EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "AGREEMENT") is made and entered into
this 10th day of October, 2001, by and among ACTIVE IQ TECHNOLOGIES, INC., a
Minnesota corporation ("PURCHASER"), and XXXXXXX XXXXXX, XXXXXXX XXXXX, XXXX
SAINT and XXXXXXX XXXXX (each a "SHAREHOLDER" and collectively, the
"SHAREHOLDERS").
WHEREAS, the Shareholders own all of the issued and outstanding capital
stock (collectively, the "COMPANY SHARES") of FMS Marketing, Inc., an Illinois
corporation (the "COMPANY"); and
WHEREAS, Purchaser desires to purchase, and the Shareholders desire to sell
to Purchaser, all of the Company Shares on the terms and conditions hereinafter
set forth.
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF COMPANY SHARES
1.1 Purchase of Company Shares. On the terms and subject to the conditions
set forth herein, at the Closing (as defined herein), the Shareholders shall
sell, transfer, convey, assign and deliver to Purchaser, and Purchaser shall
purchase, acquire and accept from the Shareholders, the Company Shares on the
terms and subject to the conditions set forth in this Agreement. At the Closing,
the Shareholders shall deliver to Purchaser certificates evidencing the Company
Shares duly endorsed for transfer, and all such other documentation as is
necessary and helpful as determined by Purchaser to transfer the Company Shares
to Purchaser.
1.2 Consideration Payable to Shareholders. In consideration for the
Shareholder's assignment and delivery to Purchaser of the Company Shares,
Purchaser shall deliver to the Shareholders the following at the Closing: (a) an
aggregate of Two Hundred Fifty Thousand (250,000) shares of Purchaser common
stock, par value $.01 per share (the "PURCHASER SHARES"), (b) an aggregate cash
payment of Three Hundred Thousand Dollars ($300,000) (the "CLOSING PAYMENT"),
(c) promissory note(s) in favor of the Shareholders in the aggregate principal
amount of Three Hundred Thousand ($300,000), which note(s) shall be payable six
(6) months from the Closing, in the form of EXHIBIT A attached hereto (the
"PURCHASER NOTES").
1.3 Closing. The closing of the transactions contemplated by this Agreement
(the "CLOSING") shall take place at the offices of Xxxxxx Xxxxxxx Xxxxxx &
Brand, LLP, 00 Xxxxx Xxxxxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx, at 10:00 a.m.,
Minneapolis time, on October 15, 2001 (the "CLOSING DATE"), unless the parties
hereto agree upon a different time, date or place, provided all of the
conditions to the Closing contained herein have been satisfied or waived in
writing on or prior to the Closing Date.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to the Company and the Shareholders that:
2.1 Organization and Corporate Authority. Purchaser is organized, validly
existing and in good standing under the laws of the State of Minnesota and has
all requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. This Agreement and all other
agreements herein contemplated to be executed in connection herewith by
Purchaser have been (or upon execution will have been) duly executed and
delivered by Purchaser, have been effectively authorized by all necessary
action, corporate or otherwise, and constitute (or upon execution will
constitute) legal, valid and binding obligations of Purchaser enforceable in
accordance with their respective terms, except as the same may be subject to
general principles of equity or limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance or similar laws.
2.2 Agreement Not in Breach of Other Instruments. The execution, delivery
and performance of this Agreement and all other agreements contemplated herein
to be executed by Purchaser and the consummation of the transactions
contemplated hereby and thereby, and the fulfillment of the terms hereof and
thereof, will not result in a breach of any of the terms or provisions of, or
constitute a default under, or conflict with, (a) any material agreement,
contract, commitment, permit, indenture or other instrument to which Purchaser
is a party or by which its assets are bound or (b) the Articles of Incorporation
or Bylaws of Purchaser.
2.3 Validity of Purchaser Shares. The Purchaser Shares have been duly
authorized, and upon issuance, delivery and payment therefor will be validly
issued, fully paid and nonassessable.
2.4 Investment Representation. Purchaser is purchasing the Company Shares
for its own account with the present intention of holding such shares for
investment purposes and not with a view to or for sale in connection with any
distribution of the Company Shares in violation of any applicable securities
law.
2.5 No Legal Bar. Purchaser is not prohibited by any order, writ,
injunction or decree of any body of competent jurisdiction from consummating the
transactions contemplated by this Agreement, and no such action or proceeding is
pending against Purchaser which questions the validity of this Agreement, any of
the transactions contemplated hereby or any action which has been taken by any
of the parties in connection herewith or in connection with any of the
transactions contemplated hereby.
2.6 Brokers. No broker or finder has acted for Purchaser or any Affiliate
of Purchaser in connection with this Agreement or the transactions contemplated
hereby, and no broker or finder is entitled to any brokerage or finder's fees or
other commissions in respect of such transactions based in any way on
agreements, arrangements or understandings made by or on behalf of Purchaser or
any Affiliate of Purchaser.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE
SHAREHOLDERS REGARDING THE SHAREHOLDERS AND THE COMPANY SHARES
Each of the Shareholders, jointly and severally, represents and warrants to
Purchaser that the following representations and warranties are, as of the date
hereof, and will be, as of the Closing Date, true and correct:
3.1 Organization and Authority. Each Shareholder has executed and delivered
this Agreement, all other agreements set forth herein or contemplated hereby and
any other document or instrument delivered by the Shareholders or entered into
as part of the transactions contemplated herein or hereby (the "OTHER
AGREEMENTS") and has full and adequate authority to perform such Shareholder's
obligations hereunder. Each of the Shareholders is of legal capacity and has
full power and authority to execute and deliver this Agreement and the Other
Agreements, and to perform his or her obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of each Shareholder,
enforceable in accordance with its terms and conditions. None of the
Shareholders is required to give notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency in
order to consummate the transactions contemplated by this Agreement.
3.2 Title to Company Shares. Except as set forth in SCHEDULE 3.2, the
Shareholders have good title to the Company Shares free and clear of any and all
covenants, conditions, demands, subscriptions, commitments, warrants, proxies,
restrictions, shareholder agreements, voting trust arrangements, liens, charges,
encumbrances, community property or quasi-community property interests, options,
adverse claims or rights whatsoever. Upon consummation of the purchase
contemplated hereby, Purchaser will acquire from the Shareholders good title to
the Company Shares, free and clear of all covenants, liabilities, obligations,
conditions, demands, subscriptions, commitments, warrants, proxies,
restrictions, shareholder agreements, voting trust arrangements, liens, charges,
encumbrances, community property or quasi-community property interests, options,
adverse claims or rights whatsoever. No person other than the Shareholders has
any beneficial or legal ownership to the Company Shares.
3.3 Brokerage Fees. No broker or finder has acted for any Shareholder in
connection with this Agreement or the Other Agreements, and no broker or finder
is entitled to any broker or finder's fees or other commissions in respect of
such transactions based in any way on agreements, arrangements or understandings
made by or on behalf of such Shareholder.
3.4 Agreement Not in Breach of Other Instruments. Except as set forth on
SCHEDULE 3.4, the execution and delivery of this Agreement and the Other
Agreements, the consummation of the transactions contemplated hereby and
thereby, and the fulfillment of the terms hereof and thereof will not result in
a breach of any of the terms or provisions of, or constitute a default under, or
conflict with, (a) any agreement, contract, commitment, permit, indenture or
other instrument to which any Shareholder is a party or by which any Shareholder
or his, her or its assets or any of the Company Shares are bound, including but
not limited to any trust agreement or any agreement or instrument related
thereto, or (b) any law, statute or regulation or any judgment, decree, order or
award of any court, governmental body or arbitrator to which any Shareholder or
any of such Shareholder's Company Shares or assets are subject.
3.5 No Legal Bar. None of the Shareholders is prohibited by any order,
writ, injunction or decree of any body of competent jurisdiction from
consummating the transactions contemplated by this Agreement, and no such action
or proceeding is pending against any Shareholder which questions the validity of
this Agreement or the Other Agreements.
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3.6 Regulatory Approvals. All consents, approvals, authorizations and other
requirements prescribed by any law, rule or regulation which must be obtained or
satisfied by any or all of the Shareholders from any governmental authority in
order to permit the consummation of the transactions contemplated by this
Agreement or the Other Agreements have been obtained and satisfied, or will have
been obtained and satisfied as of the Closing Date.
3.7 Due Execution; Enforceability. This Agreement and the Other Agreements
has been (or upon execution will have been) duly executed and delivered by each
of the Shareholders and has been effectively authorized by all necessary action,
corporate or otherwise, and, constitute (or upon execution will constitute)
legal, valid and binding obligations of each of the Shareholders enforceable in
accordance with their respective terms, except as the same may be subject to
general principles of equity or limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance or similar laws.
3.8 No Other Agreements to Sell the Assets or Capital Stock of the Company
or its Subsidiaries. None of Shareholders, the Company or its Subsidiaries has
any legal obligation, absolute or contingent, to any other person or entity to
sell or effect a sale of the assets of the Company or its Subsidiaries, to sell
or effect a sale of any of the capital stock of the Company or its Subsidiaries
or to effect any merger, consolidation or other reorganization of the Company or
its Subsidiaries or to enter into any agreement or cause the entering into of an
agreement with respect thereto.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE
SHAREHOLDERS AND THE COMPANY REGARDING THE COMPANY AND ITS SUBSIDIARIES
The Shareholders, jointly and severally, represents and warrants to
Purchaser that, the following representations and warranties are true and
correct as of the date hereof and will be, as of the Closing Date, true and
correct:
4.1 Organization, Authority and Purpose. The Company is duly organized,
validly existing and in good standing under the laws of the State of Illinois
and has all requisite corporate power and authority to carry on its business as
it is now, and has since its formation has been, conducted and is duly
authorized to own the properties and assets it now owns. Each Subsidiary of the
Company is duly organized, validly existing and in good standing under the laws
of the state of its incorporation and each have the requisite corporate power
and authority to carry on its business as it is now, and has since formation
been, conducted and is duly authorized to own the properties and assets it now
owns. The Company and each Subsidiary is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction in which such
qualification is necessary under the applicable law as a result of the conduct
of its business or the ownership of its properties except where the failure to
be so qualified and in good standing would not have a Material Adverse Effect.
"MATERIAL ADVERSE EFFECT" shall mean any matter which, either individually or in
the aggregate, could or does have a material adverse effect on the Company
Shares or the assets, business, financial condition, results of operations or
prospects of the Company or its Subsidiaries. Each jurisdiction in which each of
the of the Company and its Subsidiaries are qualified to do business as a
foreign corporation is listed in SCHEDULE 4.1. SCHEDULE 4.1 also lists each
Subsidiary of the Company. Except as set forth in SCHEDULE 4.1, neither the
Company nor its Subsidiaries owns, of record or beneficially, or control,
directly or indirectly, any equity interest in any entity. The Company and its
Subsidiaries each have full power and authority to perform its obligations under
this Agreement and the Other Agreements and no other authority, whether by
directors, shareholders or otherwise, is necessary to execute, deliver or
consummate this Agreement or the Other Agreements. SCHEDULE 4.1 lists and
describes each and every predecessor (whether direct or indirect) corporation or
entity to the Company or its Subsidiaries and describes each and every assumed
name or trade name such predecessors, the Company or its Subsidiaries have used
or had rights to during the past
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ten (10) years. For purposes of this Agreement, the term "SUBSIDIARY" or
"SUBSIDIARIES" shall mean any entity or entities, respectively, with respect to
which the Company beneficially owns more than 50 percent of the outstanding
equity of such entity.
4.2 Financial Statements. SCHEDULE 4.2 contains the unaudited consolidated
balance sheets of the Company and its Subsidiaries as of September 30, 2001, and
the related statements of earnings, equity and cash flows for the nine months
then ended and the notes related thereto (the "FINANCIAL STATEMENTS"). The
Financial Statements subject to the exceptions hereinafter set forth in this
SECTION 4.2 (i) were prepared in accordance with the books and records of the
Company and its Subsidiaries, respectively; (ii) were prepared in accordance
with accounting principles consistently applied, consistent with past practices;
(iii) fairly present the Company's and its Subsidiaries' respective financial
condition and the results of their operations as at the relevant dates thereof
and for the periods covered thereby; and (iv) are true and accurate. For
purposes of this Agreement, "BALANCE SHEET" means the balance sheets of each of
the Company and its Subsidiaries as of September 30, 2001 (the "BALANCE SHEET
DATE").
