposed upon them. In connection with any
audit of the Tax Returns of the Company or any of its Subsidiaries, no issue has
been raised by any Tax officials which, by the application of similar
principles, reasonably can be expected to result in a deficiency for any other
year not so examined.
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2.12 Legal Proceedings. Except as disclosed in Section 2.12 of the
Disclosure Schedule (with paragraph references corresponding to those set forth
below):
(a) there are no Actions or Proceedings existing or, to the
Knowledge of the Shareholders, threatened against, relating to or
affecting the Shareholders, the Company or any of its Subsidiaries or any
of their respective Assets and Properties which (i) could reasonably be
expected to result in the issuance of an Order restraining, enjoining or
otherwise prohibiting or making illegal the consummation of any of the
transactions contemplated by this Agreement or any of the Operative
Agreements or otherwise result in a material diminution of the benefits
contemplated by this Agreement or any of the Operative Agreements to
Purchaser, or (ii) if determined adversely to either the Shareholders, the
Company or any of its Subsidiaries, could reasonably be expected to result
in (x) any injunction or other equitable relief against the Company or any
of its Subsidiaries that would interfere in any material respect with
their respective business or operations or (y) Losses by the Company or
any of its Subsidiaries, individually or in the aggregate with Losses in
respect of other such Actions or Proceedings, exceeding $100,000;
(b) To the Knowledge of the Shareholders, there are no facts or
circumstances that could reasonably be expected to give rise to any Action
or Proceeding that would be required to be disclosed pursuant to clause
(a) above; and
(c) there are no Orders outstanding against the Company or any of
its Subsidiaries.
2.13 Compliance With Laws and Orders. Except as disclosed in Section
2.13 of the Disclosure Schedule, neither the Company nor any of its Subsidiaries
has at any time within the last five (5) years been, or has received any notice
that it is or has at any time within the last five (5) years been, in violation
of or in default under, in any material respect, any material Law or Order
applicable to the Company or any of its Subsidiaries or any of their respective
Assets and Properties.
2.14 Benefit Plans; ERISA.
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(a) Section 2.14(a) of the Disclosure Schedule (i) contains a true
and complete list and description of each of the Benefit Plans, (ii) identifies
each of the Benefit Plans that is a Qualified Plan, (iii) identifies each
Benefit Plan which at any time during the five-year period preceding the date of
this Agreement was a Defined Benefit Plan contributed to by an ERISA Affiliate,
or any predecessor thereof. Neither the Company nor any of its Subsidiaries has
scheduled or agreed upon future increases of benefit levels (or creations of new
benefits) with respect to any Benefit Plan, and no such increases or creation of
benefits have been proposed, made the subject of representations to employees or
requested or demanded by employees under circumstances which make it reasonable
to expect that such increases will be granted. Except as disclosed in Section
2.14(a) of the Disclosure Schedule, no loan is outstanding between the Company
or any of its Subsidiaries and any employee.
(b) Neither the Company nor any of its Subsidiaries maintains nor is
it obligated to provide benefits under any life, medical or health plan (other
than as an incidental benefit under a Qualified Plan) which provides benefits to
retirees or other terminated employees other than benefit continuation rights
under the Consolidated Omnibus Budget Reconciliation of 1985, as amended.
(c) Each Benefit Plan covers only employees who are employed by the
Company and its Subsidiaries (or former employees or beneficiaries with respect
to service with the Company and its Subsidiaries), so that the transactions
contemplated by this Agreement will require no spin-off of assets and
liabilities or other division or transfer of rights with respect to any such
plan.
(d) Neither the Company or any of its Subsidiaries, any ERISA
Affiliate nor any other corporation or organization controlled by or under
common control with any of the foregoing within the meaning of Section 4001 of
ERISA has at any time contributed to any "multiemployer plan", as that term is
defined in Section 4001 of ERISA.
(e) Each of the Benefit Plans is, and its administration is and has
been since inception, in all material respects in compliance with, and neither
the Company nor any of
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its Subsidiaries has received any claim or notice that any such Benefit Plan is
not in compliance with, all applicable Laws and Orders and prohibited
transactions exemptions, including the requirements of ERISA, the Code, the Age
Discrimination in Employment Act, the Equal Pay Act and Title VII of the Civil
Rights Act of 1964. Each Qualified Plan is qualified under Section 401(a) of the
Code, and, if applicable, complies with the requirements of Section 401(k) of
the Code. Each Benefit Plan which is intended to provide for the deferral of
income, the reduction of salary or other compensation or to afford other Tax
benefits complies with the requirements of the applicable provisions of the Code
or other Laws required in order to provide such Tax benefits.
(f) Neither the Company nor any of its Subsidiaries is in default in
performing any of its contractual obligations under any of the Benefit Plans or
any related trust agreement or insurance contract. All contributions and other
payments required to be made by the Shareholders or the Company or any of its
Subsidiaries to any Benefit Plan with respect to any period ending before or at
or including the Closing Date have been made or reserves adequate for such
contributions or other payments have been or will be set aside therefor and have
been or will be reflected in financial statements in accordance with GAAP. There
are no material outstanding liabilities of any Benefit Plan other than
liabilities for benefits to be paid to participants in such Benefit Plan and
their beneficiaries in accordance with the terms of such Benefit Plan.
(g) To the Knowledge of the Shareholders, no event has occurred, and
there exists no condition or set of circumstances in connection with any Benefit
Plan, under which the Company or any of its Subsidiaries, directly or indirectly
(through any indemnification agreement or otherwise), could reasonably be
expected to be subject to any risk of material liability under Section 409 of
ERISA, Section 502(i) of ERISA, Title IV of ERISA or Section 4975 of the Code.
(h) To the Knowledge of the Shareholders, no transaction
contemplated by this Agreement will result in liability to the PBGC under
Section 302(c)(ii), 4062, 4063, 4064 or 4069 of ERISA, or otherwise, with
respect to the Company or any corporation or organization controlling,
controlled by or under common control with the Company within the meaning of
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Section 4001 of ERISA, and no event or condition exists or has existed which
could reasonably be expected to result in any such liability with respect to the
Company or any such corporation or organization. No "reportable event" within
the meaning of Section 4043 of ERISA has occurred with respect to any Defined
Benefit Plan. No termination re-establishment or spin-off re-establishment
transaction has occurred with respect to any Subject Defined Benefit Plan. No
Subject Defined Benefit Plan has incurred any accumulated funding deficiency
whether or not waived. No filing has been made and no proceeding has been
commenced for the complete or partial termination of, or withdrawal from, any
Benefit Plan which is a Pension Benefit Plan.
(i) No benefit under any Benefit Plan, including, without
limitation, any severance or parachute payment plan or agreement, will be
established or become accelerated, vested, funded or payable by reason of any
transaction contemplated under this Agreement.
(j) To the Knowledge of the Shareholders, there are no pending or
threatened claims by or on behalf of any Benefit Plan, by any Person covered
thereby, or otherwise, which allege violations of Law which could reasonably be
expected to result in liability on the part of Purchaser, the Company or any of
its Subsidiaries or any fiduciary of any such Benefit Plan, nor is there any
basis for such a claim.
(k) No employer securities, employer real property or other employer
property is included in the assets of any Benefit Plan.
(l) The fair market value of the assets of each Subject Defined
Benefit Plan, as determined as of the last day of the plan year of such plan
which coincides with or first precedes the date of this Agreement, was not less
than the present value of the projected benefit obligations under such plan at
such date as established on the basis of the actuarial assumptions applicable
under such Subject Defined Benefit Plan at said date and, to the Knowledge of
the Shareholders, there have been no material changes in such values since said
date.
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(m) Complete and correct copies of the following documents have been
furnished or made available to Purchaser prior to the execution of this
Agreement:
(i) the current Benefit Plans and any predecessor plans referred to
therein, and any related trust agreements and insurance contracts;
(ii) current summary Plan descriptions of each Benefit Plan subject
to ERISA, and any similar current descriptions of all other Benefit Plans;
(iii) the most recent Form 5500 and Schedules thereto, or any
applicable extension application relating thereto, for each Benefit Plan
subject to ERISA reporting requirements;
(iv) the most recent determination of the IRS with respect to the
qualified status of each Qualified Plan;
(v) the most recent accountings with respect to any Benefit Plan
funded through a trust; and
(vi) the most recent actuarial report of the qualified actuary of
any Subject Defined Benefit Plan or any other Benefit Plan with respect to
which actuarial valuations are conducted.
2.15 Real Property. (a) Section 2.15(a) of the Disclosure Schedule
contains a true and correct list of (i) each parcel of real property owned by
the Company or any of its Subsidiaries, (ii) each parcel of real property leased
by the Company or any of its Subsidiaries (as lessor or lessee) and (iii) all
Liens (other than Permitted Liens) relating to or affecting any parcel of real
property referred to in clause (i).
(b) Except as disclosed in Section 2.15(a) of the Disclosure
Schedule, the Company and its Subsidiaries have good and marketable fee simple
title to each parcel of real property owned by them, free and clear of all Liens
other than Permitted Liens. Except for the real property leased to others
referred to in clause (ii) of paragraph (a) above, the Company and its
Subsidiaries are in possession of each parcel of real property owned by them,
together with all buildings, structures,
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facilities, fixtures and other improvements thereon. The Company and its
Subsidiaries have adequate rights of ingress and egress with respect to the real
property listed in Section 2.15(a) of the Disclosure Schedule and all buildings,
structures, facilities, fixtures and other improvements thereon. To the
Shareholders' Knowledge, none of such real property, buildings, structures,
facilities, fixtures or other improvements, or the use thereof, contravenes or
violates any building, zoning, administrative, occupational safety and health or
other applicable Law in any material respect (whether or not permitted on the
basis of prior nonconforming use, waiver or variance).
(c) The Company and its Subsidiaries have a valid and subsisting
leasehold estate in and the right to quiet enjoyment of the real properties
leased by them for the full term of the lease thereof. Each lease referred to in
clause (ii) of paragraph (a) above is a legal, valid and binding agreement,
enforceable in accordance with its terms, of the Company or one of its
Subsidiaries and of each other Person that is a party thereto, and except as set
forth in Section 2.15(c) of the Disclosure Schedule, there is no, and the
Company and its Subsidiaries have not received notice of any, default (or any
condition or event which, after notice or lapse of time or both, would
constitute a default) thereunder. The Company and its Subsidiaries do not owe
any brokerage commissions with respect to any such leased space.
(d) The Company has delivered to Purchaser prior to the execution of
this Agreement true and complete copies of (i) all deeds, leases, mortgages,
deeds of trust, certificates of occupancy, title insurance policies, title
reports, surveys and similar documents, and all amendments thereof, with respect
to the real property owned by the Company and its Subsidiaries, and (ii) all
leases (including any amendments and renewal letters) and all other documents
referred to in clause (i) of this paragraph (d) currently in the possession of
the Company, its Subsidiaries or the Shareholders with respect to the real
property leased by the Company and its Subsidiaries.
(e) No tenant or other party in possession of any of the real
properties owned by the Company and its Subsidiaries has any right to purchase,
or holds any right of first refusal to purchase, such properties.
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(f) The improvements on the real property identified in Section
2.15(a) of the Disclosure Schedule are in good operating condition and in a
state of good maintenance and repair, ordinary wear and tear excepted, are
adequate and suitable for the purposes for which they are presently being used
and, to the Knowledge of the Shareholders, there are no condemnation or
appropriation proceedings pending or threatened against any of such real
property or the improvements thereon.
2.16 Tangible Personal Property; Investment Assets. (a) Except as
disclosed in Section 2.16(a) of the Disclosure Schedule, the Company and its
Subsidiaries are in possession of and have good title to, or have valid
leasehold interests in or valid rights under Contract to use, all tangible
personal property used in the conduct of their business, including all tangible
personal property reflected on the 1996 Base Balance Sheet and tangible personal
property acquired since November 30, 1996, other than property disposed of since
such date in the ordinary course of business consistent with past practice. All
such tangible personal property is free and clear of all Liens, other than
Permitted Liens and Liens disclosed in Section 2.16(a) of the Disclosure
Schedule, and is in good working order and condition, ordinary wear and tear
excepted, and its use complies in all material respects with all applicable
Laws.
