EXHIBIT 10.56
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ACQUISITION AGREEMENT
BETWEEN
GENERAL ELECTRIC COMPANY,
A NEW YORK CORPORATION,
AND
POSITRON CORPORATION,
A TEXAS CORPORATION
JULY 15, 1996
TABLE OF CONTENTS
Page
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ARTICLE I
CERTAIN DEFINITIONS
Section 1.1 Certain Definitions........................................................ 1
ARTICLE II
AGREEMENT TO SELL AND PURCHASE
Section 2.1 Conveyance of the Transferred Assets; Grant of License..................... 8
Section 2.2 Assumption of Certain Liabilities.......................................... 8
Section 2.3 Purchase and Sale of Sub Shares............................................ 8
Section 2.4 Purchase Price; Allocation of Purchase Price; Adjustment to Purchase Price;
Reduction of Accounts Receivable........................................... 9
Section 2.5 Costs and Proration........................................................ 12
Section 2.6 Consents to Assignment of Contracts........................................ 13
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Section 3.1 Corporate Existence Power and Authority.................................... 13
Section 3.2 Authorization; No Violation................................................ 14
Section 3.3 Title of Transferred Assets................................................ 14
Section 3.4 Owned Realty............................................................... 15
Section 3.5 Leased Realty.............................................................. 15
Section 3.6 Personal Property.......................................................... 15
Section 3.7 Rights..................................................................... 15
Section 3.8 Insurance.................................................................. 17
Section 3.9 Consents and Approvals..................................................... 17
Section 3.10 Compliance with Laws; Litigation; Bankruptcy............................... 17
Section 3.11 Employees.................................................................. 18
Section 3.12 Employee Benefit Plans..................................................... 19
Section 3.13 Environmental Matters...................................................... 20
Section 3.14 Tax Returns and Tax Liabilities............................................ 21
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Section 3.15 Accounts Receivable........................................................ 21
Section 3.16 Inventory.................................................................. 21
Section 3.17 Contracts.................................................................. 22
Section 3.18 Brokers or Finders......................................................... 22
Section 3.19 Liabilities to Related Parties............................................. 22
Section 3.20 Permits.................................................................... 22
Section 3.21 Transferred Assets Used in Business........................................ 23
Section 3.22 Matters Relating to Securities............................................. 23
Section 3.23 Business Relations......................................................... 23
Section 3.24 Warranties................................................................. 24
Section 3.25 Customers.................................................................. 24
Section 3.26 Power of Attorney; Agency.................................................. 24
Section 3.27 Financial Statements; Material Adverse Change.............................. 24
Section 3.28 Sub Financial Statements................................................... 24
Section 3.29 Previously Provided Financial Materials.................................... 25
Section 3.30 Sub Shares................................................................. 25
Section 3.31 Sub Capitalization......................................................... 25
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Section 4.1 Corporate Existence, Power and Authority................................... 25
Section 4.2 Authorization; No Violation................................................ 26
Section 4.3 Consents and Approvals..................................................... 26
Section 4.4 Brokers or Finders......................................................... 26
Section 4.5 Status of Shares........................................................... 27
Section 4.6 Compliance with Laws; Litigation; Bankruptcy............................... 27
Section 4.7 Capitalization............................................................. 27
Section 4.8 Fairness Opinion........................................................... 28
Section 4.9 SEC Reports; Financial Statements.......................................... 28
ARTICLE V
COVENANTS
Section 5.1 Operation of Business in Ordinary Course Pending Closing................... 28
Section 5.2 Due Diligence.............................................................. 30
Section 5.3 No Solicitations........................................................... 31
Section 5.4 Commercially Reasonable Efforts............................................ 32
Section 5.5 Proxy Statement............................................................ 32
Section 5.6 Damage or Destruction of Property.......................................... 32
Section 5.7 Employees, Benefits, Etc................................................... 33
Section 5.8 Seller's Access to Information............................................. 34
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Section 5.9 Public Announcements....................................................... 34
Section 5.10 No Hire.................................................................... 34
Section 5.11 Confidentiality............................................................ 34
Section 5.12 Financial Statements....................................................... 35
Section 5.13 Repurchase of Unpaid Accounts Receivable................................... 36
Section 5.14 Marketing Materials........................................................ 36
Section 5.15 Transition................................................................. 36
Section 5.16 Purchase Orders............................................................ 36
Section 5.17 Ownership of Securities.................................................... 37
Section 5.18 [Intentionally Omitted].................................................... 38
Section 5.19 Filing or Non-Filing of Section 338 Election............................... 38
Section 5.20 Refund of Sub Taxes........................................................ 38
ARTICLE VI
THE CLOSING
Section 6.1 Closing.................................................................... 39
Section 6.2 Closing Deliveries of Seller............................................... 39
Section 6.3 Closing Deliveries of Purchaser............................................ 40
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
Section 7.1 Accuracy of Representations and Warranties................................. 41
Section 7.2 Performance................................................................ 41
Section 7.3 No Litigation.............................................................. 42
Section 7.4 Good Standing Certificates................................................. 42
Section 7.5 No Material Adverse Change................................................. 42
Section 7.6 Deliveries of Seller....................................................... 42
Section 7.7 Personnel.................................................................. 42
Section 7.8 Financing.................................................................. 42
Section 7.9 Shareholder Approval....................................................... 42
Section 7.10 Consents Obtained.......................................................... 42
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
Section 8.1 Accuracy of Representations and Warranties................................. 43
Section 8.2 Performance................................................................ 43
Section 8.3 No litigation.............................................................. 43
Section 8.4 Good Standing Certificate.................................................. 43
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Section 8.5 Deliveries of Purchaser....................................................... 43
Section 8.6 No Material Adverse Change.................................................... 43
Section 8.7 Consents Obtained............................................................. 43
ARTICLE IX
CERTAIN LIABILITIES OF SELLER
Section 9.1 Liabilities and Obligations................................................... 44
Section 9.2 Bulk Transfer Laws............................................................ 44
ARTICLE X
INDEMNIFICATION, LIMITATION OF LIABILITY
Section 10.1 Survival of Actions on Representations, Warranties and Covenants.............. 44
Section 10.2 Indemnification by Seller..................................................... 44
Section 10.3 Indemnification by Purchaser.................................................. 45
Section 10.4 Limitation.................................................................... 46
Section 10.5 Settlement of Claims.......................................................... 46
ARTICLE XI
GENERAL PROVISIONS
Section 11.1 Waiver of Conditions to Closing............................................... 47
Section 11.2 Termination................................................................... 48
Section 11.3 Notices....................................................................... 49
Section 11.4 Amendment; Waiver............................................................. 49
Section 11.5 Successors and Assigns........................................................ 50
Section 11.6 Governing Law................................................................. 50
Section 11.7 Invalid Provisions............................................................ 50
Section 11.8 Entire Agreement.............................................................. 50
Section 11.9 Counterparts.................................................................. 50
Section 11.10 Remedies...................................................................... 50
Section 11.11 Dispute Resolution............................................................ 51
Section 11.12 Expenses...................................................................... 52
Section 11.13 Disclosure Schedules, Transferred Assets...................................... 53
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SCHEDULES:
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2.6 --- Nonassignable Contracts
3.2(d) --- Conflicts of Seller
3.3 --- Permitted Liens
3.5 --- Leased Realty
3.6 --- Personal Property
3.7 --- Rights
3.9 --- Authorizations, Consents and Approvals
3.10 --- Compliance with Laws; Litigation
3.11 --- Employees
3.12 --- Employee Benefit Plans
3.15 --- Accounts Receivable
3.16 --- Inventory
3.17 --- Contracts
3.19 --- Liabilities to Related Parties
3.20 --- Permits
3.23 --- Business Relations
3.24 --- Warranties
3.25 --- Customers
3.28 --- Sub Financial Statements
3.29 --- Previously Delivered Financial Materials
4.2(b) --- Conflicts of Purchaser
4.3 --- Authorizations, Consents and Approvals
4.6 --- Compliance with Laws; Litigation
4.7 --- Capitalization
5.1 --- Operation of Business in Ordinary Course
5.7(b) --- Purchaser Obligations Under Benefit Plans
APPENDICES:
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Appendix I --- Purchased Assets
Appendix II --- Assumed Liabilities
EXHIBITS:
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Exhibit A --- Form of Xxxx of Sale and Assignment
Exhibit B --- Form of License Agreement
Exhibit C --- Form of Opinion of Counsel to Seller
Exhibit D --- Form of Shareholder Agreement
Exhibit E --- Form of Purchase Agreement
Exhibit F --- Form of Opinion of Counsel to Purchaser
Exhibit G --- Form of Assumption Agreement
Exhibit H --- Form of Option Agreement
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ACQUISITION AGREEMENT
THIS ACQUISITION AGREEMENT, made and entered into as of the 15th day of
July, 1996 (this "Agreement"), is by and between General Electric Company, a New
York corporation ("Seller"), and Positron Corporation, a Texas corporation
("Purchaser").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Seller is engaged, both directly and indirectly through Sub (as
defined below), in the business of designing, manufacturing, marketing and
servicing advanced medical imaging devices utilizing positron emission
tomography and cyclotron technologies; and
WHEREAS, Seller desires to sell, transfer and assign to Purchaser, and
Purchaser desires to purchase and accept from Seller, all of the capital stock
of Sub and substantially all of the assets of Seller used principally in the
conduct of the Business (as defined herein) by Seller, and in connection
therewith Purchaser is willing to assume certain specified liabilities of Seller
relating to the operation of the Business, all on the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties herein contained and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
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Section 1.1 Certain Definitions. In addition to the terms defined above and
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in other portions of this Agreement, the following words and phrases as used in
this Agreement shall have the following meanings, unless the context otherwise
requires:
"ACCOUNTS RECEIVABLE" means all accounts receivable of Sub.
"ADJUSTMENT DATE" shall have the meaning set forth in Section 2.4(c)
hereof.
"AFFILIATE" shall mean a Person that directly, or indirectly through one or
more intermediaries, controls, is controlled by, or is under common control with
a specified Person.
"ASSIGNMENT" shall mean the Xxxx of Sale and Assignment, substantially in
the form of EXHIBIT A hereto, to be executed and delivered by Seller as
contemplated in Section 6.2(b)(i).
"ASSUMED LIABILITIES" means the liabilities assumed by Purchaser under
Section 2.2.
"ASSUMPTION AGREEMENT" shall mean the Assumption Agreement, substantially
in the form of EXHIBIT G hereto, to be entered into by and between Seller and
Purchaser as contemplated in Sections 6.2(g)(v) and 6.3(f)(iii).
"BENEFIT PLAN" means any plan, program, trust, contract, policy or
arrangement maintained by Seller or any of its Affiliates in which one or more
employees of Sub or Seller assigned to the Business as of the date hereof or as
of the Closing participate and that provides any pension, retirement, profit
sharing, bonus, deferred or incentive compensation, life, health, dental, post-
retirement medical, disability, accident, stock option, stock purchase, stock
appreciation, severance payments, fringe benefits, vacation pay, holiday pay,
sick pay or similar benefit to employees (whether active or retired) of Seller
or Sub, including any such plan, program, trust, contract, policy or arrangement
which is an "employee benefit plan" within the meaning of Section 3(3) of ERISA.
"BUSINESS" means the businesses which are conducted by the Seller, both
directly and indirectly through Sub, which involve or are related to the design
and manufacture of PET Products; provided, however, that the term "Business" as
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used in this Agreement shall not be deemed to include Seller's business of
marketing and servicing PET Products or the business of designing, engineering,
manufacturing, marketing or servicing medical imaging devices other than PET
Products.
"CASH CONSIDERATION" has the meaning set forth in Section 2.4(a).
"CLOSING" means the consummation of the acquisition of the Sub Shares and
the Transferred Assets, the assumption of the Assumed Liabilities and the other
transactions contemplated by this Agreement, as further described in Article VI.
"CLOSING DATE" means the date of the Closing as described in Section 6.1.
"COMMON STOCK" shall mean the Common Stock of Purchaser, par value $0.01
per share.
"COMPANY REPORTS" has the meaning set forth in Section 4.9.
"CONTRACTS" means all material contracts, employment contracts,
confidentiality agreements, licenses, Leases and all other agreements and
commitments, written or oral, principally relating to the Transferred Assets or
the Business.
"COSTS AND EXPENSES" has the meaning set forth in Section 2.4(c).
"COVENANT TO NOT COMPETE" shall mean the covenant of Seller set forth in
Section 1(d) of the Purchase Agreement.
"DISCLOSING PARTY" has the meaning set forth in Section 5.11(a) of this
Agreement.
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"ENVIRONMENTAL LAWS" mean all United States and foreign, state and local
laws, rules and regulations relating to pollution or protection of human health
or the environment (including without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including without limitation,
laws and regulations relating to Releases or threatened Releases of Hazardous
Substances, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous
Substances.
"ENVIRONMENTAL VIOLATION" shall mean any violation of Environmental Laws.
"EQUIPMENT" means all machinery, equipment, spare parts, vehicles, tools,
computers, fixtures and supplies owned or held by Sub or by Seller and used
principally in the conduct of the Business.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, together with all regulations promulgated thereunder.
"FINAL ALLOCATION" has the meaning set forth in Section 2.4(b).
"FINAL TERMINATION DATE" has the meaning set forth in Section 11.2(a).
"FINANCIAL STATEMENT DELIVERY DATE" shall mean the date on which Seller
delivers to Purchaser pursuant to Section 5.12 the final version of the
Financial Statements in such form as the SEC approves to be included in the
Proxy Statement.
"FINANCIAL STATEMENTS" shall mean such financial statements, prepared in
accordance with all applicable requirements of Regulation S-X (17 C.F.R. Part
210), covering Sub and the Business as conducted by both Seller and Sub as (i)
are required under the Securities Act to be included in the Proxy Statement and
(ii) Seller is capable of preparing using commercially reasonable efforts.
"HAZARDOUS SUBSTANCE(S)" means (a) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become friable, and
compressors or other equipment that contain polychlorinated biphenyls ("PCBs");
and (b) any chemicals, materials or substances which are now defined as or
included in the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "extremely hazardous wastes," "restricted hazardous
wastes," "toxic substances," "toxic pollutants," "pollutants," "contaminants,"
or words of similar import under any Environmental Law; and (c) any other
chemical, material, substance or waste, exposure to which is now prohibited,
limited or regulated under any Environmental Law.
"INVENTORY" means all inventory owned by Seller principally relating to the
Business and all inventory owned by Sub, including, without limitation, all
inventory of raw materials or supplies, components, work in process and finished
products.
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"LEASED EQUIPMENT" means all personal property leased by Seller and used by
Seller principally in the conduct of the Business and all personal property
leased by Sub, together with any options to purchase any such personal property,
and all security deposits in connection therewith.
"LEASED REALTY" means Leases of real property listed in Schedule 3.5,
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together with any options to purchase the real property covered by such Leases,
all leasehold improvements thereon owned by Seller or Sub (subject to the rights
of the lessor in such leasehold improvements), and all security deposits in
connection therewith.
"LEASES" means all leases or subleases pursuant to which Sub or Seller
leases Leased Equipment or Leased Realty.
"LICENSE" shall mean the license to be granted pursuant to the License
Agreement.
"LICENSE AGREEMENT" shall mean the Patent and Technical Information License
Agreement, substantially in the form of EXHIBIT B attached hereto, to be entered
into by and between Seller and Purchaser as contemplated in Sections 6.2(g)(iv)
and 6.3(f)(v).
"LICENSED RIGHTS" shall mean the "Licensed Patents" and the "Technical
Information," as such terms are defined in the License Agreement.
"LIENS" means all liens, charges assessments, escrows, encumbrances,
pledges, options, rights of first refusal, mortgages, indentures, easements,
licenses, conditional sales contracts, title retention arrangements,
security agreements or other security interests, including but not limited to
Tax liens and liens held by the PBGC.
"MATERIAL ASSETS" has the meaning set forth in Section 5.6 of this
Agreement.
"NET ASSET VALUE" has the meaning set forth in Section 2.4(c) of this
Agreement.
"NET ASSET VALUE SURPLUS" has the meaning set forth in Section 2.4(d) of
this Agreement.
"NONASSIGNABLE CONTRACT" has the meaning set forth in Section 2.6 of this
Agreement.
"OPTION AGREEMENT" shall mean the Option Agreement, substantially in the
form of EXHIBIT H attached hereto, to be entered into by and between Seller and
Purchaser as contemplated in Sections 6.2(g)(iii) and 6.3(f)(iv).
"OPTION SHARES" shall mean a number of shares of the Company's Common Stock
which would equal fifteen percent (15%) of the number of shares of Common Stock
outstanding immediately after the Closing and assuming the issuance and full
exercise of the Seller Option. For purposes of this calculation, the following
shall be deemed outstanding immediately after the Closing: (i) the shares of
Common Stock issuable upon conversion of all shares of Preferred Stock or any
other convertible preferred stock of the Purchaser then outstanding, (ii) all of
the Shares, and
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(iii) all shares of Common Stock issuable upon exercise of outstanding options,
warrants, calls, rights, commitments or other agreements of any character
whatsoever which may, at that time or thereafter, obligate Purchaser to issue or
sell any additional shares of Common Stock, except for such shares as are
issuable pursuant to any employee stock option plan of Purchaser.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PERMITS" means permits, franchises, licenses, approvals, and
authorizations by governmental authorities required in connection with the
operation of the Business and/or the ownership, use or possession of the
Transferred Assets.
"PERMITTED LIENS" means those Liens set forth on Schedule 3.3 hereto.
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"PERSON" means a natural person or any legal, commercial or governmental
entity including, but not limited to, a corporation, general partnership, joint
venture, limited partnership, limited liability company, trust, business
association, or any person acting in a representative capacity.
"PET PRODUCTS" has the meaning set forth in Section 1(a) of the Purchase
Agreement.
"PREFERRED STOCK" shall mean the Series A 8% Cumulative Convertible
Redeemable Preferred Stock of Purchaser, par value $1.00 per share, and the
Series B 8% Cumulative Convertible Redeemable Preferred Stock of Purchaser, par
value $1.00 per share.
"PRELIMINARY ALLOCATION" has the meaning set forth in Section 2.4(b).