4.3 Absence of Certain Changes. Except as set forth on SCHEDULE 4.3, since
the Balance Sheet Date, each of the Company and its Subsidiaries has conducted
its business in the ordinary course of business substantially consistent with
past practice and there has not been (i) any declaration or payment of
distributions or dividends by the Company or its Subsidiaries or any
intercompany transfer of assets of any kind whatsoever by the Company or its
Subsidiaries; (ii) any transaction not in the ordinary course of business (for
purposes of this Agreement, "ordinary course of business" means the ordinary
course of business consistent with past custom and practice (including with
respect to quantity and frequency)); (iii) any change in the business, results
of operations, condition (financial or otherwise), assets, liabilities (whether
absolute, accrued, contingent or otherwise) or business of the Company or its
Subsidiaries that has had or is reasonably likely to have, with the passage of
time or otherwise, a Material Adverse Effect; (iv) any damage, destruction or
loss, whether or not covered by insurance, which has had or is reasonably likely
to have, with the passage of time or otherwise, a Material Adverse Effect; (v)
any sale or transfer of any of their assets or any cancellation of any debts,
rights or claims, except sales in the ordinary course of business of inventory
or immaterial amounts (not in excess of $5,000 in the aggregate) of other
tangible personal property not required in their respective businesses; (vi) any
mortgage, pledge or subjection to lien, charge or encumbrance of any kind,
except liens for taxes not due, of any of their properties or assets; (vii) any
material amendment, modification or termination of any material contract or
agreement to which the Company or its Subsidiaries is a party; (viii) any
increase in, or commitment to increase, the compensation payable or to become
payable to any employee or agent of the Company or its Subsidiaries or any bonus
payment or similar arrangement made to or with any of such employees or agents,
except with the prior written consent of Purchaser other than those undertaken
in the ordinary course of business in connection with annual salary reviews
consistent with past practices which, in the aggregate, have not increased
annual payroll by more than $25,000 and, individually, with respect to any
employee, has not increased annual compensation by $10,000; (ix) any incurrence
of, assumption of, or taking of any property subject to, any liability, except
for liabilities incurred or assumed or property taken subsequent to the Balance
Sheet Date in the ordinary course of business and consistent with past practice;
(x) any alteration in the manner of keeping the books, accounts or records of
the Company or its Subsidiaries, or in the accounting practices therein
reflected; (xi) any issuance or sale of any interests, including but not limited
to equity and debt, in or of the Company or its Subsidiaries, or any issuance or
sale of securities convertible into, or options with respect to, or warrants to
purchase or rights to subscribe to, any interests in or of the Company or its
Subsidiaries, or any agreements entered into obligating the Company or its
Subsidiaries to issue, sell, redeem, repurchase or acquire any such interests;
(xii) any labor dispute or any activity or proceeding by a labor union or
representative thereof to organize any employees of the Company or its
Subsidiaries or any lockouts, strikes, slowdowns, work stoppages, or threats
thereof by or with respect to such employees; (xiii) any notice from any
customer or customers or supplier or suppliers, as to such customer or
supplier's intention not to conduct business with the Company or its
Subsidiaries, the results of which loss or losses of business or supplies,
individually or in the aggregate, has had, or
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may reasonably be expected to have, with the passage of time or otherwise, a
Material Adverse Effect; (xiv) any adoption of, amendment to or termination of
any Employee Plans (as defined herein); or (xv) any other event or condition of
any character which has had or may reasonably be expected to have, with the
passage of time or otherwise, a Material Adverse Effect.
4.4 Charter Documents. Attached as SCHEDULE 4.4 are true and correct copies
of the Articles of Incorporation, all amendments thereto, and the Bylaws of the
Company and its Subsidiaries, in each case as in effect on the date hereof. The
Shareholders or the Company have provided Purchaser with all the corporate
minutes of the Company and its Subsidiaries. All such documents have been
maintained in accordance with good business and record keeping practices and in
compliance with all applicable laws, regulations and procedures.
4.5 Real Property. Neither the Company nor its Subsidiaries has sold,
transferred, assigned, gifted or otherwise disposed of any interest in any real
property to any person or entity in the ten year period preceding the date of
this Agreement. Neither the Company nor its Subsidiaries owns or has any
interest, contingent or otherwise in or to any real property.
4.6 Leaseholds. Other than the leases (the "LEASES") described on SCHEDULE
4.6 relating to the real property described therein (the "LEASED PROPERTY"),
none of the Company or its Subsidiaries leases or subleases any real property
from any person or entity. With respect to the Leases:
(a) The Company or its Subsidiaries, through the Leases, have, to the
best of the Company's and each Shareholder's knowledge, valid written
leasehold interests in all of the Leased Property;
(b) The Leases are, to the best of the Company's and each
Shareholder's knowledge, legal, valid, binding, enforceable, and in full
force and effect;
(c) The Leases will continue to be legal, valid, binding, enforceable,
and in full force and effect on identical terms following the consummation
of the transactions contemplated hereby;
(d) Except as set forth on SCHEDULE 4.6, no action of any kind is
necessary or required by the Company or its Subsidiaries (or any other
person, entity or government body), including but not limited to obtaining
consent, with respect to such Leased Property or the Leases, in connection
with the transactions contemplated by this Agreement;
(e) Neither the Company nor its Subsidiaries is in breach or default,
and, to the best of the Company's and each Shareholder's knowledge, no
event has occurred which, with notice or lapse of time, would constitute a
breach or default or permit termination, modification, or acceleration
thereunder;
(f) To the best of each Shareholder's knowledge, no party to the
Leases has repudiated any provision thereof;
(g) There are no disputes, oral agreements, or forbearance programs in
effect as to the Leases;
(h) Neither the Company nor its Subsidiaries has assigned,
transferred, conveyed, mortgaged, deeded in trust, or encumbered any
interest in the Leases;
(i) All facilities leased under the Leases are supplied with utilities
and other services necessary for the operation of said facilities;
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(j) (i) there are no pending or, to the knowledge of the Company, its
Subsidiaries and each Shareholder, threatened or contemplated condemnation
proceedings, lawsuits, administrative actions, or proceedings relating to
the Leased Property or otherwise affecting adversely the current use,
occupancy, or value thereof; and (ii) neither the Company, its Subsidiaries
nor any Shareholder has received notice of or has knowledge of (without
independent investigation) any proposed or pending public improvements
project(s), the cost of which a governmental agency may assess against the
Leased Property;
(k) To the best of each Shareholder's knowledge, no violation of any
law (including but not limited to Environmental Laws), regulation,
ordinance, permit, license, certificate or other governmental requirement
(including without limitation, laws, regulations or ordinances relating to
zoning or city planning) relating to the Leased Property presently exists
other than for violations, which have not had and will not have with the
passage of time or otherwise, individually or in the aggregate, a Material
Adverse Effect;
(l) To the best of each Shareholder's knowledge, all facilities have
received all approvals of governmental authorities (including licenses and
permits) required in connection with the ownership and operation thereof
and have been operated and maintained in accordance with applicable laws
(including but not limited to Environmental Laws), rules, and regulations,
except for noncompliance which has not had, and will not have with the
passage of time or otherwise, individually or in the aggregate, a Material
Adverse Effect;
(m) Other than the Lease, there are no leases, subleases, licenses,
concessions, or other agreements, written or oral, granting to any party or
parties the right of use or occupancy of any portion of any parcel of
Leased Property;
(n) There are no parties (other than the Company or any of its
Subsidiaries ) in possession of the Leased Property;
(o) To the best of each Shareholder's knowledge, here has been no
labor or materials furnished to the Leased Property for which payment has
not been paid;
(p) There are no xxxxx located on the Leased Property;
(q) Each such Leased Property is sufficient for the conduct of the
business as is currently being carried out by the Company and its
Subsidiaries and is consistent with past practices;
(r) The Company and its Subsidiaries have maintained the improvements
on the Leased Property in a manner consistent with the ongoing requirements
of their respective businesses and have not altered such maintenance
practices in anticipation of the transactions contemplated hereby; and
(s) All facilities located on the Leased Property are supplied with
utilities and other services necessary for the operation of such
facilities, including (if necessary) gas, electricity, water, telephone,
sanitary sewer, and storm sewer, all of which services are, to the best of
the Company's and each Shareholder's knowledge, adequate in accordance with
all applicable laws, ordinances, rules, and regulations.
4.7 Tangible Personal Property. Except as set forth in SCHEDULE 4.7:
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(a) The Company and its Subsidiaries have good title to each item of
tangible personal property owned by them free and clear of any and all
Security Interests, leases, encumbrances, claims under bailment and storage
agreements, equities, conditional sales contracts, charges and restrictions
of any kind ("LIENS");
(b) Each item of tangible personal property not owned by the Company
or its Subsidiaries is in such condition that upon the return of such
property to its owner in its present condition at the end of the relevant
lease term or as otherwise contemplated by the applicable agreement between
the Company and the owner or lessor thereof, the obligations of the Company
to such owner or lessor will be discharged;
(c) The tangible personal property owned or used by each of the
Company and its Subsidiaries is sufficient for the proper conduct of its
business as heretofore conducted;
(d) The Company and its Subsidiaries have maintained the tangible
personal property owned or leased by them and material to their respective
businesses in a manner consistent with the ongoing requirements of their
respective businesses and have not altered such maintenance practices in
anticipation of the transactions contemplated hereby;
(e) The Company and its Subsidiaries own or otherwise have the right
to use all of the tangible personal property currently in the operation of
its business; and
(f) Neither the Company nor its Subsidiaries has any material
contract, letter of intent or proposal relating to the acquisition or
divestiture of tangible personal property.
4.8 Capitalization. The Company is authorized to issue 1,000 shares of
common stock, no par value, and no other capital stock or other equity or debt
interests. Of its authorized capital stock, 1,000 shares of common stock are
issued and outstanding, all of which are owned, of record and beneficially, by
the Shareholders in such amounts as set forth in SCHEDULE 4.8. All of the
Company Shares have been duly authorized and are validly issued, fully paid and
nonassessable. There are not, and on the Closing Date there will not be,
outstanding (i) any options, warrants or, other rights to purchase from the
Company or any other person or entity any capital stock of the Company or its
Subsidiaries, (ii) any securities convertible into or exchangeable for shares of
such stock or (iii) any other commitments of any kind for the issuance of
additional shares of capital stock or options, warrants or other securities of
the Company. There are no outstanding obligations of the Company or its
Subsidiaries to repurchase, redeem or otherwise acquire any capital stock of the
Company or securities convertible into such capital stock.
4.9 Subsidiaries. SCHEDULE 4.9 sets forth for each Subsidiary: (i) its name
and jurisdiction of incorporation, (ii) the number of shares of authorized
capital stock of each class of its capital stock, (iii) the number of issued and
outstanding shares of each class of its capital stock, the names of the holders
thereof, and the number of shares held by each such holder, and (iv) the number
of shares of its capital stock held in treasury. All of the issued and
outstanding shares of capital stock of each Subsidiary have been duly authorized
and are validly issued, fully paid, and nonassessable. The Company or its
Subsidiaries holds of record and owns beneficially all of the outstanding shares
of each subsidiary, free and clear of any restrictions on transfer (other than
restrictions under the Securities Act and state securities laws), Taxes,
Security Interests, options, warrants, purchase rights, contracts, commitments,
equities, claims, and demands. There are no outstanding or authorized options,
warrants, purchase rights, subscription rights, conversion rights, exchange
rights, or other contracts or commitments that could require the Company or its
Subsidiaries to sell, transfer, or otherwise dispose of any capital stock of any
of its subsidiaries that could require any Subsidiary to issue, sell, or
otherwise cause to become outstanding any of its own capital stock. There are no
outstanding stock appreciation, phantom stock, profit participation, or similar
rights with respect to any Subsidiary. There are no voting trusts, proxies,
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or other agreements or understandings with respect to the voting of any capital
stock of any Subsidiary. Neither the Company nor its Subsidiaries controls
directly or indirectly or has any direct or indirect equity participation in any
corporation, limited liability company, limited liability partnership,
partnership, trust, or other business association which is not a Subsidiary.
4.10 Agreement Not in Breach of Other Instruments. Except as set forth in
SCHEDULE 4.10, neither the execution and delivery of this Agreement or the Other
Agreements, nor the consummation of the transactions contemplated hereby or
thereby, nor the fulfillment of the terms hereof or thereof, will (a) violate,
or result in a breach of, any of the terms and provisions of, or constitute a
default under, or conflict with (i) any agreement, contract, commitment, permit,
indenture or other instrument to which any of the Company or its Subsidiaries is
a party or by which any of the Company or its Subsidiaries or any of their
assets, are bound, or give rise to any right of termination, cancellation or
acceleration under any such agreement, contract, commitment, permit, indenture
or other instrument by any party thereto, (ii) the bylaws, articles/certificate
of incorporation or shareholder agreements of any of the Company or its
Subsidiaries or (iii) any law, statute or regulation, or any judgment, decree,
order or award of any court, governmental body or arbitrator applicable to any
of the Company or its Subsidiaries; or (b) result in the creation or imposition
of any lien, charge, pledge, Security Interest or encumbrance of any kind on any
asset of any of the Company or its Subsidiaries.
4.11 Insurance. Schedule 4.11 sets forth a true and correct list of all
insurance policies of any nature whatsoever, including self-insurance plans,
currently maintained by the Company or its Subsidiaries or maintained by a
Shareholder and covering the Company or its Subsidiaries or the Company's or its
Subsidiaries' assets, and the annual or other premiums payable from time to time
thereunder. All such policies of the Company and its Subsidiaries (i) are issued
by insurance companies reasonably believed by the Shareholders to be financially
sound and reputable and are in full force and effect; (ii) are sufficient (in
form, amount and otherwise) for compliance with all requirements of law and of
all applicable agreements; (iii) are valid, outstanding and enforceable
policies; and (iv) in the reasonable judgment of each of the Company, its
Subsidiaries and the Shareholders provide reasonable insurance coverage for the
assets and operations of the Company and its Subsidiaries for all risks normally
insured against by persons carrying on the same business as the Company and its
Subsidiaries. SCHEDULE 4.11 also contains a description of all contingent
liability that the Company or its Subsidiaries may be subject as a result of
retrospective insurance premium obligations, and describes the extent of any
self-insurance reserves which are actuarially determinable but not accrued as
liabilities on the Financial Statements. There are no outstanding claims by the
Company or its Subsidiaries under the insurance coverages listed in SCHEDULE
4.11, as to which full and complete coverage (subject to deductibles) for losses
has been questioned, disputed or denied. None of the Company and its
Subsidiaries has failed to give any notice or present any outstanding claim
under any insurance policy in a timely and complete manner. No claims are being
handled by an insurer of the Company or its Subsidiaries under a reservation of
rights letter. To the best of the Company's and each Shareholder's knowledge,
there are no outstanding requirements or recommendations by any insurance
company that issued any policy listed in SCHEDULE 4.11 or by any Board of Fire
Underwriters or other similar body exercising similar functions or by any
governmental authority exercising similar functions which requires or recommends
any changes in the conduct of the business of, or any repairs or other work to
be done on or with respect to any of the properties or assets of the Company or
its Subsidiaries. None of the Company and its Subsidiaries has received any
notice or other communication from any such insurance company within the three
years preceding the date hereof canceling or materially amending or materially
increasing the annual or other premiums payable under any of said insurance
policies, and no such cancellation, amendment or increase of premiums is
threatened.
