STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (as amended, this "Agreement") dated
as of October 12, 1999 by and between EXTREME COMFORT, INC., an Oregon
corporation (the "Company"), the stockholders of the Company listed in Schedule
1 (each a "Stockholder" and collectively, the "Stockholders") and XXXXXX
TECHNOLOGIES, INC., a Delaware corporation ("Buyer").
RECITALS
1. The Stockholders own all of the issued and outstanding common stock, no
par value per share (the "Common Stock"), of the Company.
2. Buyer and the Company executed a letter of interest on August 26, 1999
contemplating the sale by the Stockholders to Buyer of the Common Stock (the
"Purchase") in exchange for the Aggregate Purchase Consideration, pursuant to
the terms of this Agreement.
3. The parties desire to make certain representations, warranties and
covenants in connection with and to prescribe various conditions to the
Purchase.
Accordingly, the parties agree as follows:
I. DEFINITIONS
I.1. Definitions. In addition to the terms defined elsewhere in this
Agreement, the terms set forth in Appendix A to this Agreement, as used in this
Agreement, have the meanings set forth in Appendix A when used in this Agreement
with initial capital letters.
II. AGGREGATE PURCHASE CONSIDERATION AND CLOSING PAYMENTS
II.1. Purchase of Common Stock. On the terms and subject to the conditions
of this Agreement, at the Closing, Buyer will purchase from each Stockholder and
each Stockholder will sell, assign, transfer and deliver ("Transfer") to Buyer,
the Common Stock owned by such Stockholder. The Stockholders will deliver to
Buyer the certificates representing the Common Stock, duly endorsed in blank, or
accompanied by stock powers duly executed in blank, by each Stockholder
Transferring the same to Buyer with all necessary transfer tax and other revenue
stamps, acquired at such Stockholder's expense, affixed and canceled. Each
Stockholder will cure any deficiencies with respect to the endorsement of the
certificates representing the Common Stock owned by such Stockholder or with
respect to the stock power accompanying any such certificates.
II.2. Purchase Price. In consideration for the Transfer by the Stockholders
of the Common Stock to Buyer, Buyer will deliver to the Stockholders the
Aggregate Purchase Consideration in accordance with the terms of this Agreement.
At the Closing, Buyer will deliver to the Stockholders 40,000 shares, in the
aggregate, of Buyer Stock (such shares of Buyer Stock, together with the Net
Proceeds Amount, are referred to herein as the "Purchase Price"). Buyer will
deliver to each Stockholder a stock certificate issued in the name of such
Stockholder representing the number of shares of Buyer Stock set forth across
from such Stockholder's name in Schedule 2.2.
II.3. Net Proceeds Amount. (a) At the Closing, each Stockholder listed in
Schedule 2.3(a) will deliver to Buyer evidence, in form satisfactory to Buyer,
that such Stockholder has contributed to the capital of the Company its
outstanding debt claim against the Company, as set forth in Schedule 2.3(a).
(b)(i) Within 30 days after Buyer's preparation of unaudited financial
statements covering the period commencing on the Closing Date and ending
December 31, 2002 (the "Net Proceeds Period") and certification thereof by
Buyer's Chief Financial Officer, which Buyer shall use reasonable efforts
to complete within 30 days after the end of the Net Proceeds Period, Buyer
will prepare and deliver to the Stockholders' Representative a statement of
Net Cash Proceeds and Annual Net Earnings for the Net Proceeds Period
(pro-rated for partial years) (the "Net Proceeds Statement"). The Net
Proceeds Statement will be prepared in accordance with GAAP and will be
subject to the review, dispute and final determination procedures set forth
in this Section 2.3(b). If, within 30 days after the date of Buyer's
delivery of the Net Proceeds Statement, the Stockholders' Representative
does not object to the preparation of the Net Proceeds Statement or the
determination of Net Cash Proceeds and Annual Net Earnings thereunder, then
such failure to object will constitute the final and binding acceptance of
Buyer's preparation of the Net Proceeds Statement.
(ii) Subject to Section 2.3(c), within 45 days after the final
determination of the Net Proceeds Statement pursuant to this Section
2.3(b), Buyer will deliver to the Stockholders' Representative (for the
benefit of the Stockholders listed on Schedule 2.3(a) the applicable amount
(the "Net Proceeds Amount") set forth below under the caption entitled "Net
Proceeds Amount":
Net Cash Proceeds Net Proceeds Amount
----------------- -------------------
o If Net Cash Proceeds, as calculated in the 10% of Annual Net Earnings, as calculated in the
Net Proceeds Statement, are equal to or Net Proceeds Statement
greater than $556,796.62
o If Net Cash Proceeds, as calculated in 10% of Annual Net Earnings, as caluculated in the
the Net Proceeds Statement are less than Net Proceeds Statement, multiplied by a factor,
$556,796.62 the numerator of which shall be the amount of
Net Cash Proceeds and the denominator of
which shall be $556,796.62
The Net Proceeds Amount will be payable to the Stockholders' Representative in
cash by wire transfer in immediately available funds to the account specified by
the Stockholders' Representative at least three (3) Business Days in advance of
such payment; provided, however, that, notwithstanding the foregoing, in no
event will the Net Proceeds Amount exceed $434,424.64.
(iii) If, within 30 days after the date of Buyer's delivery of the Net
Proceeds Statement, the Stockholders' Representative determines in good
faith that the Net Proceeds Statement has not been prepared and determined
in accordance with this Agreement, the Stockholders' Representative will
give written notice to Buyer within such 30 day period (1) setting forth
the Stockholders' Representative's proposed changes to the Net Proceeds
Statement as prepared by Buyer and the determination by the Stockholders'
Representative of Net Cash Proceeds and Pre-Tax Earnings and (ii)
specifying in detail the Stockholders' Representative's basis for
disagreement with Buyer's preparation and determination of the Net Proceeds
Statement. If Buyer and the Stockholders' Representative are unable to
resolve any disagreement between them with respect to the preparation of
the Net Proceeds Statement within 30 days after the giving of notice by the
Stockholders' Representative to Buyer of such disagreement, the items in
dispute will be referred for determination to a nationally recognized "Big
5" accounting firm reasonably satisfactory to the Stockholders'
Representative and Buyer (who does not have any material relationship with
any of the Stockholders or Buyer) (the "Accountants") as promptly as
practicable, but not later than five days after the expiration of such 30
day period. Buyer and the Stockholders' Representative will use reasonable
efforts to cause the Accountants to render their decision as soon as
practicable thereafter, including, without limitation, by promptly
complying with all reasonable requests by the Accountants for information,
books, records and similar items. The parties will instruct the Accountants
to make a determination as to each of the items in dispute (but only those
items in dispute) (A) in writing, (B) as promptly as practicable after the
items in dispute have been referred to the Accountants (but in no event
later than 30 days thereafter), and (C) in accordance with this Agreement.
The Accountants' determination will be conclusive and binding upon each of
the parties hereto. Nothing herein will be construed to authorize or permit
the Accountants to determine (i) any question or matter whatsoever under or
in connection with this Agreement, except the determination of what
adjustments, if any, must be made in one or more disputed items reflected
in the Net Proceeds Statement delivered by Buyer in order for the Net Cash
Proceeds and Pre-Tax Earnings to be determined in accordance with the
provisions of this Agreement, or (ii) a computation of the Net Cash
Proceeds and Pre-Tax Earnings that is not equal to one of, or between, the
Net Cash Proceeds and Pre-Tax Earnings as determined by the Stockholders'
Representative and as determined by Buyer. The fees and expenses of the
Accountants will be paid by the party whose last written settlement offer
related to all items in dispute, in the aggregate, submitted to the
Accountants upon the referral of the matter to the Accountants in
accordance with this Section 2.3(b) (each, a "Last Offer") varies by the
greatest absolute amount from the determination by the Accountants of all
such disputed items. No party will disclose to the Accountants, and the
Accountants will not consider for any purpose, any settlement discussions
or settlement offer (other than the Last Offer) made by any party.
(iv) During the period that the Stockholders' Representative's
advisers and personnel are conducting their review of Buyer's preparation
of the Net Proceeds Statement and determination of the Net Cash Proceeds
and Pre-Tax Earnings, the Stockholders' Representative and its
representatives will have reasonable access during normal business hours to
the work papers prepared by or on behalf of Buyer and its representatives
in connection with Buyer's preparation of the Net Proceeds Statement;
provided, however, that the Stockholders' Representative will conduct such
review in a manner that does not unreasonably interfere with the conduct of
the business of Buyer or result in substantial out-of-pocket costs to
Buyer. To the extent any such work papers are in the control of the
Stockholders or the Stockholders' Representative after the Closing, the
Stockholders or the Stockholders' Representative, as the case may be, will
grant Buyer and its representatives reciprocal access rights for the
purpose of finalizing the preparation of the Net Proceeds Statement. The
Stockholders, the Stockholders' Representative and Buyer agree in good
faith to use all reasonable efforts to provide such information and access
described in this Section 2.3(b)(iv).
(c) Notwithstanding anything to the contrary in Section 2.3(b)(ii),
(i) the Net Proceeds Amount shall not be payable by Buyer until the
earlier to occur of (A) the date of termination of the Xxxxxxx Licensing
Agreement, (B) the date on which Buyer and the Company receive written
notice from the licensor under the Xxxxxxx Licensing Agreement that such
licensor has released the Company from its obligation to pay the Xxxxxxx
Contingent Payment, or (C) the date on which the Stockholders listed on
Schedule 2.3(a) execute and deliver to Buyer a written agreement whereby
such Stockholders, jointly and severally, agree to indemnify Buyer against
any and all claims arising out of or in connection with the Xxxxxxx
Contingent Payment, upon such terms and conditions as are mutually
acceptable to Buyer and such Stockholders; and
(ii) the Net Proceeds Amount shall be reduced as follows:
(A) by an amount equal to 50% of the amount of the Company's legal
expenses paid by Buyer pursuant to Section 9.4; and
(B) in the event that the Xxxxxxx Contingent Payment becomes due and
payable, by an amount equal to the Xxxxxxx Contingent Payment plus the
amount of any legal expenses incurred by Buyer or the Company in connection
therewith.
II.4. Xxxxxxx Debt. At the Closing, Buyer will pay in full the Company's
outstanding debt obligations set forth in Schedule 2.4 to the Stockholder set
forth therein by delivery to such Stockholder of an amount in cash equal to the
amount of such debt obligations, payable to such Stockholder by wire transfer in
immediately available funds to the account specified at least two (2) Business
Days prior to the Closing Date by such Stockholder. Such payment by Buyer shall
constitute the complete discharge and cancellation of such debt obligations of
the Company.
II.5. Earnouts. As further consideration for the Transfer of the Common
Stock to Buyer, the Stockholders will be eligible to receive the following
additional consideration on the following terms and conditions:
(a) For each calendar year ended 2000 through 2003, within 30 days
after Buyer's preparation of unaudited financial statements of the Company
for each such calendar year and certification thereof by Buyer's Chief
Financial Officer, which Buyer shall use reasonable efforts to complete
within 30 days after the end of each such calendar year, Buyer will prepare
and deliver to the Stockholders' Representative a statement of Annual Sales
and Annual Net Earnings for each such calendar year, respectively (each an
"Earnout Statement"). The Earnout Statements will be prepared in accordance
with GAAP and will be subject to the review, dispute and final
determination procedures set forth in Section 2.3(b).
(b)(i) If, after the final determination of any Earnout Statement
pursuant to Section 2.5(a), Annual Sales, as calculated in such Earnout
Statement, are equal to or greater than $2.5 million, then within 45 days
after such final determination, Buyer shall deliver to the Stockholders'
Representative (for the benefit of the Stockholders) 5,000 shares of Buyer
Stock (the "Sales Earnout") in the manner set forth in Section 2.5(d);
provided, however, that once Buyer has delivered the Sales Earnout with
respect to any Earnout Statement, no further Sales Earnout shall be
deliverable to the Stockholders' Representative (for the benefit of the
Stockholders) and Buyer's obligation to prepare and deliver any Earnout
Statement under Section 2.5(a) with respect to the calculation of Annual
Sales shall cease.
(ii) If, after the final determination of all Earnout Statements
pursuant to Section 2.5(a), Annual Sales, as calculated in each such
Earnout Statement, respectively, are less than $2.5 million, Buyer shall
have no obligation to deliver any Buyer Stock in respect of the Sales
Earnout.