"PROXY STATEMENT" shall mean the proxy statement on Schedule 14A to be
filed with the SEC and in the form delivered to Purchaser's shareholders in
connection with the Shareholder Approval.
"PURCHASE AGREEMENT" shall mean the Purchase and Distribution Agreement,
substantially in the form of EXHIBIT E attached hereto, to be entered into by
and between Seller and Purchaser as contemplated in Sections 6.2(g)(ii) and
6.3(f)(ii).
"PURCHASE PRICE" means the purchase price for the Sub Shares, the
Transferred Assets, the Licensed Rights and the Covenant to Not Compete as
determined under Section 2.4.
"PURCHASER" has the meaning set forth in the first paragraph of this
Agreement.
"RECEIVING PARTY" has the meaning set forth in Section 5.11(a) of this
Agreement.
"RECORDS" means all books and records principally related to the operation
of the Business, including, without limitation, all files of Seller or Sub
related to the Transferred Assets; lists of suppliers and customers of the
Business; plans, drawings, records and information with respect to production,
product development, customer specifications, costs, supplies, machinery, and
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equipment; data and correspondence; sales, promotional, marketing and
advertising materials; maintenance charts; operating manuals; third party
warranties; accounting records; purchasing materials; shipping materials;
technical documentation; and research files and similar or related materials in
Seller's or Sub's possession principally related to the Business or the design,
manufacture, maintenance and operation of the Transferred Assets, whether
current or historical.
"REFERENCE AMOUNT" has the meaning set forth in Section 2.4(c).
"RELEASE(S)" means any release, spill, emission, leaking, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the
atmosphere, soil, surface water, groundwater or property.
"RIGHTS" means all inventions, technical and business know-how, Trade
Secrets, ideas, Software, designs, creations, proprietary data (whether
patentable or not), and original designs and works (whether subject to copyright
or patent protection or not), patents, patent applications, copyrights,
copyright registrations and applications, trademarks, service marks, trade
names, service names, slogans, assumed names and logos, registrations and
applications for registration therefor granted to or from either of the Seller
or Sub which are owned by or licensed to Seller or Sub and principally used in
the conduct of the Business as well as all renewals and extensions thereof. The
term "Rights" shall not include any rights to the use of the name, trademark or
service xxxx "General Electric," "General Electric Medical Systems," "GE," the
"GE" monogram, the "GE" signature xxxx or any variation or derivation thereof or
to the expression "we bring good things to life."
"SEC" shall mean the U.S. Securities and Exchange Commission.
"SECURITIES" shall mean the collective reference to the Shares, the Seller
Option and the Option Shares.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, and the
rules and regulations of the Securities and Exchange Commission promulgated
thereunder.
"SELLER" shall have the meaning set forth in the first paragraph of this
Agreement.
"SELLER OPTION" shall mean the option to purchase the Option Shares to be
granted by Purchaser to Seller pursuant to the Option Agreement.
"SHAREHOLDER AGREEMENT" shall mean the Shareholder Agreement, substantially
in the form of EXHIBIT D attached hereto, to be entered into by and between
Seller and Purchaser as contemplated in Section 6.2(g)(i) and 6.3(f)(ii).
"SHAREHOLDER APPROVAL" shall mean the approval of all of the following
actions by the holders of a number of shares of Common Stock and Preferred Stock
having no less than the minimum number of votes required to approve such actions
under the applicable rules of the
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National Association of Securities Dealers Automated Quotation Stock Market and
the provisions of Purchaser's Articles of Incorporation and bylaws: (i) the
amendment to Purchaser's Articles of Incorporation to increase the authorized
shares of capital stock of Purchaser in an amount sufficient to allow the
issuance of the Shares, the Option Shares and the securities, if any, to be
issued by Purchaser in connection with the financing of the transactions
contemplated in this Agreement; (ii) the issuance of the Seller Option and the
Shares to Seller and the securities, if any, to be issued by Purchaser in
connection with the financing of the transactions contemplated in this
Agreement; and (iii) any other matter which requires the approval of Purchaser's
shareholders in order to consummate the transactions contemplated in this
Agreement.
"SHARES" shall mean a number of shares of Purchaser's Common Stock which
would equal ten percent (10%) of the number of shares of Common Stock
outstanding immediately after the Closing and assuming the issuance of such
Shares to Seller as contemplated in Sections 2.4(a) and 6.3(d). For purposes of
this calculation, the following shall be deemed outstanding immediately after
the Closing: (i) the shares of Common Stock issuable upon conversion of all
shares of Preferred Stock or any other convertible preferred stock of the
Purchaser then outstanding, (ii) the shares of Common Stock issuable upon the
issuance and full exercise of the Seller Option, and (iii) all shares of Common
Stock issuable upon exercise of outstanding options, warrants, calls, rights,
commitments or other agreements of any character whatsoever which may, at that
time or thereafter, obligate Purchaser to issue or sell any additional shares of
Common Stock, except for such shares as are issuable pursuant to any employee
stock option plan of Purchaser.
"SOFTWARE" means all computer programs or other computer software owned,
leased or licensed by the Seller and used principally in the conduct of the
Business or owned, leased or licensed by Sub, including without limitation the
software products listed in Schedule 3.7, and the source codes relating thereto.
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"SUB" means GEMS PET Systems AB, a Swedish corporation.
"SUB CASH" means all of Sub's cash or cash equivalents including, without
limitation, cash on deposit in financial institutions (including cash on deposit
with Seller or other Affiliates of Seller for cash management), money market
funds, certificates of deposit, commercial paper, marketable securities,
treasury bills and other similar instruments and investments.
"SUB FINANCIAL STATEMENTS" has the meaning set forth in Section 3.28.
"SUB SHARES" has the meaning set forth in Section 2.3.
"TAX" or "TAXES" shall mean any United States or foreign federal, state, or
local income, payroll, ad valorem, value added, excise, sales, use, occupancy,
real estate, capital stock, franchise or other Tax of any kind or any other
governmental charge, including any interest, fines, penalties, and additions
relating to any such Tax.
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"TAX RETURN" shall include any statement, form, return, or other document
relating to the Business or the Transferred Assets and required to be supplied
to a taxing authority in connection with Taxes.
"TRADE SECRETS" means all trade secrets, know-how, processes, procedures,
research records, studies or surveys and market surveys owned by Seller and
principally related to the Business or the Transferred Assets or owned by Sub,
including, without limitation, the future results of any research, study, survey
or market study that is currently being conducted or for which commitments to
conduct have been obtained.
"TRANSFERRED ASSETS" has the meaning set forth in Section 2.1.
"TRANSACTION DOCUMENTS" means this Agreement, the Shareholder Agreement,
the Purchase Agreement, the Option Agreement, the License Agreement, the
Assumption Agreement, the Assignment and any other documents or instruments
executed in connection therewith.
"TRANSITION PLAN" has the meaning set forth in Section 5.15.
ARTICLE II
AGREEMENT TO SELL AND PURCHASE
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Section 2.1 Conveyance of the Transferred Assets; Grant of License. On
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the Closing Date, upon and subject to the terms and conditions set forth herein,
Seller shall sell, transfer, assign and convey to Purchaser free and clear of
any Liens other than Permitted Liens, and Purchaser shall purchase and accept
from Seller, all of the assets, properties, and rights owned, leased or held by
Seller that are listed in Appendix I hereto (the "Transferred Assets").
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Section 2.2 Assumption of Certain Liabilities. Upon the Closing and
---------------------------------
subject to the terms and conditions set forth herein, Purchaser agrees to
assume, pay, perform and discharge when due, all liabilities and obligations of
Seller that are listed on Appendix II hereto (collectively, the "Assumed
--------------
Liabilities"). Other than the Assumed Liabilities, Purchaser does not agree to,
and neither this Agreement nor the Assumption Agreement shall obligate Purchaser
to, pay, assume, perform, or discharge any claim, demand, liability or
obligation of Seller of any kind whatsoever (whether direct or indirect,
absolute or contingent, known or unknown, matured or unmatured, or otherwise)
including without limitation unpaid Taxes or Benefit Plan obligations. This
Section 2.2 is not intended to and shall not benefit any Person other than
Seller and Purchaser. Nothing in this Section 2.2 shall create or be construed
as creating any third party beneficiary right in any Person.
Section 2.3 Purchase and Sale of Sub Share. On the Closing Date, upon
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and subject to the terms and conditions set forth herein, Seller shall sell,
transfer, assign and convey to Purchaser free and clear of any Liens, and
Purchaser shall purchase and accept from Seller, all of the outstanding shares
of capital stock of Sub (the "Sub Shares").
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Section 2.4 Purchase Price; Allocation of Purchase Price; Adjustment to
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Purchase Price; Reduction of Accounts Receivable.
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(a) The purchase price of the Sub Shares, the Transferred Assets, the
License and the Covenant to Not Compete (the "Purchase Price") shall be (i) the
sum of $25,000,000, as adjusted in accordance with the terms of Section 2.4(c)
(the "Cash Consideration"); (ii) the Shares; (iii) the Seller Option; and (iv)
assumption of the Assumed Liabilities.
(b) Within ninety (90) days after the Closing, Purchaser and Seller
shall use commercially reasonable efforts to agree upon (1) a statement of the
value of the Shares and the Seller Option as of the Closing Date, and (2) a
statement of the allocation (the "Final Allocation") of the consideration (as
defined in Treas. Reg. (S)1.1060-1T(c)) for the Sub Shares, the Transferred
Assets, the License and the Covenant to Not Compete and, upon such agreement,
each party shall use the Final Allocation for all financial and Tax reporting
purposes, including on any Form 8594 required to be filed by either. The Final
Allocation shall be made reasonably and in conformity with Treas. Reg.
(S)1.1060-1T.
(c) For purposes of this Agreement "Net Asset Value" shall mean the
sum of (i) the aggregate cost to the Seller and Sub of the Inventory calculated
pursuant to Section 2.4(c)(i), plus (ii) the balance on the Closing Date of the
Accounts Receivable determined in accordance with Section 2.4(c)(ii), plus (iii)
the balance on the Closing Date of the Sub Cash determined in accordance with
Section 2.4(c)(iii), plus (iv) the book value on the Closing Date of all
deferred charges of Sub determined in accordance with Section 2.4(c)(iv), minus
(v) the book value on the Closing Date of all liabilities of Sub determined in
accordance with Section 2.4(c)(v). Such adjustment shall be made upon the date
of the final determination or settlement of the matters described in Sections
2.4(c)(i), 2.4(c)(ii), 2.4(c)(iii), 2.4(c)(iv) and 2.4(c)(v) (the "Adjustment
Date"). If the Net Asset Value exceeds $4,825,000 (the "Reference Amount"), the
Cash Consideration shall not be adjusted. If the Net Asset Value is less than
the Reference Amount, the Cash Consideration shall be decreased by the amount of
such deficiency. Seller shall be obligated to pay to Purchaser the amount of any
adjustment to the Cash Consideration required pursuant to this Section 2.4(c) in
cash, by certified or cashier's check, or by immediately available wire
transferred funds within 30 days after the Closing (subject to extension solely
for the purpose of resolving disagreements between the parties). If the Cash
Consideration is adjusted as set forth in this Section 2.4(c), the parties agree
that such adjustment shall be allocated in such a manner as is agreed upon
between Seller and Purchaser in conformity with Treas. Reg. (S) 1.1060-1T.
(i) INVENTORY. On the day prior to the Closing Date, the
---------
Seller, Purchaser and their respective representatives shall perform a
physical inventory by actually counting and inspecting items in the
Inventory and calculating the cost of such items, as of the close of
business on the day prior to the Closing Date. Pursuant to such physical
verification, the Seller and Purchaser shall determine which items are not
in usable or, if normally held for resale, resalable condition due to
damage, obsolescence or any other reason. The Seller shall determine the
cost on a first-in, first-out basis of each such item in accordance with
generally accepted accounting
9
principles consistently applied. The aggregate cost of the Inventory
for purposes of determining Net Asset Value shall be the aggregate cost
to the Seller and Sub of all items of Inventory in usable or, if normally
held for resale, resalable condition as of the close of business on the day
prior to the Closing Date as finally determined pursuant to this paragraph
(i). At the Closing, Seller shall deliver to the Purchaser a written
statement setting forth an itemization of the cost thereof as determined
above. Purchaser or its representatives shall have the right to verify the
quantities, cost and usable or, if normally held for resale, resalable
condition of the items included in such written statement. If within 15
days following delivery of such statement the Purchaser shall not have
objected in writing to such statement, the same shall become final and
binding on the parties. If within such 15 day period Purchaser objects to
such statement and the parties are unable to agree in good faith as to any
portion of such statement, then the parties shall submit such dispute for
resolution as described in Section 11.11. All items of Inventory deemed not
to be in usable or, if normally held for resale, resalable condition shall
not be included in the Inventory to be transferred to Purchaser at closing
and shall remain the property of Seller.
(ii) ACCOUNTS RECEIVABLE. At the Closing, Seller shall
-------------------
deliver to Purchaser a written schedule setting forth a listing and aging,
as of the close of business on the Closing Date, of all Accounts
Receivable. The Accounts Receivable to be reflected on such schedule shall
not include those which have been referred to legal counsel or a collection
agency for collection or which Seller in good faith has reason to believe
will not be collectible when due, it being understood and agreed that such
accounts receivable are to be transferred to Seller. If within 15 days
following the delivery of such written schedule by the Seller, the
Purchaser shall not have objected in writing to such schedule, the same
shall become final and binding on the parties. If within such 15 day period
Purchaser objects to such schedule and the parties are unable to agree in
good faith as to any portion of such schedule, then the parties shall
submit such dispute for resolution as described in Section 11.11. The
balance of the Accounts Receivable for purposes of determining Net Asset
value shall be the amount as finally determined pursuant to this paragraph
(ii). Purchaser hereby agrees to forward promptly to Seller any amounts
received by it following the Closing in respect of any Accounts Receivable
which are transferred to Seller pursuant to the terms hereof, and Seller
hereby agrees to promptly forward to Purchaser any amounts received by it
following the Closing in respect of any Accounts Receivable included in the
Net Asset Value which are not transferred to Seller pursuant to the terms
hereof.
(iii) SUB CASH. At the Closing, Seller shall deliver to
--------
Purchaser a written schedule setting forth the balance of Sub Cash as
of the close of business on the Closing Date. If within 15 days
following the delivery of such written schedule by Seller, the
Purchaser shall not have objected in writing to such schedule, the
same shall become final and binding on the parties. If within such 15-
day period
10
Purchaser objects to such schedule and the parties are unable to
agree in good faith as to any portion of such schedule, then the
parties shall submit such dispute for resolution as described in
Section 11.11. The balance of the Sub Cash for purposes of
determining Net Asset Value shall be the amount as finally
determined pursuant to this paragraph (iii).
(iv) DEFERRED CHARGES. At the Closing, Seller
----------------
shall deliver to Purchaser a written schedule setting forth the
book value, if any, determined in accordance with generally
accepted accounting principles, of all deferred charges of
Sub, as of the close of business on the Closing Date. If within
15 days following the delivery of such written schedule by
Seller, the Purchaser shall not have objected in writing to such
schedule, the same shall become final and binding on the parties.
If within such 15-day period Purchaser objects to such schedule
and the parties are unable to agree in good faith as to any
portion of such schedule, then the parties shall submit such
dispute for resolution as described in Section 11.11. The book
value of all deferred charges of Sub for purposes of determining
Net Asset Value shall be the amount as finally determined
pursuant to this paragraph (iv).
(v) SUB LIABILITIES. At the Closing, Seller shall
---------------
deliver to Purchaser a written schedule setting forth the book
value, if any, determined in accordance with generally accepted
accounting principles, of all liabilities of Sub as of the close
of business on the Closing Date. If within 15 days following the
delivery of such written schedule by Seller, the Purchaser shall
not have objected in writing to such schedule, the same shall
become final and binding on the parties. If within such 15-day
period Purchaser objects to such schedule and the parties are
unable to agree in good faith as to any portion of such schedule,
then the parties shall submit such dispute for resolution as
described in Section 11.11. The book value of all liabilities of
Sub for purposes of determining Net Asset Value shall be the
amount as finally determined pursuant to this paragraph (v).
(d) If the Net Asset Value exceeds the Reference Amount, a portion of
the Accounts Receivable, Sub Cash and Inventory, in that order, up to the total
balance thereof on the Closing Date, equal in dollar amount to the amount of
such excess (the "Net Asset Value Surplus") shall be transferred to Seller. If
the Net Asset Value Surplus exceeds the aggregate balance of Accounts
Receivable, Sub Cash and Inventory on the Closing Date, no adjustment shall be
made to the Purchase Price and no further adjustment to, or conveyance of,
assets comprising a portion of the Transferred Assets or Sub's assets shall be
made. Notwithstanding the provisions set forth in Section 5.1, prior to Closing
Seller may, after notifying and obtaining the consent of Purchaser (which
consent shall not be unreasonably withheld or delayed), dispose of, or cause Sub
to distribute to Seller or otherwise dispose of, Accounts Receivable, Sub Cash
or Inventory, or to repay or otherwise remove Sub liabilities, in such amount as
is necessary to assure that the Net Asset Value will not exceed the Reference
Amount.
11
Section 2.5 Cost and Proration.
----------- ------------------
(a) Seller shall pay any sales, use, value added, excise or
similar transfer Taxes, any documents or revenue stamps and any transfer, real
estate conveyance, recording or similar fees and charges arising in connection
with the transfer of the Transferred Assets, the purchase of the Sub Shares, the
grant of the License or the assumption of the Assumed Liabilities. Seller will
pay such Taxes, fees and charges without regard to whether Seller or Purchaser
would otherwise be liable for such Taxes, fees and charges in the absence of
this Section 2.5(a).
(b) At or prior to Closing, Seller shall pay any fees and
expenses in connection with the prepayment, release, satisfaction or removal of
any Liens affecting the Sub Shares or the Transferred Assets to be conveyed
hereunder other than Permitted Liens, including without limitation, any
applicable loan prepayment penalties and release fees.