4.12 Employee Benefit Matters.
(a) SCHEDULE 4.12(A) lists and generally describes:
9
(i) each employee welfare benefit plan and each employee pension
benefit plan within the meaning of Section 3 of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), that is
maintained or contributed to by the Company, its Subsidiaries or any
Shareholder for the benefit of the Company's or its Subsidiaries'
employees (collectively, the "ERISA PLANS"); and each trust fund
maintained by the Company, its Subsidiaries or any Shareholder in
connection with any of such ERISA Plans; and
(ii) all other plans providing compensation (other than salaries
or wages), benefits or perquisites to any class of employees of the
Company or its Subsidiaries, including without limitation any
incentive, bonus, stock option, restricted stock, vacation pay, sick
pay and severance plans ("COMPENSATION PLANS"); and any cafeteria
plan" ("125 PLAN") governed by Section 125 of the Internal Revenue
Code of 1986, as amended, including all regulations and rules adopted
in connection therewith or pursuant thereto (the "CODE"). the ERISA
Plans, the Compensation Plans and any 125 Plan may be collectively
referred to as the "EMPLOYEE PLANS."
(b) The Company or the Shareholders have furnished to Purchaser a
true, correct and complete copy of each of the ERISA Plans and any related
trust agreements or other funding vehicles; true, correct and complete
copies of the Compensation Plans and 125 Plan (or summaries of any
unwritten Compensation Plans or 125 Plan) and true, correct and complete
copies of any employment policy manuals distributed to any class of
employees of the Company or its Subsidiaries. With respect to each of the
ERISA Plans and any 125 Plan, the Shareholders have also furnished to
Purchaser the most recent summary plan description and the last three most
recently filed annual reports required to be made on Form 5500. As to each
of the ERISA Plans that is funded, the Company and its Subsidiaries have
delivered or made available to Purchaser a true, correct and complete copy
of the most recent annual financial report (including any auditor's report)
with respect to such plan, and any subsequent interim report. Each such
financial report and interim report is an accurate description of the
financial status of the subject employee benefit plan, and to the knowledge
of the Company, its Subsidiaries and each of the Shareholders, there have
been no adverse changes in the financial status of any such funded ERISA
Plans since the date of the most recent report provided with respect
thereto.
(c) SCHEDULE 4.12(C) specifically identifies each of the ERISA Plans
that is represented to be a qualified plan under Code Section 401(a)
("QUALIFIED PLAN"). With respect to each Qualified Plan, the following are
true: (i) the plan, in form and operation, currently satisfies, and for all
years subsequent to the establishment of such plan, has satisfied, the
qualification requirements of Section 401(a) of the Code; and (ii) the
Internal Revenue Service (the "IRS") has issued a favorable letter of
determination with respect to the plan (including without limitation the
provisions of the Tax Reform Act of 1986 and related regulations), and all
amendments required by the Code as a condition of retention of such
qualified status as of the date hereof have been adopted within time limits
required to maintain such status or such time limits have not expired. Each
of the Qualified Plans is and has been operating in compliance with all
amendments required by the Tax Reform Act of 1986 and subsequent
legislation and regulations. the Company or its Subsidiaries have furnished
to Purchaser a true, correct and complete copy of the most recent letter of
determination issued with respect to each such Qualified Plan.
(d) None of the Company and its Subsidiaries maintains or contributes
to any Qualified Plan that is subject to Title IV of ERISA, nor has the
Company or its Subsidiaries terminated or withdrawn from participation in
any such plan. Except as set forth in SCHEDULE 4.12(D), none of the
Qualified Plans is a Multiemployer Plan, as defined in ERISA Section
4001(a)(3). All
10
contributions payable by the Company or its Subsidiaries to any of the
ERISA Plans for any plan year ending prior to the date hereof have been
paid in full on a timely basis and no accumulated funding deficiency (as
defined in Section 302(a)(2) of ERISA) has been incurred with respect to
any Qualified Plan subject to Code Section 412. Except as set forth in
SCHEDULE 4.12(D), (i) neither the Company nor its Subsidiaries has
maintained, contributed to or been required to contribute to a
Multiemployer Plan, (ii) no amount is due by the Company or its
Subsidiaries to any Multiemployer Plan on account of any withdrawal
therefrom, (iii) no withdrawal events triggering liability have occurred
with respect to any Multiemployer Plan (and no material risk of such event
exists), (iv) no contingent liability exists with respect to any
Multiemployer Plan in respect of an asset sale by the Company or any ERISA
Affiliate made in the prior five (5) years, and (v) SCHEDULE 4.12(D), lists
and described the current liability of the Company and its Subsidiaries
under each Multiemployer Plan if a withdrawal liability occurred on the
date of this Agreement.
(e) Neither the Company nor its Subsidiaries have engaged in, nor
entered into any arrangement pursuant to which the Company or a Subsidiary
is contractually bound to enter into, any transaction which could result in
imposition upon the Company or its Subsidiaries, Purchaser or Purchaser's
subsidiaries, of any excise tax under Sections 4971 through 4980B,
inclusive, and Section 5000 of the Code or civil liability under Section
502(i) or 502(l) of ERISA or otherwise incurred a liability for any excise
tax with respect to any of the Employee Plans, other than excise taxes that
have heretofore been paid or have been accrued, and, in either case are
fully reflected in the Balance Sheet.
(f) The Company or its Subsidiaries has (i) filed or caused to be
filed on a timely basis each and every return, report, statement, notice,
declaration and other document required to be filed with any governmental
agency, federal, state and local (including, without limitation, the IRS,
the Department of Labor, the Pension Benefit Guaranty Corporation and the
SEC) with respect to each of the Employee Plans; and the Company or its
Subsidiaries have maintained on their premises (or have caused to be
maintained by a service provider) all records with respect to such plans as
are required for their proper administration and proper continued reporting
and disclosure; (ii) timely complied with all applicable participant
disclosure requirements of ERISA; and (iii) maintained in full force and
effect any bond required under ERISA in connection with the ERISA Plans.
(g) Neither the Company nor any Subsidiary (during the period it is a
Subsidiary) is or ever has been a member of a controlled group of
corporations, an unincorporated trade or business under common control, or
a member of an affiliated service group (as such terms are defined in
Sections 414(b), 414(c) and 414(m) of the Code), that includes any entity
other than the Company and its Subsidiaries.
(h) The Company and its Subsidiaries have not utilized to any material
extent, the services of "leased employees" (as defined in Section 414(n) of
the Code) within the four (4) year period ending on the Closing Date, nor
are there any persons now working for the Company or its Subsidiaries who
are anticipated to become such leased employees with the passage of time,
except to the extent such status would not have a Material Adverse Effect
on any of the Employee Plans.
(i) Except as described in SCHEDULE 4.12(I), neither the Company nor
its Subsidiaries maintain any group life insurance or health benefit
coverage for former employees or directors of the Company or its
Subsidiaries, other than group life insurance or health benefit coverage
mandated by applicable law. the Company and its Subsidiaries have timely
complied with all of their respective "COBRA" obligations under ERISA
Section 602, Code Section 4980B and
11
applicable state insurance laws, with respect to group life insurance or
health benefit continuation coverage to be provided by those of its
Employee Plans that provide such benefits.
(j) With respect to the Employee Plans, there are no claims, actions,
suits or proceedings pending or, to the knowledge of the Company, its
Subsidiaries and each Shareholder, threatened against the Company, its
Subsidiaries or any other fiduciaries thereof, respecting their duties or
obligations to any such plan, its assets, any trust thereunder or any
participant or beneficiary thereof, except claims made in the ordinary
course for benefits or compensation provided by such plans.
(k) Neither the Company, its Subsidiaries, nor any of their respective
directors, officers, employees or other "fiduciaries," as that term is
defined in Section 3(21) of ERISA, has committed any breach of fiduciary
responsibility imposed by ERISA or any other applicable law with respect to
the ERISA Plans, that would subject the Company or its Subsidiaries,
Purchaser, Purchaser's subsidiaries or any of their respective directors,
officers or employees to any liability under ERISA or any other applicable
law and that is reasonably expected to have a Material Adverse Effect.
4.13 Tax Matters.
(a) The following terms shall have the meanings indicated below:
(i) "TAXES" (or "TAX" or "TAXABLE" or "TAXING" where the context
requires) shall mean (a) all federal, state, county, local, foreign
and other taxes (including, without limitation, net income, gross
income, profits, premium, estimated, excise, sales, use, value-added,
occupancy, occupation, gross receipts, franchise, license, ad valorem,
severance, capital levy, production, transfer, withholding, employment
and payroll related, and property taxes, custom and import duties and
other governmental fees, charges and assessments), whether
attributable to statutory or nonstatutory rules and whether or not
measured in whole or in part by net income, whether or not
consolidated, combined, unitary or separate; (B) any interest,
additions to tax or interest and penalties with respect thereto; and
(C) any liability for the payment of any of such amounts as a result
of being a member of an affiliated or combined group.
(ii) "TAX AGREEMENT" shall mean any tax sharing or indemnity
arrangement among or between the Company, its Subsidiaries, a
Shareholder or any Shareholder's Affiliates, or any predecessor
thereof and described in SCHEDULE 4.13(A).
(iii) "TAX RETURNS" (or "TAX RETURN" where the context requires)
shall mean all returns, declarations, reports and information returns
of whatsoever kind in respect of Taxes.
(iv) "PRE-CLOSING TAX PERIOD" shall mean all Tax Periods ending
on or before the Closing Date and that portion to and including the
Closing Date of any Taxable period that includes (but does not end on)
the Closing Date.
(b) Each of the Company and its Subsidiaries: (i) has timely filed all
Tax Returns required to be filed through the date hereof, has timely paid
any Tax due through the date hereof with respect to the time periods
covered by such Tax Returns and shall timely pay any such Taxes required to
be paid by it after the date hereof and on or prior to the Closing Date
with respect to such Tax Returns; and (ii) shall prepare and timely file
all such Tax Returns required to be filed after the date hereof and through
the Closing Date and timely pay all Taxes required to be paid by
12
them on or prior to the Closing Date with respect to the periods covered by
such Tax Returns; and (iii) all such Tax Returns filed pursuant to clause
(i) after the date hereof shall, in each case, be prepared and filed in a
manner consistent in all material respects (including elections and
accounting methods and conventions) with such Tax Return most recently
filed in the relevant jurisdiction prior to the date hereof, except as
otherwise required by law or regulation or agreed to in writing by
Purchaser.
(c) All consolidated or combined Tax Returns (except those described
in subparagraph (b) above) required to be filed by any person through the
date hereof that are required or permitted to include the income, or
reflect the activities, business, operations, assets or transactions, of
the Company and its Subsidiaries for any taxable period have been timely
filed, and the income, business, activities, operations, property and
transactions of each of the Company and its Subsidiaries have been properly
included and reflected thereon. The Shareholders shall prepare and timely
file, or cause to be prepare and timely filed, all such consolidated or
combined Tax Returns that are required or permitted to include the income,
or reflect the activities, business, operations, assets or transactions, of
each of the Company and its Subsidiaries, with respect to any taxable year
or operation thereof ending on or prior to the Closing Date.
(d) There has been adequately disclosed in the federal income Tax
Returns filed by the Company and its Subsidiaries or will be disclosed in
any such Tax Returns to be filed on or before the Closing Date, all
positions taken therein that otherwise could give rise to a substantial
understatement of federal taxes within the meaning of Code Section 6662.
(e) As of the time of filing, each of such Tax Returns:
(i) correctly reflected (and, as to any Tax Returns not filed as
of the date hereof, will correctly reflect) the facts regarding
income, activities, business, operations, assets, transactions and
status of the Company and its Subsidiaries and any other information
required to be shown therein;
(ii) constitute (and, as to any Tax Returns not filed as of the
date hereof, will constitute) complete and accurate representations of
the Tax liabilities for the periods covered; and
(iii) accurately set forth all items (to the extent required to
be included or reflected in the Tax Returns) relevant to future Tax
liabilities, including the Tax bases of properties and assets.
(f) All amounts required to be withheld as of the Closing Date by the
Company and its Subsidiaries for Taxes or otherwise shall by then have been
withheld and paid when due to the appropriate agency or authority.
(g) There is no agreement, waiver or consent providing for an
extension of time with respect to the assessment of any Taxes attributable
to the Company, its Subsidiaries or any of their assets or operations that
is currently in effect. No power of attorney granted by the Company or its
Subsidiaries with respect to any Tax matter is currently in force.
(h) Neither the Company nor its Subsidiaries is delinquent in the
payment of any Taxes with respect to the Company or its Subsidiaries; or
has requested any extension of time within which to file or send any Tax
Return required to be filed by the Company or its Subsidiaries, which Tax
Return has not since been filed or sent.
13
(i) SCHEDULE 4.13(I) (i) sets forth Taxable years of the Company and
its Subsidiaries for which the statute of limitations has not expired for
federal or state income Tax purposes; and (ii) with respect to such open
years, specifies whether an examination by the IRS or state taxing
authority has been initiated or completed.
(j) Except as set forth in SCHEDULE 4.13(J), there is no action, suit,
proceeding, audit, claim, demand, deficiency or additional assessment
outstanding, in progress, pending, or to the knowledge of the Company, its
Subsidiaries and each Shareholder, threatened, against or with respect to
any Tax attributable to the Company or its Subsidiaries, any of their
assets or operations, or pursuant to which the Company or its Subsidiaries
could be held liable for any Tax attributable to the Company or its
Subsidiaries; nor, to the knowledge of the Company, its Subsidiaries and
each Shareholder, is any investigation pending or threatened regarding any
of the foregoing.
(k) There are no Tax rulings, requests for Tax rulings, or Tax closing
agreements relating to the Company or its Subsidiaries, in which any of the
Shareholder, the Company or its Subsidiaries is named that could affect the
liability of Purchaser, the Company or its Subsidiaries for any taxable
period ending after the Closing.
(l) Except as set forth on SCHEDULE 4.13(L), the Company has not
agreed, and is not required, to make any adjustment under Code Section
481(a) that could affect a Tax Period ending after the Closing Date.
(m) No property of the Company or its Subsidiaries is either
"tax-exempt use property" within the meaning of Section 168(h) of the Code,
or property that Purchaser and/or the Company or its Subsidiaries will be
required to treat as being owned by another person pursuant to Section
168(f)(8) of the Internal Revenue Code of 1954, as amended and in effect
immediately prior to the enactment of the Tax Reform Act of 1986.