(c)(i) If, after the final determination of any Earnout Statement
pursuant to Section 2.5(a), Net Earnings, as calculated in such Earnout
Statement, are equal to or greater than $825,000, then within 45 days after
such final determination, Buyer shall deliver to the Stockholders'
Representative (for the benefit of the Stockholders) 5,000 shares of Buyer
Stock (the "Net Earnings Earnout") in the manner set forth in Section
2.5(d); provided, however, that once Buyer has delivered the Net Earnings
Earnout with respect to any Earnout Statement, no further Net Earnings
Earnout shall be deliverable to the Stockholders' Representative (for the
benefit of the Stockholders) and Buyer's obligation to prepare and deliver
any Earnout Statement under Section 2.5(a) with respect to the calculation
of Net Earnings shall cease.
(ii) If, after the final determination of all Earnout Statements
pursuant to Section 2.5(a), Net Earnings, as calculated in each such
Earnout Statement, respectively, are less than $825,000, Buyer shall have
no obligation to deliver any Buyer Stock in respect of the Net Earnings
Earnout.
III. CLOSING AND CLOSING DELIVERIES
III.1. Closing. The closing of the Purchase (the "Closing") will take place
at the offices of Xxxxx, Day, Xxxxxx & Xxxxx located at 000 Xxxxxxxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx, at 10:00 a.m. New York time, on October 15, 1999, or on such
other date and at such other location as the parties may mutually agree (the
date on which the Closing occurs is referred to herein as the "Closing Date").
III.2. Closing Deliveries. In addition to the deliveries provided for in
Article II, at the Closing, the parties will deliver the other agreements,
instruments and certificates provided for in Article VII.
III.3. Proceedings. Except as otherwise specifically provided for in this
Agreement, all proceedings that will be taken and all documents that will be
executed and delivered by the parties hereto on the Closing Date will be deemed
to have been taken and executed simultaneously, and no proceeding will be deemed
taken nor any document executed and delivered until all have been taken,
executed and delivered.
IV. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDERS
IV.1. Representations and Warranties of the Company. Each of the Company
and the Stockholders jointly and severally represents and warrants, as of the
date hereof and the Closing Date, to Buyer as follows:
IV.1.1. Corporate Existence and Power. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of
the State of Oregon. The Company has all corporate power and all
governmental licenses, authorizations, permits, consents and approvals
required to carry on its business as now conducted. The Company is duly
qualified to do business as a foreign corporation and is in good standing
in each jurisdiction where such qualification is necessary except for those
jurisdictions where the failure to be so qualified or in good standing
would not, individually or in the aggregate, have a material adverse
effect. The Company has delivered to Buyer true and complete copies of its
certificate of incorporation and bylaws as currently in effect.
IV.1.2. Corporate Authorization; Enforceability. The execution,
delivery and performance by the Company of this Agreement and each of the
Ancillary Agreements to which it will be a party at the Closing are within
the Company's corporate powers and will have been duly authorized by all
necessary corporate action on the part of the Company. This Agreement has
been and each of the Ancillary Agreements to which the Company will be a
party at the Closing, will have been duly executed and delivered by the
Company and are valid and binding obligations of the Company, enforceable
against the Company in accordance with their respective terms.
IV.1.3. Governmental Authorization. The execution, delivery and
performance by the Company of this Agreement and each Ancillary Agreement
to which the Company will be a party at the Closing require no action by or
in respect of, or filing with, any Governmental Authorities.
IV.1.4. Non-Contravention; Consents. Except as disclosed on Schedule
4.1.4, the execution, delivery and performance by the Company of this
Agreement and each Ancillary Agreement to which the Company will be a party
at the Closing will not (a) violate the articles of incorporation or bylaws
or comparable organizational documents of the Company, (b) violate any
applicable Law or Order, (c) require any filing with or permit, consent or
approval of, or the giving of any notice to, any Person (including filings,
consents or approvals required under any permits of the Company or any
licenses to which the Company is a party), (d) result in a violation or
breach of, conflict with, constitute (with or without due notice or lapse
of time or both) a default under, or give rise to any right of termination,
cancellation or acceleration of any right or obligation of, the Company or
to a loss of any benefit to which the Company is entitled under any
agreement or other instrument binding upon, the Company or any license,
franchise, permit or other similar authorization held by the Company, or
(e) result in the creation or imposition of any Lien on any asset of the
Company, except in the case of clauses (c), (d) and (e) for such filings,
permits, consents, approvals or notices and violations, breaches, conflicts
and Liens which, individually or in the aggregate could not reasonably be
expected to have a material adverse effect.
IV.1.5. Capitalization; No Subsidiaries. (a) The authorized capital of
the Company consists of 2,000 shares of Common Stock, of which 1,745.835
shares of Common Stock are validly issued and outstanding, fully paid and
nonassessable. The Common Stock is duly authorized and, when delivered to
Buyer in accordance with this Agreement, will be validly issued and
outstanding, fully paid and nonassessable and free and clear of any Lien or
other limitation or restriction (including any restriction on the right to
vote, sell or otherwise dispose of such shares, subject to applicable
securities laws).
(b) There are no outstanding (1) shares of capital stock or other
securities of the Company, (ii) securities of the Company convertible into
or exchangeable for shares of capital stock or other securities of the
Company, or (iii) options or other rights to acquire from the Company, or
other obligation of the Company to issue, any capital stock, other
securities or securities convertible into or exchangeable for capital stock
or other securities of the Company (the items in clauses (i), (ii), and
(iii) being referred to collectively as the "Company Securities"). There
are no outstanding obligations of the Company to repurchase, redeem or
otherwise acquire any Company Securities.
(c) The Company has no subsidiaries and does not own of record or
beneficially (i) any shares of capital stock or voting securities or any
other equity interest in any other Person or (ii) any participating or
other interest in any partnership, joint venture or other non-corporate
business enterprise.
IV.1.6. Financial Statements; Books and Records. (a) Copies of the
Financial Statements have been delivered to Buyer. Except as set forth in
Schedule 4.1.6, the Financial Statements fairly present the financial
position of the Company as of the dates thereof and its results of
operations and changes in financial position for the periods then ended in
conformity with GAAP.
(b) There have been no changes in the Company's reserve or accrual
amounts or policies since August 31, 1999.
(c) All accounts, books, ledgers and official and other records
material to the business of the Company have been fully, properly and
accurately kept and compiled, and there are no material inaccuracies or
discrepancies contained or reflected therein. Except as set forth in
Schedule 4.1.6, the Company's books of account have been kept in conformity
with GAAP.
IV.1.7. No Undisclosed Liabilities. There are no material liabilities
of the Company of any kind whatsoever, whether accrued, contingent,
absolute, determined, determinable or otherwise, and there is no existing
condition, situation or set of circumstances which could reasonably be
expected to result in such a material liability, other than:
(a) liabilities provided for in the Financial Statements or disclosed
in the notes thereto;
(b) liabilities disclosed on Schedule 4.1.7.
(c) liabilities incurred in the ordinary course of business consistent
with past practices after the Interim Balance Sheet Date; and
(d) liabilities reasonably incurred in connection with the
transactions contemplated by this Agreement.
IV.1.8. Intercompany Accounts. Schedule 4.1.8 contains a complete list
of all intercompany balances as of August 31, 1999 between any Stockholder
and such Stockholder's Affiliates, on the one hand, and the Company, on the
other hand. Other than (a) as disclosed on Schedule 4.1.8 and (b)
compensation paid in the ordinary course consistent with past practice,
since such date, there has not been any accrual of liability by the Company
to any Stockholder or such Stockholder's Affiliates or other transaction
between the Company and any Stockholder and such Stockholder's Affiliates
or any action taken (other than this Agreement) which could reasonably be
expected to result in any such accrual, or the incurrence of any legal or
financial obligation to any such Person, after the Closing Date.
IV.1.9. Accounts Receivable and Inventory. (a) All accounts receivable
reflected in the Financial Statements (net of reserves set forth therein)
and all accounts receivable which have arisen since the Interim Balance
Sheet Date (net of additional reserves established since then, none of
which are material) are valid and enforceable claims, and the goods sold
and delivered which gave rise to such accounts receivable were sold and
delivered in accordance with the applicable purchase orders, agreements and
specifications. Such accounts receivable are subject to no defenses,
offsets or recovery and are fully collectible in the ordinary course of
business without resort to legal proceedings except to the extent of the
amount of the reserve for doubtful accounts reflected on the Financial
Statements.
(b) Except as set forth on Schedule 4.1.9(b), all inventories
reflected on the Financial Statements (net of reserves set forth thereon)
and all inventories which have been acquired since the Interim Balance
Sheet Date (net of reserves established since such date, none of which is
material) are carried in accordance with GAAP at lower of cost or market,
are in good condition and are not obsolete (as determined in accordance
with industry standards). The amount and mix of items in the inventories of
supplies, in-process and finished products are consistent with the past
business practices of the Company.
IV.1.10. Accounts Payable. Schedule 4.1.10. sets forth a true and
correct "aged" list of all accounts payable of the Company as of September
30, 1999.
IV.1.11. Properties. (a) The Company does not own any real property.
Except as set forth in Schedule 4.1.11, the Company has good title to, or
in the case of leased property has valid leaseholds in, all of its property
and assets (whether real or personal, tangible or intangible), including
without limitation, those properties and assets reflected on the Financial
Statements, free and clear of all Liens, except for (i) Liens identified on
the Financial Statements, (ii) Liens for Taxes not yet due, (iii) Liens
which do not materially detract from the value or materially interfere with
any present or intended use of such property or assets, or (iv) mechanics',
workmen's, repairmen's or other similar Liens arising or incurred in the
ordinary course of business.
(b) The assets owned or leased by the Company, or which it otherwise
has the right to use, constitute all of the assets held for use or used in
connection with the business of the Company and are sufficient for the
conduct of the Company's business as currently conducted.
IV.1.12. Intellectual Property. (a) Schedule 4.1.12(a) identifies all
Intellectual Property Rights and all licenses, sublicenses and other
written agreements to which the Company is a party and pursuant to which
any Person is authorized to use such Intellectual Property Rights,
including the identity of all parties thereto. As used in this Agreement,
the term `Intellectual Property Rights" means any trademark, service xxxx,
trade name, invention, license, patent, trade secret, copyright, know-how
(including any registrations or applications for registration of any of the
foregoing), in each case which is owned, licensed, used or held for use in
connection with the conduct of the business of the Company as now
conducted. The Company has the valid right to use the Intellectual Property
Rights in the conduct of its business and such Intellectual Property Rights
are sufficient for the conduct and development of the Company's business as
currently conducted and as presently contemplated by the Company to be
conducted in the future.
(b) Except as set forth in Schedule 4.1.12(b):
(i) The Company has not been sued or charged with or been a defendant
in any claim, suit, action or proceeding relating to its business that is
either pending or, to the knowledge of the Company, threatened, that
involves a claim of infringement by the Company or any of its Affiliates of
any trademark, service xxxx, trade name, invention, patent, trade secret,
copyright, know-how or any other similar type of proprietary intellectual
property right of any other Person and the Company has no knowledge of any
basis for any such claim of infringement, including with respect to the
future development of the Company's business as presently contemplated, by
any other Person of any Intellectual Property Rights;
(ii) To the knowledge of the Company, there is no unauthorized use,
infringement or misappropriation or any continuing infringement of any of
the Intellectual Property Rights by any other Person, including any
employee, former employee, supplier, licensee, customer or Affiliate of the
Company.
(iii) The Company is not in violation of any license, sublicense or
other agreement in respect of which the Company is a party and pursuant to
which it is authorized to use any Intellectual Property Rights or any other
trademarks, service marks, trade names, inventions, patents, trade secrets,
copyrights, know-how or any other similar type of proprietary intellectual
property rights of any other Person.
(iv) No Intellectual Property Right is subject to any outstanding
order, judgment, decree, stipulation or agreement restricting the use
thereof by the Company or restricting the licensing thereof by the Company
to any Person;
(v) The Company has not entered into any agreement to indemnify any
other Person against any charge of infringement of any trademark, service
xxxx, trade name, invention, patent, trade secret, copyright, know-how or
any other similar type of proprietary intellectual property right; and
(vi) There are no trade secrets, unpatented inventions or other
confidential know-how of the Company, the value of which to the Company is
contingent upon maintenance of the confidentiality thereof, that are not
subject to confidentiality agreements between the Company and its
employees, consultants and suppliers.