(b) Section 2.16(b) of the Disclosure Schedule describes each
Investment Asset owned by the Company and its Subsidiaries. Except as disclosed
in Section 2.16(b) of the Disclosure Schedule, all such Investment Assets are
owned by the Company and its Subsidiaries free and clear of all Liens other than
Permitted Liens.
2.17 Intellectual Property Rights. The Company and its Subsidiaries
have interests in or use only the Intellectual Property disclosed in Section
2.17 of the Disclosure Schedule, each of which the Company and its Subsidiaries
have all right, title and interest in or a valid and binding right under
Contract to use. No other Intellectual Property is used in the conduct of the
business of the Company. Except as disclosed in Section 2.17 of the Disclosure
Schedule, (i) to the Knowledge of the Shareholders, the Company and its
Subsidiaries have the exclusive right to use the Intellectual Property disclosed
in Section 2.17 of the Disclosure Schedule, (ii) to the Knowledge of the
Shareholders, all registrations with and applications to
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Governmental or Regulatory Authorities in respect of such Intellectual Property
are valid and in full force and effect and are not subject to the payment of any
Taxes or maintenance fees or the taking of any other actions by the Company and
its Subsidiaries to maintain their validity or effectiveness, (iii) there are no
restrictions on the direct or indirect transfer of any Contract, or any interest
therein, held by the Company and its Subsidiaries in respect of such
Intellectual Property, (iv) the Company has delivered to Purchaser, prior to the
execution of this Agreement, documentation with respect to any invention,
process, design, computer program or other know-how or trade secret included in
such Intellectual Property, which documentation is accurate in all material
respects and reasonably sufficient in detail and content to identify and explain
such invention, process, design, computer program or other know-how or trade
secret, (v) the Company and its Subsidiaries have taken reasonable security
measures to protect the secrecy, confidentiality and value of their trade
secrets, (vi) the Company and its Subsidiaries are not, nor have they received
any notice that they are, in default (or with the giving of notice or lapse of
time or both, would be in default) under any Contract to use such Intellectual
Property and (vii) to the Knowledge of the Shareholders, no such Intellectual
Property is being infringed by any other Person. Neither the Shareholders nor
the Company nor any of its Subsidiaries has received any notice that the Company
or any of its Subsidiaries is infringing any Intellectual Property of any other
Person, no claim is pending or, to the Knowledge of the Shareholders, has been
made to such effect that has not been resolved and, to the Knowledge of the
Shareholders, neither the Company nor any of its Subsidiaries is infringing any
Intellectual Property of any other Person.
2.18 Contracts. (a) Section 2.18(a) of the Disclosure Schedule (with
paragraph references corresponding to those set forth below) contains a true and
complete list of each of the following Contracts or other arrangements (true and
complete copies or, if none, reasonably complete and accurate written
descriptions of which, together with all amendments and supplements thereto and
all waivers of any terms thereof, have been delivered to Purchaser prior to the
execution of this Agreement), to which the Company or any of its Subsidiaries is
a party or by which any of their respective Assets and Properties is bound:
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(i) (A) all Contracts (excluding Benefit Plans) providing for a
commitment of employment or consultation services for a specified or
unspecified term or otherwise relating to employment or the termination of
employment, the name, length of employment, position, rate of compensation
and benefits of each Person party to such a Contract and the expiration
date of each such Contract; and (B) any written or unwritten
representations, commitments, promises, communications or courses of
conduct (excluding Benefit Plans and any such Contracts referred to in
clause (A)) involving an obligation of the Company or any of its
Subsidiaries to make payments in any year, other than with respect to
salary or incentive compensation payments in the ordinary course of
business, to any employee or former employee;
(ii) all Contracts with any Person containing any provision or
covenant prohibiting or limiting the ability of the Company or any of its
Subsidiaries to engage in any business activity or compete with any Person
or prohibiting or limiting the ability of any Person to compete with the
Company or any of its Subsidiaries;
(iii) all partnership, joint venture, shareholders' or other similar
Contracts with any Person;
(iv) all Contracts relating to Indebtedness of the Company or any of
its Subsidiaries in excess of $50,000;
(v) all Contracts with distributors, dealers, manufacturer's
representatives, sales agencies or franchisees;
(vi) all Contracts relating to (A) the future disposition or
acquisition of any Assets and Properties other than dispositions or
acquisitions in the ordinary course of business consistent with past
practice and (B) any merger or other business combination;
(vii) all Contracts between or among the Company or any of its
Subsidiaries, on the one hand, and either Shareholder, or any Affiliate of
such Shareholder (other than the Company and its Subsidiaries), on the
other hand;
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(viii) all collective bargaining or similar labor Contracts;
(ix) all Contracts that (A) limit or contain restrictions on the
ability of the Company or any of its Subsidiaries to declare or pay
dividends on, to make any other distribution in respect of or to issue or
purchase, redeem or otherwise acquire its capital stock, to incur
Indebtedness, to incur or suffer to exist any Lien, to purchase or sell
any Assets and Properties, to change the lines of business in which it
participates or engages or to engage in any business combination or (B)
require the Company or any of its Subsidiaries to maintain specified
financial ratios or levels of net worth or other indicia of financial
condition; and
(x) all other Contracts (other than Benefit Plans, leases listed in
Section 2.15 of the Disclosure Schedule and insurance policies listed in
Section 2.22 of the Disclosure Schedule) that (A) involve the payment or
potential payment, pursuant to the terms of any such Contract, by or to
the Company or any of its Subsidiaries of more than $50,000 annually and
(B) cannot be terminated within thirty (30) days after giving notice of
termination without resulting in any material cost or penalty to the
Company or any of its Subsidiaries.
(b) Each Contract disclosed in Section 2.18(a) of the Disclosure
Schedule is in full force and effect and constitutes a legal, valid and binding
agreement, enforceable in accordance with its terms, of each party thereto; and
except as disclosed in Section 2.18(b) of the Disclosure Schedule, neither the
Company or any of its Subsidiaries, any Shareholder nor, to the Knowledge of the
Shareholders, any other party to such Contract is, or has received notice that
it is, in violation or breach of or default under any such Contract (or with
notice or lapse of time or both, would be in violation or breach of or default
under any such Contract) in any material respect.
2.19 Licenses. Section 2.19 of the Disclosure Schedule contains a
true and complete list of all Licenses used or held for use in, and individually
or in the aggregate with other such Licenses material to, the Business or
Condition of the Company (and all pending applications for any such Licenses),
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setting forth the grantor, the grantee, the function and the expiration and
renewal date of each. Prior to the execution of this Agreement, the Company has
delivered to Purchaser true and complete copies of all such Licenses. Except as
disclosed in Section 2.19 of the Disclosure Schedule:
(i) the Company and its Subsidiaries own or validly hold all
Licenses that are material, individually or in the aggregate, to their
business or operations;
(ii) each License listed in Section 2.19 of the Disclosure Schedule
is valid, binding and in full force and effect;
(iii) neither the Company nor any of its Subsidiaries is, nor has it
received any notice that it is, in default (or with the giving of notice
or lapse of time or both, would be in default) under any such License in
any material respect.
2.20 Warranty Claims. Except as set forth in Section 2.20 of the
Disclosure Schedule, there are no existing claims against the Company or any of
its Subsidiaries arising out of or relating to any products sold by the Company
or any of its Subsidiaries under any warranties, whether express or implied.
2.21 Product Liability Claims. Except as set forth in Section 2.21
of the Disclosure Schedule, there are, and during the past five (5) years there
have been, no product liability claims with respect to any products now or
previously sold by the Company or any of its Subsidiaries.
2.22 Insurance. (a) Section 2.22 of the Disclosure Schedule contains
a true and complete list (including the names and addresses of the insurers, the
names of the Persons to whom such policies have been issued, the expiration
dates thereof, the annual premiums and payment terms thereof, whether it is a
"claims made" or an "occurrence" policy and a brief description of the interests
insured thereby) of all liability, property, workers' compensation, and other
insurance policies currently in effect that insure the business, operations or
employees of the Company and its Subsidiaries or affect or relate to the
ownership, use or operation of any of the Assets and Properties of the Company
and its Subsidiaries and that (i) have been issued
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to the Company or any of its Subsidiaries or (ii) to the Shareholders'
Knowledge, have been issued to any Person (other than the Company or any of its
Subsidiaries) for the benefit of the Company or any of its Subsidiaries. The
insurance coverage provided by any of the policies described in clause (i) above
will not terminate or lapse by reason of the transactions contemplated by this
Agreement. To the Shareholders' Knowledge, each policy listed in Section 2.22 of
the Disclosure Schedule is valid and binding and in full force and effect, no
premiums due thereunder have not been paid and neither the Company or any of its
Subsidiaries nor the Person to whom such policy has been issued has received any
notice of cancellation or termination in respect of any such policy or is in
default thereunder. The insurance policies listed in Section 2.22 of the
Disclosure Schedule are placed with financially sound and reputable insurers.
Neither the Company or any of its Subsidiaries nor, to the Shareholders'
Knowledge, the Person to whom such policy has been issued has received notice
that any insurer under any policy referred to in this Section is denying
liability with respect to a claim thereunder or defending under a reservation of
rights clause.
(b) The Company and its Subsidiaries have complied in all material
respects with and maintain in full force and effect all applicable workers
compensation insurance required by law.
2.23 Affiliate Transactions. Except as disclosed in Section
2.18(a)(vii) or Section 2.23(a) of the Disclosure Schedule, (i) there are no
intercompany Liabilities between the Company or any of its Subsidiaries, on the
one hand, and any Shareholder, or any Affiliate of any Shareholder, on the
other, (ii) neither such Shareholder nor such Affiliate provides or causes to be
provided any assets, services or facilities to the Company or any of its
Subsidiaries and (iii) neither the Company nor any of its Subsidiaries provides
or causes to be provided any assets, services or facilities to such Shareholder
or any such Affiliate. Except as disclosed in Section 2.23(b) of the Disclosure
Schedule, since November 30, 1996, all settlements of intercompany Liabilities
between the Company and its Subsidiaries, on the one hand, and any Shareholder
or any such Affiliate, on the other, have been made, and all allocations of
intercompany expenses have been applied, in the ordinary course of business
consistent with past practice.
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2.24 Employees; Labor Relations. (a) Section 2.24(a) of the
Disclosure Schedule contains a correct and complete list of the name of each
officer and employee of the Company and its Subsidiaries at the date hereof,
together with each such person's position or function, length of service, annual
base salary or wages and any incentive or bonus arrangement or benefits with
respect to such person in effect on such date, including those on lay-off (as
well as the reason for their absence) but other than those receiving benefits
under workers' compensation legislation.
(b) Except as disclosed in Section 2.24(b) of the Disclosure
Schedule, (i) no employee of the Company or any of its Subsidiaries is presently
a member of a collective bargaining unit or represented by a similar employee
association and, to the Knowledge of the Shareholders, there are no threatened
or contemplated attempts to organize for collective bargaining purposes any of
the employees of the Company or any of its Subsidiaries and (ii) no unfair labor
practice, complaint, grievance or arbitration against the Company or any of its
Subsidiaries is pending or has been brought during the last five (5) years
against the Company or any of its Subsidiaries. Since August 31, 1992, there has
been no work stoppage, strike or other concerted action by employees of the
Company or any of its Subsidiaries. During that period, the Company and its
Subsidiaries have complied in all material respects with all applicable Laws
relating to the employment of labor, including, without limitation those
relating to wages, hours and collective bargaining.
2.25 Environmental Matters. The Company and its Subsidiaries have
obtained all Licenses which are required under applicable Environmental Laws in
connection with the conduct of their business or operations. Each of such
Licenses is in full force and effect and the Company and its Subsidiaries are in
compliance in all material respects with the terms and conditions of all such
Licenses and with any applicable Environmental Law. In addition, except as set
forth in Section 2.25 of the Disclosure Schedule (with paragraph references
corresponding to those set forth below):
(a) No Order has been issued, no Environmental Claim has been filed,
no penalty has been assessed and no investigation or review is pending or, to
the Knowledge of the Shareholders,
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threatened by any Governmental or Regulatory Authority with respect to any
alleged failure by the Company or any of its Subsidiaries to have any License
required under applicable Environmental Laws in connection with the conduct of
their business or operations or with respect to any generation, treatment,
storage, recycling, transportation or Release of any Hazardous Material, and to
the Knowledge of the Shareholders, there are no facts or circumstances in
existence which could reasonably be expected to form the basis for any such
Order, Environmental Claim, penalty or investigation.