(n) Neither the Company nor its Subsidiaries has participated in an
international boycott within the meaning of Section 999 of the Code.
(o) No Tax is required to be withheld pursuant to Section 1445 of the
Code as a result of the transactions contemplated in this Agreement.
(p) Neither the Company nor its Subsidiaries is a party to, bound by,
or has any obligation under (i) any Tax Agreement, (ii) any agreement
relating to a foreign sales corporation within the meaning of Section
922(a) of the Code, or (iii) any cost sharing agreement with respect to the
sharing of the costs and risks of developing intangible property within the
meaning of Treas. Reg. 1.482-7(d).
(q) There have been made available to Purchaser true and complete
copies of Tax Returns for the last three (3) fiscal years and any other Tax
Returns requested by Purchaser that may be relevant to the Company or its
Subsidiaries or their respective business, assets or operations for any and
all periods up through the period ending on December 31, 2000; and for any
other Tax years that remain subject to audit or investigation by any Taxing
authority or entity.
(r) To the best of the Company's and each Shareholder's knowledge,
there is no contract, agreement, plan or arrangement, including but not
limited to the provisions of this Agreement, covering any employee or
former employee of the Company or its Subsidiaries that,
14
individually or collectively, could give rise to the payment of any amount
that would not be deductible pursuant to Section 280G or 162 of the Code.
(s) Neither the Company nor its Subsidiaries is or has been subject to
any liability under Treas. Reg. 1.1502-6 with respect to any affiliated
group, except for the group including only them.
(t) Neither the Company nor any of its Subsidiaries is or has been
liable for any accumulated earnings Tax under Code Section 531 for any
Taxable period, except (i) to the extent that such Tax has been paid or
(ii) for any Taxable periods for which the statute of limitations
(including any extensions thereof) for assessment and collection of such
Tax has expired.
4.14 Litigation. Except as set forth in SCHEDULE 4.14, there is no charge,
complaint, action, order, writ, injunction, judgment or decree outstanding or
claim, suit, litigation, proceeding, labor dispute, arbitral action or, to the
knowledge of any Shareholder, threatened or anticipated against, relating to or
affecting, or an investigation pending concerning (collectively, "ACTIONS"): (a)
the Company or its Subsidiaries or their assets or operations as currently
operated, (b) any Employee Plan or any trust or other funding instrument,
fiduciary or administrator thereof, (c) the transactions contemplated by this
Agreement or the Other Agreements, or (d) the Company Shares. Each of the
Company and its Subsidiaries is not in default with respect to any judgment,
order, writ, injunction or decree of any court or governmental agency, and there
are no unsatisfied judgments against the Company or its Subsidiaries or the
business of the Company or its Subsidiaries. To the knowledge of each
Shareholder, there is not a reasonable likelihood of an adverse determination of
any pending Actions that would, individually or in the aggregate, have a
Material Adverse Effect.
4.15 Suppliers. There has been no adverse change in the business
relationship with any supplier material to their respective businesses and, to
the knowledge of the Company, its Subsidiaries, and Shareholder, no threat or
indication that any such change is reasonably foreseeable which is reasonably
likely to have a Material Adverse Effect.
4.16 Banking Facilities. SCHEDULE 4.16 contains a true and complete list
of: (a) each bank, savings and loan, trust company or similar or other financial
institution in which the Company or its Subsidiaries has an account or safety
deposit box and the numbers of such accounts or safety deposit boxes; (b) the
names of all persons authorized to draw on each such account or to have access
to any such safety deposit box facility, together with a description of the
authority (and conditions thereof, if any) of each such person with respect
thereto; and (c) each letter of credit issued by either the Company or its
Subsidiaries.
4.17 Indebtedness to and from Officers, Directors and Stockholders; Insider
Transactions. Except as set forth in SCHEDULE 4.17, neither the Company nor its
Subsidiaries is indebted, directly or indirectly, to any person who is an
officer, director or shareholder of the Company or its Subsidiaries, nor any
Affiliate of such persons, in any amount whatsoever, other than for salaries for
services rendered or reimbursable business expenses incurred in the ordinary
course of business, nor is any such officer, director, shareholder or Affiliate
indebted to the Company or its Subsidiaries except for advances made to
employees of the Company or its Subsidiaries in the ordinary course of business
consistent with past practice to meet reimbursable business expenses anticipated
to be incurred by such obligor. Except as set forth in SCHEDULE 4.17, none of
the directors, officers or shareholders of the Company or its Subsidiaries has
any transaction pending or agreement (oral or written) outstanding with the
Company or its Subsidiaries.
4.18 Personnel. SCHEDULE 4.18 contains a true and complete list of the
names and current salaries of all the directors and officers of the Company and
its Subsidiaries and all employees
15
(collectively, the "EMPLOYEES") of the Company and its Subsidiaries. There is
listed on SCHEDULE 4.18 the annual salary, vacation, other compensation due and
benefits entitled to for each such Employee.
4.19 Powers of Attorney and Suretyships. Except as set forth on SCHEDULE
4.19, neither the Company nor its Subsidiaries has any general or special powers
of attorney outstanding (whether as grantor or grantee thereof) or any
obligation or liability (whether actual, accrued, accruing, contingent or
otherwise) as guarantor, surety, co-signer, endorser, co-maker, indemnitor or
otherwise in respect of the obligation of any person, corporation, partnership,
joint venture, association, organization or other entity, except as endorser or
maker of checks or letters of credit, made in the ordinary course of business.
4.20 Contracts.
(a) Except as disclosed in SCHEDULE 4.20, neither the Company nor its
Subsidiaries is a party or subject to any of the following written or oral
contracts and agreements: (i) any union or collective bargaining agreements
and any employment contracts; (ii) any contracts with agents, consultants,
advisors, salespersons, sales representatives, distributors or dealers;
(iii) any contracts or commitments for capital expenditures or the
acquisition of fixed assets providing for payments of $10,000 in the
aggregate; (iv) any contracts relating to the rental or use of equipment,
other personal property or fixtures involving payment of fixed or
contingent annual rentals or sums in excess of $10,000; (v) any contracts
relating in any way to indebtedness for borrowed money or evidenced by a
bond, debenture, note or other evidence of indebtedness (whether secured or
unsecured) including but not limited to, indebtedness by way of lease or
installment purchase arrangement, guarantee, undertaking on which others
rely in extending credit, or otherwise, and any conditional sales
contracts, chattel and purchase money mortgages and other security
arrangements with respect to any equipment, other personal property or
fixtures; (vi) any contracts limiting the freedom of the Company or its
Subsidiaries to engage in or to compete in any line of business or with any
person or in any area or to use or disclose any information in its
possession; (vii) any license or franchise agreements, either as licensor
or licensee or as franchisee or franchisor; (viii) any contracts or
commitments not made in the ordinary course of business; (ix) any joint
venture or partnership contracts; (x) any contracts or agreements for the
purchase of any materials or supplies or services in the ordinary course of
business and involving more than $10,000 in consideration in each such
case; (xi) any contracts or agreements under which either the Company or
its Subsidiaries has agreed to indemnify any person or entity with respect
to, or to share, any liability of any person or entity; and (xii) any other
contract or commitment which is material to the Company or its Subsidiaries
or that, if terminated, could reasonably be expected to have, with the
passage of time or otherwise, a Material Adverse Effect. The contracts and
agreements which are required to be identified in SCHEDULE 4.20 are each
hereinafter referred to individually as a "CONTRACT" and collectively as
the "CONTRACTS."
(b) Except as set forth on SCHEDULE 4.20:
(i) Each of the Contracts is a valid and binding agreement of the
Company or its Subsidiaries, respectively, and, to the knowledge of
the Company, its Subsidiaries, and each Shareholder, all other parties
thereto (subject to general principles of equity and bankruptcy,
insolvency, reorganization or other similar laws);
(ii) The Company and its Subsidiaries have, respectively,
fulfilled all obligations required pursuant to each of the Contracts
to have been performed by it prior to the date hereof and none of the
Company, its Subsidiaries nor any Shareholder, has reason to believe
that the Company or its Subsidiaries will not be able to fulfill, when
due, all of their respective obligations under the Contracts which
remain to be performed after the date hereof;
(iii) There has not occurred a default under any of the Contracts
on the part of the Company or its Subsidiaries, or to the knowledge of
the Company, its Subsidiaries, and each
16
Shareholder, on the part of any other party thereto nor has any event
occurred which with the giving of notice or the lapse of time, or both,
would constitute a default on the part of the Company or its Subsidiaries
under any of the Contracts nor, to the knowledge of the Company, its
Subsidiaries and each Shareholder, has any event occurred which with the
giving of notice or the lapse of time, or both, would constitute any
default on the part of any other party to any of the Contracts; and
(iv) No consent of any party to any of the Contracts is required
by the execution, delivery or performance of this Agreement, the Other
Agreements or the consummation of the transactions contemplated
hereby.
4.21 Accounts Receivable; Accounts Payable; Inventory.
(a) The accounts and notes receivable of the Company and its
Subsidiaries on the Balance Sheet and arising after the date thereof (i)
arose from the bona fide sale of inventory, assets or services, in each
case, in the ordinary course of business, (ii) constitute only valid and
undisputed claims, (iii) are not subject to counterclaims or setoffs, and
(iv) to the best knowledge of the Company and the Shareholders, are
collectible in full, net of the applicable reserve for doubtful accounts,
in the ordinary course of business. The reserves for accounts and notes
receivable of the Company and its Subsidiaries, as reflected on their
respective books and records, are adequate to reserve for all such
outstanding receivables that are or become uncollectible in the ordinary
course of business within such 90 day period and such reserves were
calculated in a manner consistent with past practices.
(b) The accounts payable of the Company and its Subsidiaries on the
Balance Sheet and arising after the date thereof are the result of bona
fide transactions in the ordinary course of business and were paid, will be
paid, or are not yet due and payable.
(c) Each of the products produced or sold or services provided by the
Company and its Subsidiaries: (i) is and at all times has been, in
compliance in all respects with all applicable federal, state, local and
foreign laws, rules, and regulations and (ii) is, and at all relevant times
has been, fit for the ordinary purposes for which such product or service
is intended to be used and conforms in all respects to any warranties or
promises or affirmations of fact, oral or written, including but not
limited to those made on the container or label for such products or in
connection with its sale. There is no design defect with respect to any of
the products or services.
4.22 Compliance with Laws; Permits. Except as set forth on SCHEDULE 4.22,
the Company and its Subsidiaries, and the conduct of their respective
businesses, are in compliance with all applicable laws, statutes, ordinances,
rules and regulations promulgated, or judgments, decisions or orders entered, by
any federal, state, local, or foreign court or governmental agency, department,
authority or instrumentality relating to the assets or the business of the
Company or its Subsidiaries. Except as set forth on SCHEDULE 4.22, neither the
Company, its Subsidiaries, nor any Shareholder has received during the past five
years any written notice to the effect that, or to the knowledge of the Company,
its Subsidiaries and each Shareholder, otherwise been advised by a governmental
authority, that, the Company or its Subsidiaries is not in compliance with any
of such statutes, regulations, orders, ordinances or other laws, and neither the
Company, its Subsidiaries, their directors or officers, nor any Shareholder has
any reason to anticipate that any currently existing circumstances are likely to
result in violations of any such regulations which could, in any one case or in
the aggregate, have a Material Adverse Effect. The Company and its Subsidiaries
have all Permits (as herein defined), authorizations and approvals, each of
which is currently valid and in full force and effect, material to the conduct
of the business of each of the Company and its Subsidiaries, which licenses,
Permits, authorizations and approvals are set forth in SCHEDULE 4.22. Without
limiting the generality of the preceding representation and warranty, neither
the Company nor its
17
Subsidiaries has (i) made or agreed to make any contribution, payment or gift to
any government official, employee, or agent where either the contribution,
payment or gift or the purpose thereof was illegal under the laws of any
federal, state, local or foreign jurisdiction, (ii) established or maintained
any unrecorded fund or asset for any purpose or made any false entries on the
books and records of the Company or its Subsidiaries for any reason, or (iii)
made or agreed to make any contribution, or reimbursed any political gift or
contribution made by any other person, to any candidate for, federal, state,
local or foreign public office. In addition, each of the Company and its
Subsidiaries (a) has materially complied with all applicable laws relating to
employee and civil rights and relating to employment opportunities, (b) filed in
a timely manner all reports and documents it was required to file (and the
information contained therein was correct and complete in all respects) under
all applicable laws, (c) has possession of all records and documents it was
required to retain under all applicable law, and (d) has not violated in any
material respect or received a notice or charge asserting any material violation
of and there are no current, nor have there been any in the past five (5) years,
government investigations, including but not limited to any civil investigative
demand or similar request, related to the Xxxxxxx Act, the Xxxxxxx Act, the
Xxxxxxxx-Xxxxxx Act, the Federal Trade Commission Act, the Securities Act of
1933 or the Securities Exchange Act of 1934, each as amended, except where such
violation would not have a Material Adverse Effect. "PERMITS" shall mean all
licenses, permits and other governmental authorizations necessary to carry on
the business of the Company and its Subsidiaries as presently conducted and as
proposed to be conducted.
4.23 No Undisclosed Liabilities. Neither the Company nor its Subsidiaries
has liabilities or obligations of any nature or kind whatsoever, liquidated or
unliquidated, absolute, accrued, contingent or otherwise, and whether due or to
become due (including, without limitation, any liability for Taxes and interest,
penalties and other charges payable with respect to any such liability or
obligation) (the "COMPANY LIABILITIES"), other than (i) liabilities or
obligations reflected or reserved against in the Interim Financial Statements;
and (ii) liabilities or obligations incurred in the ordinary course of business
consistent with past practice since the Balance Sheet Date, which individually
or in the aggregate will not have a Material Adverse Effect or is otherwise
specifically disclosed in detail in a written Schedule attached hereto
referencing a specific Section of this Agreement but only with respect to and to
the extent of the specifically detailed exception to the representation or
warranty being referenced by such Schedule. There is no existing condition,
situation or set of circumstances which could reasonably be expected to result
in the Company Liabilities other than the matters set forth in Subsections
4.23(i) and (ii) and liabilities or obligations covered by any insurance policy
disclosed in SCHEDULE 4.11 to this Agreement.