IV.1.13. Contracts. (a) Except as disclosed in Schedule 4.1.13(a), the
Company is not a party to or bound by:
(i) any lease or sublease of real or personal property or;
(ii) any agreement for the purchase of materials, supplies, goods,
services, equipment or other assets that provides for payments by the
Company in any one year of $10,000 or more;
(iii) any agreement providing for the sale by the Company of goods,
services, equipment or other assets that provides for payments to the
Company of $10,000 or more;
(iv) any partnership, joint venture or other similar agreement or
arrangement;
(v) any agreement relating to the acquisition or disposition of any
business (whether by merger, sale of stock, sale of assets or otherwise);
(vi) any agreement relating to indebtedness for borrowed money or the
deferred purchase price of property (other than trade payables arising in
the ordinary course of business) (in either case, whether incurred,
assumed, guaranteed or secured by any asset);
(vii) any indenture, note, bond, guaranty, surety, or other obligation
for, or relating to, the borrowing or lending of money;
(viii) any license agreement or other agreement with respect to any
Intellectual Property Rights;
(ix) any agency, dealer, distributorship, sales representative,
marketing or other similar agreement;
(x) any agreement that limits the freedom of the Company to compete in
any line of business or with any Person or in any area or which would so
limit the freedom of the Company after the Closing Date; or
(xi) any other agreement, commitment or arrangement not made in the
ordinary course of business that is material to the Company.
(b) Each agreement, contract or commitment disclosed or required to be
disclosed in any Schedule to this Agreement is a valid and binding
agreement of the Company and is in full force and effect, and the Company:
(1) has performed all obligations required to be performed by it under
such agreements, contracts or commitments;
(2) is current in all payments obligations under such agreements,
contracts or commitments; and
(c) Except as disclosed in Schedule 4.1.13(c), each lease of real
property to which the Company is a party is valid, binding and enforceable
in accordance with its respective terms and the Company is a tenant or
possessor in good standing thereunder, and all due under such leases for
which any applicable grace period has expired have been paid. The Company
is not nor, to the knowledge of the Company, is any other party thereto in
default or breach in any respect under the terms of any such lease.
IV.1.14. Absence of Certain Changes. Except as disclosed on Schedule
4.1.14, since the Interim Balance Sheet Date, the business of the Company
has been conducted in he ordinary course consistent with past practice and
there has not been:
(a) any event, occurrence or development or state of circumstances or
facts which, individually or in the aggregate has had or could reasonably
be expected to have a material adverse effect;
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any securities issued by the Company, or any
repurchase, redemption or other acquisition by the Company of any
outstanding securities issued by the Company;
(c) any amendment of any term of any outstanding security issued by
the Company;
(d) any incurrence, assumption or guarantee by the Company of any
indebtedness for borrowed money;
(e) any creation or assumption by the Company of any Lien on any
material asset;
(f) any making by the Company of any loan, advance or capital
contributions to or investment in any Person;
(g) any damage, destruction or other casualty loss (whether or not
covered by insurance) affecting the business or assets of the Company
which, individually or in the aggregate, has had or would reasonably be
expected to have a material adverse effect;
(h) any write off, write up or write down of any material assets of
the Company;
(i) except for this Agreement and for transactions or commitments
entered into in the ordinary course of business consistent with past
practice, any by the Company;
(k) any forward purchase commitments outside of the ordinary course of
business, or at prices higher than then current market prices;
(l) any change in compensation, bonuses or other benefits payable to
any director, officer or employee of the Company;
(m) any change in the terms of the Company's severance or retirement
plans or policies thereof or
(n) any labor dispute, other than routine individual grievances.
IV.1.15. Tax Matters. Except as set forth in the Financial Statements
(including the notes thereto) or on Schedule 4.1.15, (a) all Tax returns,
statements, reports and forms (including estimated tax or information
returns and reports) required to be filed with any Taxing Authority with
respect to any Pre-Closing Tax Period by or on behalf of the Company
(collectively, the "Returns") have, to the extent required to be filed on
or before the date hereof, been or will be filed when due in accordance
with all applicable laws; (b) as of the time of filing, the Returns
correctly reflected (and, as to any Returns not filed as of the date
hereof, will correctly reflect) in all material respects the facts
regarding the income, business, assets, operations, activities and status
of the Company and any other information required to be shown therein; (c)
all Taxes shown as due and payable on the Returns that have been filed have
been timely paid, or withheld and remitted to the appropriate Taxing
Authority; (d) the charges, accruals and reserves for Taxes for any
Pre-Closing Tax Period (including any Pre-Closing Tax Period for which no
Return has yet been filed) reflected on the books of the Company (excluding
any provision for deferred income taxes) are adequate to cover such Taxes;
(e) the Company is not delinquent in the payment of any Tax; (f) the
Company has not granted any extension or waiver of the statute of
limitations period applicable to any Return, which period (after giving
effect to such extension or waiver) has not yet expired; (g) there is no
claim, audit, action, suit, proceeding, or investigation now pending or, to
the knowledge of the Company, threatened against or with respect to the
Company in respect of any Tax (other than normal audits conducted by state
or local Tax Authorities in the ordinary course of business); (h) neither
the Company nor any other Person on behalf of the Company has entered into
any agreement or consent pursuant to Section 341(f) of the Code; (i) there
are no Liens for Taxes upon the assets of the Company except Liens for
current Taxes not yet due; (j) the Company will not be required to include
any adjustment in taxable income for any Post-Closing Tax Period under
Section 48 1(c) of the Code (or any similar provision of the Tax laws of
any jurisdiction) as a result of a change in method of accounting for a
Pre-Closing Tax Period or pursuant to the provisions of any agreement
entered into with any Taxing Authority with regard to the Tax liability of
the Company for any Pre-Closing Tax Period; and (k) the Company has never
been a member of an affiliated, consolidated, combined or unitary group or
participated in any other arrangement whereby any income, revenues,
receipts, gain or loss of the Company was determined or taken into account
for Tax purposes with reference to or in conjunction with any income,
revenues, receipts, gain, loss, asset or liability of any other Person.
IV.1.16. Insurance Coverage. Schedule 4.1.16 contains a complete list
of all insurance policies and fidelity bonds covering the assets, business,
operations, employees, officers and directors of the Company. Except as set
forth in Schedule 4.1.16, (i) there is no claim by the Company pending
under any of such policies or bonds as to which coverage has been
questioned, denied or disputed by the underwriters of such policies or
bond;, (ii) all premiums due and payable under all such policies and bonds
have been paid and the Company has complied with the terms and conditions
of all such policies and bonds; (iii) such policies of insurance and bonds
(or other policies and bonds providing substantially similar insurance
coverage) are in full force and effect; (iv) such policies of insurance and
bonds are of the type and in amounts deemed by the management of the
Company to be sufficient; and (v) the Company does not know of any
threatened termination of, or premium increase with respect to, any of such
policies or bonds.
IV.1.17. Litigation. Except as set forth in Schedule 4.1.17, there is
no action, suit, investigation or proceeding (including, without
limitation, any product liability claim) pending or, to the knowledge of
the Company, threatened against or affecting the Company or any of its
properties before any court or arbitrator or any governmental body, agency
or official.
IV.1.18. Compliance with Laws; End-Use Products. (a) Except as
disclosed on Schedule 4.1.18(a), the Company, in the conduct of its
business, is in compliance in all material respects with all laws, rules,
regulations, judgments, injunctions, orders or decrees applicable thereto.
(b) Schedule 4.1.18(b) describes each government or regulatory
license, authorization, permit, Environmental Permit, consent and approval
held by the Company, issued in respect of the Company or required to be so
held or issued to carry on the business of the Company as now conducted.
Except as set forth on Schedule 4.1.18(b), each such license,
authorization, permit, Environmental Permit, consent and approval is valid
and in full force and effect and will not be terminated or impaired (or
become terminated or impaired) as a result of the transactions contemplated
hereby. The Company is not in default under, and, to the knowledge of the
Company, no condition exists that with notice or lapse of time or both
would constitute a default under, any license, franchise, permit,
Environmental Permit, or similar authorization held by the Company.
(c) Except as set forth on Schedule 4.1.18(c), there are no
statements, citations or decisions issued by any governmental authority
that any product manufactured, marketed or distributed by the Company or
any of its licensees (an "End-Use Product"), is, in whole or in part,
defective or fails to meet any standard promulgated by any such
governmental authority nor has any such governmental authority or other
Person threatened, in writing, or, to the knowledge of the Company,
otherwise threatened, to issue any such statement, citation or decision.
Except as set forth on Schedule 4.1.18(c), (i) to the knowledge of the
Company, there have been no threatened or actual government recalls by any
Governmental Authority with respect to any End-Use Product; and (ii) there
is no reasonable basis for the Company or any licensee to recall any
End-Use Product or a duty to warn customers of a defect or insufficiency in
any End-Use Product.
IV.1.19. Environmental Matters. (a) Except as disclosed on Schedule
4.1.19,
(i) the Company has no knowledge of nor has it received any written
notice from any Person alleging that the assets or properties now or
previously owned, leased or operated by the Company do not comply with, or
that the Company is in violation of or has violated, in connection with its
use of any such assets or properties or the conduct of its business, any
Environmental Laws;
(ii) the Company has no knowledge of nor has it received any written
notice from any Person alleging that there is any liability on the part of
the Company arising out of or related to, directly or indirectly, any
Environmental Laws;
(iii) to the knowledge of the Company, no polychlorinated biphenyls,
radioactive material, urea formaldehyde, lead, asbestos,
asbestos-containing materials or underground storage tank (active or
abandoned) is present at any property now owned, leased or operated by the
Company; or
(iv) to the knowledge of the Company, no Hazardous Substance has been
transported, stored, used, manufactured, generated, distributed, released,
discharged or disposed of by the Company in violation of any applicable
Environmental Laws.
(b) There has been no environmental investigation, study, audit, test,
review or other analysis conducted by or on behalf of the Company (or by a
third party of which the Company has knowledge) in relation to the business
of the Company or any property or facility currently or, to the knowledge
of the Company, previously owned or leased by the Company.
IV.1.20. Plans and Material Documents. (a) Schedule 4.1.20 sets forth
a list of all employee benefit plans (as defined in Section 3(3) of ERISA),
and all other employee benefit plans, programs, arrangements, contracts or
schemes, written or oral, statutory or contractual, with respect to which
the Company or any ERISA Affiliate has or has had in the six years
preceding the date hereof any obligation or liability or which are or were
in the six years preceding the date hereof maintained, contributed to or
sponsored by the Company or any ERISA Affiliate for the benefit of any
current or former employee, officer or director of the Company or any ERISA
Affiliate (collectively, the "Plans"). With respect to each employee
pension benefit plan subject to ERISA, the Company has delivered to Buyer a
true and complete copy of each such Plan (including all amendments thereto)
and a true and complete copy of each material document (including all
amendments thereto) prepared in connection with each such Plan including,
without limitation, (i) a copy of each trust or other funding arrangement,
(ii) each summary plan description and summary of material modifications,
and (iii) the most recently filed IRS Form 5500 for each such Plan, if any.
The Company has no express or implied commitment, whether legally
enforceable or not, to create, incur liability with respect to or cause to
exist any employee benefit plan or to modify any Plan, other than as
required by law.
(b) Except as disclosed in Schedule 4.1.20, none of the Plans is a
plan that is or has ever been subject to Title IV of ERISA, Section 302 of
ERISA or Section 412 of the Code. None of the Plans is (i) a "multiemployer
plan" as defined in Section 3(37) of ERISA, (ii) a plan or arrangement
described under Section 4(b)(5) or 401(a)(1) of ERISA, or (iii) a plan
maintained in connection with a trust described in Section 501(c)(9) of the
Code. Except as disclosed in Schedule 4.1.20, (A) none of the Plans
provides for the payment of separation, severance, termination or
similar-type benefits to any person, and (B) none of the Plans provides for
or promises retiree medical or life insurance benefits to any current or
former employee, officer or director of the Company. Except as disclosed in
Schedule 4.1.20, each of the Plans is subject only to the laws of the
United States or a political subdivision thereof.
(c) Except as disclosed in Schedule 4.1.20, each Plan is in compliance
in all material respects with, and has always been operated in all material
respects in accordance with, its terms and the requirements of all
applicable law, foreign and domestic, and the Company and all ERISA
Affiliates have satisfied in all material respects all of their statutory,
regulatory and contractual obligations with respect to each such Plan. No
legal action, suit or claim is pending or, to the knowledge of the Company
and any Stockholder, threatened with respect to any Plan (other than claims
for benefits in the ordinary course) and no fact or event exists that could
give rise to any such action, suit or claim.
(d) Except as disclosed in Schedule 4.1.20, each Plan or trust which
is intended to be qualified or exempt from taxation under Section 401(a),
401(k) or 501(a) of the Code has received a favorable determination letter
from the Internal Revenue Service that it is so qualified or exempt, and no
fact or event has occurred since the date of such determination letter to
adversely affect the qualified or exempt status of any Plan or trust.