(b) Neither the Company nor any of its Subsidiaries owns, operates
or leases a treatment, storage or disposal facility; and, without limiting the
foregoing, neither the Company nor any of its Subsidiaries is subject to any
Liability by reason of the presence or existence of any of the following,
whether past or present, at, on or under any site or facility now or previously
owned, operated or leased by the Company or any of its Subsidiaries: (i)
polychlorinated biphenyl, (ii) asbestos or asbestos-containing material, (iii)
underground storage tanks or surface impoundments for Hazardous Materials,
active or abandoned, or (iv) any Release of Hazardous Material in a quantity
reportable under, or in violation of, any Environmental Law.
(c) Neither the Company nor any of its Subsidiaries has transported
for disposal or arranged for the transportation for disposal of any Hazardous
Material to any location that is (i) listed on the NPL under CERCLA, (ii) listed
for possible inclusion on the NPL by the Environmental Protection Agency in
CERCLIS or on any similar state or local list or (iii) the subject of
enforcement actions by federal, state or local Governmental or Regulatory
Authorities that may lead to Environmental Claims against the Company or any of
its Subsidiaries.
(d) No written notification of a Release of a Hazardous Material has
been filed by or on behalf of the Company or any of its Subsidiaries and no site
or facility now or previously owned, operated or leased by the Company or any of
its Subsidiaries is listed or proposed for listing on the NPL, CERCLIS or any
similar state or local list of sites requiring investigation or clean-up.
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(e) No Liens have arisen under or pursuant to any Environmental Law
on any site or facility owned, operated or leased by the Company or any of its
Subsidiaries and no federal, state or local Governmental or Regulatory Authority
action has been taken or, to the Knowledge of the Shareholders, is in process
that could subject any such site or facility to such Liens, and neither the
Company nor any of its Subsidiaries would be required to place any notice or
restriction relating to the presence of Hazardous Materials at any such site or
facility in any deed to the real property on which such site or facility is
located.
(f) There have been no environmental investigations, studies,
audits, tests, reviews or other analyses conducted by, or that are in the
possession of, the Company or any of its Subsidiaries in relation to any site or
facility now or previously owned, operated or leased by the Company or any of
its Subsidiaries which have not been delivered to Purchaser prior to the
execution of this Agreement.
2.26 Substantial Customers and Suppliers. Section 2.26(a) of the
Disclosure Schedule lists the twenty-five (25) largest customers of the Company
and its Subsidiaries, on the basis of revenues for goods sold or services
provided for the most recently-completed fiscal year. Section 2.26(b) of the
Disclosure Schedule lists the twenty-five (25) largest suppliers of the Company
and its Subsidiaries, on the basis of cost of goods or services purchased for
the most recently-completed fiscal year. Except as disclosed in Section 2.26(c)
of the Disclosure Schedule, no such customer or supplier has ceased or
materially reduced its purchases from, use of the services of, or sales or
provision of services to the Company and its Subsidiaries since November 30,
1996, or to the Knowledge of the Shareholders, has threatened to cease or
materially reduce such purchases, use, sales or provision of services after the
date hereof. Except as disclosed in Section 2.26(d) of the Disclosure Schedule,
to the Knowledge of the Shareholders, no such customer or supplier is threatened
with bankruptcy or insolvency.
2.27 Bank and Brokerage Accounts; Investment Assets. Section 2.27 of
the Disclosure Schedule sets forth (a) a true and complete list of the names and
locations of all banks, trust companies, securities brokers and other financial
institutions at which the Company or any of its Subsidiaries has an account or
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safe deposit box or maintains a banking, custodial, trading or other similar
relationship; (b) a true and complete list and description of each such account,
box and relationship, indicating in each case the account number and the names
of the officers, employees, agents or other similar representatives of the
Company or any of its Subsidiaries having signatory power with respect thereto;
and (c) a list of each Investment Asset, the name of the record and beneficial
owner thereof, the location of the certificates, if any, therefor, the maturity
date, if any, and any stock or bond powers or other authority for transfer
granted with respect thereto.
2.28 No Powers of Attorney. Neither the Company nor any of its
Subsidiaries has any powers of attorney or comparable delegations of authority
outstanding.
2.29 Inventory. All inventory of the Company and its Subsidiaries
reflected on the 1996 Base Balance Sheet and all such inventory acquired since
November 30, 1996 consists of a quality and quantity usable and salable in the
ordinary course of business consistent with past practice, subject to (i)
specific write-offs that have been taken, (ii) the fact that demonstration
products are often sold at reduced costs, (iii) reserves for unusable or
unsalable inventory kept on the Books and Records of the Company and its
Subsidiaries and (iv) normal and customary allowances in the industry for
spoilage, damage and outdated items. Except as disclosed in Section 2.29 of the
Disclosure Schedule, all items included in such inventory are the property of
the Company and its Subsidiaries, free and clear of any Lien other than
Permitted Liens, have not been pledged as collateral, are not held by the
Company or any of its Subsidiaries on consignment from others and conform in all
material respects to all standards applicable to such inventory or its use or
sale imposed by Governmental or Regulatory Authorities.
2.30 Nature of Purchase; Accredited Investor. (a) Each Shareholder
is acquiring the Purchaser Shares issued pursuant to this Agreement for his or
her own account for investment, not as a nominee or agent, and not with a view
to the resale or distribution of such shares or any part thereof, and each
Shareholder has no present intention of selling, granting any participation in,
or otherwise distributing the same, except as contemplated by the Registration
Rights Agreement. Each Shareholder acknowledges that the issuance of the
Purchaser
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Shares pursuant to this Agreement will not be registered under the Securities
Act or any state securities or blue sky law, on the grounds that the offering
and sale of the Purchaser Shares contemplated by this Agreement are exempt from
registration pursuant to exceptions available under such laws, and that
Purchaser's reliance upon such exemptions is predicated upon the Shareholders'
representations set forth in this Agreement. Each Shareholder acknowledges and
understands that such shares must be retained by such Shareholder until they are
subsequently registered under the Securities Act and/or applicable state
securities or blue sky laws or an exemption from such registration is available,
and that the certificates representing such shares will contain a legend to the
foregoing effect.
(b) Each Shareholder is an "accredited investor" within the meaning
of Regulation D promulgated under the Securities Act.
2.31 Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by the Shareholders
directly with Purchaser without the intervention of any Person on behalf of the
Shareholders in such manner as to give rise to any valid claim by any Person
against Purchaser, the Company or any of its Subsidiaries for a finder's fee,
brokerage commission or similar payment.
2.32 Accounting Matters. To the Knowledge of the Shareholders,
neither the Company nor any of its Affiliates has taken or agreed or failed to
take any action that (without giving effect to any action taken or agreed to be
taken by Purchaser or any of its Affiliates) would disqualify the treatment of
the business combination to be effected pursuant to this Agreement as a "pooling
of interests" for accounting purposes.
2.33 Disclosure. No representation or warranty contained in this
Agreement, and no statement contained in the Disclosure Schedule or in any
certificate, list or other writing furnished to Purchaser pursuant to any
provision of this Agreement (including without limitation the Financial
Statements), contains any untrue statement of a material fact.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to the Shareholders as follows:
3.01 Organization. Purchaser is a corporation duly incorporated,
validly existing and in good standing under the Laws of the State of Delaware.
Purchaser has full corporate power and authority to execute and deliver this
Agreement and the Operative Agreements to which it is a party, to perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby.
3.02 Authority. The execution and delivery by Purchaser of this
Agreement and the Operative Agreements to which it is a party, and the
performance by Purchaser of its obligations hereunder and thereunder, have been
duly and validly authorized by the Board of Directors of Purchaser, no other
corporate action on the part of Purchaser or its stockholders being necessary.
This Agreement has been duly and validly executed and delivered by Purchaser and
constitutes, and upon the execution and delivery by Purchaser of the Operative
Agreements to which it is a party, such Operative Agreements will constitute,
legal, valid and binding obligations of Purchaser enforceable against Purchaser
in accordance with their terms.
3.03 No Conflicts. The execution and delivery by Purchaser of this
Agreement do not, and the execution and delivery by Purchaser of the Operative
Agreements to which it is a party, the performance by Purchaser of its
obligations under this Agreement and such Operative Agreements and the
consummation of the transactions contemplated hereby and thereby will not:
(a) conflict with or result in a violation or breach of any of the
terms, conditions or provisions of the certificate of incorporation or by-laws
of Purchaser;
(b) subject to obtaining the consents, approvals and actions, making
the filings and giving the notices disclosed in Schedule 3.04 hereto, conflict
with or result in a violation or breach of any term or provision of any Law or
Order applicable to Purchaser or any of its Assets and Properties; or
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(c) except as disclosed in Schedule 3.03 hereto, (i) conflict with
or result in a violation or breach of, (ii) constitute (with or without notice
or lapse of time or both) a default under, (iii) require Purchaser to obtain any
consent, approval or action of, make any filing with or give any notice to any
Person as a result or under the terms of or (iv) result in the creation or
imposition of any Lien upon Purchaser or any of its Assets and Properties under,
any Contract or License to which Purchaser is a party or by which any of its
Assets and Properties are bound.
3.04 Governmental Approvals and Filings. Except as disclosed in
Schedule 3.04 hereto, no consent, approval or action of, filing with or notice
to any Governmental or Regulatory Authority on the part of Purchaser is required
in connection with the execution, delivery and performance of this Agreement or
the Operative Agreements or the consummation of the transactions contemplated
hereby or thereby.
3.05 Legal Proceedings. There are no Actions or Proceedings pending
or, to the knowledge of Purchaser, threatened against, relating to or affecting
Purchaser or any of its Assets and Properties which could reasonably be expected
to result in the issuance of an Order restraining, enjoining or otherwise
prohibiting or making illegal the consummation of any of the transactions
contemplated by this Agreement or any of the Operative Agreements.
3.06 SEC Reports and Financial Statements; No Adverse Change.
Purchaser delivered to the Shareholders prior to the execution of this Agreement
a true and complete copy of each form, report, schedule, registration statement,
definitive proxy statement and other document (together with all amendments
thereof and supplements thereto) filed by Purchaser or any of its subsidiaries
with the Securities and Exchange Commission (the "SEC") since January 1, 1997
(as such documents have since the time of their filing been amended or
supplemented, the "Purchaser SEC Reports"), which are all the documents (other
than preliminary material) that Purchaser and its subsidiaries were required to
file with the SEC since such date. As of their respective dates, the Purchaser
SEC Reports (i) complied as to form in all material respects with the
requirements of the Securities Act or the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder, as
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the case may be, and (ii) did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. The audited consolidated financial
statements and unaudited interim consolidated financial statements (including,
in each case, the notes, if any, thereto) included in the Purchaser SEC Reports
(the "Purchaser Financial Statements") complied as to form in all material
respects with the published rules and regulations of the SEC with respect
thereto, were prepared in accordance with GAAP (except as may be indicated
therein or in the notes thereto and except with respect to unaudited statements
as permitted by Form 10-Q of the SEC) and fairly present (subject, in the case
of the unaudited interim financial statements, to normal, recurring year-end
audit adjustments) the consolidated financial position of Purchaser and its
consolidated subsidiaries as at the respective dates thereof and the
consolidated results of their operations and cash flows for the respective
periods then ended. Except as disclosed in the Purchaser SEC Reports filed prior
to the date of this Agreement, since December 31, 1996 there has not been any
change, event or development having, or that could be reasonably expected to
have, individually or in the aggregate, a material adverse effect on the
business, financial condition or results of operations of Purchaser and its
subsidiaries taken as a whole.
3.07 Capital Stock. The shares of Purchaser Common Stock issuable in
connection with this Agreement constitute voting stock, have been duly
authorized by Purchaser and reserved for issuance pursuant to this Agreement
and, when issued in exchange for the Shares in accordance with the terms hereof,
will be validly issued, fully paid and non-assessable. All such shares of
Purchaser Common Stock will be free of preemptive or similar rights created by
Purchaser.