4.24 Environmental Matters. Except as set forth in SCHEDULE 4.24:
(a) Each of the Company and its Subsidiaries is conducting and has
conducted its business and operations in compliance with all applicable
Environmental Laws and pursuant to all necessary government permits,
including but not limited to in connection with any clean-up or remedial
work necessitated by such compliance failure, any damages to personal
property arising from such compliance failure, any damages for personal
injury or nuisance claims arising from such compliance failure or any
fines, penalties or natural resource damages arising from such compliance
failure. Neither the Company nor its Subsidiaries is violating and has not
violated any Environmental Laws, including but not limited to in connection
with any clean-up or remedial work in respect of such violation, any
damages to personal property arising from such violation, any damages for
personal injury or nuisance claims arising from such violation or any
fines, penalties or natural resource damages arising from such violation.
There is no Environmental Claim (as herein defined) pending, or to the
knowledge of the Company, its Subsidiaries and each Shareholder,
threatened, against the Company or its Subsidiaries or with respect to any
properties or assets now or previously owned, leased or used by any of
them, including but not limited to in connection with any clean-up or
remedial work in respect of such Environmental Claim, any damages to
personal property arising from such Environmental Claim,
18
any damages for personal injury or nuisance claims arising from such
Environmental Claim or any fines, penalties or natural resource damages
arising from such Environmental Claim.
(b) To the best knowledge of the Company and the Shareholders, there
has been no release, emission, discharge, storage, generation, treatment or
disposal of any Hazardous Substance (as herein defined) by the Company or
its Subsidiaries, their respective agents or contractors, that could form
the basis of any Environmental Claim against the Company or its
Subsidiaries or with respect to any of their properties or assets. No
property or facility now owned, used or leased, or to the knowledge of the
Company, its Subsidiaries and Shareholder, previously owned, used or leased
by the Company or its Subsidiaries is listed or, to the knowledge of the
Company, its Subsidiaries and each Shareholder, proposed for listing under
CERCLA or any similar Environmental Law, as sites requiring investigation
or clean up.
(c) Neither the Company nor its Subsidiaries has transported or
arranged for the transportation (directly or indirectly) of any Hazardous
Substance to any location which is listed or, to the knowledge of the
Company, its Subsidiaries, and each Shareholder, proposed for listing under
CERCLA or any other similar Environmental Law, or which is the subject of
federal, state, local or foreign enforcement actions or other investigation
which may be reasonably anticipated to lead to claims against the Company
or its Subsidiaries for clean-up costs, remedial work, damages to natural
resources, personal injury or nuisance claims.
(d) There have been no environmental investigations, administrative
orders, consent orders, studies, audits, tests, reviews or other analyses
conducted by or which are in the possession of the Company or its
Subsidiaries in relation to any property or facility now or previously
owned, used or leased by the Company or its Subsidiaries which have not
been delivered to Purchaser prior to the date hereof and which deal with or
relate to facts that would form the basis of an Environmental Claim against
the Company or its Subsidiaries or with respect to any of their properties
and assets.
(e) To the best knowledge of each Shareholder, no Hazardous Substance
has been generated, treated, stored, released, disposed or otherwise placed
or located on or deposited in the Leased Property or the Leased Property or
any real property previously owned or leased by the Company or its
Subsidiaries, or their agents or contractors in such form or substance as
to create any liability for the Company or its Subsidiaries.
(f) To the best knowledge of each Shareholder, there are not now, nor
have there ever been in the past, any underground or above ground storage
tanks or other contaminant facilities of any kind on the Leased Property or
the Leased Property or any real property previously owned or leased by the
Company or its Subsidiaries which contain or ever did contain any Hazardous
Substance (including but not limited to fuel oil or diesel fuel).
(g) Throughout this Agreement, the following terms shall have the
meanings set forth below:
(i) "AFFILIATE" or "AFFILIATES" as applied to any other Person,
shall mean any other Person directly or indirectly controlling,
controlled by or under common control with that Person.
(ii) "ENVIRONMENTAL CLAIM" shall mean any claim or demand, or
notice thereof, alleging potential liability (including, without
limitation, liability for investigatory costs, clean-up costs,
monitoring costs, governmental response costs, natural resources
damages, property damages, liability for nuisance or damage to
property values, personal
19
injuries or penalties) arising out of, based on or resulting from: (A)
noncompliance with Environmental Laws by the Company, its
Subsidiaries, or by any of their respective Affiliates, employees or
agents, (B) the condition of any real or personal property now or
previously owned, used or leased by the Company or its Subsidiaries;
(C) the release into the environment of any Hazardous Substance by the
Company, its Subsidiaries or any of their respective Affiliates,
employees or agents.
(iii) "ENVIRONMENTAL LAWS" shall mean all present and future
Federal, state, local, foreign or other statutes, laws, regulations,
ordinances, rules, orders, consent decrees, consent judgments,
judicial or administrative decisions, agreements or directives, issued
or enacted relating to: (A) pollution or protection of the
environment, including natural resources; (B) exposure of any
individual, including employees of the Company and its Subsidiaries,
to any Hazardous Substance; (C) protection of human health or welfare
from the effects of manufacture, use or introduction into commerce of
Hazardous Substances, including, without limitation, use of or rights
with respect to their manufacture, formulation, packaging, labeling,
distribution, transportation, handling, storage and disposal; and (E)
regulation generally of the use of the environment, including, without
limitation, ambient air, surface water, ground water, and surface or
subsurface strata, in each case, as amended and as now or hereafter in
effect. For purposes of this definition, the term "Environmental Laws"
shall include, without limitation, the following statutes: (1) the
Clean Air Act, as amended, 42 X.X.X.xx.xx. 7401 et seq.; (2) the
Federal Water Pollution Control Act, as amended, 33 X.X.X.xx.xx. 1251
et seq.; (3) the Resource Conservation and Recovery Act of 1976, as
amended, 42 U.S.C.ss.ss.6901 et seq. ("RCRA"); (4) the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as
amended, 42 X.X.X.xx.xx. 9601 et seq., as amended by the Superfund
Amendments and Reauthorization Act of 1986 ("CERCLA"); (5) the Toxic
Substances Control Act, as amended, 15 U.S.C. xx.xx. 2601 et seq.; (6)
the Occupational Safety and Health Act, as amended, 29 X.X.X.xx. 651;
(7) the Emergency Planning and Community Right-to-Know Act of 1986, 42
U.S.C.ss.ss.801 et seq.; (8) the Mine Safety and Health Act of 1977,
as amended, 30 X.X.X.xx.xx. 801 et seq.; (9) the Safe Drinking Water
Act, 42 U.S.C. ss.ss.3008 et seq.; and (10) all comparable United
States, state, local and foreign laws, statutes, rules regulations,
judgments, orders decrees, stipulations or charges.
(iv) "HAZARDOUS SUBSTANCE" shall mean: (A) any "hazardous
substance" as defined in CERCLA, 42 X.X.X.xx. 9601(14); (B) any
"pollutant or contaminant" as defined in CERCLA, 42 X.X.X.xx.
9601(33); (C) any "hazardous waste" as defined in RCRA, 42 X.X.X.xx.
6903(5); (D) any asbestos, dioxins, polychlorinated biphenyls that
exceed regulated levels, uranium, radioactive isotopes and other
nuclear by-products, toxic substances or petroleum products,
by-products or derivatives; (E) any substance, whether liquid, solid
or gas that presents a significant risk of an adverse or harmful
effect upon human health, upon animals or upon air, water, land,
natural resources or any other aspects of the environment; and (F) any
other substance, material or waste classified as hazardous, toxic,
harmful or dangerous or otherwise regulated under any Environmental
Law.
(v) "PERSON" shall mean any individual, corporation, limited
liability company, limited liability partnership, partnership, firm,
joint venture, association, joint stock company, trust, unincorporated
organization, governmental or regulatory body, or other entity.
4.25 Approvals. Except as set forth in SCHEDULE 4.25, no consent, approval,
authorization or order of or registration, declaration or filing with any entity
is required in connection with (a) the
20
execution, performance and delivery of this Agreement and the Other Agreements,
or (b) the consummation of the transactions contemplated hereby and thereby.
4.26 Intellectual Property. SCHEDULE 4.26 (i) lists (including where
applicable the federal, state, local or foreign registration, application or
patent number and the date of registration, application or patent and the name
in which such registration, application or patent was applied for and, if
different, issued), to the extent material to the business of the Company or its
Subsidiaries, (x) all of the Company's and its Subsidiaries' registrations of
trademarks, service marks, assumed names and trade names, and all pending
applications for any of the foregoing, (y) all of the Company's or its
Subsidiaries' patents and copyrights and all pending applications therefor, and
(z) all computer software owned and/or used by the Company or its Subsidiaries
in the conduct of their respective businesses ("COMPUTER SOFTWARE") (all of the
items referred to in this clause (i) being "INTELLECTUAL PROPERTY RIGHTS"), and
(ii) identifies any Intellectual Property Rights that any third party owns and
that the Company or its Subsidiaries uses (specifically excluding normal
commercial software routinely available for purchase), and specifies whether
such use is pursuant to license, sublicense, agreement or permission. the
Company or its Subsidiaries owns (or, as set forth on SCHEDULE 4.26, possesses
adequate and enforceable licenses or other rights to use) all Intellectual
Property Rights now used in its business and has taken all reasonably necessary
or appropriate action to protect the Intellectual Property Rights. Except as set
forth on SCHEDULE 4.26, no person has a right to receive a royalty or similar
payment in respect of any Intellectual Property Rights by the Company or its
Subsidiaries pursuant to any contractual arrangements entered into by the
Company, its Subsidiaries or otherwise. Except as set forth on SCHEDULE 4.26(A)
and 4.26(B), neither the Company nor its Subsidiaries has licenses granted by or
to it and no other agreements exist to which it is a party, relating in whole or
in part to any of the Intellectual Property Rights. To the knowledge of each
Shareholder, neither the Company nor its Subsidiaries has received notice that,
the Company's or its Subsidiaries' use of the Intellectual Property Rights is
(and to the knowledge or the Company, its Subsidiaries and each Shareholder,
such use is not) interfering with, infringing upon or otherwise violating the
rights of any third party in or to such Intellectual Property Rights, and no
proceedings have been instituted against or notices received by the Company or
its Subsidiaries alleging that the Company's or its Subsidiaries' use of any
Intellectual Property Rights infringes upon or otherwise violates any rights of
a third party in or to such Intellectual Property Rights.
4.27 Labor and Employment Agreements. Except as set forth in SCHEDULE 4.27:
(a) Each of the Company and its Subsidiaries has paid in full, or
fully accrued for in the Financial Statements, the Interim Financial
Statements and the Closing Balance Sheet, all wages, overtime wages,
salaries, commissions, bonuses, stay-pay benefits, severance payments,
vacation payments, pay in lieu of compensatory time and other compensation
or remuneration due or to become due to all current and former employees of
the Company and its Subsidiaries for all services performed through the
Closing Date by any of them;
(b) Upon the Closing Date and/or the date of termination of the
employment of any of said employees, neither the Company, its Subsidiaries
nor Purchaser will be liable to any of said current or former employees for
"severance pay" or similar form of termination pay or incentive pay;
(c) Each of the Company and its Subsidiaries is in compliance in all
material respects with all applicable federal, state, local and foreign
laws, rules and regulations relating to the employment of labor, including
without limitation, laws, rules and regulations relating to payment of
wages, employment and employment practices, terms and conditions of
employment, hours, immigration, discrimination, child labor, occupational
health and safety, collective bargaining, and other aspects of labor
management relations and the payment and withholding of Taxes and other
sums required by governmental authorities;
21
(d) There is no unfair labor practice charge pending or threatened
against the Company or its Subsidiaries before the National Labor Relations
Board or any other federal, state or local agency or department;
(e) There have not been in the past three years and currently are no
labor strikes, disputes, slowdowns, sympathy strikes, wildcat strikes,
lockouts or other form of work stoppages pending nor, to the knowledge of
each Shareholder threatened against or involving the Company or its
Subsidiaries, and there has not been in the past three years and there
currently is no recognitional picketing at any of the Company's or its
Subsidiaries' locations;
(f) No grievance or any arbitration proceeding arising out of or under
collective bargaining agreements is pending against the Company or its
Subsidiaries and no claim therefor has been asserted;
(g) No collective bargaining agreement is currently in place or being
negotiated by the Company or its Subsidiaries;
(h) To the knowledge of each Shareholder, there have been no attempts
to organize any employees of the Company or its Subsidiaries to join a
labor organization;
(i) No key employee of the Company or its Subsidiaries or group of
such employees has stated an intent to terminate his, her or their
employment;
(j) No civil action, administrative charge, or any other type of
employment claim whatsoever is pending against the Company or its
Subsidiaries in any court, governmental agency, or elsewhere;
(k) the Company has no affirmative action plans with any governmental
agency except as set forth on any SCHEDULE 4.12; and
(l) There are no employment contracts for a definite term between the
Company and current employees, and all employees work for the Company on an
at will basis.
4.28 Entire Business. All of the assets, properties, intellectual
properties and operations of the Company and its Subsidiaries are comprised
within and owned by the Company or its Subsidiaries. Following the consummation
of the transactions contemplated by this Agreement and the Other Agreements, the
Company and its Subsidiaries will own all of the assets and rights necessary to
conduct the businesses of the Company and its Subsidiaries in the same manner as
conducted during the periods covered by the Financial Statements, and no
Shareholder, directly or indirectly, will own or have any interest in any real
or personal property, tangible or intangible, used in or useful for such
businesses.
4.29 Warranties. To the knowledge of each Shareholder, and except as set
forth on SCHEDULE 4.29, all products manufactured or sold, and all services
provided by the Company and its Subsidiaries during the longer of the three (3)
year period prior to the date hereof or the period prior to the date hereof for
which any applicable statute of limitations would apply with respect to any
claims related thereto, have complied, and are in compliance with all
contractual requirements, warranties or covenants, express or implied,
applicable thereto, and complied with all applicable governmental or regulatory
specifications therefor or applicable thereto at the time of manufacture or
sale.