(e) There has been no non-exempt prohibited transaction (within the
meaning of Section 406 of ERISA or Section 4975 of the Code) with respect
to any Plan. Neither the Company nor any ERISA Affiliate has incurred any
material liability for any excise tax arising under Section 4971, 4972,
4975, 4980 or 4980B of the Code and no fact or event exists which could
give rise to such liability. Neither the Company nor any ERISA Affiliate
has incurred any material liability relating to Title IV of ERISA (other
than for the payment of premiums to the Pension Benefit Guaranty
Corporation), and no fact or event exists which could give rise to such
liability.
(f) All material contributions, premiums or payments required to be
made with respect to any Plan have been made on or before their due dates.
All such contributions have been fully deducted for income tax purposes and
no such deduction has been challenged or disallowed by any Governmental
Authorities, and no fact or event exists which could give rise to any such
challenge or disallowance.
(g) There has been no amendment to, written interpretation of or
announcement (whether or not written) by the Company or any ERISA Affiliate
thereof relating to, or change in employee participation or coverage under,
any Plan that would increase materially the expense of maintaining such
Plan above the level of the expense incurred in respect thereto for the
most recent fiscal year ended prior to the date hereof.
(h) Except as disclosed in Schedule 4.1.20 or in this Agreement or the
Ancillary Agreements, no employee or former employee of the Company or any
ERISA Affiliate thereof will become entitled to any bonus, retirement,
severance, job security or similar benefit or enhanced such benefit
(including acceleration of vesting or exercise of an incentive award) as a
result of the transactions contemplated hereby.
(i) Except as disclosed in Schedule 4.1.20, no current or former
employee of the Company or any ERISA Affiliate thereof holds any option to
purchase shares of the Company.
(j) None of the Plans promises or provides retiree health or life
insurance benefits.
IV.1.21. Interests in Customers, Suppliers, Etc. Except as disclosed
in Schedule 4.1.21, to the knowledge of the Company, no Stockholder, nor
any other officer or director of the Company possesses, directly or
indirectly, any ownership interest in, or is a director, officer or
employee of, any Person which is a supplier, customer, lessor, lessee,
licensor, developer, competitor or potential competitor of the Company.
Ownership of securities of a company whose securities are registered under
the Exchange Act of 2% or less of any class of such securities will not be
deemed to be a financial interest for purposes of this Section 4.1.21.
IV.1.22. Customer, Supplier and Employee Relations; Employee
Compensation; Bonuses. (a) The relationships of the Company with its
customers, suppliers and employees are good commercial working
relationships and, except as disclosed in Schedule 4.1.22(a), none of the
Company's material customers or material suppliers or employees receiving
annual compensation in excess of $50,000 has canceled, terminated or
otherwise materially altered or notified the Company of any intention or
otherwise threatened to cancel, terminate or materially alter its
relationship with the Company effective prior to, as of, or within one year
after, the Closing. As of the date hereof, there has not been, and the
Company has no reason to believe that there will be, any change in
relations with material customers, suppliers or employees of the Company as
a result of the transactions contemplated by this Agreement.
(b) Schedule 4.1.22(b) lists (i) all employees of the Company who
receive annual compensation in excess of $50,000 and (ii) all bonuses and
any other amounts to be paid by the Company to employees of the Company at
or in connection with the Closing ("Bonuses").
IV.1.23. Other Employment Matters. (a) The Company is in material
compliance with all Federal, state or other applicable laws, domestic or
foreign, respecting employment and employment practices, terms and
conditions of employment and wages and hours, and has not, and is not,
engaged in any unfair labor practice; no unfair labor practice complaint
against the Company is pending before the National Labor Relations Board;
there is no labor strike, dispute, slowdown or stoppage actually pending or
threatened against or involving the Company; the Company is not a party to
any collective bargaining agreement and no collective bargaining agreement
is currently being negotiated by the Company; to the knowledge of each of
the Company and the Stockholders, no representation question exists
respecting employees of the Company; and, except as specifically set forth
on Schedule 4.1.23, no claim in respect of the employment of any employee
has been asserted and is currently pending or, to the knowledge of the
Company or any Stockholder threatened, against the Company.
(b) Schedule 4.1.23 contains a complete and accurate list of the
following information for each employee or director of the Company,
including each employee on leave of absence or layoff status: employer;
name; job title; current compensation paid or payable and any change in
compensation since the Interim Balance Sheet Date: vacation accrued; and
service credited for purposes of vesting and eligibility to participate
under any pension, retirement, profit-sharing, thrift-savings, deferred
compensation, stock bonus, stock option, cash bonus, employee stock
ownership (including investment credit or payroll stock ownership),
severance pay, insurance, medical, welfare, or vacation plan, other Plan of
the Company.
(c) No former or current employee or current or former director of the
Company is a party to, or is otherwise bound by, any agreement or
arrangement, including any confidentiality, non-competition, or proprietary
rights agreement, between such employee or director and any other Person
that in any way adversely affected, affects, or will affect (i) the
performance of his duties as an employee or director of the Company, or
(ii) the ability of the Company to conduct its business.
(d) Schedule 4.1.23 also contains a complete and accurate list of the
following information for each retired employee or director of the Company,
or their dependents, receiving benefits or scheduled to receive benefits in
the future: name, pension benefits, pension option election, retiree
medical insurance coverage, retiree life insurance coverage, and other
benefits.
IV.1.24. Millennium Compliance. Schedule 4.1.24 describes the measures
that have been implemented to determine the extent to which the computer
systems used by the Company in its business (the "Computer Systems") are
not in Millennium Compliance, and the material details of any program
undertaken with a view towards causing the Computer Systems to achieve
Millennium Compliance.
IV.1.25. Finders' Fees. There is no investment banker, broker, finder
or other intermediary which has been retained by or is authorized to act on
behalf of the Company who might be entitled to any fee or commission in
connection with the transactions contemplated by this Agreement.
IV.1.26. Full Disclosure. The representations and warranties of the
Company contained in this Agreement do not contain any untrue statement of
a material fact or omit to state any material fact necessary in order to
make the statements contained herein, in the light of the circumstances in
which they are being made, not misleading.
IV.2. Representations and Warranties of the Stockholders. Each Stockholder
represents and warrants, severally and not jointly and with respect to such
Stockholder only, to Buyer, as of the date hereof and the Closing Date, as
follows:
IV.2.1. Authority; Enforceability. Such Stockholder has all requisite
power and authority, and has taken all action necessary, to execute and
deliver this Agreement and each Ancillary Agreement to which such
Stockholder will be a party at the Closing, to consummate the transactions
contemplated hereby and to perform his or her obligations hereunder. This
Agreement has been and each of the Ancillary Agreements to which such
Stockholder will be a party at the Closing will have been, duly executed
and delivered by such Stockholder and are legal, valid and binding
obligations of such Stockholder enforceable against such Stockholder in
accordance with their respective terms.
IV.2.2. No Conflicts. The execution and delivery of this Agreement and
each Ancillary Agreement to which such Stockholder will be a party at the
Closing do not and will not at the Closing, and the consummation of the
transactions contemplated hereby and compliance with the terms hereof do
not and will not at the Closing, violate or conflict with in any respect or
result in a breach under any contract, license, Order or Law applicable to
such Stockholder.
IV.2.3. No Consents. No consent of, approval or filing with, any court
or other Person is required to be obtained or made by or with respect to
such Stockholder in connection with the execution and delivery of this
Agreement or any of the Ancillary Agreements to which such Stockholder will
be a party at the Closing or the consummation by such Stockholder of the
transactions contemplated hereby or thereby.
IV.2.4. Ownership of Shares; Title. All of the issued and outstanding
shares of the Common Stock set forth opposite such Stockholder's name on
Schedule 4.2.4 are lawfully owned of record and beneficially by such
Stockholder, free and clear of any Liens. Such Stockholder has the full
legal right, power and authority to vote, sell, assign, transfer and convey
such shares of Common Stock. Except as set forth in Schedule 4.2.4, such
shares are not subject to any voting trust agreement or other contract,
agreement, arrangement, commitment, option, proxy, right of first refusal
or understanding, including without limitation any contract restricting or
otherwise relating to the voting, dividend rights or disposition of such
shares.
IV.2.5. Litigation. Except as disclosed in Schedule 4.2.5, there is no
action, suit, investigation, arbitration or administrative or other
proceeding pending or, to the knowledge of such Stockholder, threatened
against or affecting such Stockholder before any court or arbitrator or any
Governmental Authorities which, individually or in the aggregate, if
determined or resolved adversely to such Stockholder could, individually or
when considered together with all other such matters, adversely affect the
right or ability of such Stockholder to consummate the transactions
contemplated by this Agreement and the Ancillary Agreements to which such
Stockholder will be a party at the Closing; and such Stockholder knows of
no valid basis for any such action, proceeding or investigation.
IV.2.6. Interests in Customers, Suppliers, Etc. Except as disclosed in
Schedule 4.2.6, neither such Stockholder, nor, to the knowledge of such
Stockholder, any other officer or director of the Company, possesses,
directly or indirectly, any ownership interest in, or is a director,
officer or employee of, any Person which is a supplier, customer, lessor,
lessee, licensor, developer, competitor or potential competitor of the
Company. Ownership of securities of a company whose securities are
registered under the Exchange Act of 2% or less of any class of such
securities will not be deemed to be an ownership interest for purposes of
this Section 4.2.6.
IV.2.7. Investment Risks. Such Stockholder recognizes that the sale to
Buyer of the Common Stock owned by such Stockholder in exchange for, in
significant part, shares of Buyer Stock involves significant risks. Such
Stockholder further recognizes that the value of the Buyer Stock to be
issued to such Stockholder hereunder may increase or decrease for reasons
beyond the control of such Stockholder or Buyer.
IV.2.8. Information Made Available. Such Stockholder has been provided
a copy of Buyer's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998, Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1999 and June 30, 1999 and Proxy Statement in respect of Buyer's
1999 annual meeting of shareholders, and has been afforded the opportunity
to review additional documents and additional information and has had the
opportunity to ask questions of the officers, directors and representatives
of Buyer, concerning Buyer, its business, operations, financial condition
and prospects or any other matter relating to the operations of Buyer or
Buyer Stock. Buyer has responded to all inquiries that such Stockholder has
made of it concerning Buyer, its business, operations, financial condition
and prospects or any other matter relating to the operations of Buyer or
Buyer Stock.
IV.2.9. Business or Financial Experience. Such Stockholder has,
through himself or through his unaffiliated professional advisor(s), the
business or financial experience to protect his interest in connection with
the issuance of any shares of Buyer Stock and the entering into of the
transactions contemplated by this Agreement.
IV.2.10. Evaluation of Risks. Such Stockholder has, with the
assistance of independent professional legal counsel, financial advisors
and accountants, evaluated the merits and risks of selling his shares of
Common Stock to Buyer in exchange for, in significant part, shares of Buyer
Stock and entering into the transactions contemplated by this Agreement.
IV.2.11. Purchase For Investment. Such Stockholder intends to obtain
any shares of Buyer Stock offered to him for investment and not with a view
toward distribution of those shares.
IV.2.12. No Third Party Interest. No other person or entity has any
direct or indirect beneficial interest in such shares of Buyer Stock to be
received by such Stockholder hereunder.
IV.2.13. Unregistered Securities. Such Stockholder understands that
(i) the issuance of shares of Buyer Stock to such Stockholder has not been
registered under the Securities Act of 1933 and the rules and regulations
promulgated thereunder (as amended, the "Securities Act") or any state
securities laws in reliance on the exemption for nonpublic offerings
provided by Section 4(2) of the Securities Act and Regulation D of the
Securities Act and analogous state securities law provisions, and such
shares of Buyer Stock must be held indefinitely unless they are
subsequently registered under the Securities Act and applicable state
securities laws or an exemption from such registration is available, (ii)
Buyer is under no obligation to register such shares of Buyer Stock on such
Stockholder's behalf or to assist him in complying with any exemption from
registration, and (iii) such shares of Buyer Stock may not be sold pursuant
to Rule 144 of the Securities Act unless all of the conditions of that Rule
are met.
IV.2.14. No Governmental Approval. Such Stockholder understands that
no government agency has passed upon such shares of Buyer Stock or made any
finding or determination as to the fairness of the investment or any
recommendation or endorsement of such shares of Buyer Stock.