(c) Any of the following types of costs and expenses shall be
prorated as of the Closing Date as follows:
(i) "Cost and Expenses" shall mean all costs and expenses
related to any (1) Contracts, (2) Permits, (3) insurance premiums for
policies being assumed by Purchaser hereunder, if any, or (4) utility or
similar regular periodic charges respecting the Transferred Assets or the
Business for which a final billing has not been received by Seller, where
such costs and expenses cover a period of time both prior and subsequent to
the Closing. Any payments made in respect of the Costs and Expenses shall
be prorated between Seller and Purchaser on the basis of the actual number
of days elapsed from the first days of such period to the Closing Date. On
or before the date which is thirty (30) days after the Closing Date, the
parties hereto shall determine the amount of all of the Costs and Expenses.
If Purchaser pays any of the Costs and Expenses for which Seller is
responsible, Seller shall, within five (5) days of the date of such
determination, reimburse Purchaser the amount of such Costs and Expenses.
If Seller pays any of the Costs and Expenses for which Purchaser is
responsible, Purchaser shall, within five (5) days of the date of such
determination, reimburse Seller the amount of such Costs and Expenses.
(ii) All property Taxes and special assessments payable but
not yet due with respect to any of the Transferred Assets shall be prorated
between Seller and Purchaser on the basis of actual days elapsed between
the commencement of the current fiscal Tax year and the Closing Date, based
on a 365-day year, provided, however, that all such assessments which
Seller has agreed to pay on an installment basis shall be paid in full at
or prior to the Closing date. In connection with such proration of Taxes
and assessments, in the event that actual Tax or assessment figures for the
year of Closing are not available at the Closing Date, an estimated,
provisional proration of Taxes and assessments shall be made using Tax and
assessment figures from the preceding year and the Purchase Price shall be
reduced by Seller's prorated amount of such Taxes and assessments. When
actual Tax and
12
assessment figures for the year of Closing become available, a
corrected and definitive proration of Taxes and assessments shall be
promptly made by Purchaser. In the event that Taxes and assessments
for the year of Closing exceed the amount estimated in such
provisional proration, Seller shall pay Purchaser its pro rata share
of the amount by which the actual Taxes and assessments exceeded the
estimated Taxes and assessments within five (5) days following
delivery to Seller of the definitive proration. Similarly, in the
event that Taxes and assessments for the year of Closing are less than
the amount estimated in such provisional proration, Purchaser shall
pay Seller its pro rata share of the amount by which the estimated
Taxes and assessments exceeded the actual Taxes and assessments within
five (5) days following determination of the definitive proration.
Section 2.6 Consents to Assignment of Contracts. Schedule 2.6 hereto
----------------------------------- ------------
lists each Contract which, by its terms or by law, may not be assigned without
the consent of any other party or parties or as to which all rights or remedies
available to Seller thereunder would not by law pass to Purchaser upon the
consummation of the transactions provided for in this Agreement (a
"Nonassignable Contract"). Nothing in this Agreement shall be construed as an
attempt by Seller to assign to Purchaser pursuant to this Agreement any
Nonassignable Contract unless such consent or approval shall have been given,
and from the date hereof through the Closing Date, Seller shall use its
commercially reasonable efforts to obtain all of such consents and approvals. If
any such consent or approval in respect of, or a novation of, a Nonassignable
Contract shall not have been obtained on or before the Closing Date and the
Closing occurs, to the extent lawful, practicable and reasonable in the
circumstances, Seller, at the request and under the direction of Purchaser,
shall use its commercially reasonable efforts, including the obtaining of any
such necessary consent or approval after the Closing, to assure that the
rights under such Nonassignable Contracts shall be preserved for the benefit of
Purchaser. Purchaser shall indemnify and hold harmless Seller for any loss,
cost, claim, damage, liability or expense which Seller may suffer or incur in
performing its obligations set forth in the preceding sentence.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
---------------------------------------
Seller hereby represents and warrants to Purchaser as follows:
Section 3.1 Corporate Existence Power and Authority.
---------------------------------------
(a) Seller is a corporation duly organized, validly existing and in
good standing under the laws of the State of New York. Seller has all requisite
corporate power and authority to make, execute, deliver and perform its
obligations under this Agreement and the other Transaction Documents to be
executed and delivered by it hereunder. Seller has all requisite corporate power
to own its property and carry on the Business as now being conducted. Seller is
qualified to do business as a foreign corporation and in good standing in each
jurisdiction in which the failure to so qualify would have a material adverse
effect on the Business or the Transferred Assets. Other than
13
its ownership of Sub, Seller has no equity ownership in any partnership,
corporation, joint venture or any other entity which conducts any activities
relating to the Business.
(b) Sub is a corporation duly organized, validly existing and in
good standing under the laws of Sweden. Sub has all requisite corporate power
and authority to own its property and carry on its business as now being
conducted. Sub is qualified to do business as a foreign corporation and in good
standing in each jurisdiction in which the failure to so qualify would have a
material adverse effect on Sub's business as now being conducted. Sub does not
engage in any business activities other than the conduct of the Business. Sub
has no equity ownership in any partnership, corporation, joint venture or any
other entity which conducts any activities relating to the Business.
Section 3.2 Authorization; No Violation.
---------------------------
(a) The execution, delivery and performance of this Agreement
and the other Transaction Documents to be executed and delivered by it hereunder
have been duly and validly authorized by all necessary corporate action on the
part of Seller. This Agreement constitutes the valid and binding obligation of
Seller, enforceable against Seller in accordance with its terms, except as such
enforcement may be limited by applicable bankruptcy, insolvency, moratorium or
similar laws affecting the enforcement of creditors' rights generally.
(b) Except as disclosed in Schedule 3.2(b), neither the execution and
---------------
delivery of this Agreement or the other Transaction Documents by Seller, nor the
consummation by Seller of the transactions contemplated hereby or thereby, does
or will, after the giving of notice or the lapse of time or otherwise, (i)
conflict with, result in a breach of, or constitute a default under the articles
of incorporation, bylaws or other charter documents of Seller or Sub, (ii)
conflict with, violate or result in the creation of any Lien upon the Sub Shares
or any of the Transferred Assets under any United States or foreign federal,
state or local law, rule or regulation or any court or administrative order,
judgment, process or decree, or (iii) result in a breach or violation of,
constitute a default under, result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration
under, or result in the creation of any Lien upon any of the Sub Shares or the
Transferred Assets under, any Contract or Permit except for such conflicts,
breaches, violations, defaults, terminations or accelerations under such
Contracts or Permits which individually or in the aggregate could not be
reasonably expected to have a material adverse effect on the Business, the
Transferred Assets or Purchaser's ability to conduct the Business (directly or
indirectly through Sub) after Closing in substantially the same manner as the
Business is presently conducted by Seller and Sub.
(c) Neither Seller nor Sub is a party to, or subject to or bound by,
any judgment, injunction or decree of any United States or foreign federal,
state or local court or governmental authority which may materially restrict or
interfere with Seller's performance of this Agreement.
Section 3.3 Title to Transferred Assets. Except as set forth on
---------------------------
Schedule 3.3. Seller has, and shall convey to Purchaser at the Closing, good and
------------
marketable title to or, with respect only to
14
the Leased Equipment, a valid leasehold interest in, all of the Transferred
Assets, free and clear of all Liens. There are no other parties in possession of
any portion of the Transferred Assets.
Section 3.4 Owned Realty. Sub does not own any real property.
------------
Section 3.5 Leased Realty. The only real property leased by Sub in
-------------
connection with the conduct of the Business is the real property leased pursuant
to the Leases listed in Schedule 3.5. A copy of each of these Leases, as
------------
currently in effect, has been, or within fifteen (15) days after the date of
this Agreement will be, made available to Purchaser. Assuming the other party to
each such Lease has validly authorized and executed such Lease, each such Lease
is valid and in full force and effect on the date hereof. To the knowledge of
Seller or Sub, the other party to each such Lease has validly authorized and
executed such Lease and such Lease is enforceable against such party in
accordance with its terms, except as such enforcement may be limited by
applicable bankruptcy, insolvency, moratorium or similar laws affecting the
enforcement of creditors' rights generally. Neither Sub, nor, to the knowledge
of Seller or Sub, any other party is in default under any such Lease nor is
there any event which, with notice or lapse of time, or both, would constitute a
default thereunder by Sub or, to the knowledge of Seller of Sub, any other party
thereto. Neither Seller nor Sub has received notice that any party to any such
Lease intends to cancel, terminate or refuse to renew the same or to exercise or
decline to exercise any option or other right thereunder.
Section 3.6 Personal Property.
-----------------
(a) Schedule 3.6 contains a complete and accurate list, as of the
------------
date hereof, of all Equipment and Leased Equipment.
(b) The items of Equipment and Leased Equipment and Leased listed in
Schedule 3.6 are in good operating condition and repair, reasonable wear and
------------
tear excepted (or are currently covered by a service contract that will cover
the repair of such condition at no cost to Purchaser), and are reasonably fit
and useable for the purposes for which they are being used, reasonably
sufficient for the current operations of the Business and conform in all
material respects with all applicable United States and foreign federal, state
and local ordinances, regulations and laws.
Section 3.7 Rights. A list of all Rights is set forth on Schedule 3.7.
------ -------------
(a) Schedule 3.7(a) lists all United States and foreign patents and
---------------
patent applications owned by Seller and principally related to the Transferred
Assets or the Business or owned by Sub, and all of such patents and patent
applications have been duly issued by or filed with, as applicable, the
governmental agency or agencies shown on Schedule 3.7(a).
---------------
(b) Schedule 3.7(b) lists (i) all registered United States, foreign
---------------
and state trademarks and service marks owned by Seller and principally related
to the Transferred Assets or the Business, or owned by Sub, and (ii) all United
States, foreign and state trademarks and service marks owned by Seller and
principally related to the Transferred Assets or the Business, or owned by Sub,
for which application has been made. The trademarks and service marks listed as
being
15
registered are still in use, have been timely renewed and are in full force and
effect. All applications for trademarks or service marks listed in Schedule
--------
3.7(b) are pending in the trademark offices of the jurisdictions shown in
------
Schedule 3.7(b).
---------------
(c) Schedule 3.7(c) lists (i) all United States and foreign copyright
---------------
registrations issued to Seller and principally related to the Transferred Assets
or the Business, or issued to Sub, and (ii) all United States and foreign
copyright applications made by Seller which are principally related to the
Transferred Assets or the Business, or made by Sub.
(d) Schedule 3.7(d) lists all licenses granted from or to Seller or
---------------
Sub with respect to any Rights and all other agreements relating to the Rights
or to which the Rights are subject. All such licenses and agreements are valid
and enforceable. Each of Seller and Sub has performed in all material respects
its obligations imposed upon it thereunder, and neither Seller or Sub nor, to
the knowledge of Seller or Sub, any other party thereto, is in default
thereunder, nor is there any event which with notice or lapse of time, or both,
would constitute a default thereunder by Seller or Sub or, to the knowledge of
Seller or Sub, any other party thereto. To the knowledge of Seller and Sub, the
other party to each such agreement validly authorized and executed such
agreement and such agreement is enforceable against such party in accordance
with its terms, except as such enforcement may be limited by applicable
bankruptcy, insolvency, moratorium or similar laws affecting the enforcement of
creditors' rights generally. Except as set forth in Schedule 3.7(d), neither
---------------
Seller nor Sub has received notice that any party to any such agreement intends
to cancel, terminate or refuse to renew the same or to exercise or decline to
exercise any option or other right thereunder.
(e) Schedule 3.7(e) lists all computer programs or other computer
---------------
software (i) owned, leased or licensed by Seller and principally related to the
Transferred Assets or used principally in the conduct of the Business or (ii)
owned, leased or licensed by Sub.
(f) In the operation of the Business, neither Seller nor Sub
infringes any patents or copyrights of any other Person. In the operation of the
Business, neither Seller nor Sub infringes any trademark, trade name or service
xxxx of any other Person. Except as set forth on Schedule 3.7(f), either Seller
---------------
or Sub, as the case may be, has good and marketable title to each of the Rights
and each of the Rights is free of any Lien or contractual obligation of Seller
or Sub to pay any royalty or other payment for the use, reproduction, or other
disposition thereof, and such use, reproduction, or other disposition will not
infringe or violate any patents or copyrights of any other Person. Neither
Seller nor Sub is aware of any infringement by any other person of any of the
Rights.
(g) The expiration date or renewal rights, if any, of the Rights are
set forth on Schedule 3.7(g). None of the Rights is subject to any pending or,
---------------
to the knowledge of Seller or Sub, threatened challenge or reversion.
(h) Pursuant to the terms of any Contract, Permit or other document
relating to the Rights, Seller has the authority to transfer the Rights listed
in Section 3.7 of Appendix I hereto to Purchaser as contemplated herein. Except
----------- -----------------
as set forth on Schedule 3.7(h), the consummation of
---------------
16
the transactions contemplated by this Agreement will not result in any change
in the terms or provisions of any Rights or create any right of termination,
cancellation or reversion with respect thereto.
(i) Except as described in Section 3.7(i), there is no claim, action,
--------------
suit, proceeding, arbitration, grievance or governmental investigation pending
or, to the knowledge of Seller or Sub, threatened which could reasonably be
expected to materially interfere with Sub's or Purchaser's right to use and
enjoy the Rights (including Trade Secrets) upon the transfer to Purchaser at
Closing of (x) the Sub Shares, and (y) the Rights listed in Section 3.7 of
Appendix I hereto.
----------
(j) Seller has all necessary right, power and authority to grant to
Purchaser the License to the Licensed Rights as contemplated in the License
Agreement. Upon execution and delivery of the License Agreement by Seller and
Purchaser, Purchaser shall be entitled to the use and benefits of the Licensed
Rights upon the terms and conditions set forth in the License Agreement.
Section 3.8 Insurance. All of the assets of Sub and the Transferred
---------
Assets that are of an insurable nature and of the character usually insured by
companies of similar size and in similar businesses are insured by Seller or Sub
in such amounts and against such losses, casualties or risks as is usual and
customary by such companies and for such properties.
Section 3.9 Consents and Approvals. Except as set forth on Schedule
---------------------- --------
3.9, no authorization, consent or approval of any United States or foreign
---
federal, state or local governmental authority or third party, and no action or
filing with any Unites States or foreign court, judicial authority,
administrative agency or other governmental or regulatory body or third party is
required for the execution, delivery and performance by Seller of this Agreement
and the Transaction Documents or the consummation of the transactions to be
consummated by Seller hereunder or thereunder, except for such authorizations,
consents or approvals the failure to obtain which could not reasonably be
expected to have a material adverse effect on (i) Sub, the Business or the
Transferred Assets, (ii) the legality, validity or enforceability of the
Transaction Documents, or (iii) the Seller's ability or obligation to perform on
a timely basis any obligation which it has under any of the Transaction
Documents.
Section 3.10 Compliance with Laws; Litigation; Bankruptcy.
--------------------------------------------
(a) Neither Seller, the Business nor the Transferred Assets are in
violation of any applicable laws, statutes, ordinances, rules, regulations,
requirements or orders of any government or governmental body relating to the
Transferred Assets or the Business which would have a material adverse effect on
(i) Sub, the Business or the Transferred Assets, (ii) the legality, validity or
enforceability of the Transaction Documents, or (iii) the Seller's ability or
obligation to perform on a timely basis any obligation which it has under any of
the Transaction Documents. Seller has not received any notice asserting any such
violation. Except as set forth on Schedule 3.10(a), there is no claim, action,
----------------
suit, proceeding, arbitration, grievance or governmental investigation pending
or, to the knowledge of Seller or Sub, threatened against Seller, and no
judgment, order, injunction, decree, stipulation or award outstanding (whether
rendered by a court administrative agency, by
17
arbitration or otherwise) against Seller or by which Seller or any of its
properties is bound which would, if adversely resolved, have a material adverse
effect on (i) Sub, the Business or the Transferred Assets, (ii) the legality,
validity or enforceability of the Transaction Documents, or (iii) the Seller's
ability or obligation to perform on a timely basis any obligation which it has
under any of the Transaction Documents. Seller is not in violation of or in
default with respect to any applicable judgment, order, writ, injunction or
decree applicable to the Business or the Transferred Assets.
(b) Sub is not in violation of any applicable laws, statutes,
ordinances, rules, regulations, requirements or orders of any government or
governmental body which would have a material adverse effect on (i) Sub, the
Business or the Transferred Assets, (ii) the legality, validity or
enforceability of the Transaction Documents, or (iii) the Seller's ability or
obligation to perform on a timely basis any obligation which it has under any of
the Transaction Documents. Sub has not received any notices asserting any such
violation. Except as set forth on Schedule 3.10(b), there is no claim, action,
----------------
suit, proceeding, arbitration, grievance or governmental investigation pending
or, to the knowledge of Seller or Sub, threatened against Sub, and no judgment,
order, injunction, decree, stipulation or award outstanding (whether rendered by
a court, administrative agency, by arbitration or otherwise) against Sub or by
which Sub or any of its properties is bound which would, if adversely resolved,
have a material adverse effect on (i) Sub, the Business or the Transferred
Assets, (ii) the legality, validity or enforceability of the Transaction
Documents, or (iii) the Seller's ability or obligation to perform on a timely
basis any obligation which it has under any of the Transaction Documents. Sub is
not in violation of, or in default with respect to, any applicable judgment,
order, writ, injunction or decree.
(c) Neither Seller nor Sub has (i) applied for or consented to the
appointment of, or the taking of possession by, a receiver, custodian, trustee
or liquidator of itself or all or a substantial part of its property, (ii)
admitted in writing its inability to pay its debts as such debts become due,
(iii) made a general assignment for the benefit of its creditors, (iv) commenced
a voluntary case under the Federal Bankruptcy Code or similar law of a foreign
jurisdiction, or (v) filed a petition seeking to take advantage of any other
relating to bankruptcy, insolvency, reorganization, winding up or composition or
adjustments of its debts, nor has any such proceeding been commenced without the
application or consent of either Seller or Sub.
Section 3.11 Employees.
---------
(a) Schedule 3.11 sets forth an accurate list of all employees of
-------------
Seller who are principally employed in the conduct of the Business and all
employees of Sub and the following information with respect to such employee:
(1) name; (2) job description; (3) summary of salary and benefits; (4) facility
where employed; (5) date most recently hired by Seller or Sub, as the case may
be; (6) whether actively employed, on leave of absence, or on layoff; and (7)
whether the employee has been employed an average of fewer than 20 hours per
week during the 90 day period ending with the date hereof. Except as set forth
in Schedule 3.11, neither Seller nor Sub is a party to any written employment
-------------
contract or employment agreement with any employee employed in the conduct of
the Business.