4.30 Predecessor Entities. No facts or circumstances exist whereby any of
the Company, its Subsidiaries and Purchaser has or will incur any liability,
costs or damages, or which could result in
22
a Material Adverse Effect, related to, connected with or resulting from any (i)
entity that is a direct or indirect predecessor (whether through stock or
assets) to the Company or its Subsidiaries, or (ii) an entity that is currently
owned or was previously owned, directly or indirectly, by any of Shareholder, or
their predecessors (collectively, a "PREDECESSOR").
4.31 Other Information. No representations or warranties by any of the
Shareholders, whether made on behalf of the Shareholders, the Company or its
Subsidiaries, in this Agreement, the Other Agreements, any document, exhibit,
statement, certificate or schedule furnished or to be furnished to Purchaser
pursuant hereto, contains or will contain any untrue statement of a material
fact, or omits or will omit to state any material fact necessary to make the
statements or facts contained therein not misleading. There is no material fact
that has not been disclosed in writing to Purchaser which has a Material Adverse
Effect or could reasonably be anticipated to have a Material Adverse Effect.
ARTICLE V
CERTAIN COVENANTS, UNDERSTANDINGS AND AGREEMENTS
5.1 Tax Covenants.
(a) Preparation of Tax Returns. For Tax Returns required to be filed
on or before the Closing Date, the Shareholders shall cause the Company and
its Subsidiaries to prepare and timely file such Tax Returns so as to not
reflect any new elections or the adoption of any new accounting methods or
conventions or other similar items, except to the extent such particular
reflection or adoption is required to comply with any law or regulation,
without the prior written approval of Purchaser. For Tax Returns required
to be filed after the Closing Date, Purchaser agrees to cause the Company
and its Subsidiaries to prepare and timely file such Tax Returns, to the
extent they relate to a Pre-Closing Tax period, in a manner consistent with
all material respects with such Tax Returns previously filed in the
relevant jurisdiction, unless the relevant Taxing authority will not accept
such a return filed on that basis.
(b) Payment of Taxes. The Shareholders shall cause the Company and its
Subsidiaries to timely pay any Taxes due on or before the Closing Date, as
required by SECTION 4.13(B) of this Agreement. Purchaser agrees to cause
the Company and its Subsidiaries to pay Taxes due after the Closing Date,
to the extent they relate to Pre-Closing Tax Periods, in a timely manner.
Nothing contained in this SECTION 6.08(B) shall be deemed to modify the
indemnities contained in ARTICLE IX. For Tax Returns required to be filed
after the Closing Date for Tax Periods ending on or prior to the Closing
Date, Purchaser shall cause the Company to engage its regular accountants
to prepare such returns, and the fees and expenses of such firm shall be
equally shared between Shareholder and the Purchaser.
(c) After the Closing, Purchaser and the Company shall (except as
provided in SECTION 10.3(E)) have the exclusive right to exercise, at their
own expense, control at any time over the handling, disposition and/or
settlement of any issue raised in any official inquiry, examination or
proceeding regarding any Tax Return for Taxes affecting the Company or its
Subsidiaries (including the right to settle or otherwise terminate any
contest with respect thereto).
(d) Subsequent to the date hereof (including the time after the
Closing), the parties hereto shall provide each other, and Purchaser or the
Shareholders (as applicable) shall cause the Company to provide the
Shareholders, with such cooperation and information relating to the Company
as a party reasonably may request in (i) filing any Tax Return, amended Tax
Return, claim for Tax refund, election or consent, (ii) determining any
liability for Taxes or a right to refund of Taxes, (iii) conducting or
defending any audit or other proceedings in respect of Taxes
23
or (iv) conducting due diligence with respect to the transaction
contemplated by this Agreement. Such mutual cooperation and information
shall include providing copies of all relevant Tax Returns, together with
accompanying schedules and related work papers, documents relating to
rulings or other determinations by Tax authorities and records concerning
the ownership and Tax basis of property which any party, the Company, or
its Subsidiaries or predecessors may possess. Shareholder or Purchaser (as
applicable) shall make, and shall cause the Company to make its employees,
accountants and other advisors available on a mutually convenient basis to
provide explanations of any documents or information required to be
provided hereunder. In response to requests made after the Closing, such
persons or required documents and information, as the case may be, shall be
made available or delivered, as applicable, to the requesting party within
thirty (30) days after a party's receipt of any written request therefor.
the requesting party shall pay or reimburse the direct out-of-pocket
expenses of the other party (excluding compensation for services of a party
or an Affiliate or their employees) reasonably incurred in providing
assistance in response to such request.
(e) Each of the Shareholders shall deliver to Purchaser, on or before
the Closing Date, an affidavit of Shareholder, sworn to under penalty of
perjury, setting forth the Shareholder's name, address and federal tax
identification number and stating that Shareholder is not a "foreign
person" within the meaning of Section 1445 of the Code. If, on or before
the Closing Date, Purchaser shall not have received such affidavit in a
form satisfactory to Purchaser, Purchaser may withhold from the purchase
price payable at Closing to Shareholder pursuant hereto such sums as are
required to be withheld therefrom under Section 1445 of the Code.
5.2 Conditions. The Shareholders shall take all commercially reasonable
actions necessary or desirable to cause the conditions set forth in ARTICLE VI
to be satisfied.
5.3 Waiver and Release by Shareholder. Effective as of the Closing, each
Shareholder, for himself or herself and for each of such Subsidiaries,
Affiliates, successors, assigns, beneficiaries insurers, indemnitors, trustees,
agents, and representatives (collectively, the "RELEASING PARTIES"), hereby
releases and forever discharges the Company and each of its Subsidiaries, and
each of their respective officers, directors, shareholders, Affiliates existing
prior to Closing, predecessors, successors, assigns, insurers, indemnitors,
attorneys, employees, agents and representatives (collectively, the "RELEASED
PARTIES"), of and from any and all past, present and future claims, demands,
liabilities, judgments, and causes of action, at law or in equity, known or
unknown, asserted or unasserted, liquidated or unliquidated, absolute or
contingent, accrued or not accrued, which any of the Releasing Parties (either
individually or jointly) ever had, presently has, might have in the future,
claim to have, or claim to have had against any of the Released Parties arising
out of, touching upon, relating to, or in any manner connected with (i) the
Company Shares, or (ii) the Company or its Subsidiaries or the operation and
conduct of the business of the Company and its Subsidiaries prior to and
including the Closing Date.
5.4 Covenant to Register the Common Stock. Following the Closing, Purchaser
shall undertake to prepare and file a registration statement with the Securities
and Exchange Commission covering the resale of the Purchaser Shares issued to
the Shareholders hereunder (the "REGISTRATION STATEMENT").
5.5 Lockup Agreements. Each Shareholder shall enter into a lockup agreement
(in substantially the form of EXHIBIT B attached hereto) pursuant to which the
transfer of 60 percent of the Purchaser Shares issued to such Shareholder shall
be restricted; provided, however, that every three (3) months following the
effective date of the Registration Statement, 20 percent of the Purchaser Shares
shall no longer be subject to such transfer restrictions.
24
5.6 Repayment of Company Debt. Within ten (10) business days following the
Closing Date, Purchaser shall satisfy the Company's outstanding indebtedness to
First National Bank of Manhattan in the approximate amount of $55,000, including
accrued interest.
5.7 Due Diligence, Access to Information; Confidentiality.
(a) Between the date hereof and the Closing Date, Purchaser and the
Company (including its Subsidiaries) shall afford to the other party and
their authorized representatives the opportunity to conduct and complete a
due diligence investigation of the other party as described herein. In
light of the foregoing, each party shall permit the other party full access
on reasonable notice and at reasonable hours to its properties and shall
disclose and make available (together with the right to copy) to the other
party and its officers, employees, attorneys, accountants and other
representatives, all books, papers and records relating to the assets,
stock, properties, operations, obligations and liabilities of such party
and its subsidiaries, including, without limitation, all books of account
(including, without limitation, the general ledger), tax records, minute
books of directors' and stockholders' meetings, organizational documents,
bylaws, contracts and agreements, filings with any regulatory authority,
accountants' work papers, litigation files (including, without limitation,
legal research memoranda), attorney's audit response letters, documents
relating to assets and title thereto (including, without limitation,
abstracts, title insurance policies, surveys, environmental reports,
opinions of title and other information relating to the real and personal
property), plans affecting employees, securities transfer records and
stockholder lists, and any books, papers and records relating to other
assets or business activities in which such party may have a reasonable
interest, and otherwise provide such assistance as is reasonably requested
in order that each party may have a full opportunity to make such
investigation and evaluation as it shall reasonably desire to make of the
business and affairs of the other party; provided, however, that the
foregoing rights granted to each party shall, whether or not and regardless
of the extent to which the same are exercised, in no way affect the nature
or scope of the representations, warranties and covenants of the respective
party set forth herein. In addition, each party and its officers and
directors shall cooperate fully (including providing introductions, where
necessary) with such other party to enable the party to contact third
parties, including customers, prospective customers, specified agencies or
others as the party deems reasonably necessary to complete its due
diligence; provided that such party agrees not to initiate such contacts
without the prior approval of the other party, which approval will not be
unreasonably withheld.
(b) The Purchaser or the Shareholders may, in their respective sole
discretion, elect not to proceed with the transactions contemplated herein
based upon its due diligence investigation performed pursuant to SECTION
5.6(A) above, if the results of such due diligence investigation, in such
party's reasonable judgment, (i) causes the value of the Purchaser, the
Company or the Company Shares to be materially less than it would have been
in the absence of such information or (ii) reveals any event, condition or
occurrence (not previously disclosed in this Agreement or the schedules
attached hereto) that materially adversely affects the financial condition,
assets, operating results, business condition or prospects of the other
party, by providing such other party with written notice thereof on or
before the Closing Date.
(c) Prior to Closing and if, for any reason, the transactions
contemplated by this Agreement are not consummated, neither the Purchaser,
the Shareholders nor any of their respective officers, employees,
attorneys, accountants and other representatives, shall disclose to third
parties or otherwise use any confidential information received from the
other party in the course of investigating, negotiating, and performing the
transactions contemplated by this Agreement; provided, however, that
nothing shall be deemed to be confidential information which:
(i) is known to the party receiving the information at the time
of disclosure;
(ii) becomes publicly known or available without the disclosure
thereof by the party receiving the information in violation of this
Agreement; or
25
(iii) is rightfully received by the party receiving the
information from a third party.
This provision shall not prohibit the disclosure of information required to
be made under federal or state securities laws. If any disclosure is so
required, the party making such disclosure shall consult with the other party
prior to making such disclosure, and the parties shall use all reasonable
efforts, acting in good faith, to agree upon a text for such disclosure which is
satisfactory to both parties.
5.8 No Solicitation. Unless and until this Agreement shall have been
terminated pursuant to ARTICLE IX, the Shareholders (whether in their capacity
as shareholders, officers or directors of the Company) shall not, directly or
indirectly, encourage, solicit or initiate discussions or negotiations with, or
engage in negotiations or discussions with, or provide non-public information
to, any corporation, partnership, person or other entity or groups concerning
any merger, sale of capital stock, sale of substantial assets or other business
combination.
5.9 License Agreement. As soon as possible following the Closing, the
Shareholders shall obtain from Farm Management, Inc., an Illinois corporation
("FMI"), an amendment or termination of that certain License Agreement dated
October 31, 1990 by and between FMI and the Company (the "FMI LICENSE
AGREEMENT"), which shall release the Company (including any Affiliate of the
Company) from any liability or obligation arising under or relating to such
license agreement. Notwithstanding anything to the contrary contained herein,
Purchaser shall have no obligation under the Purchaser Notes unless and until
the Shareholders have obtained from FMI the aforementioned release from the FMI
License Agreement.
5.10 Security for Purchaser Notes. Immediately following the Closing,
Purchaser shall grant to the Shareholders a security interest in the assets of
the Company identified on SCHEDULE 5.11 solely to secure Purchaser's obligations
arising under the Purchaser Notes pursuant to the terms and conditions of a
security agreement in a form to be mutually agreed upon by the parties (the
"SECURITY AGREEMENT").
5.11 Company Debt. The amount of the Company's outstanding indebtedness,
including without limitation, bank indebtedness and accounts payable, shall not
exceed $100,000 on the Closing Date.
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser to effect the transactions contemplated
hereby shall be, at the option of Purchaser, subject to the fulfillment, at or
prior to the Closing Date, of the following additional conditions:
6.1 Representations and Warranties. The representations and warranties of
the Shareholders contained in this Agreement, the Other Agreements, the
Schedules hereto and any other agreement contemplated herein or hereby shall be
true and correct on the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the Closing
Date with the same force and effect as though made on the Closing Date, except
for: (i) changes specifically contemplated by this Agreement and (ii)
inaccuracies which, individually or in the aggregate, have not had and are not
reasonably likely to have a Material Adverse Effect (without regard to any
materiality limitations contained in any such representation or warranty), or a
Material Adverse Effect upon the consummation of the transactions contemplated
hereby; and Shareholder shall have delivered to Purchaser a certificate to such
effect signed by Shareholder.
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6.2 Performance of the Shareholders. Each of the obligations of the
Shareholders to be performed by any of them on or before the Closing Date
pursuant to the terms of this Agreement, including but not limited to those set
forth in ARTICLE V, shall have been duly performed on or before the Closing
Date; and the Shareholders shall have delivered to Purchaser a certificate to
such effect signed by each Shareholder.
6.3 No Adverse Change. There shall not have occurred between the date
hereof and the Closing Date any material adverse changes in the consolidated
results of operations, condition (financial or otherwise), assets, liabilities
(whether absolute, accrued, contingent or otherwise) or business of the Company
or its Subsidiaries or the Company Shares.
6.4 Consents. The Company or the Shareholders shall have obtained or, to
the satisfaction of Purchaser obviated the need to obtain, all consents,
approvals or waivers from governmental bodies or agencies, regulatory
authorities and third parties necessary for the execution, delivery and
performance of this Agreement, the Other Agreements and the transactions
contemplated hereby. Purchaser shall have obtained all consents, approvals or
waivers from governmental bodies or agencies, regulatory authorities and third
parties necessary for the execution, delivery and performance of this Agreement,
the Other Agreements and the transactions contemplated hereby.