IV.2.15. No Reliance. In entering into this transaction, (a) such
Stockholder is not relying on information other than (i) that provided by
Buyer or its representatives, and/or (ii) the results of the independent
investigation conducted by such Stockholder and its advisors and
representatives, and (b) such Stockholder has not received (i) any
assurances or projections as to the prospects for Buyer's business or (ii)
any inducement other than the Aggregate Purchase Consideration to enter
into the transactions contemplated by this Agreement.
V. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Company and the Stockholders, as of
the date hereof and the Closing Date, as follows:
V.1. Organization and Existence. Buyer is a corporation duly organized and
validly existing under the laws of Delaware and has all requisite powers and all
governmental licenses, authorizations, permits, consents and approvals required
to carry on its business as now conducted.
V.2. Authorization. The execution, delivery and performance by Buyer of
this Agreement and each of the Ancillary Agreements to which it will be a party
at Closing are within the powers of Buyer and have been duly authorized by all
necessary actions on the part of Buyer. This Agreement has been and each of the
Ancillary Agreements to which Buyer will be a party at Closing will have been
duly executed and delivered by Buyer and are legal, valid and binding
obligations of Buyer, enforceable against Buyer in accordance with their
respective terms.
V.3. Non-Contravention. The execution, delivery and performance by Buyer of
this Agreement and each of the Ancillary Agreements to which it will be a party
at Closing do not and will not (a) contravene or conflict with the constituent
documents of Buyer, (b) require any action by or in respect of, or filing with,
any governmental body, agency or official or (c) violate any applicable law,
rule, regulation, judgment, injunction, order or decree binding upon Buyer.
V.4. Finders' Fees. There is no investment banker, broker, finder or other
intermediary which has been retained by or is authorized to act on behalf of
Buyer who might be entitled to any fee or commission from the Company upon
consummation of the transactions contemplated by this Agreement or any of the
Ancillary Agreements.
V.5. Compliance with Exchange Act. Buyer is in compliance with its
reporting obligations under Sections 13 and 15(d) of the Exchange Act.
VI. COVENANTS
VI.1. Conduct of Business of the Company. During the period from the date
of this Agreement to the Closing Date, the Stockholders will cause the Company
to, and the Company will, conduct its operations only according to its ordinary
and usual course of business (including managing its working capital in
accordance with its past practice and custom) and use its respective best
efforts to: (a) preserve intact its business organizations, (b) keep available
the services of its officers and employees and (c) maintain its relationships
and goodwill with licensors, suppliers, distributors, customers, landlords,
employees, agents and others having business relationships with it. The Company
will confer with Buyer concerning operational matters of a material nature and
report periodically to Buyer concerning its business, operations and finances.
Without limiting the generality or effect of the foregoing, prior to the Closing
Date, except with the prior written consent of Buyer, the Company will not, and
the Stockholders will cause the Company not to:
(i) Amend or modify its articles of incorporation, bylaws or any other
organizational document from its form on the date of this Agreement;
(ii) Change any salaries or other compensation of, or pay any bonuses to
any director, officer, employee or stockholder of the Company, or enter into any
employment, severance, or similar agreement with any director, officer,
stockholder or employee of the Company, provided, however, that the compensation
of employees of the Company receiving annual compensation of less than $50,000
may be changed in the ordinary course of business consistent with past practice;
(iii) Adopt or increase any benefits under any profit sharing, bonus,
deferred compensation, savings, insurance, pension, retirement, or other
employee benefit plan for or with any of its employees;
(iv) Enter into any contract or commitment except contracts and commitments
(for capital expenditures or otherwise) in the ordinary course of business
consistent with past practice;
(v) Incur, assume or guarantee Indebtedness;
(vi) Enter into any transaction or commitment relating to the assets or the
business of the Company which, individually or in the aggregate, could be
material to the Company, or cancel or waive any claim or right of substantial
value which, individually or in the aggregate, could be material to the Company,
or amend any term of any Company Securities;
(vii) Set aside or pay any dividend or make any other distribution with
respect to any shares of capital stock of the Company or repurchase, redeem or
otherwise acquire directly or indirectly, any outstanding shares of capital
stock or other securities of, or other ownership interests in, the Company;
(viii) Make any change in accounting methods or practices (including
changes in accruals or reserve amounts or policies);
(ix) Issue or sell any Company Securities or make any other changes in its
capital structure, including the grant of any stock option or other right to
purchase shares of capital stock of the Company;
(x) Sell, lease or otherwise dispose of any material asset or property;
(xi) Except as expressly permitted under this Agreement, write-off as
uncollectable any notes or accounts receivable, except write-offs in the
ordinary course of business charged to applicable reserves, none of which
individually or in the aggregate is material; write-off, write-up or write-down
any other material asset of the Company; or alter its customary time periods for
collection of accounts receivable or payments of accounts payable;
(xii) Create or assume any Lien other than a permitted Lien;
(xiii) Make any loan, advance or capital contributions to or investment in
any Person;
(xiv) Terminate or close any material facility, business or operation of
the Company;
(xv) Cause or suffer any damage, destruction or other casualty loss
(whether or not covered by insurance) affecting the business or assets of the
Company which, individually or in the aggregate, has had or could reasonably be
expected to have a material adverse effect;
(xvi) Cause any other event, occurrence, development or state of
circumstances or facts which individually or together with other matters, has
had or could reasonably be expected to have a material adverse effect; or
(xvii) Agree to do any of the foregoing.
VI.2. Exclusive Dealing. During the period from the date of this Agreement
to the earlier of the Closing Date and the termination of this Agreement in
accordance with its terms, no Stockholder, nor the Company, or any of their
respective Affiliates, or any officer or director of the Company, or any of
their respective Affiliates, or other representative of any of the foregoing
(including advisors, agents, attorneys, employees or consultants) will take any
action to, directly or indirectly, encourage, initiate, solicit or engage in
discussions or negotiations with, or provide any information to any Person,
other than Buyer (and its affiliates and representatives), concerning any
purchase of any capital stock of the Company or any purchase, asset sale or
similar transaction involving the Company. Each of the Company, and the
Stockholders will disclose to Buyer the existence or occurrence of any proposal
or contract which it or they or any of their representatives described above may
receive in respect of any such transaction and the identity of the Person from
whom such a proposal or contract is received.
VI.3. Review of the Company; Confidentiality. (a) Buyer may, prior to the
Closing Date, directly or through its representatives, review the properties,
books and records of the Company and their financial and legal condition to the
extent they deem necessary or advisable to familiarize itself with such
properties and other matters. The Company will permit Buyer and its
representatives to have, after the date of execution of this Agreement,
reasonable access to the premises and to all the respective books and records of
the Company and to cause the officers of the Company to furnish Buyer with such
financial and operating data and other information with respect to the
respective business and properties of the Company as Buyer will from time to
time reasonably request. The Company will deliver or cause to be delivered to
Buyer such additional instruments, documents, certificates and opinions as Buyer
may reasonably request for the purpose of (i) verifying the information set
forth in this Agreement or on any Schedule attached hereto and (ii) consummating
or evidencing the transactions contemplated by this Agreement.
(b) Prior to the Closing, without the prior written consent of the other
parties, no party will, or will permit any of its Affiliates to, disclose to any
other Person (other than such Person's financing sources, existing stockholders
and such Person's directors, officers, employees, advisors and other
representatives that need to know) any proprietary, non-public information of
another party previously delivered or made available to such other party in
connection with the transactions contemplated hereby (including the existence of
and terms of this Agreement and the Ancillary Agreements), other than to the
extent required by applicable Law and upon the advice of counsel. Each party
will direct its financing sources, stockholders, directors, officers, employees
and representatives to keep all such information in strict confidence; provided,
however, that each such person may disclose such information to the extent
required by Law and upon the advice of counsel.
VI.4. Best Efforts. Each of the Company, the Stockholders and Buyer will
cooperate and use their respective best efforts to take, or cause to be taken,
all appropriate actions, and to make, or cause to be made, all filings
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
including, without limitation, their respective reasonable efforts to obtain,
prior to the Closing Date, all licenses, permits, consents, approvals,
authorizations, qualifications and orders of Governmental Authorities and
parties to contracts with the Company as are necessary for consummation of the
transactions contemplated by the Agreement and to fulfill the conditions to the
sale contemplated hereby. Notwithstanding any other provision hereof, in no
event will Buyer or any of its Affiliates (including the Company after the
Closing) be required to (a) enter into or offer to enter into any divestiture,
hold-separate, business limitation or similar agreement or undertaking in
connection with this Agreement or the transactions contemplated hereby or (b)
make any payment in connection with any consent or approval or condition to
Closing set forth in any subsection of Section 7.1 which it is necessary or
advisable for the Stockholders or the Company to obtain or satisfy in order to
consummate the transactions contemplated by this Agreement.
VI.5. Notices of Actions and Proceedings. (a) The Company will promptly
notify Buyer of any claims, actions, proceedings, or investigations commenced
or, to its knowledge, threatened, involving or affecting the Company, which
could have a material adverse effect or which could adversely affect the
consummation of the transactions contemplated by this Agreement.
(b) The Company will promptly give notice to Buyer of: (i) any notice or
other communication from any third party alleging that the consent of such third
party is or may be required in connection with the transactions contemplated by
this Agreement; (ii) any notice or other communication from any governmental
authority in connection with the transactions contemplated by this Agreement;
(iii) the occurrence or nonoccurrence of any event which would cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate; (iv) any failure of the Company to comply with or satisfy in any
material respect when required any covenant, condition or agreement to be
complied with or satisfied by it hereunder; or (v) the discovery of any
information indicating that a representation or warranty contained in this
agreement is untrue or incorrect in a material respect; provided, however, that
the delivery of any notice pursuant to this Section II.5 will not prejudice
Buyer's right to any remedies to which it may be entitled hereunder.
VI.6. Use of Names. On and after the Closing Date, the Stockholders will
discontinue all use of the names and marks included in the Intellectual Property
Rights Transferred pursuant to this Agreement, including the names "Extreme
Comfort, Inc.", "Extreme Comfort", "Ski Time" and "Roo", alone or any
combination of any words or marks confusingly similar thereto, and will as
promptly as possible, but in no event later than 30 days after the Closing Date,
eliminate such names from all signs, letterheads, business cards, displays and
other materials used by any of the Stockholders, except to the extent such names
and marks are used solely in connection with the continuing operation of the
Company's business by Buyer.
VI.7. Further Assurances. From time to time, as and when requested by any
party hereto, the other parties will execute and deliver, or cause to be
executed and delivered, all such documents and instruments and will take, or
cause to be taken, all such further or other actions, as the requesting party
may reasonably deem necessary or desirable to consummate the transactions
contemplated by this Agreement.
VI.8. Advisory Committee. Buyer will form an advisory committee consisting
of Xx. Xxxxx Xxxxxxx, Xx. Xxxxxxx Xxxxxx and a representative of Buyer to serve
for a term commencing on the Closing Date and ending on December 31, 2003. The
advisory committee will meet on a quarterly basis for the sole purpose of
reviewing the business and financial results of operations of the Company and
the status of the Company's initiatives in new product and market development
and promotional activities for the immediately preceding quarter, as presented
by Mr. Xxxx Xxxxx. The advisory committee will submit formal recommendations to
the Company's Board of Directors with respect to such review; provided, however,
that the Advisory Committee will function solely in an advisory capacity and
neither the Company nor its Board of Directors will have any obligation to
implement such recommendations.
VI.9. Certain Tax Matters.
(a) Buyer and the Stockholders agree to treat the Purchase for all federal,
state and local tax purposes as a fully taxable purchase and not a
reorganization. Buyer shall have the option, in its sole discretion, to make an
election under Section 338(g) of the Code (and any comparable election under
state, local or foreign tax law) with respect to the Company.
(b) The Stockholders, the Company and Buyer, shall make available to each
other, as reasonably requested, all records, information and documents, and
shall take or cause its proper officers and directors to take any and all
actions reasonably requested by the other, in order to comply with this Section
6.9.
(c) All transfer, documentary, sales, use, stamp, registration, value added
and other U.S. taxes and fees (including any penalties and interest) imposed on
the Company in connection with the sale of the Common Stock to Buyer under this
Agreement will be borne and paid by the Stockholders' Representative (on behalf
of the Stockholders) when due, and the Stockholders' Representative (on behalf
of the Stockholders) will, at its own expense, file all necessary Tax returns
and other documentation with respect to all such Taxes and fees.
VI.10. Restriction on Transfer of Buyer Stock. No Stockholder will Transfer
any shares of Buyer Stock without first registering or qualifying such shares
under applicable securities Laws, unless such Transfer is exempt under such
Laws.