3.08 Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by Purchaser directly
with the Shareholders without the intervention of any Person on behalf of
Purchaser in such manner as to give rise to any valid claim by any Person
against the Shareholders for a finder's fee, brokerage commission or similar
payment.
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3.09 Accounting Matters. To the knowledge of Purchaser, neither
Purchaser nor any of its Affiliates has taken or agreed or failed to take any
action that (without giving effect to any action taken or agreed to be taken by
the Company or any of its Affiliates) would disqualify the treatment of the
business combination to be effected pursuant to this Agreement as a "pooling of
interests" for accounting purposes.
ARTICLE IV
COVENANTS OF THE SHAREHOLDERS
The Shareholders covenant and agree with Purchaser that, at all
times from and after the date hereof until the Closing and, with respect to any
covenant or agreement by its terms to be performed in whole or in part after the
Closing, for the period specified therein or, if no period is specified therein,
indefinitely, the Shareholders will, and will cause the Company and its
Subsidiaries to, comply with all covenants and provisions of this Article IV,
except to the extent Purchaser may otherwise consent in writing.
4.01 Regulatory and Other Approvals. The Shareholders will, as
promptly as practicable, (a) take all commercially reasonable steps necessary or
desirable to obtain all consents, approvals or actions of, make all filings with
and give all notices to Governmental or Regulatory Authorities or any other
Person required of the Shareholders or the Company to consummate the
transactions contemplated hereby and by the Operative Agreements, including
without limitation those described in Sections 2.05 and 2.06 of the Disclosure
Schedule, (b) provide such other information and communications to such
Governmental or Regulatory Authorities or other Persons as Purchaser or such
Governmental or Regulatory Authorities or other Persons may reasonably request
in connection therewith and (c) cooperate with Purchaser in connection with the
performance of its obligations under Sections 5.01 and 5.02. The Shareholders
will provide prompt notification to Purchaser when any such consent, approval,
action, filing or notice referred to in clause (a) above is obtained, taken,
made or given, as applicable, and will advise Purchaser of any communications
(and, unless precluded by Law, provide copies of any such communications that
are in writing) with any Governmental or Regulatory Authority or other Person
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regarding any of the transactions contemplated by this Agreement or any of the
Operative Agreements.
4.02 Investigation by Purchaser. The Shareholders will (a) provide
Purchaser and its officers, directors, employees, agents, counsel, accountants,
financial advisors, consultants and other representatives with full access, upon
reasonable prior notice and during normal business hours, to all officers,
employees, agents and accountants of the Company and its Subsidiaries and their
respective Assets and Properties and Books and Records, and (b) furnish
Purchaser and such other Persons with all such information and data (including
without limitation copies of Contracts, Licenses, Benefit Plans and other Books
and Records) concerning the business and operations of the Company and its
Subsidiaries as Purchaser or any of such other Persons reasonably may request in
connection with such investigation.
4.03 No Solicitations. [INTENTIONALLY OMITTED]
4.04 Conduct of Business. The Company and its Subsidiaries will
conduct their business or operations only in the ordinary course consistent with
past practice.
4.05 Financial Statements and Reports; Filings. (a) Not later than
forty-five (45) days following the Closing Date, Purchaser shall have received
from the Shareholders such financial statements of the Company and its
Subsidiaries as are sufficient to enable Purchaser to comply with its obligation
to file a Current Report on Form 8-K with the SEC (if required) and any other
SEC filing related to the transactions hereunder, together with a balance sheet
of the Company and its consolidated Subsidiaries as of the Closing Date and the
related statements of operations and cash flows for the period commencing
December 1, 1996 and ending on the Closing Date, accompanied by a review report
of independent auditors of recognized standing. The cost of providing the
financial statements required by this Section 4.05 shall be borne equally by
Purchaser and the Shareholders.
(b) As promptly as practicable, the Company and its Subsidiaries
will deliver to Purchaser true and complete copies of such other financial
statements, reports and analyses as may be prepared or received by it relating
to the business or operations of the Company and its Subsidiaries.
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(c) As promptly as practicable, the Company and its Subsidiaries
will deliver copies of all License applications and other filings made by the
Company or any of its Subsidiaries after the date hereof and before the Closing
Date with any Governmental or Regulatory Authority (other than routine,
recurring filings made in the ordinary course of business consistent with past
practice).
4.06 Employee Matters. Except as may be required by Law, the Company
and its Subsidiaries will refrain from either directly or indirectly:
(a) making any representation or promise, oral or written, to any
officer, employee or consultant of the Company or any of its Subsidiaries
concerning any Benefit Plan, except for statements as to the rights or accrued
benefits of any officer, employee or consultant under the terms of any Benefit
Plan;
(b) making any increase in the salary, wages or other compensation
of any officer, employee or consultant of the Company or any of its
Subsidiaries;
(c) adopting, entering into or becoming bound by any Benefit Plan,
employment-related Contract or collective bargaining agreement, or amending,
modifying or terminating (partially or completely) any such Benefit Plan,
employment-related Contract or collective bargaining agreement, except to the
extent required by applicable Law and, in the event compliance with legal
requirements presents options, only to the extent that the option which the
Company reasonably believes to be the least costly is chosen; or
(d) establishing or modifying any (i) targets, goals, pools or
similar provisions in respect of any fiscal year under any Benefit Plan or any
employment-related Contract or other employee compensation arrangement or (ii)
salary ranges, increase guidelines or similar provisions in respect of any
Benefit Plan or any employment-related Contract or other employee compensation
arrangement.
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4.07 Certain Restrictions. The Company and its Subsidiaries will
refrain from:
(a) amending their articles of incorporation or by-laws (or other
comparable corporate charter documents) or taking any action with respect to any
such amendment or any recapitalization, reorganization, liquidation or
dissolution of any the corporation;
(b) authorizing, issuing, selling or otherwise disposing of any
shares of capital stock of or any Option with respect to the Company or any of
its Subsidiaries, or modifying or amending any right of any holder of
outstanding shares of capital stock of or Option with respect to the Company or
any of its Subsidiaries;
(c) declaring, setting aside or paying any dividend or other
distribution in respect of the capital stock of the Company, or directly or
indirectly redeeming, purchasing or otherwise acquiring any capital stock of or
any Option with respect to the Company;
(d) acquiring or disposing of, or incurring any Lien (other than a
Permitted Lien) on, any Assets and Properties, other than in the ordinary course
of business consistent with past practice;
(e) entering into, amending, modifying, terminating (partially or
completely), granting any waiver under or giving any consent with respect to any
Contract or License;
(f) violating, breaching or defaulting under in any material
respect, or taking or failing to take any action that (with or without notice or
lapse of time or both) would constitute a material violation or breach of, or
default under, any term or provision of any License held or used by the Company
or any of its Subsidiaries or any Contract to which the Company or any of its
Subsidiaries is a party or by which any of their respective Assets and
Properties are bound;
(g) (i) incurring Indebtedness in an aggregate principal amount
exceeding $50,000 (net of any amounts of Indebtedness discharged during such
period), or (ii) purchasing, canceling, prepaying or otherwise providing for a
complete or
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partial discharge in advance of a scheduled payment date with respect to, or
waiving any right of the Company or any of its Subsidiaries under, any
Indebtedness of or owing to the Company or any of its Subsidiaries;
(h) engaging in any transaction with any officer, director or
Affiliate of the Company or any of its Subsidiaries, either outside the ordinary
course of business consistent with past practice or other than on an
arm's-length basis;
(i) making capital expenditures or commitments for additions to
property, plant or equipment constituting capital assets in an aggregate amount
exceeding $50,000; or
(j) entering into any Contract to do or engage in any of the
foregoing.
4.08 Books and Records, etc.; Removal of Property. On the Closing
Date, the Shareholders will deliver or make available to Purchaser at the
offices of the Company all of the Books and Records, and if at any time after
the Closing either Shareholder discovers in his possession or under his control
any other Books and Records, such Shareholder will forthwith deliver such Books
and Records to Purchaser.
4.09 Pooling of Interests; Resale Restrictions. (a) From and after
the date hereof and until the Closing, neither the Company nor any of its
Subsidiaries or other Affiliates will take any action, or fail to take any
action, that would disqualify the treatment of the business combination to be
effected pursuant to this Agreement as a "pooling of interests" for accounting
purposes.
(b) Notwithstanding anything to the contrary contained in this
Agreement or in the Registration Rights Agreement, each Shareholder represents
to and covenants with Purchaser that such Shareholder (i) has and will not,
within the thirty (30) days prior to the Closing Date, sell, transfer or
otherwise dispose of any Purchaser Shares or any other shares of capital stock
of Purchaser held by such Shareholder and (ii) will not sell, transfer or
otherwise dispose of any Purchaser Shares or any other shares of capital stock
of Purchaser held by such Shareholder until after such time as Purchaser shall
have
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published the results of the combined post-Closing operations of Purchaser and
the Company as contemplated by Section 5.05(b).
4.10 Fulfillment of Conditions. The Shareholders will execute and
deliver at the Closing each Operative Agreement that the Shareholders are
required hereby to execute and deliver as a condition to the Closing, will take
all commercially reasonable steps necessary or desirable and proceed diligently
and in good faith to satisfy each other condition to the obligations of
Purchaser contained in this Agreement and will not take or fail to take any
action that could reasonably be expected to result in the nonfulfillment of any
such condition.
ARTICLE V
COVENANTS OF PURCHASER
Purchaser covenants and agrees with the Shareholders that, at all
times from and after the date hereof until the Closing and, with respect to any
covenant or agreement by its terms to be performed in whole or in part after the
Closing, for the period specified therein, or, if no period is specified
therein, indefinitely, Purchaser will comply with all covenants and provisions
of this Article V, except to the extent the Shareholders may otherwise consent
in writing.
5.01 Regulatory and Other Approvals. Purchaser will, as promptly as
practicable, (a) take all commercially reasonable steps necessary or desirable
to obtain all consents, approvals or actions of, make all filings with and give
all notices to Governmental or Regulatory Authorities or any other Person
required of Purchaser to consummate the transactions contemplated hereby and by
the Operative Agreements, including without limitation those described in
Schedules 3.03 and 3.04 hereto, (b) provide such other information and
communications to such Governmental or Regulatory Authorities or other Persons
as the Shareholders or such Governmental or Regulatory Authorities or other
Persons may reasonably request in connection therewith and (c) cooperate with
the Shareholders in connection with the performance of their obligations under
Sections 4.01 and 4.02. Purchaser will provide prompt notification to the
Shareholders when any such consent, approval, action, filing or notice referred
to in clause (a) above is obtained, taken, made or
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given, as applicable, and will advise the Shareholders of any communications
(and, unless precluded by Law, provide copies of any such communications that
are in writing) with any Governmental or Regulatory Authority or other Person
regarding any of the transactions contemplated by this Agreement or any of the
Operative Agreements.
5.02 Fulfillment of Conditions. Purchaser will execute and deliver
at the Closing each Operative Agreement that it is required hereby to execute
and deliver as a condition to the Closing, will take all commercially reasonable
steps necessary or desirable and proceed diligently and in good faith to satisfy
each other condition to the obligations of the Shareholders contained in this
Agreement and will not take or fail to take any action that could reasonably be
expected to result in the nonfulfillment of any such condition.
5.03 Listing of Stock. Purchaser shall cause all shares of Purchaser
Common Stock issued to the Shareholders or furnished to the Escrow Agent to be
listed on the national securities exchange on which the Purchaser Common Stock
is traded.
5.04 Access to Records. Each Shareholder shall have access, upon
reasonable prior notice and during normal business hours, to the Books and
Records of the Company and its Subsidiaries for purposes of (a) considering,
defending and resolving any disputes or claims relating to the operations of the
Company and its Subsidiaries on or prior to the Closing, including without
limitation any Tax matter, (b) considering, prosecuting, defending or resolving
any disputes or claims under this Agreement, (c) preparation of Tax Returns of
any Shareholder or any Affiliate of a Shareholder or (d) other reasonable and
necessary purposes related to the operations of the Company and its Subsidiaries
prior to the Closing. For a period of five years after the Closing, Purchaser
will cause the Company and its Subsidiaries to give reasonable advance notice to
each Shareholder of the planned destruction of any documents in such party's
possession relating to any of the foregoing, and the Shareholders so notified
shall be given the opportunity, at their sole expense, to take possession of
such records (subject to whatever reasonable confidentiality restrictions that
Purchaser may impose as a condition to providing such Books and Records to a
Shareholder).