18
(b) Schedule 3.11 also sets forth the following information
-------------
about each of Seller's employees previously principally employed in the conduct
of the Business and each of Sub's former employees whose employment has been
terminated during the one year period preceding the date hereof: (1) name; (2)
facility where employed; (3) date most recently hired by Seller or Sub, as the
case may be; (4) date of termination; (5) whether the termination was due to
voluntary resignation, retirement, or discharge by Seller or Sub, as the case
may be; and (6) whether the employee had been employed an average of fewer than
20 hours per week during the 90 days ending with termination.
(c) Schedule 3.11 accurately lists all labor unions which
-------------
represent any employees of Sub or Seller who are employed in the conduct of the
Business. No activities the purpose of which is to achieve any other such
representation of all or some of such employees are ongoing or, to the knowledge
of Seller or Sub proposed. There is no contractual grievance or arbitration, or
administrative charge or complaint, or litigation concerning unfair or
discriminatory labor or employment practices pending or, to the knowledge of
Seller or Sub, threatened against either Seller or Sub by any of their
respective employees who are employed in the conduct of the Business, and no
pending or, to the knowledge of Seller or Sub, threatened, administrative
complaints or charges filed against either Seller or Sub relating to the conduct
of the Business with the Equal Employment Opportunity Commission, the National
Labor Relations Board, the United States Department of Labor or any other
foreign or United States federal or state agency charged with enforcing or
administering labor and/or employment laws and matters. In conducting the
Business, both Seller and Sub comply with all applicable laws relating to
collective bargaining and relating to the employment of labor, including without
limitation any provisions thereof relating to wages and hours, discrimination
because of age, religion, sex, national origin, race or color, disability, or
immigration status. There is no litigation pending or, to the knowledge of
Seller or Sub, threatened against Seller relating to the conduct of the Business
or threatened against Sub and based on any law applicable to the employment of
labor, including without limitation any provisions thereof relating to wages and
hours, wrongful discharge/breach of employment benefits, breach of a collective
bargaining agreement, or discrimination because of age, religion, sex, national
origin, race or color, disability, immigration status, participation in
protected concerted activity, or retaliation for seeking workers' compensation
benefits.
(d) Schedule 3.11 will be updated at Closing to provide the
-------------
information required by Sections 3.11(a) and (b) with respect to employees of
Seller and Sub who are employed by Seller and Sub, respectively, immediately
prior to Closing.
(e) All of Seller's employees employed in the United States in
the conduct of the Business are authorized to be employed in the United States
under the Immigration Reform & Control Act of 1986.
Section 3.12 Employee Benefit Plans.
----------------------
(a) A complete and accurate list of each Benefit Plan is set
forth on Schedule 3.12. No later than fifteen (15) days after the date of this
-------------
Agreement, Seller will provide to
19
Purchaser true and complete copies of all material documents relating to each
Benefit Plan relating to Sub, including all amendments, if any, thereto.
(b) None of Seller's or Sub's employees employed in the conduct of
the Business are entitled to receive any benefits under, or are otherwise
covered by, a Benefit Plan which is a "multiemployer plan" within the meaning of
Section 3(37) of ERISA.
(c) Purchaser will not, by operation of law or otherwise solely as a
result of the consummation of the transactions contemplated in this Agreement,
become subject to any liability relating to Seller's employment of its
employees, including but not limited to any liability relating to pension,
retirement, profit sharing, bonus, deferred or incentive compensation, life,
health, dental, post-retirement medical, disability, accident, stock option,
stock purchase, stock appreciation, severance payments, fringe benefits,
vacation pay, holiday pay, sick pay or similar benefits, whether the right to
such benefits arises under a Benefit Plan, under applicable law or otherwise.
Section 3.13 Environmental Matters.
---------------------
(a) There are no claims, actions, suits, proceedings or
investigations related to any Environmental Violation pending or, to the
knowledge of Seller or Sub, threatened against either Seller or Sub with respect
to the use, condition, or operation of the Business, the Leased Realty or any of
the Transferred Assets in any court or before or by any United States or foreign
federal, state or other governmental agency or private arbitration tribunal.
(b) There are no existing Environmental Violations with respect to
Sub or the use, condition, or operation of the Business, the Leased Realty or
any of he Transferred Assets.
(c) No written or oral notice or other communication from any court,
governmental agency, official, governmental instrumentality or private party of
any alleged violation of or liability under Environmental Laws has been
delivered or communicated to Seller or Sub, and to the knowledge of Seller or
Sub, there is no basis for the allegation of any such violation or liability.
(d) All Hazardous Substances or solid waste generated by either of
the Seller or Sub or their respective agents, employees, lessors or predecessors
in interest at any site, including the Leased Realty, have, in the past, been
transported, treated and disposed of only by carriers maintaining valid permits
under any Environmental Laws, and only at treatment, storage and disposal
facilities maintaining valid permits under Environmental Laws, which carriers
and facilities have been and are operating in compliance with such permits and
are not the subject of any existing, pending or threatened action,
investigation or inquiry by any governmental authority in connection with any
Environmental Law.
(e) No conditions exist on any site at which the Business is
conducted by Seller or Sub, including the Leased Realty, resulting from
operations conducted thereon which could give rise to or result in the
imposition of remedial obligations under any Environmental Laws.
20
Section 3.14 Tax Returns and Tax Liabilities.
-------------------------------
(a) All Tax Returns required to be filed on or before the
Closing Date relating to Sub, the Business and the Transferred Assets have been
filed or will be filed within the time prescribed by applicable law (including
extensions of time approved by the appropriate taxing authority). The Tax
Returns so filed are in all material respects complete and accurate
representations of the Tax liabilities relating to Sub, the Business and the
Transferred Assets, and such Tax Returns accurately set forth or will accurately
set forth in all material respects all items to the extent required to be
reflected or included in such returns. All Tax liabilities shown on such Tax
Returns have been paid and discharged when due.
(b) There is no investigation, audit, or claim pending or, to
the knowledge of Seller or Sub, threatened with respect to either Seller or Sub
regarding any Tax relating to the Business or the Transferred Assets.
(c) No later than fifteen (15) days after the date of this
Agreement, Seller will make available to Purchaser correct and complete copies,
for all taxable periods beginning on or after January 1, 1991, and ending prior
to January 1, 1995, all Tax Returns, examination reports and statements of
deficiencies assessed against or agreed to (i) by Seller relating solely to the
Business or the Transferred Assets, or (ii) by Sub.
(d) Purchaser will not, by operation of law or otherwise as a
result of the consummation of the transactions contemplated in this Agreement,
(i) be or become liable for any Tax liability of Seller, or (ii) be or become
subject to any liability for any sales, use, value added, excise or similar
transfer Taxes, any documents or revenue stamps or any transfer, real estate
conveyance, recording or similar fees or charges arising in connection with the
transfer of the Transferred Assets or the Sub Shares, the grant of the License
or the assumption of the Assumed Liabilities.
Section 3.15 Accounts Receivable. Schedule 3.15 will contain as of
------------------- -------------
Closing a complete and accurate list of all Accounts Receivable. Each of the
Accounts Receivable (a) arose from bona fide sales of goods or services in the
ordinary course of business consistent with the normal business practices of
Seller or Sub, as the case may be, (b) are owned free and clear of any Lien
other than Permitted Liens, (c) are not subject to any offsets or claims of
offset, and (d) are collectible and may be collected in full within ninety (90)
days after the day on which it becomes due and payable. None of the obligors of
the Accounts Receivable have given notice that they will or may refuse to pay
the full amount thereof or any portion thereof.
Section 3.16 Inventory. Schedule 3.16 contains a complete and accurate
--------- -------------
list of all Inventory. Each of Seller and Sub has good and marketable title to
each item of its Inventory (including but not limited to the Inventory described
in Section 3.16 of Appendix I), free and clear of all Liens other than Permitted
----------
Liens. All items of Inventory, including Inventory in the hands of suppliers
which Seller or Sub is committed to purchase, were purchased in the ordinary
course of
21
business, and all material portions of the Inventory are fit, good and useful
for their intended purpose and are not obsolete.
Section 3.17 Contracts. Schedule 3.17 contains a true and complete list
--------- -------------
of each Contract to which either Seller or Sub is a party or by which either of
Seller or Sub or its respective properties are bound. No later than fifteen (15)
days after the date of this Agreement, true and complete copies of each such
Contract will be delivered to Purchaser, or will be made available to Purchaser.
Each of such Contracts is in full force and effect and has not been modified or
amended in any material respect form the copies to be made available to
Purchaser. To the knowledge of Seller and Sub, the other party to each Contract
validly authorized and executed such Contract and such Contract is enforceable
against such party in accordance with its terms, except as such enforcement may
be limited by applicable bankruptcy, insolvency, moratorium or similar laws
affecting the enforcement of creditors' rights generally. Except as set forth on
Schedule 3.17, each of Seller and Sub has performed in all material respects its
-------------
respective obligations under each Contract and neither Seller nor Sub nor, to
the knowledge of Seller or Sub, any other party thereto is in material default
thereunder, not is there any event which with notice or lapse of time, or both,
would constitute a material default thereunder by either Seller, Sub or, to the
knowledge of Seller or Sub, any other party thereto. Neither Seller nor Sub has
received notice that any party to any such Contract intends to cancel,
terminate, or refuse to renew the same or to exercise or decline to exercise any
option or right thereunder. Other than as disclosed in Schedule 3.17, upon the
-------------
consummation of the transactions contemplated in this Agreement, Purchaser or
Sub, as the case may be, shall be entitled to hold, enjoy and receive all of the
rights, titles and benefits accruing to Seller or Sub, as the case may be, under
such Contracts. Other than as disclosed in Schedule 3.17, and other than certain
-------------
agreements which will in no event bind, or otherwise apply to, Purchaser or Sub
after Closing, neither Seller nor Sub is subject to any noncompetition
agreements relating to the conduct of the Business.
Section 3.18 Brokers or Finders. No agent, broker, finder or investment
------------------
or commercial banker, or other Person or firm engaged by or acting on behalf of
Seller in connection with the negotiation, execution or performance of this
Agreement or the transactions contemplated hereby is or will be entitled to any
brokerage or finder's or similar fee or other commission as a result of this
Agreement other than any such fees or commissions that have been disclosed to
Purchaser and as to which the Seller shall have full responsibility.
Section 3.19 Liabilities to Related Parties. Except as disclosed on
------------------------------
Schedule 3.19, none of the Assumed Liabilities represent obligations incurred by
-------------
Seller to any officer, director or Affiliate of Seller.
Section 3.20 Permits. Schedule 3.20 sets forth a list of all Permits held
------- -------------
by Seller or Sub which are material to the conduct of the Business. Except as
specifically set forth in Schedule 3.20, (a) such Permits are all Permits
-------------
necessary to conduct the Business as currently conducted, (b) such Permits are
in full force and effect; (c) no violations exist in respect of any Permits
which could reasonably be expected to have a material adverse effect on the
Transferred Assets or the ability of Purchaser to conduct the Business, directly
or indirectly through Sub, after Closing in substantially
22
the same manner as it has been conducted prior to the date hereof; and (d) no
proceeding is pending or, to the knowledge of Seller or Sub, threatened seeking
to revoke or limit any Permit and there is no basis or ground for any such
revocation or limitation. Except as disclosed on Schedule 3.20, upon the
-------------
Closing, Purchaser or Sub, as the case may be, shall be entitled to hold, enjoy
and receive all of the rights, titles and benefits under such Permits.
Section 3.21 Transferred Assets Used in Business. The assets of Sub, the
-----------------------------------
Transferred Assets and the Licensed Rights constitute all of the assets (real,
personal, or mixed, tangible or intangible), properties, licenses, permits,
contracts and other agreements which are presently being principally used in the
operation of the Business as presently conducted by Seller and Sub, and include
all assets, properties, licenses, permits, contracts and agreements which, when
combined with the assets, properties, licenses, permits, contracts and
agreements of Purchaser, are necessary to permit Purchaser, directly or
indirectly through Sub, to conduct the Business after Closing in substantially
the same manner as it has been conducted prior to the date hereof.
Section 3.22 Matters Relating to Securities.
------------------------------
(a) Investment Intent. The Seller Option and the Shares to be
-----------------
acquired by Seller hereunder are being acquired (and upon exercise of the Seller
Option, the Option Shares will be acquired) for Seller's own account for
investment and with no intention of distributing or reselling such Securities or
any part thereof or interest therein in any transaction which would be in
violation of the securities laws of the United States of America or any State or
any foreign country or jurisdiction.
(b) Seller Status. At the xxxx Xxxxxx was offered the Securities, it
-------------
was, and at the date hereof, Seller is an "accredited investor" as defined in
Rule 501(a) under the Securities Act, and Seller has such knowledge,
sophistication and experience in business and financial matters so as to be
capable of evaluating the Purchaser and an investment in the Securities, and is
able to bear the economic risk of such investment.
(c) Access to Information. Seller acknowledges that it has been
---------------------
afforded (i) the opportunity to ask such questions as it has deemed necessary
of, and to receive answers from, representatives of the Purchaser concerning the
terms and conditions of the issuance of the Securities and the merits and risks
of investing in the Securities; (ii) access to such information about the
Purchaser, the Purchaser's financial condition, results of operations, business,
properties, management and prospects as the Seller has requested; and (iii) the
opportunity to obtain such additional information which the Purchaser possesses
or can acquire without unreasonable effort or expense as the Seller has
requested to verify the accuracy and completeness of the information contained
herein.
Section 3.23 Business Relations. Other than as described in Schedule
------------------ --------
3.23, neither Seller nor Sub has been advised, nor do either Seller or Sub have
----
reason to believe, that any of their respective suppliers with respect to the
Business will cease to do business with Seller or Sub, or will
23
refuse to do business with Purchaser or Sub after the consummation of the
transactions contemplated in this Agreement.
Section 3.24 Warranties. Schedule 3.24 sets forth the forms of all
---------- -------------
express warranties and guaranties customarily made by Seller or Sub to third
parties with respect to the Transferred Assets, the Business and the products
manufactured by Seller and Sub in the conduct of the Business. No claim of any
breach of product or service warranty to any customer has been made against
either Seller or Sub nor, to the knowledge of Seller or Sub, is any such claim
threatened.
Section 3.25 Customers. Schedule 3.25 contains a true and complete list
--------- -------------
of all customers of Seller and Sub relating to the Business within the past five
years.
Section 3.26 Power of Attorney; Agency. Neither Seller nor Sub has
-------------------------
designated or appointed any person or other entity, except for current
management, to act for it or on its behalf pursuant to any power of attorney or
agency which is presently in effect and which affects the Business.
Section 3.27 Financial Statements; Material Adverse Change. (a) Upon the
---------------------------------------------
initial delivery of the Financial Statements, and upon each delivery of updated
Financial Statements, all as contemplated in Section 5.12 hereof, the Financial
Statements (including the notes thereto) shall, except as may be stated therein,
(i) be prepared in accordance with the books and records and accounting methods
of the Seller and Sub, as the case may be, (ii) present fairly in all material
respects the financial position and results of operation and cash flows, as
applicable, of Sub and the Business, as the case may be, as of the dates and for
the periods indicated, and (iii) have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
involved.
(b) Except to the extent reflected in the Financial Statements, Sub
will not have as of the dates of such Financial Statements any material
liabilities or obligations of any nature, whether accrued, absolute, fixed or
contingent, or matured or unmatured, relating to the Business and that should be
reflected in the Financial Statements.
Section 3.28 Sub Financial Statements.
------------------------
(a) Attached hereto as Schedule 3.28 are certain financial statements
-------------
of Sub (the "Sub Financial Statements").
(b) Except as may be stated therein, each of the Sub Financial
Statements (including the notes thereto) (a) were prepared in accordance with
the books and records of Sub, (b) present fairly in all material respects the
financial position and results of operation of Sub as of the dates and for the
periods indicated, and (c) have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the period
involved. Except to the extent reflected in the most recent balance sheet
included in the Sub Financial Statements, Sub has no material liabilities or
obligations of any nature, whether accrued, absolute, fixed or contingent, or
24
matured or unmatured, that under applicable generally accepted accounting
principles should be reflected in the Sub Financial Statements.
Section 3.29 Previously Provided Financial Materials. Attached hereto as
---------------------------------------
Schedule 3.29 are certain financial materials relating to the Seller (the
-------------
"Previously Provided Financial Materials"). Except as may be stated therein, the
Previously Provided Financial Materials (a) are in accordance with the books and
records and accounting methods of Seller or Sub, as the case may be, (b) present
fairly in all material respects the financial position and results of operation
of the Seller or Sub, as the case may be, as of the dates and for the periods
indicated, and (c) except for the lack of notes thereto, have been prepared
in accordance with generally accepted accounting principles consistently applied
throughout the periods involved.
Section 3.30 Sub Shares. Seller represents and warrants that (a) Seller
----------
has good and valid title to the Sub Shares free and clear of Liens other than
Permitted Liens, and (b) there are no outstanding options, warrants, calls,
rights, commitments or other agreements of any character whatsoever which give
any other Person the right to purchase or otherwise receive the Sub Shares. Upon
the delivery of certificates or other documents at the Closing by Seller in the
manner provided in Section 6.2(a), Purchaser will receive good and valid title
to the Sub Shares, fee and clear of all Liens other than Permitted Liens or any
such options, warrants, calls, rights, commitments or other such agreements.
Section 3.31 Sub Capitalization. The Sub Shares comprise, and at Closing
------------------
will comprise, all of Sub's issued and outstanding capital stock. All of such
issued and outstanding shares have been duly authorized and are validly issued,
fully paid and non-assessable, except as may be provided under applicable law
with respect to any Swedish corporation. There are no outstanding or authorized
options, warrants, purchase rights, prescription rights, conversion rights,
exchange rights, or other contracts or commitments that could require the Sub to
issue, sell or otherwise cause to become outstanding any of its capital stock.