6.5 Tax Certifications. Each Shareholder shall have furnished Purchaser a
non-foreign person affidavit as defined in Section 1445(b)(2) of the Code.
6.6 Legal Actions or Proceedings. No legal action or proceeding shall have
been instituted or threatened by, any entity or person seeking to (i) restrain,
prohibit, invalidate, or otherwise affect the consummation of the transactions
contemplated hereby; (ii) impose any material limitation upon the ability of
Purchaser to own, hold or vote the interest or operate, manage or conduct the
business of the Company or its Subsidiaries or the business of Purchaser or its
Affiliates; or (iii) cause the divestiture, or the holding separate, of any
material portion of the business, of the Company or its Subsidiaries from
Purchaser or any of its Affiliates.
6.7 No Injunction. No preliminary or permanent injunction issued by any
court to restrain or prohibit consummation of this Agreement shall be in effect.
6.8 Loss. There shall have been no damage, destruction or loss of or to any
property or properties owned or used by the Company or its Subsidiaries, whether
or not covered by insurance, which, in the aggregate, has, or would be
reasonably likely to have, a Material Adverse Effect.
6.9 Deliveries. On the Closing Date, the Company or Shareholders, as
appropriate, shall have delivered to Purchaser all of the following:
certificates referred to in SECTION 6.1 AND 6.2;
copies of the third party and governmental consents and approvals
referred to in SECTION 6.5 above;
the stock certificates issued to each of the Shareholders representing
the Company Shares, duly endorsed for transfer or accompanied by a duly
executed stock power, with requisite stock transfer stamps, if any,
attached;
the Company's and its Subsidiaries' minute books, stock transfer
records, corporate seal and other materials related to the Company's and
its Subsidiaries' corporate administration;
27
resignations (effective as of the Closing Date) from such of the
Company's and its Subsidiaries' officers and members of the Company's and
its Subsidiaries' Board of Directors as Purchaser shall have requested
prior to the Closing Date;
Certificates of Good Standing dated as of a recent date from the
Secretary(ies) of State of the State(s) of incorporation of the Company and
its Subsidiaries evidencing the good standing of the Company and its
Subsidiaries in each such jurisdiction, as well as Certificates of Good
Standing or Certificates of Authority from each jurisdiction in which the
Company or its Subsidiaries is authorized to do business as a foreign
corporation;
Letters of Investment Intent in substantially the form of the attached
EXHIBIT C signed by each of the Shareholders; and
such other certificates, documents and instruments as Purchaser
reasonably requests related to the transactions contemplated hereby.
6.10 Searches. Purchaser shall have received, as of a date no more than
five (5) days prior to the Closing Date, Uniform Commercial Code Searches
against the Company and its Subsidiaries from the Secretary of State of Illinois
and from such other states, countries and/or counties as Purchaser shall
reasonably request, together with tax lien and judgment lien searches, in each
case certified by a reporting service reasonably satisfactory to Purchaser, and
disclosing no liens or security interests against the assets of the Company or
its Subsidiaries or the Company Shares.
6.11 Employment Agreements. Purchaser shall have received signed copies of
Employment Agreements between Purchaser and each of the Employees of the Company
set forth in SCHEDULE 6.12 on substantially the form of EXHIBIT D attached
hereto.
6.12 Due Diligence. Purchaser shall not have discovered on or prior to the
Closing Date, any fact or condition in the performance of its due diligence
which Purchaser believes, in its sole discretion, effects the amount,
composition, quality or prospects of the Company Shares or the business of the
Company.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF THE SHAREHOLDERS
The obligations of each of the Shareholders to effect the transactions
contemplated hereby shall be, at the option of the Shareholders, subject to the
fulfillment, at or prior to the Closing Date, of the following additional
conditions, any one or more of which may be waived by the Shareholders:
7.1 Representations and Warranties. The representations and warranties of
Purchaser contained in this Agreement and the Schedules hereto shall be true and
correct on the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the Closing
Date with the same force and effect as though made on the Closing Date, except
for (i) changes specifically contemplated by this Agreement and (ii)
inaccuracies which, individually or in the aggregate, have not had and are not
reasonably likely to have a material adverse effect on Purchaser or upon the
consummation of the transactions contemplated hereby; and Purchaser shall have
delivered to Shareholder a certificate to such effect signed by an executive
officer of Purchaser.
7.2 Performance of Covenants. Each of the obligations of Purchaser to be
performed by it on or before the Closing Date pursuant to the terms of this
Agreement shall have been duly performed on or before the Closing Date, and
Purchaser shall have delivered to the Shareholders a certificate to such effect.
28
7.3 No Injunction. No preliminary or permanent injunction issued by any
court to restrain or prohibit consummation of this Agreement shall be in effect.
7.4 Legal Action or Proceedings. No legal action or proceeding shall have
been instituted or threatened by any entity or person (other than Shareholder,
the Company, its Subsidiaries or an entity Affiliated with any of them) seeking
to restrain, prohibit, invalidate, or otherwise affect the consummation of the
transactions contemplated hereby.
7.5 Employment Agreements. The Purchaser shall have provided signed copies
of Employment Agreements between Purchaser and each of the Employees of the
Company set forth in SCHEDULE 6.12 in substantially the form of EXHIBIT E
attached hereto.
7.6 Deliveries. On the Closing Date, the Purchaser shall have delivered to
the Shareholders all of the following:
(a) The certificates referred to in SECTIONS 7.1 AND 7.2 above; and
(b) The Purchaser Shares, the Closing Payment and the Purchaser Notes.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification by Shareholders.
(a) Generally. The Shareholders, jointly and severally, shall
indemnify, defend and hold harmless Purchaser and its Affiliates
(including, without limitation, the Company and its successors and
assigns), directors, officers, employees, agents, consultants,
representatives, successors, transferees and assigns (individually a
"Purchaser Indemnified Party"; and collectively the "Purchaser's
Indemnified Parties"), promptly upon demand, at any time and from time to
time, from, against, and in respect of any and all demands, claims, losses,
damages, judgments, liabilities, assessments, suits, actions, proceedings,
interest, penalties, and expenses (including, without limitation,
settlement costs and any out-of-pocket legal, accounting and other expenses
for investigating or defending any actions or threatened actions or for
enforcing such rights of indemnity and defense) incurred or suffered by the
Purchaser's Indemnified Parties, in connection with, arising out of or as a
result of each and all of the following:
(i) any material breach of any representation or warranty made by
any Shareholder in this Agreement or in any other document or
instrument delivered by the Shareholders to Purchaser or entered into
as part of the transactions contemplated by this Agreement;
(ii) the material breach of any covenant, agreement or obligation
of any Shareholder contained in this Agreement or any other document
or instrument delivered by any Shareholder to Purchaser or entered
into as part of the transactions contemplated by this Agreement;
(iii) any material misrepresentation or omission contained in any
statement or certificate furnished by any Shareholder pursuant to this
Agreement or in connection with the transactions contemplated by this
Agreement; and
(iv) any claim relating to or arising under the FMI License
Agreement.
29
(b) Deductible. No claim for indemnification under this SECTION 8.1
shall be made by a Purchaser Indemnified Party unless and until the
aggregate amount of such claims (including attorney's fees and costs) by
all the Purchaser's Indemnified Parties shall exceed Twenty Five Thousand
Dollars ($25,000) (the "Threshold Amount"), and in such event, the
Purchaser's Indemnified Parties shall each be entitled to all amounts
including but not limited to the Threshold Amount.
(c) Limitation on Indemnification. The right to indemnification under
this SECTION 8.1 to the extent based on any breach of any representation or
warranty shall terminate on the second (2nd) anniversary of the Closing
Date, except (a) for any claim based on the untruth or inaccuracy of any
representation or warranty made herein or in any statement, certificate or
schedule furnished hereunder with an intent to deceive or defraud or with
reckless disregard for the truth or accuracy thereof, (b) for any pending
claim for indemnity hereunder which shall have been made prior to such
termination dates, (c) any claim relating to SECTION 5.1 hereof, and (d)
any claims relating to or arising under the FMI License Agreement, the
right to indemnity shall have no limit as to time and such claim shall not
terminate until the final determination and satisfaction of such claim. In
addition, no such loss, cost or expense indemnified under this Section 8.1
shall be deemed to have been sustained by the Purchaser Indemnified Parties
to the extent of any proceeds received by the Purchaser Indemnified Parties
from any insurance policy with respect thereto. Furthermore, the maximum
liability of the Shareholders under this SECTION 8.1 shall be an amount
equal to the Purchase Price; provided, however, that with respect to any
claim for indemnification arising under or relating to the FMI License
Agreement, there shall be no limitation on the amount of such
indemnification.
(d) Third Party Procedures. In the event any demands or claims are
asserted against a Purchaser Indemnified Party or any actions, suits or
proceedings are commenced against a Purchaser Indemnified Party for which
Seller is obligated to indemnify a Purchaser Indemnified Party under this
SECTION 8.1, then Purchaser Indemnified Party shall give prompt notice
thereof to the Shareholders in order to permit the Shareholders the
necessary time to evaluate the merits of such demand, claim, action, suit
or proceeding and defend, settle or compromise the same so that the
Shareholders' interests are not materially prejudiced. The Shareholders
shall assume the defense thereof with counsel chosen by the Shareholders
and reasonably acceptable to the Purchaser Indemnified Party. The
Shareholders shall not be liable for any costs or expenses incurred by a
Purchaser Indemnified Party in connection with any demand, claim, action,
suit or proceeding for which the Shareholders are obligated to indemnify
Purchaser Indemnified Party under this Section 8.1, provided that the
Shareholders shall have assumed the defense thereof in accordance with this
Section 8.1. Purchaser Indemnified Parties shall be entitled to participate
in (but not control) the defense of any such action, with its counsel and
at its own expense. If the Shareholders do not assume the defense of any
such claim or litigation resulting therefrom, (a) a Purchaser Indemnified
Party may defend against such claim or litigation, in such manner as it may
deem appropriate, at the Shareholders' expense, including, but not limited
to, settling such claim or litigation, after giving notice of the same to
the Shareholders on such terms as such Purchaser Indemnified Party may deem
appropriate, and (b) the Shareholders shall be entitled to participate in
(but not control) the defense of such action, with their own counsel and at
its own expense.
(e) Other Procedures. In the event any Purchaser Indemnified Party
should have a claim against the Shareholders that does not involve a third
party claim as contemplated by SECTION 8.1(D), the Purchaser Indemnified
Party shall deliver a notice of such claim with reasonable promptness to
the Shareholders. If the Shareholders notify the Purchaser Indemnified
Party that it does not dispute the claim described in such notice or fails
to notify the Purchaser
30
Indemnified Party within 30 days after delivery of such notice by the
Purchaser Indemnified Party whether the Shareholders dispute the claim
described in such notice, the amount specified in the Purchaser Indemnified
Party's notice will be conclusively deemed a joint and several liability of
the Shareholders and the Shareholders shall pay the amount to the Purchaser
Indemnified Party on demand.
(f) Settlement and Compromise. The Shareholders shall not settle or
compromise any demands, claims, actions, suits or proceedings for which a
Purchaser Indemnified Party has sought indemnification from the
Shareholders unless it shall have given Purchaser Indemnified Party not
less than fifteen (15) days prior written notice of the proposed settlement
or compromise and afforded Purchaser Indemnified Party an opportunity to
consult with the Shareholders regarding the proposed settlement or
compromise.
(g) Manner of Indemnification. All indemnification by the Shareholders
shall be effected by the payment of cash or delivery of a certified or
official bank check within thirty (30) days of the resolution of any such
claim. Any and all indemnification payments shall be deemed an adjustment
to the Purchase Price.
(h) Non-Waiver, Non-Exclusive Remedy. Failure of Purchaser Indemnified
Parties to give reasonably prompt notice of any claim or claims shall not
release, waive or otherwise affect the Shareholders' obligations with
respect thereto, except to the extent that the Shareholders can demonstrate
actual loss or prejudice as a result of such failure. The indemnification
provisions contained in this Section 8.1 are in addition to, and not in
derogation of, any statutory, common law or equitable rights or remedies
any party may have for breach of any representation, warranty, covenant or
agreement.
8.2 Indemnification by Purchaser.
(a) Generally. Purchaser shall indemnify, defend and hold harmless the
Shareholders and their respective directors, officers, employers, agents,
consultants, representatives, successors, transferees and assigns
(individually a "Shareholder Indemnified Party;" and collectively the
"Shareholder Indemnified Parties"), promptly upon demand, at any time and
from time to time, from, against, and in respect of any and all demands,
claims, losses, damages, judgments, liabilities, assessments, suits,
actions, proceedings, interest, penalties, and expenses (including, without
limitation, settlement costs and any legal, accounting and other expenses
for investigating or defending any actions or threatened actions or for
enforcing such rights of indemnity and defense) incurred or suffered by the
Shareholder Indemnified Parties, in connection with, arising out of or as a
result of each and all of the following:
(i) any material breach of any representation or warranty made by
Purchaser in this Agreement or any other document or instrument
delivered by Purchaser to the Shareholders or entered into as part of
the transactions contemplated by this Agreement;
(ii) the material breach of any covenant, agreement or obligation
of Purchaser contained in this Agreement or any other document or
instrument delivered by Purchaser to the Shareholders or entered into
as part of the transactions contemplated by this Agreement; and
(iii) any material misrepresentation or omission contained in any
statement or certificate furnished by Purchaser pursuant to this
Agreement or in connection with the transactions contemplated by this
Agreement.
31
(b) Deductible. No claim for indemnification under this SECTION 8.2
shall be made by a Shareholder Indemnified Party unless and until the
aggregate amount of such claims by all Shareholder Indemnified Parties
shall exceed Twenty Five Thousand Dollars ($25,000) (the "Threshold
Amount"), and in such event, the Shareholder Indemnified Parties shall each
be entitled to all amounts including but not limited to the Threshold
Amount.