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5.05 Pooling of Interests. (a) From and after the date hereof and
until the Closing, neither Purchaser nor any of its Affiliates will take any
action, or fail to take any action, that would disqualify the treatment of the
business combination to be effected pursuant to this Agreement as a "pooling of
interests" for accounting purposes.
(b) As soon as practicable following the Closing, but in any event
on or before November 30, 1997, Purchaser will publish results covering at least
thirty (30) days of post-Closing combined operations of the Company and
Purchaser, in the form of a quarterly earnings report, an effective registration
statement filed with the SEC, a report to the SEC on Form 10-K, 10-Q or 8-K, or
any other public filing or announcement which includes the combined results of
operations, including sales and net income.
5.06 Release of Guarantees. As promptly as possible after the
Closing, Purchaser shall use its best efforts to obtain the release of the
guarantees that the Shareholders have given in respect of Indebtedness of the
Company and the Subsidiaries described in Section 5.06 of the Disclosure
Schedule.
5.07 Filing of Registration Statement. As promptly as practicable
after the Closing, but in no event later than September 4, 1997, Purchaser shall
file the Registration Statement with the SEC.
ARTICLE VI
CONDITIONS TO OBLIGATION OF PURCHASER
The obligation of Purchaser hereunder to purchase the Shares from
the Shareholders is subject to the fulfillment, at or before the Closing, of
each of the following conditions (all or any of which may be waived in whole or
in part by Purchaser in its sole discretion):
6.01 Representations and Warranties. Each of the representations and
warranties made by the Shareholders in this Agreement (other than those made as
of a specified date earlier than the Closing Date) shall be true and correct in
all material respects on and as of the Closing Date as though such
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53
representation or warranty was made on and as of the Closing Date, and any
representation or warranty made as of a specified date earlier than the Closing
Date shall have been true and correct in all material respects on and as of such
earlier date.
6.02 Performance. The Shareholders shall have performed and complied
with, in all material respects, each agreement, covenant and obligation required
by this Agreement to be so performed or complied with by the Company and its
Subsidiaries or the Shareholders, as the case may be, at or before the Closing.
6.03 Shareholders' and Secretaries' Certificates. The Shareholders
shall have delivered to Purchaser a certificate, dated the Closing Date and
executed by each of the Shareholders, substantially in the form and to the
effect of Exhibit B hereto, and a certificate, dated the Closing Date and
executed by the corporate secretaries of the Company and each of its
Subsidiaries, substantially in the form and to the effect of Exhibit C hereto.
6.04 Orders and Laws. There shall not be in effect on the Closing
Date any Order or Law restraining, enjoining or otherwise prohibiting or making
illegal the consummation of any of the transactions contemplated by this
Agreement or any of the Operative Agreements or which could reasonably be
expected to otherwise result in a material diminution of the benefits of the
transactions contemplated by this Agreement or any of the Operative Agreements
to Purchaser, and there shall not be pending or threatened on the Closing Date
any Action or Proceeding in, before or by any Governmental or Regulatory
Authority which could reasonably be expected to result in the issuance of any
such Order or the enactment, promulgation or deemed applicability to Purchaser,
the Company or any of its Subsidiaries, the Shareholders or the transactions
contemplated by this Agreement or any of the Operative Agreements of any such
Law.
6.05 Regulatory Consents and Approvals. All consents, approvals and
actions of, filings with and notices to any Governmental or Regulatory Authority
necessary to permit Purchaser and the Shareholders to perform their obligations
under this Agreement and the Operative Agreements and to consummate the
transactions contemplated hereby and thereby (a) shall have been duly obtained,
made or given, (b) shall be in form and substance
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reasonably satisfactory to Purchaser, (c) shall not be subject to the
satisfaction of any condition that has not been satisfied or waived and (d)
shall be in full force and effect.
6.06 Third Party Consents. The consents (or in lieu thereof waivers)
listed in Section 6.06 of the Disclosure Schedule (a) shall have been obtained,
(b) shall be in form and substance reasonably satisfactory to Purchaser, (c)
shall not be subject to the satisfaction of any condition that has not been
satisfied or waived and (d) shall be in full force and effect.
6.07 Estimated Net Book Value. The Estimated Net Book Value set
forth on the Pre-Closing Certificate shall be at least $2,276,271.
6.08 Escrow Agreement. The Shareholders shall have entered into the
Escrow Agreement with Purchaser and the Escrow Agent.
6.09 Pooling Letters. Purchaser shall have received letters from
Ernst & Young LLP and BDO Xxxxxxx LLP, each dated the Closing Date and addressed
to Purchaser and the Company, respectively, stating that the business
combination to be effected pursuant to this Agreement will qualify as a "pooling
of interests" transaction under Opinion 16 of the Accounting Principles Board.
6.10 Opinion of Counsel. Purchaser shall have received the opinion
of Robins, Kaplan, Xxxxxx & Xxxxxx LLP, counsel to the Company and the
Shareholders, dated the Closing Date, substantially in the form and to the
effect of Exhibit D hereto.
6.11 Resignations of Directors and Officers. Such members of the
boards of directors and such officers of the Company and its Subsidiaries as are
designated in a written notice delivered by Purchaser to the Shareholders shall
have tendered, effective at the Closing, their resignations as such directors
and officers.
6.12 Employment Agreements. S.E. (Gene) Xxxxx shall have entered
into an employment agreement with Purchaser substantially in the form of Exhibit
E-1 hereto and Xxxxx Xxx shall have entered into an employment agreement with
Purchaser
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substantially in the form of Exhibit E-2 hereto (collectively, the "Employment
Agreements").
6.13 Non-Competition Agreements. S.E. (Gene) Xxxxx shall have
entered into a non-competition agreement with Purchaser substantially in the
form of Exhibit F-1 hereto and Xxxxx Xxx shall have entered into a
non-competition agreement with Purchaser substantially in the form of Exhibit
F-2 hereto (collectively, the "Non-Competition Agreements").
6.14 Proceedings. All proceedings to be taken on the part of the
Shareholders and the Company and its Subsidiaries in connection with the
transactions contemplated by this Agreement and all documents incident thereto
shall be reasonably satisfactory in form and substance to Purchaser, and
Purchaser shall have received copies of all such documents and other evidences
as Purchaser may reasonably request in order to establish the consummation of
such transactions and the taking of all proceedings in connection therewith.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF THE SHAREHOLDERS
The obligations of the Shareholders to sell the Shares to Purchaser
are subject to the fulfillment, at or before the Closing, of each of the
following conditions (all or any of which may be waived in whole or in part by
the Shareholders in their sole discretion):
7.01 Representations and Warranties. Each of the representations and
warranties made by Purchaser in this Agreement shall be true and correct in all
material respects on and as of the Closing Date as though such representation or
warranty was made on and as of the Closing Date.
7.02 Performance. Purchaser shall have performed and complied with,
in all material respects, each agreement, covenant and obligation required by
this Agreement to be so performed or complied with by Purchaser at or before the
Closing.
7.03 Officers' Certificates. Purchaser shall have delivered to the
Shareholders a certificate, dated the Closing
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Date and executed in the name and on behalf of Purchaser by any of its Vice
Presidents, substantially in the form and to the effect of Exhibit G hereto, and
a certificate, dated the Closing Date and executed by the corporate secretary of
Purchaser, substantially in the form and to the effect of Exhibit H hereto.
7.04 Orders and Laws. There shall not be in effect on the Closing
Date any Order or Law restraining, enjoining or otherwise prohibiting or making
illegal the consummation of any of the transactions contemplated by this
Agreement or any of the Operative Agreements or which could reasonably be
expected to otherwise result in a material diminution of the benefits of the
transactions contemplated by this Agreement or any of the Operative Agreements
to the Shareholders, and there shall not be pending or threatened on the Closing
Date any Action or Proceeding in, before or by any Governmental or Regulatory
Authority which could reasonably be expected to result in the issuance of any
such Order or the enactment, promulgation or deemed applicability to Purchaser,
the Company or any of its Subsidiaries, the Shareholders or the transactions
contemplated by this Agreement or any of the Operative Agreements of any such
Law.
7.05 Regulatory Consents and Approvals. All consents, approvals and
actions of, filings with and notices to any Governmental or Regulatory Authority
necessary to permit Purchaser and the Shareholders to perform their obligations
under this Agreement and the Operative Agreements and to consummate the
transactions contemplated hereby and thereby (a) shall have been duly obtained,
made or given, (b) shall be in form and substance reasonably satisfactory to the
Shareholders, (c) shall not be subject to the satisfaction of any condition that
has not been satisfied or waived and (d) shall be in full force and effect.
7.06 Third Party Consents. All consents (or in lieu thereof waivers)
to the performance by the Shareholders of their obligations hereunder and to the
consummation of the transactions contemplated hereby as are required under the
Contracts listed in Section 7.06 of the Disclosure Schedule (a) shall have been
obtained, (b) shall be in form and substance reasonably satisfactory to the
Company and the Shareholders, (c) shall not be subject to the satisfaction of
any condition that has not been satisfied or waived and (d) shall be in full
force and effect.
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7.07 Opinion of Counsel. The Shareholders shall have received the
opinion of Milbank, Tweed, Xxxxxx & XxXxxx, special counsel to Purchaser, dated
the Closing Date, substantially in the form and to the effect of Exhibit I
hereto.
7.08 Employment Agreements. Purchaser shall have entered into an
Employment Agreement with each of the Shareholders.
7.09 Non-Competition Agreements. Purchaser shall have entered into a
Non-Competition Agreement with each of the Shareholders.
7.10 Proceedings. All proceedings to be taken on the part of
Purchaser in connection with the transactions contemplated by this Agreement and
all documents incident thereto shall be reasonably satisfactory in form and
substance to the Shareholders, and the Shareholders shall have received copies
of all such documents and other evidences as the Shareholders may reasonably
request in order to establish the consummation of such transactions and the
taking of all proceedings in connection therewith.
ARTICLE VIII
SURVIVAL AND INDEMNIFICATION
8.01 Survival of Representations, Warranties, Covenants and
Agreements. Notwithstanding any right of Purchaser (whether or not exercised) to
investigate the affairs of the Company and its Subsidiaries or any right of any
party (whether or not exercised) to investigate the accuracy of the
representations and warranties of the other party contained in this Agreement,
the Shareholders and Purchaser have the right to rely fully upon the
representations, warranties, covenants and agreements of the other contained in
this Agreement. The representations, warranties, covenants and agreements
contained in this Agreement, and the statements contained in the Disclosure
Schedule or in any certificate, list or other writing furnished pursuant to any
provision of this Agreement, will survive the Closing; provided that (i) the
representations and warranties contained in Sections 2.10, 2.11, 2.12, 2.14,
2.20, 2.21, 2.25, 2.31, 3.07 and 3.08 will only survive the Closing until
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August 31, 2000 with respect to the matters covered thereby, (ii) the
representations and warranties contained in Section 2.29 will only survive the
Closing until the Determination Date, and (iii) all other representations and
warranties contained in Articles II and III will only survive the Closing until
the earlier of (x) the first anniversary of the Closing Date and (y) the date on
which Purchaser's independent auditors issue an audit opinion on Purchaser's
consolidated financial statements for the year ending December 31, 1997;
provided further that any representation or warranty that would otherwise
terminate in accordance with clause (i), (ii) or (iii) above will continue to
survive with respect to a specific claim if an Indemnity Notice shall have been
timely given under Section 8.02 on or prior to such termination date, until the
specific claim for indemnification has been satisfied or otherwise resolved as
provided in Section 8.02.