There are no outstanding or authorized stock appreciation, phantom stock,
profit participation or similar rights with respect to Sub.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
-------------------------------------------
Purchaser hereby represents and warrants to Seller as follows:
Section 4.1 Corporate Existence, Power and Authority. Purchaser is a
----------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Texas. Purchaser has all requisite corporate power and
authority to make, execute, deliver and perform its obligations under this
Agreement and the other Transaction Documents to be executed and delivered by it
hereunder.
25
Section 4.2 Authorization: No Violation.
---------------------------
(a) The execution, delivery and performance of this Agreement and the
other Transaction Documents to be executed and delivered by it hereunder have
been duly and validly authorized by all necessary corporate action on the part
of Purchaser other than the Shareholder Approval. This Agreement constitutes the
valid and binding obligation of Purchaser enforceable against Purchaser in
accordance with its terms, except as such enforcement may be limited by
applicable bankruptcy, insolvency, moratorium or similar laws affecting the
enforcement of creditors' rights generally.
(b) Except as disclosed in Schedule 4.2(b), neither the execution and
---------------
delivery of this Agreement or the other Transaction Documents by Purchaser, nor
the consummation by Purchaser of the transactions contemplated hereby or
thereby, does or will, after the giving of notice or the lapse of time or
otherwise, (i) conflict with, result in a breach of, or constitute a default
under the articles of incorporation or bylaws of Purchaser, (ii) conflict with,
violate or result in the creation of any Lien upon any of the assets of
Purchaser under any United States or foreign federal, state or local law, rule
or regulation, any court or administrative order, judgment, process or decree
applicable to Purchaser, or (iii) conflict with, result in a breach or violation
of, constitute a default under, result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration
under, or result in the creation of any Lien upon any of the assets of Purchaser
under any material contract or agreement of Purchaser except for such conflicts,
breaches, violations, defaults, terminations or accelerations of such contracts
or agreements of Purchaser which individually or in the aggregate could not be
reasonably expected to have a material adverse effect on the business of
Purchaser.
(c) Purchaser is not a party to, or subject to or bound by, any
judgment, injunction or decree of any court or governmental authority which may
restrict or interfere with Purchaser's performance of this Agreement.
Section 4.3 Consents and Approvals. Except as set forth on Schedule 4.3,
---------------------- ------------
no authorization, consent or approval of any United States or foreign federal,
state or local governmental authority or third party and no action or filing
with any United States or foreign court, judicial authority, administrative
agency or governmental or regulatory body or third party is required for the
execution, delivery and performance by Purchaser of this Agreement and the
Transaction Documents or the consummation of the transactions to be consummated
by Purchaser hereunder or thereunder, except for such authorizations, consents
or approvals the failure to obtain which could not reasonably be expected to
have a material adverse effect on (i) Purchaser, (ii) the legality, validity or
enforceability of the Transaction Documents, or (iii) Purchaser's ability or
obligation to perform on a timely basis any obligation which it has under any of
the Transaction Documents.
Section 4.4 Brokers or Finders. No agent, broker, finder or investment
------------------
or commercial banker, or other Person or firm engaged by or acting on behalf of
Purchaser in connection with the negotiation, execution or performance of this
Agreement or the transactions contemplated hereby
26
is or will be entitled to any brokerage or finder's or similar fee or other
commission as a result of this Agreement other than any such fees or commissions
that have been disclosed to Seller and as to which the Purchaser shall have full
responsibility.
Section 4.5 Status of Shares. The issuance and sale of the Shares has
----------------
been duly authorized by all necessary corporate action on the part of the
Purchaser other than obtaining the Shareholder Approval. The Shares, when
delivered to the Seller at the Closing as provided herein, will be validly
issued, fully paid and non-assessable and the issuance and sale of the Shares is
not subject to preemptive rights of any other shareholder of the Purchaser.
Section 4.6 Compliance with Laws; Litigation; Bankruptcy. (a) Except as
--------------------------------------------
set forth on Schedule 4.6, Purchaser is not in violation of any applicable laws,
------------
statutes, ordinances, rules, regulations, requirements or orders of any
government or governmental body which would have a material adverse effect on
(i) Purchaser, (ii) the legality, validity or enforceability of the Transaction
Documents, or (iii) the Purchaser's ability or obligation to perform on a timely
basis any obligation which it has under any of the Transaction Documents.
Purchaser has not received any notice asserting any such violation. Except as
set forth on Schedule 4.6, there is no claim, action, suit, proceeding,
------------
arbitration, grievance or governmental investigation pending or, to the
knowledge of Purchaser, threatened against Purchaser, and no judgment, order,
injunction, decree, stipulation or award outstanding (whether rendered by a
court or administrative agency, by arbitration or otherwise) against Purchaser
or by which Purchaser is bound which, if adversely resolved, would have a
material adverse effect on (i) Purchaser, (ii) the legality, validity or
enforceability of the Transaction Documents, or (iii) the Purchaser's ability or
obligation to perform on a timely basis any obligation which it has under any of
the Transaction Documents. Purchaser is not in violation of or in default with
respect to any applicable judgment, order, writ, injunction or decree.
(b) Purchaser has not (i) applied for or consented to the appointment
of, or the taking of possession by, a receiver, custodian, trustee or liquidator
of itself or all or a substantial part of its property, (ii) admitted in writing
its inability to pay its debts as such debts become due, (iii) made a general
assignment for the benefit of its creditors, (iv) commenced a voluntary case
under the Federal Bankruptcy Code, or (v) filed a petition seeking to take
advantage of any other law relating to bankruptcy, insolvency, reorganization,
winding-up or composition or adjustments of its debts, nor has any such
proceeding been commenced without the application or consent of Purchaser.
Section 4.7 Capitalization. The entire authorized capital stock of the
--------------
Purchaser consists of 15,000,000 shares of Common Stock, of which 3,637,320
shares are issued and outstanding, and 10,000,000 shares of Preferred Stock, of
which 2,692,977 shares of Purchaser's Series A 8% Cumulative Convertible
Redeemable Preferred Stock and 25,000 shares of Purchaser's Series B 8%
Cumulative Convertible Redeemable Preferred Stock are issued and outstanding.
All of such issued and outstanding shares have been duly authorized, are validly
issued, fully paid, and nonassessable. Except as set forth in the Company
Reports and on Schedule 4.7, there are no outstanding or authorized options,
------------
warrants, purchase rights, subscription rights, conversion rights, exchange
rights, or other contracts or commitments that could require the Purchaser to
issue, sell, or otherwise cause
27
to become outstanding any of it capital stock. Except as described in the
Company Reports, there are no outstanding or authorized stock appreciation,
phantom stock, profit participation, or similar rights with respect to the
Purchaser.
Section 4.8 Fairness Opinion. The Purchaser has received a written
----------------
opinion from its financial adviser to the effect that, as of the date hereof,
the terms of the transactions set forth in the Transaction Documents are fair,
from a financial point of view, to the shareholders of the Purchaser.
Section 4.9 SEC Reports; Financial Statements. The Purchaser has made
---------------------------------
available to the Seller true and complete copies of (a) each registration
statement, report on Form 8-K, proxy statement or information statement filed or
issued by it in the fiscal year prior to the date hereof (b) the Company's
Annual Report on Form 10-KSB for the fiscal years ended December 31, 1995, 1994
and 1993, and (c) the Company's Quarterly Report on Form 10-QSB for the period
ended March 31, 1996, each in the form (including exhibits and amendments) filed
with the SEC (collectively, the "Company Reports"). Each Company Report was
prepared and filed in accordance with all applicable rules and regulations of
the SEC and at the time of its filing was otherwise in compliance with such
rules and regulations in all material respects. As of their respective dates,
the Company Reports 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 made a statement made therein not misleading, except as the same was
corrected or superseded in a subsequent report or statement filed with the SEC,
which subsequent report or statement has been delivered to Seller. Except as may
be stated therein, the financial statements (including the notes thereto)
included in the Company Reports of the Purchaser (i) were prepared in accordance
with the books and records and accounting methods of Purchaser, (ii) present
fairly in all material respects the financial position and results of operation
and cash flows of Purchaser as of the dates and for the periods indicated, and
(iii) were prepared in accordance with generally accepted accounting principals
consistently applied throughout the periods involved.
ARTICLE V
COVENANTS
---------
Section 5.1 Operation of Business in Ordinary Course Pending Closing.
--------------------------------------------------------
Except as disclosed in Schedule 5.1, Seller covenants and agrees with Purchaser
------------
that from the date of this Agreement to and including the Closing Date (or such
earlier date as this Agreement may be terminated in accordance with Section
11.2), except with the prior written consent of Purchaser and except as
necessary to effect the transactions contemplated in this Agreement, the
Business will be operated by Seller and Sub in the ordinary course and
consistent with past practices. Without limiting the generality of the
foregoing, until the Closing Date, Seller shall, and shall cause Sub to:
(a) maintain the Equipment comprising a portion of Sub's assets and
the Transferred Assets in substantially the same working order and condition or
repair as they are in as of the date of this Agreement, ordinary wear and tear
excepted;
28
(b) not sell, transfer, lease or otherwise dispose of any Sub's
assets or the Transferred Assets, except in the ordinary course of business
consistent with past practices;
(c) not mortgage, pledge or subject to Lien any of Sub's assets or
the Transferred Assets, except in the ordinary course of business consistent
with past practices;
(d) refrain from amending any Benefit Plan (except for such
amendments which apply generally to all participants in Benefit Plans available
to employees of Seller) or, except in the ordinary course of business consistent
with past practices, increasing salaries or benefits to employees or consultants
of Seller or Sub employed or engaged in connection with the conduct of the
Business (including, without limitation, granting or entering into any agreement
or arrangement to grant bonuses or other incentive compensation, increases in
commission rates or increases in employee benefits or severance benefits);
(e) refrain from entering into additional contracts, commitments,
arrangements or transactions in the conduct of the Business or the operation or
maintenance of Sub's assets or the Transferred Assets, which individually
require payments in excess of $500,000 in any year, except in the ordinary
course of business consistent with past practices;
(f) refrain from making any material change in the accounting, credit
or collection procedures or practices of Seller or Sub in connection with the
conduct of the Business, or from making or changing any election for Tax or
accounting purposes in connection with the conduct of the Business, except in
the ordinary course of business consistent with past practices;
(g) refrain from deliberately taking or omitting to take any action
that would result in a breach of the representations and warranties contained in
this Agreement or render them inaccurate as of the date hereof or at the Closing
Date;
(h) comply in all material respects with all statutes and laws and
with all judgments, decrees, orders, regulations or rules of any court or
governmental authority applicable to the Business, Sub, Sub's assets or the
Transferred Assets;
(i) promptly advise Purchaser in writing of any matters arising or
discovered after the date of this Agreement which, if existing or known at the
date hereof, would be required to be set forth or described in this Agreement or
the Exhibits or Schedules hereto;
(j) preserve intact Sub's assets, the Transferred Assets and the
Business and use its commercially reasonable efforts to retain the services of
Seller's and Sub's present employees and independent contractors and preserve
the goodwill of its suppliers, customers and others having business
relationships with Seller or Sub, except in the ordinary course of business
consistent with past practices;
29
(k) not waive, release, grant, permit the lapse of, or transfer any
Rights or Trade Secrets or modify or change in any material respect any existing
Contract, Lease, or Permit, except in the ordinary course of business consistent
with past practices;
(l) retain Sub's corporate existence and not institute proceedings
for its merger, consolidation or dissolution;
(m) promptly notify Purchaser of any lawsuits, claims, proceedings
or investigations which are threatened or commenced against Seller or Sub which,
if adversely resolved, could reasonably be expected to have a material adverse
effect on (i) Sub or its business as it is presently being conducted, (ii) the
Transferred Assets, (iii) the Business, or (iv) the ability of the parties
hereto to consummate the transactions contemplated in this Agreement;
(n) refrain from issuing, purchasing, redeeming or otherwise
effecting any transactions with respect to any equity securities of Sub, or any
right to acquire any equity securities of Sub;
(o) refrain from declaring, issuing, making, or paying any dividend
or other distribution of assets, whether consisting of money, other tangible or
intangible personal property, real property, securities, or any other thing of
value, on any shares of Sub's capital stock, or splitting, combining,
dividending, distributing or reclassifying any shares of Sub's capital stock;
(p) promptly notify Purchaser of any material adverse change, insofar
as it relates to the Business, in the financial position, results of operation
or business of Seller or Sub since the date of the most recent balance sheet
included in the Financial Statements; and
(q) refrain from entering into any agreement to take any action which
is prohibited by, or is inconsistent with, the provisions set forth in Sections
5.1(a) through 5.1(p) above.
Section 5.2 Due Diligence.
-------------
(a) From the date hereof through the Closing Date, or such earlier
date as this Agreement is terminated in accordance with its terms, Seller will,
and Seller will cause Sub to, make available for inspection to Purchaser and
Purchaser's authorized representatives, legal counsel, accountants and financing
sources all information reasonably requested by Purchaser relating to Sub, the
Business, the Transferred Assets, the Licensed Rights and the Assumed
Liabilities, and shall allow Purchaser and such representatives, legal counsel,
accountants and financing sources reasonable access to all books, records,
files, documents, assets, employees, agents, representatives, and contracts of
Sub and Seller related to Sub, the Business, the Transferred Assets, the
Licensed Rights or the Assumed Liabilities, including, without limitation, all
contracts, agreements, leases, insurance policies, stock transfer books, minute
books, ledgers and books of account, financial statements and reports, working
papers, Tax and operating records and correspondence files, to the extent
related to Sub, the Business, the Transferred Assets, the Licensed Rights or the
Assumed
30
Liabilities. The parties hereto acknowledge that Purchaser has not had the
opportunity to fully perform its due diligence of Seller, Sub, the Business, the
Transferred Assets, the Licensed Rights or the Assumed Liabilities prior to the
date of this Agreement, and that the due diligence contemplated in this Section
5.2(a) is intended to give Purchaser the opportunity to conduct additional due
diligence and elect, if it chooses, to terminate this Agreement. Accordingly,
Purchaser may terminate this Agreement at any time prior to the date which is
forty-five (45) days after the date of this Agreement by notifying Seller in
writing of its election to terminate this Agreement in accordance with this
Section 5.2(a) if Purchaser determines in its reasonable judgment that the
financial position, results of operations, business or prospects of Sub, the
Business or the Transferred Assets differ materially and adversely from
Purchaser's understanding of such matters at the time of execution of this
Agreement. Purchaser's right to terminate this Agreement in accordance with this
Section 5.2(a) shall not be limited or affected in any way by the delivery by
Seller of any revised Schedule or Appendices to this Agreement delivered
pursuant to Section 11.13 or otherwise. Purchaser shall have the right to make
copies of any portion of the records referred to in this Section 5.2(a) relating
to Sub, the Business, the Transferred Assets or the Assumed Liabilities, subject
to Section 5.11.
(b) From the date hereof through the Closing Date, or such earlier
date as this Agreement is terminated in accordance with its terms, Purchaser
will make available for inspection to Seller and Seller's authorized
representatives, legal counsel and accountants all information reasonably
requested by Seller relating to Purchaser, Purchaser's financial condition,
results of operations, business, properties and management and will afford
Seller the opportunity to ask such questions of representatives of the Purchaser
as Purchaser shall reasonably request. Such information shall be inspected
during normal business hours and at mutually agreeable locations in a manner
that does not disrupt the normal business operations of Purchaser.
(c) No investigation by Purchaser or Seller shall affect the
representations or warranties of Purchaser or Seller or the conditions or
obligations of the parties hereto.
(d) If, in the course of its due diligence investigation of Seller
and Sub or otherwise, Purchaser becomes aware of information which leads it to
believe that any representation or warranty made by Seller in this Agreement is
materially inaccurate, or that any covenant contained in Section 5.1 has been
breached in any material respect, Purchaser will promptly inform Seller of such
information, at which time Purchaser shall have the right to terminate this
Agreement in accordance with Section 11.2(a)(v). If Purchaser fails to inform
Seller of such breach, or notifies Seller of such breach but does not terminate
this Agreement as permitted by Section 11.2(a)(v), Purchaser shall be deemed to
automatically waive its rights, if any, to indemnification by Seller for such
breach pursuant to Article X.
Section 5.3 No Solicitations.
----------------
(a) From the date hereof through the Closing Date, or such earlier
date as this Agreement is terminated in accordance with its terms, Seller shall
not, and Seller shall cause Sub and each of Seller's and Sub's respective
subsidiaries, Affiliates, officers, employees, directors,
31
shareholders and representatives not to, solicit offers, inquires or proposals
from, or negotiate or participate in discussions with, or disclose information
to, others in connection with the possible sale or other disposition of (i) all
or substantially all of the Business, Transferred Assets or the Licensed Rights
or (ii) any equity interest in Sub.
(b) From the date hereof through the Closing Date, or such earlier
date as this agreement is terminated in accordance with its terms, Purchaser
shall not, and shall cause its subsidiaries, Affiliates, officers, employees,
directors, shareholders, and representatives not to, solicit offers, inquiries
or proposals from other in connection with the possible acquisition by Purchaser
of any business (or equity interest in any Person who operates a business) which
is substantially similar to the Business.
Section 5.4 Commercially Reasonable Efforts. Upon the terms and subject
-------------------------------
to the conditions hereof, each of Seller and Purchaser agrees to use its
commercially reasonable efforts (a) to take or cause to be taken all actions to
be taken by such party and to do or cause to be done all things to be done by
such party which are necessary, proper, or advisable to meet the conditions to
Closing set forth in Articles VII and VIII hereof, and (b) to obtain all
waivers, consents and approvals needed to be obtained by such party; provided,
however, that notwithstanding any other provision set forth in this Agreement,
any approval of this Agreement and the transactions contemplated hereby by the
Board of Directors of either Purchaser or Seller, and any recommendation, if
any, made by either of such Boards of Directors to their respective stockholders
to approve this Agreement and the transactions contemplated hereby, shall remain
subject to the fiduciary duties of the members of such Boards of Directors to
their respective stockholders under applicable law.