VI.11. Piggy-Back Registration Rights. (a) If, at any time or from time to
time while any Registrable Securities are outstanding, Buyer proposes to
register any of its securities (whether for its own or others' account) under
the Securities Act (other than by a registration statement on Form S-8 or Form
S-4 or successor or similar forms), Buyer shall promptly give written notice, in
accordance with the notice provisions of Section 9.2, to the holders of the
Registrable Shares (the "Holders") of Buyer's intention to effect such
registration. If, within 15 days after receipt of such notice, any Holder
submits a written request to Buyer specifying the Registrable Securities such
Holder proposes to sell or otherwise dispose of(a "Piggy-Back Registration"),
Buyer shall, subject to Section 6.11(c) below, include the number of shares of
Registrable Securities specified in such Holder's request in such registration
statement and Buyer shall use its reasonable efforts to keep each such
registration statement in effect and to maintain compliance with Federal and
state securities and Blue Sky laws and regulations for the period necessary for
such Holder to effect the proposed sale or other disposition. Any Holder
participating in an Underwritten Offering pursuant to this Section 6.11 shall,
if required by the managing underwriter or underwriters of such offering, enter
into an underwriting agreement in a form customary for underwritten offerings of
the same general type as such offering.
(b) Unless a Holder, or a person acting on behalf of a Holder, has
commenced a distribution under this Section 6.11, nothing in this Section 6.11
will create any liability on the part of Buyer to the Holders of Registrable
Securities if Buyer for any reason should decide not to file a registration
statement proposed to be filed under the preceding paragraph or to withdraw such
registration statement subsequent to its filing, regardless of any action
whatsoever that a Holder may have taken, whether as a result of the issuance by
Buyer of any notice under this Section 6.11 or otherwise.
(c) Notwithstanding anything contained in this Section 6.11, if the
managing underwriter or underwriters of an offering described in Section 6.11(a)
deliver(s) a written opinion to the Holders that the size of the offering that
the Holders, Buyer or any other Person intends to make or the kind or
combination of securities that the Holders, Buyer and any other Persons intend
to include in such offering are such that the success of the offering would be
materially and adversely affected by inclusion of the Registrable Securities
requested to be included, then the amount of any securities proposed to be
offered shall be reduced or excluded for the offering as follows:
(i) in the case of a Piggy-Back Registration initiated by a Person other
than Buyer, all securities (including Registrable Securities) to be included in
such offering by the Holders and the holders of similar "piggy-back"
registration rights shall be reduced or excluded from such offering on a
pro-rata basis before any securities of Buyer and the Persons initiating the
Piggy-Back Registration are reduced or excluded; and
(ii) in the case of a Piggy-Back Registration initiated by Buyer, all
securities (including Registrable Securities) to be included in such offering by
the Holders, and any other holders of similar "piggy-back" registration rights
shall be reduced or excluded from such offering on a pro-rata basis before any
securities of Buyer are reduced or excluded.
VI.12. Compliance with Exchange Act. For so long as any Registrable
Securities are outstanding, Buyer will comply with its reporting obligations
under Sections 13 and 15(d) of the Exchange Act.
VI.13. Listing of Registrable Securities. At or after the Closing, Buyer
will cause any outstanding Registrable Securities to be listed with the NASDAQ
exchange as unregistered shares of Buyer Stock within a reasonable period of
time after the issuance of such Registrable Securities to the Stockholders.
VI.14. Debt Repayment. Within 60 days after the Closing Date, Buyer will
cause the outstanding principal amount, together with all accrued but unpaid
interest, under the Promissory Note, dated June 1, 1993, between Xxxxx X. Xxxx,
Xxxxxxx X. Xxxxxx, R. Xxx Xxxxx, Xxxxxxx Xxxxx, Xxxxx Xxxxxxx, R. Xxxx Xxxxxxxx
and Xxxxxxx X. Xxxx and Siuslaw Valley Bank, and the amendments thereto, to be
paid in full.
VII. CONDITIONS TO CLOSING
VII.1. Conditions to Obligations of Buyer. The obligation of Buyer to
consummate the Closing are subject to the satisfaction of the following
conditions:
VII.1.1. Representations, Warranties and Covenants of the Company. (a) The
representations and warranties of the Company made in this Agreement shall be
true and correct as of the date hereof and as of the Closing, as though made as
of the Closing; (b) the Company shall have performed and complied in all
material respects with all terms, agreements and covenants contained in this
Agreement required to be performed or complied with by it on or before the
Closing Date; and (c) the Company shall have delivered to Buyer a certificate,
signed by an authorized officer of the Company, dated the Closing Date
confirming the foregoing.
VII.1.2. Secretary's Certificate. The Company shall have delivered to Buyer
a certificate from its Secretary certifying as to the due adoption of
resolutions adopted by its Board of Directors authorizing the execution of this
Agreement and the taking of any and all actions deemed necessary or advisable to
consummate the transactions contemplated herein.
VII.1.3. Stockholder Approval. This Agreement and the transactions
contemplated hereby shall have been approved in the manner and by the requisite
vote of the Stockholders required by applicable law.
VII.1.4. Representations, Warranties and Covenants of the Stockholders. (a)
The representations and warranties of the Stockholders made in this Agreement
shall be true and correct as of the date hereof and as of the Closing, as though
made as of the Closing; (b) the Stockholders shall have performed and complied
in all material respects with all terms, agreements and covenants contained in
this Agreement required to be performed or complied with by them on or before
the Closing Date; and (c) each Stockholder shall have delivered to Buyer a
certificate, signed by such Stockholder, dated the Closing Date confirming the
foregoing.
VII.1.5. No Injunction, Etc. No provision of any applicable law or
regulation and no judgment, injunction, order or decree shall be in effect which
prohibits the consummation of the Closing.
VII.1.6. No Proceedings. No proceeding challenging this Agreement, the
Ancillary Agreements or the transactions contemplated hereby or thereby or
seeking to prohibit, alter, prevent or materially delay the Closing or seeking
damages will have been instituted by any Person (other than Buyer or the
Company) before any court, arbitrator or Governmental Authorities and be
pending.
VII.1.7. Required Filings. All actions by or in respect of or filings by
the Company or the Stockholders with any Person required to permit the
consummation of the Closing shall have been taken, made or obtained.
VII.1.8. Due Diligence. Buyer shall have completed, or caused to be
completed by its attorneys, accountants and other representatives, to its
satisfaction, business, legal, environmental and accounting due diligence
investigations and reviews of the Company.
VII.1.9. Resignation of Directors. Each of the Directors of the Company
immediately prior to the Closing shall have submitted a letter of resignation to
the Company effective as of the Closing.
VII.1.10. Third Party Consents; Governmental Approvals. All consents,
approvals or waivers, if any, disclosed on any Schedule attached hereto or
otherwise required in connection with the consummation of the transactions
contemplated by this Agreement shall have been received. All of the consents,
approvals, authorizations, exemptions and waivers from Governmental Authorities
that will be required in order to enable Buyer to consummate the transactions
contemplated hereby shall have been obtained.
VII.1.11. FIRPTA. Each of the Stockholders shall have furnished to Buyer,
on or prior to the Closing Date, a non-foreign person affidavit required by
Section 1445 of the Code.
VII.1.12. No Material Adverse Change. Prior to the Closing, no event shall
have occurred which, individually or when considered together with all other
matters, has had or which could reasonably be expected to have a material
adverse effect.
VII.1.13. Opinion of Counsel. Buyer shall have received an opinion of
Gleaves, Swearingen, Larsen, Potter, Xxxxx & Xxxxx LLP, counsel to the Company,
dated the Closing Date, substantially in the form of Exhibit E.
VII.1.14. Termination of Restrictions on Common Stock. The Company and the
Stockholders shall have delivered to Buyer, on or prior to the Closing Date,
evidence in a form reasonably satisfactory to Buyer of the termination of the
agreements set forth in Schedule 4.2.4.
VII.1.15. Ancillary Agreements. Each of the Ancillary Agreements to which
the Company or the Stockholders are a party shall have been duly executed and
delivered to Buyer.
VII.2. Conditions to Obligations of the Company and the Stockholders. The
obligations of the Company and the Stockholders to consummate the Closing are
subject to the satisfaction of the following conditions:
VII.2.1. Representations, Warranties and Covenants of Buyer. (a) The
representations and warranties of Buyer made in this Agreement shall be true and
correct as of the date hereof and as of the Closing, as though made as of the
Closing; (b) Buyer shall have performed and complied in all material respects
with all terms, agreements and covenants contained in this Agreement required to
be performed or complied with by Buyer on or before the Closing Date; and (c)
Buyer shall have delivered to the Company a certificate, signed by an authorized
officer of Buyer, dated the Closing Date confirming the foregoing.
VII.2.2. Secretary's Certificate. Buyer shall have delivered to the Company
a certificate from its Secretary certifying as to the due adoption of
resolutions adopted by its Board of Directors authorizing the execution of this
Agreement and the taking of any and all actions deemed necessary or advisable to
consummate the transactions contemplated herein.
VII.2.3. No Injunction, etc. No provision of any applicable law or
regulation and no judgment, injunction, order or decree shall be in effect which
will prohibit the consummation of the Closing.
VII.2.4. Required Filings. All actions by or in respect of or filings by
Buyer with any Person required to permit the consummation of the Closing shall
have been taken, made or obtained.
VII.2.5. Opinion of Counsel. The Company shall have received an opinion of
Xxxxx, Day, Xxxxxx & Xxxxx, counsel to Buyer, dated the Closing Date,
substantially in the form of Exhibit F.
VII.2.6. Ancillary Agreements. Each of the Ancillary Agreements to which
Buyer is a party shall have been duly executed and delivered to the Company.
VIII. SURVIVAL; INDEMNIFICATION
VIII.1. Survival. The representations and warranties of the parties
contained in this Agreement or in any certificate or other writing delivered
pursuant hereto or in connection herewith will survive the Closing until the
second anniversary of the Closing Date; provided, however, that the
representations and warranties contained in Sections 4.1.1, 4.1.2, 4.1.4, 4.1.5,
4.1.17, 4.2.1, 4.2.2, 4.2.4, 5.1, 5.2 and 5.3 will survive until expiration of
the statute of limitations applicable to the matters covered thereby (giving
effect to any waiver, mitigation or extension thereof), if later.
Notwithstanding the preceding sentence, any representation or warranty in
respect of which indemnity may be sought under this Agreement will survive the
time at which it would otherwise terminate pursuant to the preceding sentence,
if written notice of the inaccuracy or breach thereof giving rise to such right
of indemnity shall have been given to the party against whom such indemnity may
be sought prior to such time; provided, however, that the applicable
representation or warranty will survive only with respect to the particular
inaccuracy or breach specified in said written notice. All covenants and
agreements of the parties contained in this Agreement will survive the Closing
indefinitely.
VIII.2. Indemnification. (a) Prior to the Closing, the Company and the
Stockholders, jointly and severally, and thereafter each Stockholder, jointly
and severally, will indemnify, defend and hold harmless Buyer and its officers,
directors, employees, members, managing directors, Affiliates (including, after
the Closing Date, the Company) and agents, and the successors to the foregoing
(and their respective officers, directors, employees, members, managing
directors, Affiliates and agents), against any and all liabilities, damages and
losses, including, without limitation, diminution in value of either the Company
or Common Stock, lost profits and other consequential damages and, if but only
to the extent asserted in a third party claim, punitive damages, and all costs
or expenses, including, without limitation, attorneys' and consultants' fees and
expenses ("Losses"), incurred or suffered as a result of or arising out of (i)
the failure of any representation or warranty made by the Company or any
Stockholder in any section of Article IV to be true and correct as of the date
hereof and the Closing Date, or (ii) the breach of any covenant or agreement
made or to be performed by the Company pursuant to this Agreement; provided,
however, that neither the Company nor any Stockholder will be liable under
clause (i) of this Section 8.2(a) unless the aggregate amount of Losses exceeds
$10,000 and then from the first dollar to the full extent of such Losses.
(b) The Stockholders, jointly and severally, will indemnify, defend and
hold harmless Buyer and its officers, directors, employees, members, managing
directors, Affiliates (including, after the Closing Date, the Company) and
agents and the successors to the foregoing (and their respective officers,
directors, employees, members, managing directors, Affiliates and agents)
against Losses incurred or suffered as a result of or arising out of(i) the
failure of any representation or warranty made by any Stockholder in any section
of Article IV to be true and correct as of the date hereof and the Closing Date
or (ii) the breach of any covenant or agreement made or to be performed by any
Stockholder pursuant to this Agreement; provided, however, that the Stockholders
will not be liable under clause (i) of this Section 8.2(b) unless the aggregate
amount of Losses exceeds $10,000 and then from the first dollar to the full
extent of such Losses.