8.02 Indemnification.
(a) Each Shareholder shall severally, in proportion to their
relative ownership of the Shares as set forth on Annex I hereto, indemnify the
Purchaser Indemnified Parties in respect of, and hold each of them harmless from
and against, any and all Losses suffered, incurred or sustained by any of them
or to which any of them becomes subject, resulting from, arising out of or
relating to (i) any breach of representation or warranty or nonfulfillment of or
failure to perform any material covenant or agreement on the part of either
Shareholder contained in this Agreement, (ii) any claim against the Company or
any of its Subsidiaries or any of their respective directors, officers,
employees or agents based on any deficiency or noncompliance with the filing or
payment of, or the failure to properly file or pay, any Tax arising or accruing
prior to the Closing Date or Tax Return related thereto and not disclosed in the
Disclosure Schedule and reserved against in the Closing Date Balance Sheet,
(iii) any Action or Proceeding existing or, to the Knowledge of the
Shareholders, threatened prior to the Closing Date against, relating to or
affecting the Company or any of its Subsidiaries or any of their respective
Assets and Properties or (iv) any Retained Liability.
(b) Purchaser shall indemnify the Shareholders in respect of, and
hold each of them harmless from and against, (i) any and all Losses suffered,
incurred or sustained by any of
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them or to which any of them becomes subject, resulting from, arising out of or
relating to any breach of representation or warranty or nonfulfillment of or
failure to perform any covenant or agreement on the part of Purchaser contained
in this Agreement and (ii) all reasonable legal expenses incurred by them in
defending against any Action or Proceeding relating solely to the Liabilities
described in clause (i) or (ii) of the definition of Retained Liabilities.
(c) No amounts of indemnity shall be payable as a result of any
claim in respect of a Loss arising under Section 8.02(a)(i) for a breach of a
representation or warranty:
(i) unless, until and then only to the extent that the
Purchaser Indemnified Parties have suffered, incurred, sustained or become
subject to Losses referred to in such paragraph in excess of $200,000 in the
aggregate; and
(ii) unless the Purchaser Indemnified Parties have received
payments in respect of claims made under such Section of $1,200,000 or less in
the aggregate.
(d) (i) No Indemnifying Party shall be obligated to indemnify and
hold harmless any Indemnified Party under this Section 8.02 unless the
Indemnified Party makes a specific written claim for indemnification within the
applicable survival period specified in Section 8.01. The Shareholders
acknowledge that there are no time limitations imposed by this Article VIII upon
the ability of the Purchaser Indemnified Parties to assert a claim for
indemnification with respect to matters covered by clauses (ii), (iii) or (iv)
of Section 8.02(a).
(ii) All indemnification obligations of each Shareholder
arising under Section 8.02(a) in respect of Losses arising from breaches of
representations and warranties shall be satisfied solely by delivery of shares
of Purchaser Common Stock, valued at the Per Share Price (disregarding
fractions). The Purchaser Indemnified Parties' right to obtain shares of
Purchaser Common Stock from the Shareholders in respect of their indemnity
obligations arising under Section 8.02(a) shall not be limited to the Escrow
Shares.
(e) In the event any claim or demand in respect of which an
Indemnified Party might seek indemnity under this
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Section 8.02 is asserted against or sought to be collected from such Indemnified
Party by a Person other than a party hereto or any of its Affiliates (a "Third
Party Claim"), then such Indemnified Party shall give written notice to the
latter of such Third Party Claim, provided that the failure of any Indemnified
Party to give notice as provided herein shall not relieve the Indemnifying Party
of its obligations under this Section 8.02, except to the extent that the
Indemnifying Party is actually prejudiced by such failure to give notice. In
case any such action is brought against an Indemnified Party, the Indemnifying
Party shall be entitled to participate in and to assume the defense thereof,
with counsel reasonably satisfactory to such Indemnified Party; provided that in
order to assume the defense of such action the Indemnifying Party must first
deliver to the Indemnified Party a notice of its election so to assume the
defense thereof and expressly agree in such notice that as between the
Indemnifying Party and the Indemnified Party, the Indemnifying Party shall be
solely obligated to satisfy and discharge any Liability or Loss resulting from
such Third Party Claim. After such notice is received by the Indemnified Party,
the Indemnifying Party shall not be liable to such Indemnified Party for any
legal or other expenses subsequently incurred by the latter in connection with
the defense of such Third Party Claim; provided that the Indemnified Party may
participate in such defense at the Indemnified Party's expense. If the
Indemnifying Party is not entitled to, or elects not to, assume the defense of a
Third Party Claim, it will not be obligated to pay the fees and expenses of more
than one counsel for the Indemnified Parties with respect to such claim, unless
the Indemnified Parties shall have been advised by counsel that representation
of any such Indemnified Parties by the same counsel would be inappropriate under
applicable standards of professional conduct due to actual or potential
differing interests between them, in which case such Indemnified Parties shall
have the right to select separate counsel, the fees and expenses of which shall
be paid by the Indemnifying Party. The Indemnifying Party will not consent to
the entry of any judgment or enter into any settlement which does not include a
provision whereby the plaintiff or claimant in the matter releases the
Indemnified Party from all liability with respect thereto, without the written
consent of the Indemnified Party, which consent will not be unreasonably
withheld or delayed. No Indemnifying Party shall be subject to any liability for
any
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settlement made without its consent, which consent shall not be unreasonably
withheld or delayed.
(f) In the event of any claim or demand, including Third Party
Claims, in respect of which an Indemnified Party might seek indemnity under this
Section 8.02, the Indemnified Party shall deliver an Indemnity Notice with
reasonable promptness to the Indemnifying Party. The failure by any Indemnified
Party to give the Indemnity Notice shall not impair such party's rights
hereunder except to the extent that an Indemnifying Party demonstrates that it
has been irreparably prejudiced thereby. The Indemnifying Party will notify the
Indemnified Party within the thirty (30) day period following its receipt of
such Indemnity Notice (the "Dispute Period") as to whether the Indemnifying
Party disputes its liability to the Indemnified Party hereunder. If the
Indemnifying Party notifies the Indemnified Party that it does not dispute the
claim described in such Indemnity Notice, or fails to notify the Indemnified
Party within the Dispute Period whether the Indemnifying Party disputes the
claim described in such Indemnity Notice, the Loss specified in the Indemnity
Notice will be conclusively deemed a liability of the Indemnifying Party under
this Section 8.02 and the Indemnifying Party shall pay the amount of such Loss,
when it has been finally determined, to the Indemnified Party on demand. If the
Indemnifying Party has timely disputed its liability with respect to such claim,
the Indemnifying Party and the Indemnified Party will proceed in good faith to
negotiate a resolution of such dispute, and if not resolved through negotiations
within sixty (60) days following the Indemnified Party's receipt of a written
notice from the Indemnifying Party disputing such claim, such dispute shall be
finally settled by arbitration in accordance with paragraph (f) of this Section
8.02.
(g) Any dispute submitted to arbitration pursuant to Section 8.02(f)
shall be finally and conclusively settled by the decision of a board of
arbitration consisting of three (3) members (hereinafter sometimes called the
"Board of Arbitration") selected as hereinafter provided. Each of the
Indemnified Party and the Indemnifying Party shall select one (1) member and the
third member shall be selected by mutual agreement of the other members, or if
the other members fail to reach agreement on a third member within twenty (20)
days after their selection, such third member shall thereafter be selected by
the American Arbitration Association upon application made to it for a third
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member possessing expertise or experience appropriate to the dispute jointly by
the Indemnified Party and the Indemnifying Party. The Board of Arbitration shall
meet in New York, New York or such other place as a majority of the members of
the Board of Arbitration determines more appropriate, and shall reach and render
a decision in writing (concurred in by a majority of the members of the Board of
Arbitration) with respect to the amount, if any, which the Indemnifying Party is
required to pay to the Indemnified Party in respect of a claim filed by the
Indemnified Party. In connection with rendering its decisions, the Board of
Arbitration shall adopt and follow such rules and procedures as a majority of
the members of the Board of Arbitration deems necessary or appropriate. It is
the intent of the parties hereto that, barring extraordinary circumstances,
decisions of the Board of Arbitration shall be rendered no more than thirty (30)
days following commencement of proceedings with respect thereto. The Board of
Arbitration shall cause its written decision to be delivered to the Indemnified
Party and the Indemnifying Party. Any decision made by the Board of Arbitration
(either prior to or after the expiration of such thirty (30) calendar day
period) shall be final, binding and conclusive on the Indemnified Party and the
Indemnifying Party and entitled to be enforced to the fullest extent permitted
by law and entered in any court of competent jurisdiction. Each party to any
arbitration shall bear its own expense in relation thereto, including but not
limited to such party's attorneys' fees, if any, and the expenses and fees of
the Board of Arbitration shall be divided between the Indemnifying Party and the
Indemnified Party in the same proportion as the portion of the related claim
determined by the Board of Arbitration to be payable to the Indemnified Party
bears to the portion of such claim determined not to be so payable.
(h) Following the Closing, to the extent permitted by Law, the
indemnification provisions of this Article VIII shall be the sole and exclusive
remedy of the Purchaser Indemnified Parties for recovery against the
Shareholders, provided, however, that the indemnification provisions are in
addition to, and not in derogation of, any statutory or common law remedy which
the Purchaser Indemnified Parties may have for fraud.
(i) Upon payment in full of any indemnification claim to a party
hereto or the payment of any judgement or settlement with respect to a Third
Party Claim, the Indemnifying Party shall be subrogated to the extent of such
payment to the rights of the
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Indemnified Party against any person or entity with respect to the subject
matter of such claim.
(j) Each Indemnified Party shall have a duty to take all
commercially reasonable steps to mitigate any Losses that such Indemnified Party
may suffer as a result of or arising out of or relating to any breach of
representation or warranty or nonfulfillment of or failure to perform any
covenant or agreement contained in this Agreement.
(k) If any insurance policy maintained by an Indemnified Party
provides coverage against any Loss for which the Indemnified Party may assert a
claim for indemnification under this Article VIII, the Indemnified Party shall
use all commercially reasonable efforts to recover any insurance proceeds to
which it is entitled under the terms of that policy in respect of the Loss, and
the amount of indemnification payable under this Article VIII shall not include
that amount of any insurance proceeds actually recovered by the Indemnified
Party with respect to such Loss. If insurance proceeds are received after
indemnification payments for the Loss have been made under this Article VIII,
the Indemnified Party shall remit the amount thereof to the Indemnifying Party
(such payment to be made utilizing the same form of consideration used by the
Indemnifying Party in making the indemnification payment).
ARTICLE IX
TERMINATION
9.01 Termination. This Agreement may be terminated, and the
transactions contemplated hereby may be abandoned:
(a) at any time before the Closing, by mutual written agreement of
the Shareholders and Purchaser; or
(b) By either the Shareholders, on the one hand, or Purchaser, on
the other, upon notification to the non-terminating party by the terminating
party:
(i) at any time after September 30, 1997 if the Closing shall
not have occurred on or prior to such date and the failure of the Closing
to have occurred on or prior to
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such date is not caused by a breach of this Agreement by the terminating
party;
(ii) at any time before the Closing, if there has been a material
breach of any representation, warranty, covenant or agreement on the part
of the non-terminating party set forth in this Agreement, which breach is
not curable or, if curable, has not been cured within thirty (30) days
following receipt by the non-terminating party of notice of such breach
from the terminating party; or
(iii) if any court of competent jurisdiction or other competent
Governmental or Regulatory Authority shall have issued an order making
illegal or otherwise restricting, preventing or prohibiting the
consummation of the transactions contemplated by this Agreement or any of
the Operative Agreements and such order shall have become final and
nonappealable.
9.02 Effect of Termination. If this Agreement is validly terminated
pursuant to Section 9.01, this Agreement will forthwith become null and void,
and there will be no liability or obligation on the part of the Shareholders or
Purchaser (or any of its officers, directors, employees, agents or other
representatives or Affiliates), except as provided in the next succeeding
sentence and except that the provision with respect to expenses in Section 11.03
will continue to apply following any such termination. Notwithstanding any other
provision in this Agreement to the contrary, upon termination of this Agreement
pursuant to Section 9.01(b), (i) the Shareholders will remain liable to
Purchaser for any breach of this Agreement by the Shareholders existing at the
time of such termination, and Purchaser will remain liable to the Shareholders
for any breach of this Agreement by Purchaser existing at the time of such
termination, and the Shareholders or Purchaser may seek such remedies, including
damages and reasonable fees of attorneys, against the other with respect to any
such breach as are provided in this Agreement or as are otherwise available at
Law or in equity and (ii) that certain letter agreement with respect to
confidentiality between Purchaser and the Company dated April 30, 1996 and
extended on February 27, 1997 (the "Confidentiality Agreement") shall continue
to remain in full force and effect in accordance with the terms thereof.