Section 5.5 Proxy Statement. As soon as practicable after the date
---------------
hereof, the Purchaser shall take commercially reasonable steps to promptly
prepare, file with the SEC and mail the Proxy Statement to Purchaser's
shareholders. The Purchaser represents and warrants, as to all information
contained in the Proxy Statement which is not supplied by the Seller for
inclusion therein, that such information, at the date the Proxy Statement is
mailed to the shareholders of Purchaser and at the time of the Shareholder
Meeting, will not be false or misleading with respect to any material fact
contained therein, or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading. The Seller
represents and warrants, as to all information contained in the Proxy Statement
which is expressly supplied by Seller for inclusion therein, that such
information, at the date the Proxy Statement is mailed to the shareholders of
Purchaser and at the time of the Shareholder Meeting, will not be false or
misleading with respect to any material fact contained therein, or omit to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading. The Seller will have no obligation to supply
any information expressly for inclusion in the Proxy Statement other than the
Financial Statements, and the Seller may require that the Proxy Statement
include reasonable disclaimers as to Seller's liability.
Section 5.6 Damage or Destruction of Property. If any "Material Assets"
---------------------------------
shall be substantially damaged or destroyed by fire or other cause on or prior
to the Closing Date, Seller shall, and Seller shall cause Sub to, promptly
notify Purchaser and furnish to Purchaser a written
32
statement of the amount of insurance, if any, that Seller believes will be
payable on account thereof. Purchaser shall then have the right, within ten (10)
days after receipt of such notice from Seller, to: (a) require that Seller
restore, or cause to be restored, prior to Closing the damaged or destroyed
Material Assets to their condition on the date of this Agreement to the extent
such damaged or destroyed Material Assets can be restored; or (b) notify Seller
of Purchaser's intent to close the transactions contemplated in this Agreement
(provided all other conditions to Closing are satisfied) at the time at which
Closing would otherwise occur under the terms of this Agreement, and the
Purchase Price shall be reduced by an amount equal to the excess of (i) the
value of the loss as determined by a third party mutually selected by Purchaser
and Seller, over (ii) the applicable insurance proceeds, if any, conveyed to
Purchaser as contemplated in Appendix I. For purposes of this Section 5.6,
----------
"Material Assets" shall be deemed to be such of Sub's assets or the Transferred
Assets for which the cost of replacement, repair or restoration exceeds $250,000
in the aggregate, and which cannot be replaced, repaired or restored by Seller
or Sub within thirty (30) days after the date such Material Assets are damaged
or destroyed. In the event of a loss of Sub's assets or Transferred Assets that
are not "Material Assets," Purchaser and Seller agree to close the transactions
contemplated in this Agreement (provided all other conditions to Closing are
satisfied) and the Purchase Price shall be reduced by an amount equal to the
excess of (1) the value of the loss as determined by a third party mutually
selected by Purchaser and Seller, over (ii) the applicable insurance proceeds,
if any, conveyed to Purchaser as contemplated in Appendix I.
----------
Section 5.7 Employees, Benefits, Etc.
------------------------
(a) Employees. From the date hereof through and including the
---------
Closing Date, Seller shall, and Seller shall cause Sub to, permit Purchaser (i)
to met with the employees of Seller who are principally employed in the Business
and with the employees of Sub ("Employees") at such times as shall be approved
by a representative of Seller (which approval shall not be unreasonably
withheld) and (ii) to distribute to such Employees such correspondence, forms
and other documents setting forth the terms and conditions upon which employment
after Closing, if any, by Purchaser or Sub is offered and any other
correspondence, forms and documents relating to employment after the Closing
Date by Purchaser or Sub as Purchaser may request. No later than forty-five (45)
days after the date of this Agreement, Purchaser shall deliver to Seller a list
of up to ten (10) Employees who Purchaser shall in good faith determine to be
essential to the conduct of the Business by Purchaser (the "Key Employee List").
It is explicitly understood and agreed that Purchaser shall have no obligation
under this Agreement to employ or otherwise retain the services of any Employee
of Seller or Sub subsequent to Closing, but many do so at Purchaser's sole
discretion and upon such terms and conditions as shall be acceptable to
Purchaser in Purchaser's sole discretion
(b) Benefits. Seller agrees that, with respect to all claims by
--------
Employees of Seller arising from claims incurred on or prior to the Closing Date
under all Benefit Plans, whether insured or otherwise (including, but not
limited to, bonus, retirement, vacation, life insurance, medical, severance and
disability programs), Seller at its own expense shall honor or cause to be
honored such claims, whether made before or after the Closing Date, in
accordance with the terms and conditions of such Benefit Plans. Except as set
forth on Schedule 5.7(b), Purchaser shall not be obligated to pay, assume,
---------------
perform or discharge any claim, demand, liability or obligation of any kind
whatsoever
33
under any Benefit Plan, and Seller shall indemnify and hold harmless Purchaser
for any loss, cost, claim, damage, liability or expense which Purchaser may
suffer or incur as a result thereof.
Section 5.8 Seller's Access to Information. After the Closing, Purchaser
------------------------------
shall allow Seller and its respective authorized representatives full and
complete access at all reasonable times, and upon reasonable notice, to inspect
and copy all books, records, contracts, materials and documents transferred to
Purchaser under this Agreement to the extent reasonably requested by Seller for
its accounting, Tax and legal purposes. Purchaser shall preserve and maintain
all such books, records, contracts, materials, and documents for a period of not
less than five (5) years following the Closing Date.
Section 5.9 Public Announcements. Purchaser and Seller will, and Seller
--------------------
will cause Sub to, consult with each other before issuing any press release or
otherwise making any public statements with respect to this Agreement or the
transactions contemplated by this Agreement and will not issue any such press
release or make any such public statement before such consultation, except as
may be required by law or any listing agreement with a national securities
exchange.
Section 5.10 No Hire. Except as may be otherwise agreed to in writing
-------
between Seller and Purchaser, until the second anniversary of the Closing Date,
Seller will not employ any Employee who at Closing remains an Employee of Sub or
becomes an employee of Purchaser, unless (a) such individual leaves Sub's or
Purchaser's employment or gives notice of termination of employment without any
prior solicitation by Seller, or is given notice of termination of employment by
Sub or Purchaser, or (b) Purchaser ceases to engage in the Business or becomes
bankrupt.
Section 5.11 Confidentiality. (a) None of the parties to this Agreement
---------------
shall, nor shall they permit their respective subsidiaries, Affiliates,
officers, employees, directors, shareholders or representatives to, disclose to
any third party (other than such parties' respective legal counsel, accountants
and other advisors, all of whom shall be required to observe the provisions of
this Section 5.11) any information received from the other party in the course
of investigating, negotiating, and performing the transactions contemplated by
this Agreement; provided, however, that this provision shall not be applicable
-------- -------
to information which; (i) becomes generally available to the public other than
as a result of a disclosure by the party receiving such information (a
"Receiving Party") or such Receiving Party's Affiliates, officers, directors,
employees, shareholders or representatives, (ii) was available to the Receiving
Party on a non-confidential basis prior to its disclosure to the Receiving Party
by the other party to this Agreement (a "Disclosing Party") or its Affiliates,
officers, directors, employees, shareholders or representatives, (iii) becomes
available to the Receiving Party on a non-confidential basis from a source other
than the Disclosing Party or its Affiliates, officers, directors, employees,
shareholders or representatives when such source is entitled, to the best of the
Receiving Party's knowledge, to make the disclosure, or (iv) was independently
developed by the Receiving Party without reference to the information received
from the Disclosing Party. If either party or any of their respective
Affiliates, officers, directors, employees, shareholders or representatives is
requested or required to disclose any information received by it or to disclose
any such information which is required to be kept confidential by this Section
5.11(a), such party agrees to provide the Disclosing Party with prompt notice of
each such
34
request, to the extent practicable, so that the Disclosing Party may seek an
appropriate protective order or waive compliance by the Receiving Party with the
provisions of this Section 5.11(a) or both. If, absent the entry of a protective
order or the receipt of a waiver under this Agreement, the Receiving Party, its
Affiliates, officers, directors, employees, shareholders or representatives are,
in the opinion of its counsel, legally compelled to disclose such information,
the Receiving Party may disclose such information to the persons and to the
extent required without liability under this Agreement, and such party agrees to
exercise its reasonable commercial efforts to obtain reasonable assurances that
confidential treatment will be accorded any such information so furnished.
Notwithstanding any other provision set forth in this Section 5.11 or elsewhere
in this Agreement, Seller understands and acknowledges that Purchaser will
disclose to its shareholders all information which Purchaser is required by
applicable law to disclose to its shareholders in connection with obtaining the
Shareholder Approval, including but not limited to the terms of the transactions
contemplated in this Agreement and information relating to Sub, the Business and
the Transferred Assets, and Seller hereby consents to such disclosure; provided,
that, (i) Purchaser shall consult with Seller prior to disclosing any
information in reliance on this sentence and, if Seller disputes the need for
such disclosure, the parties will work together in good faith to reach agreement
as to the extent of such information to be disclosed; and (ii) under no
circumstances will Purchaser reveal any Trade Secrets at any time prior to
Closing.
(b) Seller and Sub have taken, and after the date hereof Seller
will, and Seller will cause Sub to, take all steps reasonably necessary to
safeguard and maintain the secrecy and confidentiality of any of the Transferred
Assets that constitute Trade Secrets or other confidential or proprietary
information of Seller or Sub. From and after the date hereof, Seller shall not,
and Seller shall cause Sub to not, disclose to any Person (other than Purchaser
and such authorized representatives of Purchaser as Purchaser shall identify to
Seller in writing) any Trade Secrets or other confidential or proprietary
information with respect to the Business or the Transferred Assets except (i) as
otherwise required by law, or (ii) prior to the Closing Date, in the ordinary
course and consistent with the past business practices of Seller and Sub.
(c) If this Agreement is terminated pursuant to Section 11.2(a),
prior to December 31, 1998 neither Seller nor Purchaser shall hire (as an
employee or consultant or in any other capacity) any employee or consultant of
the other party hereto without the other party's prior written consent.
(d) To the extent that the terms of this Section 5.11 conflict
with the terms of the confidentiality Agreement made December 19, 1995 between
Seller and Purchaser, as amended, the terms of this Section 5.11 shall apply.
Section 5.12 Financial Statements. As soon as practicable after the date
--------------------
of this Agreement, but in no event later than sixty (60) days after the date of
this Agreement, Seller shall deliver to Purchaser true, complete and correct
copies of the Financial Statements. Seller hereby acknowledges and agrees that
(a) Purchaser will include the Financial Statements, and certain summary
information therefrom, in the Proxy Statement; (b) Seller has informed the
independent accountants who will prepare the Financial Statements that Purchaser
will include the Financial Statements in the Proxy
35
Statement; and (c) Seller will obtain any consents, whether from the
independent accountants or otherwise, necessary to include the Financial
Statements in the Proxy Statement. If the SEC notifies Purchaser that the
financial statements initially delivered by Seller to Purchaser under this
Section 5.12 do not meet the requirements of the Securities Act governing the
form and content of Financial Statements to be included in the Proxy Statement,
as soon as practicable thereafter Seller shall use commercially reasonable
efforts to deliver to Purchaser true, complete and correct copies of Financial
Statements which meet such requirements, and from time to time thereafter, as
soon as practicable after receipt of comments from the SEC on the Proxy
Statement, Seller shall continue to revise and update such Financial Statements
in response to such comments until the SEC provides no objection to the
inclusion of such Financial Statements in the Proxy Statement. However, if
Seller reasonably determines that it is unable to provide Financial Statements
that are satisfactory to the SEC using its commercially reasonable efforts, then
it may so notify Purchaser, whereupon either of Seller or Purchaser may, upon
delivery of fifteen (15) days prior written notice, terminate this Agreement.
Section 5.13 Repurchase of Unpaid Accounts Receivable. If any Account
----------------------------------------
Receivable existing at the Closing remains unpaid in whole or in part ninety
(90) days after the Closing, Seller shall, within five (5) days after Purchaser
delivers to Seller written notice of the unpaid amount, purchase from Sub such
Account Receivable at a purchase price equal to the unpaid amount of such
Account Receivable.
Section 5.14 Marketing Materials. As soon as practicable after the date
-------------------
of this Agreement, but in no event later than fifteen (15) days after the date
of this Agreement, Seller shall deliver to Purchaser true, complete and correct
copies of all technical documentation and sales, advertising, promotional and
other marketing materials which are used by Seller to sell, advertise, promote
and market all products which Seller produces in the conduct of the Business.
Section 5.15 Transition. Purchaser and Seller will work together in good
----------
faith to establish a plan (the "Transition Plan") whereby the Transferred
Assets will be physically delivered by Seller to Purchaser at or after the
Closing. The Seller and Purchaser will develop the Transition Plan with the goal
of effecting physical delivery of the Transferred Assets to the facilities of
Purchaser as soon as practicable after the Closing; provided, however, that the
Seller and Purchaser will endeavor to effect such deliveries in a manner which
will assure that the sale of PET Products to Seller's customers and Purchaser's
customers continue with a minimum of delay or interruption in the normal
manufacturing and deliver schedules of both Seller and Purchaser. The Transition
Plan shall be agreed to in writing by Seller and Purchaser as soon as
practicable after the date of this Agreement, but in no event later than thirty
(30) days prior to the Closing Date.
Section 5.16 Purchase Orders. At Closing, Seller shall submit to
---------------
Purchaser under the terms of the Purchase Agreement one or more purchase orders
which shall bind Seller, in accordance with the terms of the Purchase Agreement,
to purchase from Purchaser any PET Products for which Seller has received
purchase orders prior to the Closing but which have not been shipped by Seller
prior to Closing.
36
Section 5.17 Ownership of Securities.
-----------------------
(a) Transfer Restrictions. If Seller should decide to dispose of any
---------------------
of the Securities, Seller may do so only pursuant to an effective registration
statement under the Securities Act or pursuant to an exemption from registration
under the Securities Act. In connection with any offer, resale, pledge or other
transfer (individually and collectively, a "Transfer") of any Securities, other
than pursuant to an effective registration statement, Purchaser may require that
the transferor of such Securities provide to the Purchaser an opinion of
counsel, wich opinion shall be reasonably satisfactory in form and substance to
the Purchaser, to the effect that such Transfer is being made pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act and any State or foreign securities laws.
Seller agrees to the imprinting, so long as appropriate, of substantially the
following legend on certificates representing the Shares or Option Shares:
THE SHARES OF COMMON STOCK (THE "SHARES") EVIDENCED HEREBY HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE OR FOREIGN SECURITIES LAWS, AND MAY NOT BE
OFFERED OR SOLD EXCEPT IN COMPLIANCE WITH THE SECURITIES ACT AND SUCH OTHER
LAWS. BY ITS ACQUISITION HEREOF, THE HOLDER AGREES THAT IT WILL NOT OFFER,
RESELL, PLEDGE OR OTHERWISE TRANSFER (INDIVIDUALLY AND COLLECTIVELY, A
"TRANSFER") THE SHARES EVIDENCED HEREBY, EXCEPT (A) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND ANY
APPLICABLE FOREIGN OR STATE SECURITIES LAW, OR (B) PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT (SUCH AS THE EXEMPTION SET FORTH
IN RULE 144 UNDER THE SECURITIES ACT, IF AVAILABLE) AND UNDER ANY
APPLICABLE STATE OR FOREIGN SECURITIES LAWS. IF THE PROPOSED TRANSFER IS TO
BE MADE OTHER THAN PURSUANT TO CLAUSE (A) ABOVE, THE HOLDER MUST, PRIOR TO
SUCH TRANSFER, FURNISH TO THE COMPANY AND THE TRANSFER AGENT SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THEY MAY REASONABLY
REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OR ANY STATE OR FOREIGN SECURITIES LAW.
The legend set forth above shall be removed if and when the Shares or Option
Shares represented by such certificate are disposed of pursuant to an effective
registration statement under the Securities Act or the opinion of counsel
referred to above has been provided to Purchaser. The share certificates shall
also bear any additional legends required by applicable Federal, State or
foreign securities laws or necessary under applicable Tax laws, which legends
shall be removed when the Company receives such certifications, legal opinions
or other information as it may reasonably require to confirm that the same are
no longer required under the applicable requirements of such securities or Tax
laws. In connection with any Transfer of Shares or Option Shares by Seller
37
pursuant to an effective registration statement under the Securities Act, Seller
will comply with all prospectus delivery requirements of the Securities Act.
Purchaser makes no representation, warranty or agreement as to the availability
of any exemption from registration under the Securities Act with respect to any
resale of any of the Shares or Option Shares.
(b) Stop Transfer Instruction. Purchaser shall be entitled to make a
------------------------
notation on its records and give instructions to any transfer agent for the
Company's Common Stock in order to implement the restrictions on transfer set
forth in this Agreement.
(c) Reliance. Seller also understands and acknowledges that (i) the
--------
Securities are being offered and sold without registration under the Securities
Act in a transaction that is exempt from the registration provisions of the
Securities Act and applicable state and foreign securities laws and (ii) the
availability of such exemption depends in part on, and that the Purchaser will
rely upon, the accuracy and truthfulness of the representations contained in
Section 3.22 and Seller hereby consents to such reliance.
Section 5.18 [Intentionally Omitted].
---------------------
Section 5.19 Filing or Non-Filing of Section 338 Election. If Purchaser
--------------------------------------------
files, or causes to be filed, an election under section 338 of the United States
Internal Revenue Code with respect to the purchase of the Sub Shares, Purchaser
covenants and agrees that it will hold Seller harmless for any increased Tax
liability owed by Seller that results from such election. If Purchaser does not
file, or cause to be filed, such an election:
(a) Except with the prior written consent of Seller, Purchaser
covenants and agrees that Sub will not make a distribution out of its earnings
and profits (as defined for United States tax purposes) during the portion of
Sub's taxable year (as determined for United States tax purposes) that begins on
the Closing Date and ends on the last day of such year; and
(b) Except with the prior written consent of Seller, Purchaser
covenants and agrees that, during the portion of Sub's taxable year (as
determined for United States tax purposes) that begins on the Closing Date and
ends on the last day of such year, Sub will not sell, transfer or otherwise
dispose of any of its assets except in the ordinary course of business
consistent with past practices.