(c) Limitation on Indemnification. The right to indemnification under
this SECTION 8.2 to the extent based on any breach of any representation or
warranty shall terminate on the second anniversary hereof, except that (a)
for any claim based on the untruth or inaccuracy of any representation or
warranty made herein or in any statement, certificate or schedule furnished
hereunder with an intent to deceive or defraud or with reckless disregard
for the truth or accuracy thereof, (b) for any pending claim for indemnity
hereunder which shall have been made prior to such termination date, and
(c) any claim arising under Section 5.1, the right to indemnity shall have
no limit as to time and such claim shall not terminate until the final
determination and satisfaction of such claim. In addition, no such loss,
cost or expense indemnified under this Section 8.2 shall be deemed to have
been sustained by the Seller Indemnified Parties to the extent of any
proceeds received by the Shareholder Indemnified Parties from any insurance
policy with respect thereto. Furthermore, the maximum liability of
Purchaser under this SECTION 8.2 shall be an amount equal to the Purchase
Price.
(d) Third Party Procedures. In the event any demands or claims are
asserted against the Shareholder Indemnified Parties or any actions, suits
or proceedings are commenced against any Shareholder Indemnified Party for
which Purchaser is obligated to indemnify a Seller Indemnified Party under
this SECTION 8.2, then the Shareholder Indemnified Party shall give notice
thereof to Purchaser in order to permit Purchaser the necessary time to
evaluate the merits of such demand, claim, action, suit or proceeding and
defend, settle or compromise the same so that Purchaser's interest is not
materially prejudiced. Within 10 business days after such notice, Purchaser
shall assume the defense thereof with counsel chosen by Purchaser or its
insurer and reasonably acceptable to the Shareholder Indemnified Party.
Purchaser shall not be liable for any costs or expenses incurred by the
Shareholder Indemnified Party in connection with any demand, claim, action,
suit or proceeding for which Purchaser is obligated to indemnify the Seller
Indemnified Party under this SECTION 8.2, provided that Purchaser shall
have assumed the defense hereof in accordance with this SECTION 8.2. The
Shareholder Indemnified Parties shall be entitled to participate in (but
not control) the defense of any such action, with its counsel and at its
own expense. If Purchaser does not assume the defense of any such claim or
litigation resulting therefrom, (a) the Shareholder Indemnified Party may
defend against such claim or litigation, in such manner as it may deem
appropriate, including, but not limited to, settling such claim or
litigation, after giving notice of the same to Purchaser on such terms as
the Shareholder Indemnified Party may deem appropriate, and (b) Purchaser
shall be entitled to participate in (but not control) the defense of such
action, with their own counsel and at its own expense.
(e) Other Procedures. In the event any Shareholder Indemnified Party
should have a claim against Purchaser that does not involve a third party
claim as contemplated by SECTION 8.2(D), the Shareholder Indemnified Party
shall deliver a notice of such claim with reasonable promptness to
Purchaser. If Purchaser notifies the Shareholder Indemnified Party that it
does not dispute the claim described in such notice or fails to notify
Purchaser within 30 days after delivery of such notice by the Shareholder
Indemnified Party whether Purchaser disputes the claim described in such
notice, the amount specified in the Shareholder Indemnified Party's notice
will be conclusively deemed a liability of Purchaser and Purchaser shall
pay the amount to the Shareholder Indemnified Party on demand.
32
(f) Settlement and Compromise. Purchaser shall not settle or
compromise any demands, claims, actions, suits or proceedings for which the
Shareholder Indemnified Parties have sought indemnification from Purchaser
unless it shall have given the Shareholder Indemnified Parties not less
than fifteen (15) days prior written notice of the proposed settlement or
compromise and afforded the Shareholder Indemnified Parties an opportunity
to consult with Purchaser regarding the proposed settlement or compromise.
(g) Manner of Indemnification. All indemnification by Purchaser shall
be effected by the payment of cash or delivery of a certified or official
bank check within thirty (30) days of the resolution of any such claim. Any
and all indemnification payments shall be deemed an adjustment to the
Purchase Price.
(h) Non-Waiver, Non-Exclusive Remedy. Failure of the Shareholder
Indemnified Parties to give reasonably prompt notice of any claim or claims
shall not release, waive or otherwise affect any of Purchaser's obligations
with respect thereto except to the extent that Purchaser can demonstrate
actual loss and prejudice as a result of such failure. The indemnification
provisions contained in this SECTION 8.2 are in addition to, and not in
derogation of, any statutory, common law or equitable rights or remedies
any party may have for breach of any representation, warranty, covenant or
agreement.
ARTICLE IX
TERMINATION OF AGREEMENT
In addition to certain provisions contained in this Agreement, this
Agreement may be terminated at any time prior to the Closing Date:
9.1 Mutual Consent. By mutual consent of Purchaser and the Shareholders.
9.2 Termination Date. By either party if the transactions contemplated
herein are not consummated by October 31, 2001.
9.3 Breach of Agreement. By Purchaser giving written notice to the
Shareholders if any Shareholder is in breach, or by the Shareholders giving
written notice to Purchaser if Purchaser is in breach, in any material respect
of any material representation, warranty or covenant contained in this
Agreement; provided that any such notice shall be followed by a period of ten
(10) days in which the breaching party shall have the opportunity to cure such
breach(es).
9.4 Government Action. By Purchaser or Seller if any court of competent
jurisdiction in the United States or other governmental body shall have issued
an order, decree or ruling or taken any other action restraining, enjoining or
otherwise prohibiting the consummation of the transactions contemplated by this
Agreement and such order, decree, ruling or other action shall have become final
and non-appealable.
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ARTICLE X
MISCELLANEOUS
10.1 Notices. Any notice or other communication required or which may be
given hereunder shall be in writing and shall be delivered personally, or sent
by facsimile transmission with telephone confirmation, or sent by certified,
registered, or express mail, postage prepaid, and shall be deemed given when so
delivered personally, or sent by facsimile transmission, or if mailed, three
days after the date of mailing, as follows:
If to Purchaser: Active IQ Technologies, Inc.
000 Xxxxxxx Xxxxxxx, Xxxxx 0000
Xxxxxxxxxx, XX 00000
Attention: Chief Executive Officer
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
With a copy to: Xxxxxx Xxxxxxx Xxxxxx & Brand, LLP
3300 Xxxxx Fargo Center
00 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000-0000
Attention: Xxxxxxx Xxxxx, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
If to the Shareholders: Xxxxxxx Xxxxxx
0000 Xxxxxxxx Xxxx
Xxx Xxxxx, XX 00000
With a copy to: L. Park Xxxxx, Esq.
Davis, Dystrup, Hoster, Xxxxxxxxxxx &
Jarot, P.C.
000 Xxxxx Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
10.2 Knowledge. Whenever any statement herein or in any schedule, exhibit,
certificate or other document delivered to any party pursuant to this Agreement
is made "to the Shareholders' or Purchaser's knowledge" or "to the best of the
Shareholders' or Purchaser's knowledge" or words of similar intent or effect of
any party or its representative, such statement shall be deemed to be made to
the best knowledge of the party and, to the extent applicable, its senior
management.
10.3 Assignability and Parties in Interest. This Agreement shall not be
assignable by any of the parties hereto, provided that Purchaser shall have the
right to assign to one or more of its Affiliates any and all of its rights under
this Agreement. This Agreement (a) shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assigns
and (b) is not intended to confer upon any other persons any rights or remedies
hereunder.
10.4 Governing Law. This Agreement shall be governed by, and construed and
enforced in accordance with, the internal laws, and not the laws pertaining to
choice or conflicts of laws, of the State of Minnesota.
34
10.5 Counterparts. This Agreement may be executed simultaneously in one or
more counterparts, each of which shall be deemed an original, but all of which
shall constitute but one and the same instrument.
10.6 Publicity. Except as otherwise required by law or rules of any
applicable stock exchange, Shareholder and Purchaser agree that prior to issuing
any press releases and other announcements, whether written or oral, to be made
by any of them with respect to the transactions contemplated hereby, such
releasing party shall provide written notice to and consult with the other
parties hereto (either the Shareholders or the Purchaser, as the case may be)
prior to such release.
10.7 Complete Agreement. This Agreement, the Other Agreements, the exhibits
hereto, the Schedules hereto delivered pursuant to this Agreement, and all Other
Agreements contemplated herein or hereby contain the entire agreement between
the parties hereto with respect to the transactions contemplated herein and,
except as provided herein, supersede all previous oral and written and all
contemporaneous oral negotiations, commitments, writings and understandings,
including but not limited to the letter of intent between certain of the
parties.
10.8 Modifications, Amendments and Waivers. At any time prior to the
Closing Date or termination of this Agreement, the parties hereto may, by mutual
written agreement:
(a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto;
waive any inaccuracies in the representations and warranties made by
the other parties contained in this Agreement or in the Schedules hereto or
any other document delivered pursuant to this Agreement;
waive compliance with any of the covenants or agreements of the other
parties contained in this Agreement; and
modify any term hereof.
10.9 Severability. If any provision or portion thereof of this Agreement is
held to be illegal, invalid or unenforceable under any present or future law in
any jurisdiction, (a) such provision or portion thereof will be fully severable
in such jurisdiction, (b) this Agreement will be construed and enforced as if
such illegal, invalid or unenforceable provision or portion thereof had never
comprised a part hereof, (c) the remaining provisions of this Agreement will
remain in full force and effect and will not be affected by the illegal, invalid
or unenforceable provision or portion thereof or by its severance herefrom and
(d) in lieu of such illegal, invalid or unenforceable provision or portion
thereof, there will be added automatically as a part of this Agreement a legal,
valid and enforceable provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible to the maximum extent allowable by
law.
10.10 Setoff. If any of the Shareholders fails to pay any amounts any or
all or them owe Purchaser or any entity related to Purchaser in any manner
("Setoff Party") pursuant to this Agreement, the Other Agreements, or any other
agreement (oral or written) between any of such parties, Purchaser shall have
the right to offset such amounts which have not been paid against all amounts
which are owed by Purchaser or a Setoff Party to any of the Shareholders
pursuant to any and all obligations. If Purchaser fails to pay any amount it
owes to the Shareholders pursuant to this Agreement, the Other Agreements, or
any other agreement between Purchaser and the Shareholders, the Shareholders
shall have the right to
35
offset such amounts which have not been paid against all amounts which are owed
by the Shareholders to Purchaser pursuant to any and all obligations.
10.11 Payment of Expenses. Except as specifically provided for herein, each
of the parties hereto will pay all fees and expenses (including, without
limitation, brokerage, investment banking, environmental consulting and
accounting fees, as well as legal fees and expenses) incurred by them in
connection with the transactions contemplated hereunder. All sales or transfer
taxes arising out of the conveyance of the Company Shares shall be borne by the
Shareholders.
10.12 Further Assurances. If, at any time after the Closing Date, any party
shall consider or be advised that any further assignments, conveyances,
certificates, filings, instruments or documents or any other things are
necessary or desirable to vest, perfect or confirm in Purchaser title to the
Company Shares, or to consummate any of the transactions contemplated by this
Agreement, the appropriate other party(ies) shall, upon request, promptly
execute and deliver all such proper deeds, assignments, certificates, filings,
instruments and documents and do all things reasonably necessary and proper to
vest, perfect or confirm title to the Company Shares in Purchaser and to
otherwise carry out the purpose of this Agreement.
10.13 Facsimile Execution. This Agreement may be executed by one or more of
the parties by facsimile transmitted signature and all parties agree that the
reproduction of signatures by way of telecopying device will be treated as
though such reproductions were executed originals.
10.14 Interpretation. All references herein to Articles and Sections refer
to Articles and Sections of this Agreement. All Article and Section headings are
for reference purposes only and shall not affect the interpretation of this
Agreement. Within this Agreement, the singular shall include the plural and the
plural shall include the singular, and any gender shall include all other
genders, all as the meaning and the context of this Agreement shall require. The
parties acknowledge that this Agreement and the other agreements contemplated
hereby were mutually drafted by both parties and that the interpretation thereof
will not prejudice any one party due to control of the Agreement.
10.15 Negotiations. Until all parties have fully executed this Agreement,
this Agreement constitutes nonbinding negotiations between the parties hereto
and no rights shall arise hereunder.
REMAINDER OF PAGE LEFT INTENTIONALLY BLANK.
SIGNATURE PAGE TO FOLLOW.
36
IN WITNESS WHEREOF, the undersigned has duly executed this Stock
Purchase Agreement as of the date first above written.
PURCHASER: SHAREHOLDERS:
ACTIVE IQ TECHNOLOGIES, INC.
By: /s/ Xxxxxxx X. Xxxxxxx /s/ Xxxxxxx Xxxxxx
--------------------------------- -----------------------------
Xxxxxxx X. Xxxxxxx Xxxxxxx Xxxxxx
Chief Executive Officer
/s/ Xxxxxxx Xxxxx
----------------------------
Xxxxxxx Xxxxx
/s/ Xxxx Saint
----------------------------
Xxxx Saint
/s/ Xxxxxxx Xxxxx
----------------------------
Xxxxxxx Xxxxx
37
Pursuant to Item 601(b)(2) of Regulation S-K, certain Schedules and Exhibits
have been omitted from this Agreement. The Registrant will furnish a copy of
any omitted Schedule or Exhibit to the Commission upon request.
Schedules:
4.2 Financials
4.4 and 6.9d Charter Documents -- Articles of Organization, Certificate of Good Standing and Bylaws
4.6 Leases
4.7 Liens Against Tangible Personal Property
4.8 Capitalization of FMS
4.11 Insurance Certificates
4.12a Section 125 Cafeteria Plan and SARSEP Documents
4.16 Bank Information
4.18 List of Employees
4.20 Contracts
4.26 Intellectual Property
4.26a and b Licensing Agreements
5.1e and 6.5 Certification of Non-Foreign Status
The following is a list and description of the omitted Exhibits:
Exhibit A (See Exhibit 10.1 of this Form 8-K)
Exhibit B Form of Lockup Agreement
Exhibit C Form of Investment Letter
Exhibit D Form of Employment Agreements