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ARTICLE X
DEFINITIONS
10.01 Definitions. (a) Defined Terms. As used in this Agreement, the
following defined terms have the meanings indicated below:
"Accounts Receivable" means all trade accounts receivable and all
notes, bonds and other evidences of Indebtedness of and rights to receive
payments arising out of sales occurring in the conduct of the business of the
Company and its Subsidiaries.
"Actions or Proceedings" means any action, suit, proceeding,
arbitration or Governmental or Regulatory Authority investigation or audit.
"Affiliate" means any Person that directly, or indirectly through
one of more intermediaries, controls or is controlled by or is under common
control with the Person specified, and which respect to any Shareholder, any
spouse of such Shareholder. For purposes of this definition, control of a Person
means the power, direct or indirect, to direct or cause the direction of the
management and policies of such Person whether by Contract or otherwise and, in
any event and without limitation of the previous sentence, any Person owning
more than fifty percent (50%) of the voting securities of another Person shall
be deemed to control that Person.
"Agreement" means this Stock Purchase Agreement and the Exhibits,
the Annexes, the Disclosure Schedule and the Schedules hereto and the
certificates delivered in accordance with Sections 6.03 and 7.03, as the same
shall be amended from time to time.
"Assets and Properties" of any Person means all assets and
properties of every kind, nature, character and description (whether real,
personal or mixed, whether tangible or intangible, whether absolute, accrued,
contingent, fixed or otherwise and wherever situated), including the goodwill
related thereto, operated, owned or leased by such Person, including without
limitation cash, cash equivalents, Investment Assets, accounts and notes
receivable, chattel paper, documents, instruments,
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general intangibles, real estate, equipment, inventory, goods and Intellectual
Property.
"Benefit Plan" means any Plan established by the Company or any of
its Subsidiaries, or any predecessor or Affiliate of the Company or any of its
Subsidiaries, existing at the Closing Date or prior thereto, to which the
Company or any of its Subsidiaries contributes or has contributed, or under
which any employee, former employee or director of the Company or any of its
Subsidiaries or any beneficiary thereof is covered, is eligible for coverage or
has benefit rights.
"Board of Arbitration" has the meaning ascribed to it in Section
8.02(f).
"Books and Records" means all files, data, reports, lists,
documents, instruments, papers, books and records relating to the Business or
Condition of the Company, including without limitation financial statements, Tax
Returns and related work papers and letters from accountants, budgets, pricing
guidelines, ledgers, journals, deeds, title policies, minute books, stock
certificates and books, stock transfer ledgers, Contracts, Licenses, customer
and supplier lists, computer files and programs, retrieval programs, operating
data and plans and environmental studies and plans.
"Business or Condition of the Company" means the business, condition
(financial or otherwise), results of operations, Assets and Properties and
prospects of the Company and its Subsidiaries, considered as a whole.
"Business Day" means a day other than Saturday, Sunday or any day on
which banks located in the States of New York or Georgia are authorized or
obligated to close.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, and the rules and
regulations promulgated thereunder.
"CERCLIS" means the Comprehensive Environmental Response and
Liability Information System, as provided for by 40 C.F.R. Section300.5.
"Closing" has the meaning ascribed to it in Section 1.03.
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"Closing Date" has the meaning ascribed to it in
Section 1.03.
"Closing Date Accounts Receivable" has the meaning ascribed to it in
Section 1.05(a).
"Closing Date Balance Sheet" has the meaning ascribed to it in
Section 1.04(b).
"Closing Date Certificate" has the meaning ascribed to it in Section
1.04(b).
"Closing Date Financials" has the meaning ascribed to it in Section
1.04(b).
"Closing Date Net Book Value" has the meaning ascribed to it in
Section 1.04(b).
"Code" means the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
"Company" has the meaning ascribed to it in the forepart of this
Agreement.
"Company Common Stock" has the meaning ascribed to it in the
forepart of this Agreement.
"Confidentiality Agreement" has the meaning ascribed to it in
Section 9.02.
"Contract" means any agreement, Customer Order, lease, license,
evidence of Indebtedness, mortgage, indenture, security agreement or other
contract (whether written or oral).
"Customer Orders" means all unfulfilled sales orders with respect to
products sold by the Company and its Subsidiaries.
"Deficiency Amount" has the meaning ascribed to it in Section
1.04(d).
"Defined Benefit Plan" means each Benefit Plan which is subject to
Part 3 of Title I of ERISA, Section 412 of the Code or Title IV of ERISA.
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"Determination Date" has the meaning ascribed to it in Section
1.04(d).
"Disclosure Schedule" means the record delivered to Purchaser by the
Shareholders herewith and dated as of the date hereof, containing all lists,
descriptions, exceptions and other information and materials as are required to
be included therein by the Shareholders pursuant to this Agreement.
"Dispute Period" has the meaning ascribed to it in Section 8.02(e).
"Employment Agreement" has the meaning ascribed to it in Section
6.12.
"Environmental Claim" means, with respect to any Person, any written
or oral notice, claim, demand or other communication (collectively, a "claim")
by any other Person alleging or asserting such Person's liability for
investigatory costs, cleanup costs, Governmental or Regulatory Authority
response costs, damages to natural resources or other property, personal
injuries, fines or penalties arising out of, based on or resulting from (a) the
presence, or Release into the environment, of any Hazardous Material at any
location, whether or not owned by such Person, or (b) circumstances forming the
basis of any violation, or alleged violation, of any Environmental Law. The term
"Environmental Claim" shall include, without limitation, any claim by any
Governmental or Regulatory Authority for enforcement, cleanup, removal,
response, remedial or other actions or damages pursuant to any applicable
Environmental Law, and any claim by any third party seeking damages,
contribution, indemnification, cost recovery, compensation or injunctive relief
resulting from the presence of Hazardous Materials or arising from alleged
injury or threat of injury to health, safety or the environment.
"Environmental Law" means any Law or Order relating to the
regulation or protection of human health, safety or the environment or to
Releases or threatened Releases of pollutants, contaminants, deleterious
substances, Hazardous Materials or wastes into the environment (including,
without limitation, ambient air, soil, surface water, ground water, wetlands,
land or subsurface strata), or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal,
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transport or handling of pollutants, contaminants, Hazardous Materials or
wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, and the rules and regulations promulgated thereunder.
"ERISA Affiliate" means any Person who is in the same controlled
group of corporations or who is under common control with the Company or any of
its Subsidiaries.
"Escrow Agent", "Escrow Agreement" and "Escrow Shares" have the
meanings ascribed to them in Section 1.03.
"Estimated Net Book Value" has the meaning ascribed to it in Section
1.04(a).
"Final Net Book Value" has the meaning ascribed to it in Section
1.04(d).
"Financial Statements" means the financial statements of the Company
delivered to Purchaser pursuant to Section 2.08.
"GAAP" means generally accepted accounting principles, consistently
applied throughout the specified period and in the immediately prior comparable
period.
"Governmental or Regulatory Authority" means any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality of
the United States, any foreign country or any domestic or foreign state, county,
city or other political subdivision.
"Hazardous Material" means (A) any petroleum or petroleum products,
flammable explosives, radioactive materials, asbestos in any form that is or
could become friable, urea formaldehyde foam insulation and transformers or
other equipment that contain dielectric fluid containing levels of
polychlorinated biphenyls (PCBs); (B) any chemicals or other materials or
substances which are now or hereafter become defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous materials,"
liquid industrial wastes," "toxic substances," "toxic pollutants" or words of
similar import under any Environmental Law; and (C) any other chemical or other
hazardous material, waste or substance,
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exposure to which is now or hereafter prohibited, limited or regulated by any
Governmental or Regulatory Authority under any Environmental Law.
"Indebtedness" of any Person means all obligations of such Person
(i) for borrowed money, (ii) evidenced by notes, bonds, debentures or similar
instruments, (iii) for the deferred purchase price of goods or services (other
than trade payables or accruals incurred in the ordinary course of business),
(iv) under capital leases and (v) in the nature of guarantees of the obligations
described in clauses (i) through (iv) above of any other Person.
"Indemnified Party" means any Person claiming indemnification under
any provision of Section 8.02, including without limitation a Person asserting a
claim pursuant to Section 8.02(d).
"Indemnifying Party" means any Person against whom a claim for
indemnification is being asserted under any provision of Section 8.02, including
without limitation a Person against whom a claim is asserted pursuant to Section
8.02(d).
"Indemnity Notice" means written notification pursuant to Section
8.02(e) of a claim for indemnity under Section 8.02 by an Indemnified Party,
specifying the nature of and basis for such claim, together with the amount or,
if not then reasonably determinable, the estimated amount, determined in good
faith, of the Loss arising from such claim.
"Independent Accountant" has the meaning ascribed to it in Section
1.04(c).
"Intellectual Property" means all patents and patent rights,
trademarks and trademark rights, trade names and trade name rights, service
marks and service xxxx rights, service names and service name rights, brand
names, inventions, trade secrets, processes, formulae, copyrights and copyright
rights, trade dress, business and product names, logos, slogans, trade secrets,
industrial models, processes, designs, methodologies, computer programs
(including all source codes) and related documentation, technical information,
manufacturing, engineering and technical drawings, know-how and all pending
applications for and registrations of patents, trademarks, service marks and
copyrights.
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"Investment Assets" means all debentures, notes and other evidences
of Indebtedness, stocks, securities (including rights to purchase and securities
convertible into or exchangeable for other securities), interests in joint
ventures and general and limited partnerships, mortgage loans and other
investment or portfolio assets owned of record or beneficially by the Company or
any of its Subsidiaries (other than trade receivables generated in the ordinary
course of business of the Company or any of its Subsidiaries).
"IRS" means the United States Internal Revenue Service.
"Knowledge of the Shareholders" "Known to the Shareholders" or "to
the Shareholders' Knowledge" means the knowledge of S.E. (Gene) Xxxxx or Xxxxx
Xxx.
"Laws" means all statutes, codes, ordinances, decrees, rules,
regulations, municipal by-laws, judicial or arbitral or administrative or
ministerial or departmental or regulatory judgments, orders, decisions, rulings
or awards, policies, voluntary restraints, guidelines, or any provisions of the
foregoing, including general principles of common and civil law and equity,
binding on or affecting the Person referred to in the context in which such word
is used; and "Law" means any one of them.
"Liabilities" means all Indebtedness, obligations and other
liabilities of a Person (whether absolute, accrued, contingent, fixed or
otherwise, or whether due or to become due).
"Licenses" means all licenses, permits, certificates of authority,
authorizations, approvals, registrations, franchises and similar consents
granted or issued by any Governmental or Regulatory Authority.
"Liens" means any mortgage, hypothecation, pledge, assessment,
security interest, movable security, lease, lien, adverse claim, levy, defect of
title, charge or other encumbrance of any kind, or any conditional sale
Contract, title retention Contract or other Contract to give any of the
foregoing and any other rights of third parties relating to the property,
including rights of set-off, voting trusts and other encumbrances of any kind.
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"Loss" means any and all damages, fines, fees, penalties,
deficiencies, losses and expenses (including without limitation interest, court
costs, reasonable fees of attorneys, accountants and other experts or other
reasonable expenses of litigation or other proceedings or of any claim, default
or assessment).
"Net Book Value of the Company" means the consolidated total assets
of the Company and its Subsidiaries (net of allowances for doubtful accounts and
accumulated depreciation) minus the consolidated total Liabilities of the
Company and its Subsidiaries as shown on the applicable balance sheet of the
Company and its Subsidiaries, in each case calculated in accordance with GAAP.
"Net Receivables Amount" has the meaning ascribed to it in Section
1.05(a).
"1996 Base Balance Sheet" means the balance sheet of the Company and
its consolidated Subsidiaries dated November 30, 1996 and included in the
Financial Statements delivered pursuant to Section 2.08.
"Non-Competition Agreement" has the meaning ascribed to it in
Section 6.13.