(c) Buyer, on and after the Closing Date, will indemnify, defend and hold
harmless the Stockholders against Damages incurred or suffered as a result of or
arising out of (i) the failure of any representation or warranty made by Buyer
in this Agreement to be true and correct as of the date hereof and the Closing
Date or (ii) the breach of any covenant or agreement made or to be performed by
Buyer pursuant to this Agreement; provided, however, that Buyer will not be
liable under clause (i) of this Section 8.2(c) unless the aggregate amount of
Losses exceeds $10,000 and then from the first dollar to the full extent of such
Losses.
VIII.3. Procedures. (a) In case any proceeding (including any governmental
investigation) shall be instituted involving any Person in respect of which
indemnity may be sought pursuant to Section 8.3, such Person will, within 60
days after it has acquired actual knowledge of such proceeding, notify the
Person against whom such indemnity may be sought in writing and the Indemnifying
Party, upon request of the Indemnified Party, will retain counsel reasonably
satisfactory to the Indemnified Party to represent the Indemnified Party and any
others the Indemnifying Party may designate in such proceeding and will pay the
fees and disbursements of such counsel related to the proceeding. In any such
proceeding, any Indemnified Party will have the right to retain its own counsel,
but the fees and expenses of such counsel will be at the expense of such
Indemnified Party unless (i) the Indemnifying Party and the Indemnified Party
shall have mutually agreed to the retention of such counsel or (ii) the named
parties to any such proceeding (including any impleaded parties) include both
the Indemnified Party and the Indemnifying Party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them, in which case fees and expenses of such
counsel will be paid by the Indemnifying Party. It is understood that the
Indemnifying Party will not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the fees and expenses of
more than one separate firm of attorneys (in addition to any local counsel) at
any time for all such Indemnified Parties, and that all such fees and expenses
will be reimbursed as they are incurred. In the case of any such separate firm
for the Indemnified Parties, such firm will be designated in writing by the
Indemnified Parties. The Indemnifying Party will not be liable for any
settlement of any proceeding effected without its consent, but if settled with
such consent, or if there be a final judgment for the plaintiff, the
Indemnifying Party will indemnify and hold harmless such Indemnified Parties
from and against any loss or liability (to the extent stated above) by reason of
such settlement or judgment. An Indemnified Party's failure to give timely
notice or to provide copies of documents or to furnish relevant data in
connection with any claim shall not constitute a defense (in part or in whole)
to any claim for indemnification for such Indemnified Party, except and only to
the extent that such failure shall result in a material prejudice to the
Indemnifying Party.
(b) As of the Closing Date and thereafter, each Stockholder waives any
right of contribution from the Company arising in connection with the
indemnification obligations of the Company hereunder.
VIII.4. Right of Offset. In the event that, pursuant to Sections 8.2(a) and
(b), (i) Buyer incurs Losses or (ii) an event occurs giving Buyer a reasonable
expectation that it may incur Losses and Buyer provides the Stockholders'
Representative written notice thereof setting forth a specific claim and
relevant supporting evidence, Buyer will have the right to offset the amount of
such Losses against any amounts otherwise payable or any Buyer Stock otherwise
issuable to the Stockholders under this Agreement.
IX. MISCELLANEOUS
IX.1. Termination. (a) This Agreement may be terminated at any time prior
to the Closing:
(1) by the mutual written consent of Buyer, the Company and the
Stockholders;
(2) by Buyer, if there has been a material violation or breach by the
Company or a Stockholder of any covenant, representation or warranty contained
in this Agreement which has prevented the satisfaction of any condition to the
obligations of Buyer at the Closing, and such violation or breach has not been
waived by Buyer or, in the case of a covenant breach, cured by the Company or
such Stockholder within the earlier of (x) ten days after written notice thereof
from Buyer or (y) the Closing Date;
(3) by the Company, if there has been a material violation or breach by
Buyer of any covenant, representation or warranty contained in this Agreement
which has prevented the satisfaction of any condition to the obligations of the
Company at the Closing, and such violation or breach has not been waived by the
Company or, in the case of a covenant breach, cured by Buyer within the earlier
of (x) ten days after written notice thereof from the Company or (y) the Closing
Date; or
(4) by Buyer or the Company if the transactions contemplated hereby have
not been consummated by October 31, 1999; provided, however, that neither Buyer
nor either of the Company will be entitled to terminate this Agreement pursuant
to this Section 9.1(a)(iv) if such Person's (or, in the case of the Company, a
Stockholder's) breach of this Agreement has prevented the consummation of the
transactions contemplated hereby; and
(5) by Buyer, if the conditions to Closing set forth in Section 7.1.8 have
not been satisfied.
(b) In the event that this Agreement is terminated pursuant to Section
9.1(a), all further obligations of the parties hereto under this Agreement
(other than pursuant to Section 9.1, which will continue in full force and
effect) will terminate without further liability or obligation of any party to
any other party hereunder; provided, however, that no party will be released
from liability hereunder if this Agreement is terminated and the transactions
abandoned by reason of(i) failure of such party to have performed its
obligations hereunder or (ii) any misrepresentation made by such party of any
matter set forth herein.
IX.2. Notices. All notices and other communications required or permitted
hereunder will be in writing and, unless otherwise provided in this Agreement,
will be deemed to have been duly given when delivered in person or by a
nationally recognized overnight courier service or when dispatched during
sender's normal business hours by electronic facsimile transfer (confirmed in
writing by mail simultaneously dispatched) to the appropriate party at the
address specified below:
(a) if to Buyer, to:
Xxxxxx Technologies, Inc.
0000 Xxx Xxxxxxxxx Xxxx
Xxxxxxx-Xxxxx, XX 00000
Attn: Chief Executive Officer
Fax: 000-000-0000
with a copy to:
Xxxxx, Day, Xxxxxx & Xxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxxxxx, Esq.
Fax: 000-000-0000
(b) if to the Stockholders' Representative, to:
Xx. Xxxxxxx X. Xxxxx
00 Xxxx Xxxxxx
Xxxxxx, XX 00000
Fax: 000-000-0000
with a copy to:
Gleaves, Swearingen, Larsen, Potter,
Xxxxx & Xxxxx LLP
000 Xxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attn: Xxxxxx X.X. Xxxxxxxx, Esq.
Fax: 000-000-0000
or to any changed address of which the parties are notified in accordance with
this Section. All such notices, requests and other communications will be deemed
received on the date of receipt by the recipient thereof if received prior to 5
p.m. in the place of receipt and such day is a Business Day in the place of
receipt. Otherwise, any such notice, request or communication will be deemed not
to have been received until the next succeeding Business Day in the place of
receipt.
IX.3. Amendments and Waivers. (a) Any provision of this Agreement may be
amended or waived if, but only if, such amendment or waiver is in writing and is
signed, in the case of an amendment, by each party to this Agreement, or in the
case of a waiver, by the party against whom the waiver is to be effective.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder will operate as a waiver thereof nor will any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided will be cumulative and not exclusive of any rights or remedies provided
by law.
IX.4. Expenses. Each of the parties will pay all of its own expenses
incurred in connection with the transactions contemplated by this Agreement;
provided, however, that Buyer will pay the Company's legal expenses up to an
amount not to exceed $30,000.
IX.5. Successors and Assigns. The provisions of this Agreement will be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that no party may assign, delegate or
otherwise transfer any of its rights or obligations under this Agreement without
the consent of the other parties hereto.
IX.6. No Third Party Beneficiaries. Except as provided in Article VIII,
this Agreement is for the sole benefit of the parties hereto and their permitted
assigns and nothing herein expressed or implied will give or be construed to
give to any person or entity, other than the parties hereto and such permitted
assigns, any legal or equitable rights hereunder.
IX.7. Governing Law. This Agreement will be governed by, and construed in
accordance with, the law of the State of New York, without regard to the
conflict of laws rules of such State.
IX.8. Jurisdiction. Except as otherwise expressly provided in this
Agreement, any suit, action or proceeding seeking to enforce any provision of,
or based on any matter arising out of or in connection with, this Agreement or
the transactions contemplated hereby may be brought in any court of competent
jurisdiction in the Borough of Manhattan or the United States District Court for
the Southern District of New York and each of the parties hereby consents to the
exclusive jurisdiction of such courts (and of the appropriate appellate courts
therefrom) in any such suit, action or proceeding and irrevocably waives, to the
fullest extent permitted by law, any objection which it may now or hereafter
have to the laying of the venue of any such suit, action or proceeding in any
such court or that any such suit, action or proceeding which is brought in any
such court has been brought in an inconvenient forum. Process in any such suit,
action or proceeding may be served on any party anywhere in the world, whether
within or without the jurisdiction of any such court. Without limiting the
foregoing, each party agrees that service of process on such party as provided
in Section 9.2 will be deemed effective service of process on such party.
IX.9. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEED[NG, CLAIM OR
COUNTERCLAIM, WHETHER IN CONTRACT OR TORT, AT LAW OR [N EQUITY, ARISING OUT OF
OR RELATED IN ANY WAY TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
IX.10. Counterparts. This Agreement may be signed in any number of
counterparts, each of which will be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
IX.11. Headings. The headings in this Agreement are for convenience of
reference only and will not control or affect the meaning or construction of any
provisions hereof.
IX.12. Entire Agreement. This Agreement and the Ancillary Agreements
constitute the entire agreement between the parties with respect to the subject
matter of this Agreement. This Agreement and the Ancillary Agreements supersede
all prior agreements and understandings, both oral and written, among the
parties, including the Letter of Interest, dated August 26, 1999, between Buyer
and the Company, with respect to the subject matter of this Agreement and the
Ancillary Agreements.
IX.13. Severability. If any provision of this Agreement or the application
of any such provision to any person or circumstance is held invalid, illegal or
unenforceable in any respect by a court of competent jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
hereof.
IX.14. Certain Interpretive Matters. (a) Unless the context otherwise
requires, (i) all references to Sections, Articles or Schedules are to be
Sections, Articles or Schedules of or to this Agreement, (ii) each of the
Schedules will apply only to the corresponding Section or subsection of this
Agreement, (iii) each term defined in this Agreement has the meaning assigned to
it, (iv) each accounting term not otherwise defined in this Agreement has the
meaning assigned to it in accordance with GAAP, and (v) words in the singular
include the plural and vice versa. All references to $ or dollar amounts will be
to lawful currency of the United States.
(b) No provision of this Agreement will be interpreted in favor of, or
against, any of the parties hereto by reason of the extent to which any such
party or its counsel participated in the drafting thereof or by reason of the
extent to which any such provision is inconsistent with any prior draft hereof
or thereof.
(c) (1) All references to the "knowledge of the Company" or to words of
similar import will be deemed to be references solely to the knowledge of one or
more of the individuals listed on Schedule 9. l4(c)(i), which knowledge will
include such knowledge as such individuals would have had after due inquiry of
the responsible directors, officers and employees of the Company.
(ii) All references to the "knowledge of Stockholder", "knowledge of the
Stockholders" or to words of similar import will be deemed to be references to
the knowledge of such Stockholder, as applicable, after such inquiry as is
appropriate under the circumstances.
IX.15. Stockholders' Representative. (a) By the execution and delivery of
this Agreement, each Stockholder hereby irrevocably constitutes and appoints Mr.
Xxxxxxx Xxxxx as stockholders' representative ("Stockholders' Representative")
with the exclusive authority to act in accordance with Section 9.15(b). In the
event of the death, resignation or inability to act of Xx. Xxxxx, Xx. Xxxxx
Xxxxxxx will be successor Stockholders' Representative with all powers of his
predecessor.
(b) The Stockholders' Representative will have full power:
(i) to act on each Stockholder's behalf in accordance with the terms of
this Agreement, to give and receive notices on behalf of all Stockholders and to
act on their behalf in connection with any matter as to which one or more
Stockholders is an "Indemnified Party" or "Indemnifying Party" under this
Agreement, all in the absolute discretion of Stockholders' Representative;
(ii) in general, to do all things and to perform all acts, including
executing and delivering all agreements, certificates, receipts, instructions
and other instruments contemplated by or in connection with this Agreement to
substantiate the representations or warranties or to perform the covenants made
by the Stockholders herein; and
(iii) to amend this Agreement on behalf of the Stockholders solely with
respect to administrative or technical revisions which will not substantially
impact the economic terms of this Agreement.
Notwithstanding anything in this Section 9.15 to the contrary, the
Stockholders' Representative will not be authorized to alter, change or modify
the Purchase Price on behalf of the Stockholders.