Section 5.20 Refund of Sub Taxes. Purchaser covenants and agrees that, if
-------------------
Sub receives a refund of Taxes paid for its taxable year that includes the
Closing Date, or any prior taxable year, Purchaser will promptly notify Seller
of such refund. If Seller's United States federal income tax liability is
increased in a taxable year solely as a result of such refund of Taxes, reducing
the amount of Seller's foreign tax credits computed under section 902 of the
United States Internal Revenue Code, Purchaser will, within 30 days of the
Seller's payment of such increased United States federal income tax liability,
pay to Seller the amount of such increased United States federal income tax
liability, plus any interest due thereon; provided, however, that in no event
shall such payment by Purchaser exceed the amount of the refund of Taxes
received by Sub.
38
ARTICLE VI
THE CLOSING
-----------
Section 6.1 Closing. The Closing of the transactions that are the
-------
subject of this Agreement and the transfers and deliveries to be made pursuant
thereto (the "Closing") shall take place at the offices of Xxxxxx & Xxxxxx
L.L.P., 3700 Xxxxxxxx Xxxx, 0000 Xxxx Xxxxxx, Xxxxxx, Xxxxx 00000 on the fifth
business day after all conditions to Closing have been satisfied or waived in
accordance with the terms hereof or at such other time, place or date as the
parties hereto may agree in writing (the "Closing Date").
Section 6.2 Closing Deliveries of Seller. At the Closing, Seller shall
----------------------------
deliver to Purchaser in form and substance satisfactory to Purchaser and duly
executed by the appropriate Persons:
(a) A certificate or certificates representing the Sub Shares in
genuine and unaltered form, duly endorsed in blank or accompanied by a duly
executed stock power endorsed in blank (in either case with signature guaranteed
by a national bank or trust company or member firm of a national securities
exchange);
(b) Bills of sale and assignments with respect to the Transferred
Assets and all other instruments which are necessary and appropriate to vest in
Purchaser good and marketable title to the Transferred Assets, free and clear of
all Liens other than Permitted Liens, including but not limited to:
(i) a duly executed Xxxx of Sale and Assignment in
substantially the form of EXHIBIT A attached hereto; and
(ii) duly executed instruments of assignment, in recordable form
if appropriate, with respect to all Rights and all applications therefore
relating to the Business.
(c) All books and records to be transferred to Purchaser hereunder.
Seller may retain copies of any of the foregoing for their own use provided that
Seller keeps all such books and records confidential.
(d) Incumbency certificates and copies, certified by the respective
Secretary or Attesting Secretary of Seller, or resolutions of Seller's board of
directors authorizing the execution, delivery and performance of, and the
transactions contemplated by, this Agreement.
(e) Certificate dated the Closing Date and signed by a duly
authorized officer of Seller to the effect that all of the conditions set forth
in Section 7.1, Section 7.2, Section 7.3 and Section 7.4 have been satisfied.
39
(f) An opinion of counsel to Seller, dated as of the date of the
Closing Date, substantially in the form of EXHIBIT C attached hereto.
(g) All other documents to be entered into pursuant to this Agreement
requiring execution by Seller on or prior to the Closing Date, duly executed by
Seller, as appropriate, including but not limited to:
(i) a Shareholder Agreement substantially in the form of
EXHIBIT D attached hereto;
(ii) a Purchase Agreement substantially in the form of EXHIBIT
E attached hereto;
(iii) an Option Agreement substantially in the form of EXHIBIT H
attached hereto;
(iv) a License Agreement substantially in the form of EXHIBIT B
attached hereto; and
(v) an Assumption Agreement substantially in the form of
EXHIBIT G attached hereto.
(h) Any items which Seller is required to deliver under the terms of
the Transition Plan.
(i) The purchase orders required to be delivered by Seller pursuant
to Section 5.16.
Section 6.3 Closing Deliveries of Purchaser. At the Closing, Purchaser
-------------------------------
shall deliver to Seller:
(a) Incumbency certificates and copies, certified by the Secretary or
an Assistant Secretary of Purchaser, of resolutions of Purchaser's board of
directors authorizing the execution, delivery and performance of, and the
transactions contemplated by, this Agreement.
(b) Certificate dated the Closing Date and signed by a duly
authorized officer of Purchaser to the effect that all of the conditions set
forth in Section 8.1, Section 8.2 and Section 8.3 have been satisfied.
(c) Wire transfer of immediately available funds in the amount of
$25,000,000 (less any adjustments to the Purchase Price required under this
Agreement), payable to Seller pursuant to Section 2.4.
40
(d) A share certificate representing the Shares issued by Purchaser
and registered in the name of Seller.
(e) An opinion of counsel to Purchaser dated as of the Closing Date,
substantially in the form of EXHIBIT F attached hereto.
(f) All other documents to be entered into pursuant to this Agreement
requiring execution by Purchaser on or prior to the Closing Date, duly executed
by Purchaser, including but not limited to:
(i) a Shareholder Agreement substantially in the form of
EXHIBIT D attached hereto;
(ii) a Purchase Agreement substantially in the form of EXHIBIT
E attached hereto;
(iii) an Assumption Agreement substantially in the form of
EXHIBIT G attached hereto;
(iv) an Option Agreement substantially in the form of EXHIBIT H
attached hereto; and
(v) a License Agreement substantially in the form of EXHIBIT B
attached hereto.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
------------------------------------------------
The obligations of Purchaser to consummate the transactions contemplated in
this Agreement are subject to the satisfaction and fulfillment at or before the
Closing of each of the following conditions, unless waived by Purchaser:
Section 7.1 Accuracy of Representations and Warranties. All
------------------------------------------
representations and warranties of Seller made in or pursuant to this Agreement
or any document or instrument delivered to Purchaser hereunder shall be true and
correct in all material respects at and as of the Closing Date with the same
force and effect as though made at and as of the Closing Date.
Section 7.2 Performance. Seller shall have performed, observed and
-----------
complied in all material respects with all obligations and conditions required
by this Agreement to be performed, observed or complied with by Seller at or
prior to the Closing.
41
Section 7.3 No Litigation. No action, suit or proceeding before any
-------------
court or any governmental or regulatory authority in any jurisdiction and no
investigation by any governmental or regulatory authority in any jurisdiction
shall have been commenced, and no action, investigation, suit or proceeding
shall have been threatened by any governmental or regulatory authority or any
Person, against Seller, Purchaser, or the officers, shareholders, or directors
of any of them, seeking to restrain or prevent the transactions contemplated
hereby.
Section 7.4 Good Standing Certificates. Seller shall have provided to
--------------------------
Purchaser (a) a certificate issued by the Secretary of State of the State of New
York as of a date not more than thirty (30) days before the Closing Date,
stating that Seller is a corporation in good standing in New York, and (b) a
certificate issued by an appropriate authority as of a date not more than thirty
(30) days before the Closing Date, stating that Sub is a corporation in good
standing in Sweden.
Section 7.5 No Material Adverse Change. No material adverse change,
--------------------------
insofar as it relates to the Business, in the financial position, results of
operation or business of Seller or Sub shall have occurred since the date of the
most recent balance sheet included in the Financial Statements.
Section 7.6 Deliveries of Seller. The items required to be delivered by
--------------------
Seller under Section 6.2 shall have been delivered to Purchaser.
Section 7.7 Personnel. Purchaser shall have arranged to employ or
---------
otherwise engage, or Seller shall have arranged to retain and provide to
Purchaser (for a period of at least one year from the Closing Date) the
services of, such of Seller's or Sub's employees, consultants or other personnel
listed in the Key Employee List, all on such terms as shall be acceptable to
Purchaser, provided that such terms shall be at a cost to Purchaser which is no
greater than the terms of employment which Purchaser currently offers its own
employees who have similar titles, duties, positions and responsibilities as the
individuals listed on the Key Employee List.
Section 7.8 Financing. Purchaser shall have obtained all funds that are
---------
necessary to complete the transactions contemplated in this Agreement from such
financing sources, and upon such terms and conditions, as shall be acceptable to
Purchaser in Purchaser's sole discretion.
Section 7.9 Shareholder Approval. The Shareholder Approval shall have
--------------------
been obtained.
Section 7.10 Consents Obtained. All consents or approvals of any
-----------------
governmental authority or other third party that are necessary in order to
effectively and validly consummate the transactions contemplated hereby,
including conveyance of the Nonassignable Contracts, shall have been obtained.
42
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
---------------------------------------------
The obligations of Seller to consummate the transactions contemplated by
this Agreement are subject to the satisfaction and fulfillment at or before
the Closing, of each of the following conditions, unless waived by Seller.
Section 8.1 Accuracy of Representations and Warranties. All
------------------------------------------
representations and warranties of Purchaser made in or pursuant to this Purchase
Agreement or any document or instrument delivered to Seller hereunder shall be
true and correct in all material respects at and as of the Closing Date with
the same force and effect as though made at and as of the Closing Date.
Section 8.2 Performance. Purchaser shall have performed, observed and
-----------
complied in all material respects with all obligations and conditions required
by this Agreement to be performed, observed or compiled with by Purchaser at or
prior to the Closing.
Section 8.3 No Litigation. No action, suit or proceeding before any
------------
court or any governmental or regulatory authority in any jurisdiction, and no
investigation by any governmental or regulatory authority in any jurisdiction,
shall have been commenced, and no action, investigation, suit or preceding shall
have been threatened by any governmental or regulatory authority or any other
Person, against Purchaser, Seller, or the officers, shareholders or directors of
any of them, seeking to restrain or prevent the transactions contemplated
hereby.
Section 8.4 Good Standing Certificate. Purchaser shall have provided to
-------------------------
Seller a certificate issued by the Secretary of State of Texas as of a date not
more than thirty (30) days before the Closing Date, stating that Purchaser is in
good standing in such jurisdiction.
Section 8.5 Deliveries of Purchaser. The items required to be delivered
-----------------------
under Section 6.3 shall have been delivered to Seller.
Section 8.6 No Material Adverse Change. No material adverse change,
--------------------------
insofar as it relates to the business, financial position or results of
operation of Purchaser, shall have occurred since the date hereof.
Notwithstanding any other provision in this Agreement, for the purposes of this
Agreement (i) a decrease in the value or market price of any capital stock of
Purchaser, and (ii) the failure of any class or series of Purchaser's capital
stock to be listed on any securities exchange or quoted on any automated
inter-dealer quotation system, shall not by itself be deemed to be a material
adverse change relating to the business, financial position or results of
operation of Purchaser.
Section 8.7 Consents Obtained. All consents or approvals of any
-----------------
governmental authority or other third party that are necessary in order to
effectively and validly consummate the transactions contemplated hereby shall
have been obtained.
43
ARTICLE IX
CERTAIN LIABILITIES OF SELLER
-----------------------------
Section 9.1 Liabilities and Obligations. Seller shall retain and be
---------------------------
responsible for all of liabilities and obligations of Seller related to the
Business and the Transferred Assets other than the Assumed Liabilities.
Section 9.2 Bulk Transfer Laws. Purchaser hereby waives compliance with
------------------
any bulk transfer laws that may be applicable to the transactions contemplated
herein and in consideration therefor Seller shall indemnify Purchaser for any
liability that results therefrom in accordance with Article X.
ARTICLE X
INDEMNIFICATION LIMITATION OF LIABILITY
---------------------------------------
Section 10.1 Survival of Actions on Representations, Warranties and
------------------------------------------------------
Covenants. Except as provided in Section 5.2(d), representations, warranties and
---------
covenants contained herein shall not be deemed to be waived or otherwise
affected at any investigation at any time made by or on behalf of any party
hereto, whether before or after the Closing. The representations and warranties
made by Seller in Sections 3.5, 3.6, 3.8, 3.9, 3.15, 3.16, 3.20, 3.21, 3.23,
3.24, 3.25, 3.26 and 3.29 shall not survive Closing. All other representations
and warranties made by Seller and all representations and warranties made by
Purchaser pursuant to this Agreement (and in any agreement, certificate,
document or instrument delivered by or on behalf of either such party in
connection herewith) shall survive the Closing for a period of 12 months
following the Closing Date; provided, however, (a) the representations in
Sections 3.3, 3.30 and 3.31 shall survive the Closing and remain effective until
the fifth anniversary of the Closing Date, and (b) the representations and
warranties in Sections 3.13 and 3.14 shall survive the Closing and remain
effective until expiration of applicable statutes of limitations for claims that
might be asserted against Purchaser or Sub for matters related thereto. Any
claim for indemnification by Purchaser or Seller based on an alleged inaccuracy
in any such representation or warranty must be asserted in writing to the other
party within the period during which such representation or warranty survives,
or the claim shall be deemed waived and released. Unless otherwise contemplated
by this Agreement, all covenants made by Seller and Purchaser shall survive the
Closing indefinitely.
Section 10.2 Indemnification by Seller. Subject to the limitations set
-------------------------
forth in this Agreement, from and after the Closing Date, Seller shall indemnify
and hold harmless Purchaser, its subsidiaries, officers, shareholders and
directors, from and against any loss, cost, claim, damage, liability, expense
(including, without limitation, court costs and reasonable attorneys' and
accountants' fees and reasonable costs of investigation incurred in connection
with the defense of a claim) or obligation (hereinafter referred to collectively
as "Indemnifiable Damages") which they
44
or any of them may suffer or incur to the extent caused by or arising out of any
one or more of the following:
(a) any material inaccuracy in or breach of any of the Seller's
representations and warranties set forth herein (or in any agreement,
certificate, document or instrument delivered by or on behalf of Seller in
connection herewith) or the failure of Seller to perform in all material
respects any of its covenants or agreements set forth herein (or in any
agreement, certificate, document or instrument delivered by or on behalf of
Seller in connection herewith); provided, that Seller shall be obligated to
indemnify Purchaser for any inaccuracy or breach of Seller's representations or
warranties set forth in Section 3.7 only to the extent Seller or Sub knew of
such inaccuracy or breach at the time such representations or warranties were
made;
(b) liabilities or obligations of Seller related to or arising out of
Seller's ownership, use, possession or operation of the Transferred Assets and
the conduct of the Business by Seller prior to the Closing Date;
(c) any claim of infringement of any issued or pending patent,
trademark, trademark registration, or application, common law trademark,
copyright or copyright registration or application or similar right of any other
Person relating to the sale of products of the Business by Seller or Sub prior
to Closing, other than such claims which relate to modifications to such
products which were made to such products after the Closing;
(d) liabilities or obligations related to or involving any claim of
whatever nature asserted against Purchaser, or against any of the Transferred
Assets, by any Person (including but not limited to creditors of Seller or Sub)
by virtue of the failure by Seller to comply with any bulk sales law;
(e) any allegation that any information contained in (i) the Proxy
Statement or (ii) any other materials used by Purchaser in connection with the
Shareholder Approval which is supplied by Seller expressly for inclusion therein
is false or misleading with respect to any material fact contained therein, or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading; and
(f) liabilities and obligations of Seller retained by it under
Section 9.1.
Section 10.3 Indemnification by Purchaser. Subject to the limitations set
----------------------------
forth in this Agreement, from and after the Closing Date, Purchaser shall
indemnify and hold harmless Seller, its subsidiaries, officers, shareholders and
directors, from and against any Indemnifiable Damages which they or any of them
may suffer or incur to the extent caused by or arising out of any one or more of
the following:
(a) any inaccuracy in or breach of Purchaser's representations and
warranties set forth herein (or in any agreement, certificate, document or
instrument delivered by or on behalf of Purchaser in connection herewith) or
Purchaser's failure to perform in all material respects any of
45
its covenants or agreements set forth herein (or in any agreement, certificate,
document or instrument delivered by or on behalf of Purchaser in connection
herewith), including any failure to pay and perform the Assumed Liabilities when
and as due;
(b) any allegation that any information contained in (i) the Proxy
Statement, or (ii) any other materials used by Purchaser in connection with the
Shareholder Approval which is not supplied by Seller expressly for inclusion
therein is false or misleading with respect to any material fact contained
therein, or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; and
(c) liabilities or obligations related to or arising out of
Purchaser's ownership, use, possession or operation of the Transferred Assets
and the Business after the Closing Date, other than such liabilities or
obligations for which Purchaser has a right to be indemnified under this
Agreement.
Section 10.4 Limitation. Notwithstanding anything else contained herein
----------
to the contrary, neither Seller (on the one hand) nor Purchaser (on other hand)
shall be liable to indemnify the other for any Indemnifiable Damages hereunder
in respect of any inaccuracies in or breaches of representations and warranties
until the aggregate amount of such Indemnifiable Damages shall exceed $200,000,
and then only to the extent of such excess. There shall be no limit on the
aggregate amount of Indemnifiable Damages for which Seller shall be liable to
indemnify Purchaser as a result of all inaccuracies in or breaches of the
representations or warranties set forth in Section 3.13 or 3.14. The maximum
aggregate amount of Indemnifiable Damages for which Seller shall be liable to
indemnify Purchaser as a result of all inaccuracies in or breaches of the
representations or warranties set forth in Section 3.3, 3.30 or 3.31 shall be
$25,000,000. The maximum aggregate amount of Indemnifiable Damages for which
either Purchaser or Seller shall be liable to indemnify the other as a result of
all inaccuracies in or breaches of any of their other respective representations
or warranties set forth in, or delivered in connection with, this Agreement
(other than those previously described in this Section 10.4) shall be
$3,000,000.
Section 10.5 Settlement of Claims. Any party making a claim for
--------------------
indemnification under this Article X shall notify the indemnifying party or
parties of the claim in writing, describing the claim, the amount or estimated
amount thereof (if determinable), and the basis therefor. The party or parties
from whom indemnification is sought shall respond to each such claim within 30
days of receipt of such notice, unless the claim (a) relates to a lawsuit filed
by a third party, in which case the indemnifying party or parties shall respond
at least ten (10) days prior to the date a responsive pleading is due (but in no
event later than 30 days after receipt of such notice from the party seeking
indemnification), or (b) requires an immediate response, as in the case of a
cease and desist demand by a third party or a notice to show cause, in which
case the indemnifying party or parties shall respond in a prompt, timely manner
(but in no event later than 30 days after receipt of such notice from the party
seeking indemnification). In the event a response to a notice of claim involving
a third party claim is not timely made, a party seeking indemnification may
respond to such third party claim as it sees fit and seek indemnification
thereafter pursuant to the terms hereof. The omission of any party seeking
indemnification to notify the indemnifying party or parties of any such claim
46
shall not relieve the indemnifying party from any liability in respect of such
claim which it may have to the indemnified party pursuant to this Article X,
except, and only to the extent that, such failure shall result in material
prejudice to the indemnifying party or parties. If the claim is based on a claim
by a third party, the indemnifying party or parties will be entitled to
participate in the negotiation or administration thereof and, to the extent that
such claim relates to the liability of the indemnifying party or parties, to
assume the defense thereof with counsel reasonably satisfactory to the
indemnified party. Any indemnified party shall have the right to employ separate
counsel in any such action or claim and to participate in the defense thereto,
but the fees and expenses of such counsel shall not be at the expense of the
indemnifying party unless (i) the indemnifying party shall have failed to timely
assume the defense of such claim, or (ii) the employment of such counsel has
been specifically authorized by the indemnifying party in writing, or (iii) the
indemnifying party's counsel, in the reasonable opinion of the indemnifying
party's counsel, is prohibited under applicable rules of professional
responsibility from representing the interests of both parties in such defense.