"NPL" means the National Priorities List under CERCLA.
"NYSE" means The New York Stock Exchange, Inc.
"Operative Agreements" means the Escrow Agreement, the Registration
Rights Agreement and any other support or other agreements to be entered into in
connection with this Agreement.
"Option" has the meaning ascribed to it in Section 2.03.
"Order" means any writ, judgment, decree, injunction or similar
order of any Governmental or Regulatory Authority (in each such case whether
preliminary or final).
"PBGC" means the Pension Benefit Guaranty Corporation established
under ERISA.
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"Pension Benefit Plan" means each Benefit Plan which is a pension
benefit plan within the meaning of Section 3(2) of ERISA.
"Permitted Lien" means (i) any Lien for Taxes not yet due or
delinquent or being contested in good faith by appropriate proceedings for which
adequate reserves have been established in accordance with GAAP, (ii) any
statutory Lien arising in the ordinary course of business by operation of Law
with respect to a Liability that is not yet due or delinquent and (iii) any
minor imperfection of title or similar Lien which individually or in the
aggregate with other such Liens does not materially impair the value of the
property subject to such Lien or the use of such property in the conduct of the
business of the Company or any of its Subsidiaries.
"Per Share Price" means $13.4375.
"Person" means any natural person, corporation, general partnership,
limited partnership, proprietorship, other business organization, trust, union,
association or Governmental or Regulatory Authority.
"Plan" means any bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase, stock option,
stock ownership, stock appreciation rights, phantom stock, leave of absence,
layoff, vacation, day or dependent care, legal services, cafeteria, life,
health, accident, disability, workmen's compensation or other insurance,
severance, separation or other employee benefit plan, practice, policy or
arrangement of any kind, whether written or oral, including, but not limited to,
any "employee benefit plan" within the meaning of Section 3(3) of ERISA.
"Pre-Closing Balance Sheet" has the meaning ascribed to it in
Section 1.04(a).
"Pre-Closing Certificate" has the meaning ascribed to it in Section
1.04(a).
"Purchase Price" has the meaning ascribed to it in Section 1.02.
"Purchaser" has the meaning ascribed to it in the forepart of this
Agreement.
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"Purchaser Common Stock" has the meaning ascribed to it in the
forepart of this Agreement.
"Purchaser Financial Statements" has the meaning ascribed to it in
Section 3.06.
"Purchaser Indemnified Parties" means Purchaser and its officers,
directors, employees, agents and Affiliates.
"Purchaser SEC Reports" has the meaning ascribed to it in Section
3.06.
"Purchaser Shares" has the meaning ascribed to it in Section 1.02.
"Purchaser's Accountants" has the meaning ascribed to it in Section
1.04(b).
"Qualified Plan" means each Benefit Plan which is intended to
qualify under Section 401 of the Code.
"Receivables Certificate" has the meaning ascribed to it in Section
1.05(a).
"Receivables Deficiency" has the meaning ascribed to it in Section
1.05(c).
"Receivables Notice" has the meaning ascribed to it in Section
1.05(c).
"Registration Rights Agreement" has the meaning ascribed to it in
the forepart of this Agreement.
"Registration Statement" has the meaning ascribed to it in the
forepart of this Agreement.
"Release" means any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the indoor or outdoor environment, including, without limitation, the movement
of Hazardous Materials through ambient air, soil, surface water, ground water,
wetlands, land or subsurface strata.
"Resolution Period" means the period ending thirty (30) days
following receipt by an Indemnified Party of a written
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notice from an Indemnifying Party stating that it disputes all or any portion of
a claim set forth in a Claim Notice or an Indemnity Notice.
"Retained Liabilities" means all Liabilities of the Company and its
Subsidiaries existing on or prior to the Closing Date or arising thereafter from
events or actions occurring on or prior to the Closing Date, other than
Liabilities (i) disclosed in the Disclosure Schedule and reflected or reserved
against on the Closing Date Balance Sheet (subject to any adjustment determined
in accordance with the procedures contained in Section 1.04(c)) or (ii) relating
to Contracts listed or expressly not required to be listed in Section 2.14,
2.18(a) or 2.22 of the Disclosure Schedule.
"SEC" has the meaning ascribed to it in Section 3.06.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations thereunder.
"Shareholders" has the meaning ascribed to it in the forepart of
this Agreement.
"Shareholders' Accountants" has the meaning ascribed to it in
Section 1.04(b).
"Shares" has the meaning ascribed to it in the forepart of this
Agreement.
"Subject Defined Benefit Plan" means each Defined Benefit Plan
listed and described in Section 2.14(a) of the Disclosure Schedule.
"Subsidiary" means any Person in which the Company, directly or
indirectly through Subsidiaries or otherwise, beneficially owns more than fifty
percent (50%) of either the equity interests in, or the voting control of, such
Person.
"Taxes" means any federal, state, county, local or foreign income,
profits, gross receipts, franchise, sales, use, occupancy, excise, gains, value
added, withholding, employment, payroll, social security, general property,
personal property, intangible property and all other taxes of any nature, fees,
levies, duties, assessments, reassessments, deficiencies or charges imposed by
any Governmental or Regulatory Authority, and
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includes any interest and penalties (civil or criminal) on or additions to any
such taxes and any reasonable expenses incurred in connection with the
determination, settlement or litigation of any Tax Liability.
"Tax Returns" means a report, return or other information (including
any amendments) required to be supplied to a Governmental or Regulatory
Authority with respect to Taxes.
"Third Party Claim" has the meaning ascribed to it in Section
8.02(d).
(b) Construction of Certain Terms and Phrases. Unless the context of
this Agreement otherwise requires, (i) words of any gender include each other
gender; (ii) words using the singular or plural number also include the plural
or singular number, respectively; (iii) the terms "hereof," "herein," "hereby"
and derivative or similar words refer to this entire Agreement; (iv) the terms
"Article" or "Section" refer to the specified Article or Section of this
Agreement; and (v) the phrases "ordinary course of business" and "ordinary
course of business consistent with past practice" refer to the business and
practice of the Company and its Subsidiaries. Whenever this Agreement refers to
a number of days, such number shall refer to calendar days unless Business Days
are specified. All accounting terms used herein and not expressly defined herein
shall have the meanings given to them under GAAP.
ARTICLE XI
MISCELLANEOUS
11.01 Notices. All notices, requests and other communications
hereunder must be in writing and will be deemed to have been duly given only if
delivered personally or by facsimile transmission or mailed (by postage prepaid
registered or certified), return receipt requested, to the parties at the
following addresses or facsimile numbers:
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If to Purchaser, to:
Xxxxxx-Field Health Products, Inc.
000 Xxxxx Xxxxx Xxxx
Xxxxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxxx X. Xxxxxxx, Esq.
with a copy to:
Milbank, Tweed, Xxxxxx & XxXxxx
0 Xxxxx Xxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxx X. Xxxxx, Esq.
If to either Shareholders, to:
Medical Supplies of America
0000 Xxxxxxxxxx Xxxx
X.X.Xxx 0000
Xxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Mr. S.E. (Gene) Xxxxx
Xx. Xxxxx Xxx
with a copy to:
Robins, Kaplan, Xxxxxx & Xxxxxx LLP
0000 Xxx Xxxxxxx Xxxxx
000 Xxxx Xxxxx Xxxxx Xxxx, X.X.
Xxxxxxx, Xxxxxxx 00000-0000
Facsimile No.: (000) 000-0000
Attn: Rhys X. Xxxxxx, Esq.
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided in this Section, be deemed given upon receipt if received on a Business
Day and on the next Business Day if received on a day that is not a Business
Day, and (iii) if delivered by mail in the manner described above to the address
as provided in this Section, be deemed given upon
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receipt (in each case regardless of whether such notice, request or other
communication is received by any other Person to whom a copy of such notice,
request or other communication is to be delivered pursuant to this Section). Any
party from time to time may change its address, facsimile number or other
information for the purpose of notices to that party by giving notice specifying
such change to the other party hereto.
11.02 Entire Agreement. This Agreement and the Operative Agreements
supersede all prior discussions and agreements between the parties with respect
to the subject matter hereof and thereof (other than the Confidentiality
Agreement, which shall survive the execution and delivery of this Agreement and
remain in full force and effect until the Closing, at which time it will
expire), and contain the sole and entire agreement between the parties hereto
with respect to the subject matter hereof and thereof.
11.03 Expenses. Except as provided in the next succeeding sentence
and except as otherwise expressly provided elsewhere in this Agreement
(including without limitation as provided in Section 8.02), whether or not the
transactions contemplated hereby are consummated, each party will pay its own
costs and expenses incurred in connection with the negotiation, execution and
closing of this Agreement and the Operative Agreements and the transactions
contemplated hereby. The Company will pay (i) the Shareholder's legal and
accounting fees and expenses incurred in connection with the matters described
in the preceding sentence, up to a maximum of $100,000, to the extent that such
fees and expenses are reserved against in the Closing Date Balance Sheet and
(ii) the fees of the Escrow Agent for his services under the Escrow Agreement,
to the extent that one-half (1/2) of the amount of such fees are reserved
against in the Closing Date Balance Sheet.
11.04 Public Announcements. Without the prior written consent of the
other parties hereto, neither party hereto will, and will cause their respective
representatives not to, make any release to the press or other public disclosure
at any time prior to the Closing with respect to any of the transactions
contemplated by this Agreement, except for such public disclosure as may be
necessary, in the written opinion of counsel, for the party proposing to make
the disclosure not to be in violation of
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or default under any applicable Law or Order, and then only upon prior notice
and review of such disclosure by the other party.
11.05 Waiver. Any term or condition of this Agreement may be waived
at any time by the party that is entitled to the benefit thereof, but no such
waiver shall be effective unless set forth in a written instrument duly executed
by or on behalf of the party waiving such term or condition. No waiver by any
party of any term or condition of this Agreement, in any one or more instances,
shall be deemed to be or construed as a waiver of the same or any other term or
condition of this Agreement on any future occasion. All remedies, either under
this Agreement or by Law or otherwise afforded, will be cumulative and not
alternative.
11.06 Amendment. This Agreement may be amended, supplemented or
modified only by a written instrument duly executed by or on behalf of each
party hereto.
11.07 No Third Party Beneficiary. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights upon any other Person other
than any Person entitled to indemnity under Section 8.02.
11.08 No Assignment; Binding Effect. Neither this Agreement nor any
right, interest or obligation hereunder may be assigned by any party hereto
without the prior written consent of the other party hereto and any attempt to
do so will be void, except (a) for assignments and transfers by operation of Law
and (b) that Purchaser may assign any or all of its rights, interests and
obligations hereunder to a wholly-owned direct or indirect subsidiary of
Purchaser, provided that any such subsidiary agrees in writing to be bound by
all of the terms, conditions and provisions contained herein, but no such
assignment shall relieve Purchaser of its obligations hereunder. Subject to the
preceding sentence, this Agreement is binding upon, inures to the benefit of and
is enforceable by the parties hereto and their respective successors and
assigns.
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11.09 Headings. The headings used in this Agreement have been
inserted for convenience of reference only and do not define or limit the
provisions hereof.
11.10 Invalid Provisions. If any provision of this Agreement is held
to be illegal, invalid or unenforceable under any present or future Law, and if
the rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, and (c)
the remaining provisions of this Agreement will remain in full force and effect
and will not be affected by the illegal, invalid or unenforceable provision or
by its severance herefrom.
11.11 Governing Law. This Agreement shall be governed by and
construed in accordance with the Laws of the State of New York, without giving
effect to the conflicts of laws principles thereof.
11.12 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
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IN WITNESS WHEREOF, each party hereto has signed this Agreement, or
caused this Agreement to be signed by its officer thereunto duly authorized, as
of the date first above written.
XXXXXX-FIELD HEALTH PRODUCTS, INC.
By:_____________________________
Name:
Title:
_____________________________
S.E. (Gene) Xxxxx
_____________________________
Xxxxx Xxx
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ANNEX I
Number of Shares
of Purchaser
Number of Shares Common Stock to be
Shareholder Owned Received
----------- ---------------- ------------------
S.E. (Gene) Xxxxx 1800 822,816
Xxxxx Xxx 300 137,184
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