This power of attorney, and all authority hereby conferred, is granted in
consideration of the mutual covenants and agreements made herein, and is
irrevocable and will not be terminated by any act of any Stockholder or by
operation of Law, whether by the death or incapacity of any Stockholder or by
the occurrence of any other event. The Stockholders' Representative will not be
liable for any action taken in the capacity of Stockholders' Representative in
accordance with the terms of this Agreement, including the compromise,
settlement, payment or defense of any claim (including expenses and costs
associated therewith) under this Agreement regardless of whether any Stockholder
is the claimant or the party against whom a claim is being made. In connection
with the exercise of his duties, the Stockholders' Representative will be
entitled to consult with and rely upon legal counsel and other professional
advisors, with the costs thereof to be allocated among the Stockholders and will
have no liability hereunder for actions taken in good faith reliance upon the
advice of such advisers. Each Stockholder will, jointly and severally, hold the
Stockholders' Representative harmless from any and all Losses which they, or any
one of them, may sustain as a result of any action taken in good faith
hereunder.
[Remainder of page intentionally left blank.]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.
EXTREME COMFORT, INC.
By: /S/ Xxxxxxx X. Xxxxx
Xxxxxxx X. Xxxxx
President
By: /S/ Xxxxxxx X. Xxxxx
Xxxxxxx X. Xxxxx
Individually, as Stockholders'
Representative
By: /S/ Xxxxxxx X. Xxxxxx
Xxxxxxx X. Xxxxxx, individually
By: /S/ Xxxxxxx X. Xxxx
Xxxxxxx X. Xxxx, individually
By: /S/ Xxxxx Xxxxxxx
Xxxxx Xxxxxxx, individually
QUATRO VENTURES, INC.
By: /S/ Quatro Ventures, Inc.
Name:
Title:
[SIGNATURES CONTINUED ON NEXT PAGE]
THREE PLUS THREE, INC.
By: /S/ Three Plus Three, Inc.
Name:
Title:
XXXXXX TECHNOLOGIES, [NC.
By:: /S/ Xxxxx Xxxxx
Name: Xxxxxxx Xxxxx
Title: Chief Financial Officer
APPENDIX A
"Affiliate" means, with respect to any Person, any other Person directly or
indirectly controlling, controlled by, or under common control with such Person.
For the purposes of this definition, "control," when used with respect to any
Person, means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to the foregoing.
"Aggregate Purchase Consideration" means the Purchase Price, the amount payable
pursuant to Section 2.4, the Sales Earnout and the Net Earnings Earnout.
"Ancillary Agreements" means the Employment Agreement, the Non-Compete
Agreements, the Indemnification Agreement and the Real Estate Lease.
"Annual Net Earnings" means, for any given year, the Company's annual net
earnings before interest and taxes derived from sales of (i) the following
current products (and any future products derivative thereof) of the Company:
Boot Heaters, Glove Heaters, Heated Boot, Roo, Heated Slipper, Thumb Heater,
Wader Heater, RacerChaserTM, Graspen and SkiTime, (ii) the Company's current and
future products incorporating Buyer's Thermasorb(R) or ComforTemp(R) products
and (iii) other Buyer-approved products exclusively designed by the Company or
its customers, in each case less discounts, rebates and allowances and after
deduction of any other bona fide credits for returns actually made or allowed.
In determining "net earnings" Buyer will deduct the following expenses relating
to the operation of the Company: direct salary and related expenses (including
wages for regular and temporary employees, the value of stock options and
similar compensation awards to employees, profit-sharing payments and benefits
for regular employees, and an allocable portion for other employees (not
assigned to the Company) providing services to the Company on a fully burdened
hourly rate determined in accordance with the same methods utilized by Buyer
under its government contracts), other direct and allocable operating expenses
(including trade show booth and fees, travel, promotional, materials, facilities
and equipment expenses), and general and administrative expenses (including
office expenses, insurance, personnel costs for finance and administration,
legal fees, audit expenses, bad debt, management information systems expenses,
and any appropriate corporate overhead costs reasonably allocable to the
Company). All direct and allocated expense items will be determined in
accordance with GAAP applied on a basis consistent with the Company's past
practices.
"Annual Sales" means, for any given year, the Company's revenues derived from
sales of (i) the following current products (and any future products derivative
thereof) of the Company: Boot Heaters, Glove Heaters, Heated Boot, Roo, Heated
Slipper, Thumb Heater, Wader Heater, RacerChaserTM, Graspen and SkiTime, (ii)
the Company's current and future products incorporating Buyer's Thermasorb(R) or
ComforTemp(R) products and (iii) other Buyerapproved products exclusively
designed by the Company or its customers, in each case less discounts, rebates
and allowances and after deduction of any other bona fide credits for returns
actually made or allowed.
"Balance Sheet" means the unaudited balance sheet of the Company as of March 31,
1999 and the related statements of operations and cash flows for the period
ended March 31, 1999.
"Business Day" means any day except a Saturday, Sunday or other day on which
commercial banks in the City of New York are authorized by law to close.
"Buyer Stock" means duly authorized, validly issued and fully paid and
nonassessable shares of the authorized common stock of Buyer.
"Code" means the Internal Revenue Code of 1986, as amended.
"Employment Agreement" means the Employment Agreement between Buyer and Mr. Xxxx
Xxxxx, dated the Closing Date, substantially in the form attached hereto as
Exhibit A.
"Environmental Laws" means any and all federal, state, local and foreign
statutes, laws, judicial decisions, regulations, ordinances, rules, judgments,
orders, decrees, codes, plans, injunctions, permits, concessions, grants,
franchises, licenses, agreements and governmental restrictions, relating to
human health, the environment or emissions, discharges or releases of Hazardous
Substances into the environment, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Substances or the clean-up or other remediation thereof.
"Environmental Permits" means all permits, licenses, authorizations,
certificates and approvals of governmental authorities required by Environmental
Laws and necessary or proper for the business of the Company as currently
conducted.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.
"Financial Statements" means, collectively, the Balance Sheet and the Interim
Balance Sheet.
"GAAP" means United States generally accepted accounting principles,
consistently applied.
"Governmental Authority" means any domestic or foreign governmental or
regulatory authority.
"Hazardous Substances" means any toxic, radioactive, caustic or otherwise
hazardous substance, including petroleum, its derivatives, by-products and other
hydrocarbons,
or any substance having any constituent elements displaying any of the foregoing
characteristics, regulated under Environmental Laws.
"Indemnification Agreement" means the Indemnification Agreement between Buyer
and Xxxxxxx X. Xxxxxx, Xxxxx X. Xxxxxxx, Xxxxxxx X. Xxxx and Quatro Ventures,
Inc., dated the Closing Date, substantially in the form attached hereto as
Exhibit G.
"Indemnified Party" means any Person entitled to indemnification under this
Agreement.
"Indemnifying Party" means any Person required to provide indemnification under
this Agreement.
"Interim Balance Sheet" means the unaudited balance sheet of the Company for the
five month period ended August 31, 1999 and the related statement of income for
the nine month period ended August 31, 1999 attached hereto as Exhibit B.
"Interim Balance Sheet Date" means August 3 1,1999.
"Law" means any federal, state or local statute, law, rule, regulation,
ordinance, code, permit, license, policy or rule of common law.
"Lien" means, with respect to any property or asset, any mortgage, lien, pledge,
charge, security interest, encumbrance or other adverse claim of any kind in
respect of such property or asset. For the purposes of this Agreement, a Person
will be deemed to own subject to a Lien any property or asset which it has
acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to such property or asset.
"Millennium Compliance" means that the Computer Systems are capable of the
following, during and/or after January 1, 2000: (a) handling date information
involving all and any dates, including accepting input, providing output and
performing date calculations in whole or in part; (b) operating accurately
without interruption on and in respect of any and all dates and without any
change in performance; (c) responding to and processing two digit year input
without creating any ambiguity as to the century; and (d) storing and providing
date input information without creating any ambiguity as to the century.
"Net Cash Proceeds" means, for any given year, the Company's net income (or
loss) before taxes for such year, plus, with respect to such year, (i) any
depreciation expense of the Company, (ii) any increase (or decrease) in the
Company's assets (including inventory, accounts receivable and other current
assets) during such year, or, in the case of 1999, since the Closing Date, and
(iii) any increase (or decrease) in the Company's liabilities (including
accounts payable, accrued liabilities and other current liabilities) during such
year, or, in the case of 1999, since the Closing Date, minus any amounts paid in
respect of the purchase of fixed assets by the Company. "Net Cash Proceeds"
specifically excludes any amounts paid or received by the Company in respect of
any indebtedness of the Company arising from any external bank debt or
intercompany loans from Buyer.
"Non-Compete Agreements" means the Non-Compete Agreements between Buyer and each
of Mr. Xxxx Xxxxx, Xx. Xxxxx Xxxxxxx and Xx. Xxxxxxx Xxxxxx, dated the Closing
Date, substantially in the forms attached hereto as Exhibits D-1 and D-2.
"Order" means any judgment, injunction, judicial or administrative order or
decree.
"Person" means an individual, corporation, partnership, limited liability
company, association, trust or other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"Post-Closing Tax Period" means any Tax period (or portion thereof) ending after
the close of business of the Company on the Closing Date.
"Pre-Closing Tax Period" means any Tax period (or portion thereof) ending on or
before the close of business of the Company on the Closing Date.
"Real Estate Lease" means the Real Estate Lease between Buyer and States
Industries, Inc. dated the Closing Date, substantially in the form attached
hereto as Exhibit C.
"Registrable Securities" means the shares of Buyer Stock delivered to the
Stockholders hereunder in respect of the Aggregate Purchase Consideration;
provided, however, that such shares shall cease to be Registrable Securities
when (i) one or more registration statements covering such shares have become
effective under the Securities Act and such shares have been disposed of
pursuant to such effective registration statement; (ii) such shares have been
sold pursuant to Rule 144 under circumstances in which any legend borne by such
shares relating to restrictions on transferability under the Securities Act or
otherwise is removed by Buyer; or (iii) such shares are eligible to be sold
pursuant to Rule 144.
"Xxxxxxx Contingent Payment" means the lump sum payment of $30,000, payable by
the Company to the licensor under the Xxxxxxx Licensing Agreement, in the event
that the Company discontinues the sale of boot heaters under the Xxxxxxx
Licensing Agreement.
"Xxxxxxx Licensing Agreement" means the Licensing and Royalty Agreement, dated
March 1, 1991, between Skita, Inc., Xxxxxxx X. Xxxxxxx and the Company, and the
amendments thereto dated February 4, 1993 and August 30, 1999.
"Tax" means (i) any net income, alternative or add-on minimum tax, gross income,
gross receipts, sales, use, ad valorem, value added, transfer, franchise,
profits, license, withholding on amounts paid to or by the Company, payroll,
employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit tax, custom, duty or other tax, governmental
fee or other like assessment or charge of any kind whatsoever, together with any
interest, penalty, addition to tax or additional amount imposed by any
governmental authority (domestic or foreign) responsible for the imposition of
any such tax (a "Taxing Authority"), (ii) any liability of the Company for the
payment of any amounts of the type described in (i) as a result of being a party
to any agreement or arrangement whereby liability of the Company for payment of
such amounts was determined or taken into account with reference to the
liability of any other Persons, and (iii) any liability of the Company with
respect to the payment of any amounts of the type described in (i) or (ii) as a
result of any express or implied obligation to indemnify any other Person.
"Underwritten Offering" means a registration in which securities of Buyer are
sold to an underwriter for reoffering to the public.
INDEX OF DEFINED TERMS
Term Section
Accountants 2.3(b)(iii)
Agreement Introductory Paragraph
Bonuses 4.1.22(b)
Buyer Introductory Paragraph
Closing 3.1
Closing Date 3.1
Common Stock Recital I
Company Introductory Paragraph
Company Securities 4.1.5(b)
Computer Systems 4.1.24
Earnout Statement 2.5(a)
End-Use Product 4.1 .18(c)
Holders 6.11(a)
Indemnified Party 8.3
Indemnifying Party 8.3
Intellectual Property Rights 4.1.12
Last Offer 2.3(b)(iii)
Losses 8.2(a)
Net Earnings Earnout 2.5(c)(i)
Net Proceeds Amount 2.3(b)(ii)
Net Proceeds Period 2.3(b)(i)
Net Proceeds Statement 2.3(b)(i)
Piggy-Back Registration 6.11(a)
Plans 4.1.20(a)
Purchase Recital 2
Purchase Price 2.2
Returns 4.1.15
Sales Earnout 2.5(b)(i)
Securities Act 4.2.13
Stockholders Introductory Paragraph
Stockholders' Representative 9.15(a)
Transfer 2.1