In the case of the events referred to in clauses (i), (ii) or (iii) of the
preceding sentence, the fees and expenses of such counsel engaged by the
indemnified party shall be the expense of the indemnifying party. If the
indemnifying party or parties respond within the time period set forth above by
notifying the indemnified party that the indemnifying party or parties will
assume the defense of the claim, no indemnification payment shall be due until
the matter giving rise to the indemnity claim is resolved; provided, however,
that any costs and expenses incurred by the indemnified party prior to the
assumption of the defense of such claim shall be paid by the indemnifying party
promptly after notifying the indemnified party of the assumption of the defense.
If the indemnifying party or parties do not assume the defense of the claim, the
indemnified party may assume the defense and (i) receive advancement of costs
and expenses incurred by the indemnified party in connection with the defense of
such claim, and (ii) seek indemnification from time to time as the amount of the
claim for which it is entitled to be indemnified becomes liquidated.
Notwithstanding the foregoing, neither party shall pay, settle or compromise any
such claim or proceeding without the prior written approval of the other party,
which approval shall not be unreasonably withheld or delayed; provided, that the
indemnifying party or parties may pay, settle or compromise any such claim or
proceeding without the consent of the indemnified party to the extent such
payment, settlement or compromise requires solely the payment of money and is
solely the liability of the indemnifying party or parties and provides a full
release and dismissal of the indemnified party from such claim or proceeding. In
connection with any claims based on claims by third parties, the party claiming
indemnification shall cooperate reasonably in the defense, including making
available to the defending party all pertinent information under its control.
ARTICLE XI
GENERAL PROVISIONS
------------------
Section 11.1 Waiver of Conditions to Closing. Anything in this Agreement
-------------------------------
to the contrary notwithstanding, if one or more of the conditions specified in
Article VII hereof shall not have been satisfied, Purchaser shall have the
right, in addition to any other right which may be available to it, to waive
such condition in writing and proceed with the transactions contemplated hereby;
and if one or more of the conditions specified in Article VIII hereof shall not
have been satisfied, Seller shall
47
have the right, in addition to any other right which may be available to it, to
waive such condition in writing and proceed with the transactions contemplated
hereby. Any such waiver in writing by either Purchaser or Seller shall
constitute a waiver of its rights under the indemnification provisions of
Article X with respect to the item or items specifically identified in such
waiver.
Section 11.2 Termination. (a) This Agreement may be terminated at any
-----------
time prior to the Closing: (i) by mutual written consent of Purchaser and
Seller, (ii) by Purchaser in accordance with Section 5.2(a) or by either party
in accordance with Section 5.12 or Section 11.13; (iii) by either Purchaser or
Seller if the Closing shall not have occurred on or prior to the date which is
one hundred twenty (120) days after the Financial Statement Delivery Date (or
such later date as shall have been consented to by all parties hereto), unless
the failure of such occurrence shall be due to the failure of the party seeking
to terminate this Agreement to perform or observe in any material respect the
covenants, agreements and conditions hereunder to be performed or observed by
such party at or before the Closing; (iv) by either Purchaser or Seller if the
Closing shall not have occurred on or prior to December 31, 1996 (the "Final
Termination Date"), unless the Financial Statement Delivery Date occurs on a
date later than 30 days after the date of this Agreement, in which case the
Final Termination Date shall be postponed by a number of days equal to the
number of days by which the Financial Statement Delivery Date follows the date
which is 30 days after the date hereof, but in no event by more than 31 days
(i.e., no later than January 31, 1997); or (v) by Purchaser, on the one hand, or
Seller, on the other hand, if the other party hereto fails to perform or observe
in any material respect any of its covenants, agreements or conditions set forth
herein or if any representation or warranty given or made in this Agreement or
pursuant hereto by the other party was untrue in any material respect as of the
date given or made, unless the failure to satisfy such condition(s) shall be due
to the failure of the party seeking to terminate this Agreement to perform or
observe in any material respect the covenants, agreements and conditions
hereunder to be performed or observed by such party at or before the Closing.
(b) Notwithstanding the foregoing, if this Agreement is terminated
pursuant to Section 11.2(a)(iii), 11.2(a)(iv) or 11.2(a)(v) and such termination
is not due to the failure of Seller to perform or observe in any material
respect Seller's covenants, obligations or conditions set forth in this
Agreement, is not due to a breach of any Seller's representations or warranties
set forth in this Agreement and is not due to the failure by Seller to deliver
Financial Statements in a form which the SEC approves to be included in the
Proxy Statement, Purchaser shall be obligated to reimburse Seller for its
out-of-pocket expenses incurred in connection with the transactions contemplated
in this Agreement, up to a maximum aggregate amount of $250,000.
(c) If this Agreement is terminated by either party pursuant to
Section 11.2(a)(v) as a result of a breach of any of the party's representations
or warranties set forth in this Agreement, the other party shall be obligated to
reimburse the terminating party for all reasonable out-of-pocket expenses
incurred by the terminating party in connection with the transactions
contemplated in this Agreement, but the other party shall not otherwise have any
liability as a result of such breach.
48
(d) The provisions set forth in Sections 5.11(a), 5.11(c), 5.11(d),
11.2(b), 11.2(c), 11.6, 11.10, 11.11, and 11.12 shall survive termination of
this Agreement pursuant to Section 11.2(a). Termination of this Agreement
pursuant to Section 11.2(a), shall not relieve any party hereto from any
liability for any prior breach of, or a misrepresentation under, any
representation, warranty, covenant or other term of this Agreement and shall not
be deemed to constitute a waiver of any available remedy for any such breach or
misrepresentation.
Section 11.3 Notices. All notices, requests, demands, and other
-------
communications made hereunder shall be in writing and shall be deemed duly given
if delivered by hand or sent by registered or certified mail, postage prepaid,
return receipt requested, or by reputable overnight courier service, charges
prepaid to the respective address set forth below or to such other address as
any party may specify by notice to the others in accordance with this Section
11.3, or if telecopied to the recipient at such party's telecopy number set
forth below:
If to Seller, to: GE Medical Systems
Attention: Vice President-Manager, Finance
X.X. Xxx 000
Xxxxxxxxx, XX 00000
With a copy to: General Electric Company
Attention: Senior Counsel for Transactions
0000 Xxxxxx Xxxxxxxx
Xxxxxxxxx, XX 00000
If to Purchaser to: Positron Corporation
Attention: Chief Financial Officer
00000 Xxxx Xxx Xxxxx
Xxxxxxx, Xxxxx 00000
With a copy to: Xxxxxx & Xxxxxx L.L.P.
Attention: Xxxxxxx X. Xxxxxxx
3700 Xxxxxxxx Xxxx Center
0000 Xxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Notices shall be effective when received, as evidenced by the acknowledgment of
delivery issued with respect thereto by the postal authorities or the signed
receipt of the party to whom such notice is addressed or, if sent by telecopy,
by the transmission confirmation report.
Section 11.4 Amendment; Waiver. This Agreement may be amended only by an
-----------------
instrument in writing executed by each of the parties hereto. This Agreement
cannot be changed or terminated orally and no waiver of compliance with any
provisions or condition hereof and no
49
consent provided for herein shall be effective unless evidenced by an instrument
in writing duly executed by the party granting such waiver or consent.
Section 11.5 Successors and Assigns. This Agreement shall be binding
----------------------
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns. No party to this Agreement may assign or
transfer any of its rights or interests under this Agreement to any Person
without the prior written consent of each of the other parties to this
Agreement, and any purported assignment or transfer without such previous
written consent shall be void; provided, however, that at any time prior to
-------- -------
Closing, Purchaser may assign all or any portion of its rights or interests but
not its obligation under this Agreement to any Affiliate of Purchaser to the
extent necessary to allow the transfer from Seller of the Sub Shares or all or
any portion of the Transferred Assets, or the grant of the License, to such
Affiliate at Closing.
Section 11.6 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of New York.
Section 11.7 Invalid Provisions. If any provision of this Agreement is
------------------
held to be illegal, invalid or unenforceable under present or future laws
effective during the term of this Agreement, such provision shall be fully
severable; this Agreement shall be construed and enforced as if such illegal,
invalid, or unenforceable provision had never comprised a part hereof; and the
remaining provisions hereof shall remain in full force and effect and shall not
be affected by the illegal, invalid, or unenforceable provison or by its
severance herefrom. Furthermore, in lieu of such illegal, invalid, or
unenforceable provision, there shall be added automatically as a part of this
Agreement a provision as similar in terms to such illegal, invalid, or
unenforceable provision as may be possible and be legal, valid, and enforceable.
Section 11.8 Entire Agreement. This Agreement supersedes and terminates
----------------
all previous written or oral negotiations, understandings, arrangements and
agreements between the parties hereto relating to the subject matter hereof.
Section 11.9 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
Section 11.10 Remedies. Except to the extent that liabilities of the
--------
parties hereto are limited by the terms of this Agreement or matters are
otherwise addressed in this Agreement, all rights and remedies existing under
this Agreement are cumulative to, and not exclusive of, any rights or remedies
otherwise available under applicable law (it being understood that the provision
of this Agreement set forth the exclusive remedies for a breach of the
representations and warranties set forth in Articles III and IV and a breach of
the covenants set forth in Section 5.1). No failure on the part of any party to
exercise, or delay in exercising, any right hereunder shall be deemed a waiver
thereof, nor shall any single or partial exercise preclude any further or other
exercise of such or any other right. Purchaser and Seller shall be entitled to
seek any equitable remedy to the extent such remedy is available under
applicable law.
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Section 11.11 Dispute Resolution.
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(a) Mediation. If a dispute arises between the parties which cannot
---------
be resolved by negotiation, each of Seller and Purchaser agree to designate two
representatives to participate in at least four hours of mediation before
pursuing any other remedies. The mediation shall be conducted by the New York
office of United States Arbitration & Mediation, Inc. or another mutually
acceptable service, with the costs of the mediator equally split by the parties.
Mediation involves each side of a dispute conferring with an impartial person to
attempt to reach a voluntary settlement, with no formal court procedures or
rules of evidence and with the mediator having no power to render a binding
decision or force an agreement between the parties.
(b) Arbitration Proceedings. If the matter has not been resolved
-----------------------
pursuant to the foregoing procedures within thirty (30) days after the first
meeting of the parties' designated representatives (which period may be extended
by mutual agreement), the matter shall be referred to arbitration conducted in
accordance with the provisions of the Federal Arbitration Act (9 U.S.C. (S)(S)
1-16), and in accordance with the Center for Public Resources, Inc.'s Rules (the
"Rules of Arbitration") for Non-Administered Arbitration of Business Disputes,
by a single arbitrator selected in accordance with such Rules of Arbitration.
The arbitrator to be selected under this Section 11.11 shall, unless the parties
mutually agree otherwise, be a person: (i) who meets the qualifications set
forth in Rule 7 of the Rules of Arbitration; and (ii) who has past experience in
settling complex litigation involving claims relating to matters similar to
those set forth in this Agreement. Any discovery that may be permitted will be
limited to (i) 60 days, (ii) single depositions of no more than three
individuals per side who are directly involved, and (iii) a single, reasonable
request for directly relevant documents.
(c) Place of Arbitration. Any arbitration proceedings hereunder shall
--------------------
be conducted in New York, New York or at such other location as the parties may
agree.
(d) Judgments. Any arbitration award hereunder shall be final and
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binding upon the parties, and judgment may be entered thereon, upon the
application of either party, by any court having jurisdiction.
(e) Expenses. Each party shall be entitled to be reimbursed by the
--------
other party for costs and expenses incurred in connection with commencing any
action under this Section 11.11, including reasonable attorneys' fees and
arbitrators' fees, if and to the extent determined by the arbitrator or
arbitrators arbitrating any such action.
(f) Equitable Remedies. Notwithstanding anything else in this Section
------------------
11.11 to the contrary, Purchaser and Seller shall be entitled to seek any
equitable remedies available under applicable law from any court of competent
jurisdiction, and the order or judgment of any such court shall be binding in
any proceeding pursuant to this Section 11.11.
(g) Court Proceedings. At any time within 15 days after a final
-----------------
resolution of a dispute through arbitration as provided above, either party (the
"Rejecting Party") may, by notice
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to the other, reject the decision of the arbitrator. If neither party rejects
the arbitral decision within such 15 day period, it shall become valid,
binding, enforceable and irrevocable, to the maximum extent allowed by law. If
the arbitral decision is rejected, it shall have no force or effect, except as
provided below, and either party may commence an action to resolve such
dispute in the Commercial Division (or, if recourse to such division is not
available for any reason, in the appropriate division) of the New York State
court in New York County (the "Court"). The parties submit to the exclusive
jurisdiction of the Court for this purpose, agree not to pursue trial of a
dispute in any other court, waive any right to trial by jury, and stipulate that
discovery shall be limited, to the extent permitted by the Court, to an
additional round of discovery as described above in paragraph (b). Evidence
obtained in the arbitration proceeding, including the transcript thereof, will
be admissible as evidence in the Court, but no evidence that indicates the
result of the arbitration shall be admissible in the Court, and no delay
occasioned by the arbitration proceedings will be used to the prejudice of any
party in Court proceedings. If the ultimate resolution of the dispute in the
Court and any appeal therefrom (an "Ultimate Resolution") is not materially more
favorable to the Rejecting Party than the arbitral decision, then the Rejecting
Party shall, within 3 days from the date of such Ultimate Resolution, reimburse
the other party for all of its out-of-pocket costs and attorney's fees for the
arbitration, the COurt proceeding and any appeal therefrom. If the Ultimate
Resolution is materially more favorable to the Rejecting Party, then each party
will bear its own costs and attorney's fees, subject to any allocation by the
Court or appellate court, and any allocation of costs (but not the decision on
the merits) in the arbitral decision will be given effect. For purposes of this
paragraph (g), an Ultimate Resolution which involves solely the grant of
damages, costs and/or attorney's fees shall not be deemed materially more
favorable to the Rejecting Party unless, as applicable (i) the net aggregate
amount of such damages, costs and/or attorney's fees awarded to the Rejecting
Party in the Ultimate Resolution exceeds 110% of the net aggregate amount of
damages, costs and/or attorney's fees awarded to the Rejecting Party in the
arbitral decision, or (ii) the net aggregate amount of such damages, costs
and/or attorney's fees assessed against the Rejecting Party in the Ultimate
Resolution is less than 85% of the net aggregate amount of damages, costs and/or
attorney's fees assessed against the Rejecting Party in the arbitral proceeding.
(h) Damages. No party shall seek, and no arbitrator or Court shall
-------
be authorized to award, any punitive, exemplary, statutorily enhanced or similar
damages in excess of compensatory damages relating to any matter under, arising
out of, in connection with or relating to this Agreement in the arbitration or
Court proceedings set forth herein or in any other forum. The parties intend
that this agreement with regard to dispute resolution be valid, binding,
enforceable and irrevocable.
(i) Other Transaction Documents. The provisions of this Section
---------------------------
11.11 shall apply to any dispute under any other Transaction Document unless
expressly provided to the contrary therein.
Section 11.12 Expresses. Unless otherwise expressly set forth in this
---------
Agreement, Purchaser and Seller shall each bear its own respective accounting
and legal fees and other costs and expenses incurred in connection with the
negotiation and preparation of this Agreement and the consummation of the
transactions contemplated in this Agreement.
52
Section 11.13 Disclosure Schedules, Transferred Assets. Notwithstanding
----------------------------------------
any other provision set forth in this Agreement, Seller shall at any time prior
to the date which is fifteen (15) days after the date of this Agreement have the
right to provide to Purchaser a revised version of Appendix I, Appendix II and
any of the Schedules to this Agreement described in Article III. In addition,
Purchaser shall at any time prior to the date which is fifteen (15) days after
the date of this Agreement have the right to provide to Seller a revised version
of any of the Schedules to this Agreement described in Article IV. Each party to
this Agreement shall have the right, in its sole and absolute discretion, to
terminate this Agreement by giving written notice of such termination delivered
to the other party within five (5) days after receiving any revised Appendix or
Schedule delivered pursuant to this Section 11.13. Any revised version of
Appendix I and Appendix II and any revised version of any of the Schedules to
this Agreement delivered pursuant to this Section 11.13 shall be deemed to have
been delivered on the date of this Agreement; provided, that such delivery shall
not limit or affect in any way Purchaser's right to terminate this Agreement
pursuant to Section 5.2(a).
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and their corporate seals to be affixed hereto and attested by their duly
authorized officers by authority duly given, all as of the date first above
written.
GENERAL ELECTRIC COMPANY
By:/s/ Xxxxx X. Xxxxxx
----------------------------------------
Name: Xxxxx X. Xxxxxx
-----------------------------------
Title: Vice President Finance
----------------------------------
ATTEST: Financial Services
[SIGNATURE ILLEGIBLE] GE Medical Systems
-------------------------------
[ILLEGIBLE] Secretary
------------
[Corporate seal]
POSITRON CORPORATION
By:/s/ Xxxx X. Xxxx
----------------------------------------
Name: Xxxx X. Xxxx
-----------------------------------
Title: Chairman
----------------------------------
ATTEST:
/s/ Xxxxx Xxxxxxxx
-------------------------------
_________ Secretary
[Corporate seal]
54
