1
EXHIBIT 10(mm)
STOCK PURCHASE AGREEMENT
By and Among
CHILDREN'S MEDICAL VENTURES, INC.,
THE SHAREHOLDERS OF CHILDREN'S MEDICAL VENTURES, INC.
and
NOVAMETRIX MEDICAL SYSTEMS INC.
June 30, 1999
2
TABLE OF CONTENTS
Page
SECTION I PURCHASE AND SALE OF THE SHARES 1
1.01 Purchase and Sale of the Shares 1
SECTION II ESCROW AGREEMENT; THE PURCHASE PRICE 2
2.01 Purchase Price 2
2.02 The Escrow Deposit 2
SECTION III REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS OF THE COMPANY AND THE SHAREHOLDERS 3
3.01 Organization and Qualification 3
3.02 Authority 3
3.03 No Legal Bar; Conflicts 3
3.04 Capitalization 4
3.05 Financial Statements; No Undisclosed Liabilities 4
3.06 Absence of Certain Changes 5
3.07 Accounts Receivable; Inventories 5
3.08 No Dividends, Loans, etc 6
3.09 Real Property Owned or Leased 6
3.10 Title to Assets; Condition of Property 7
3.11 Taxes 8
3.12 Compliance with Applicable Law; Permits; Authorizations 9
3.13 Contractual and Other Obligations; Customers and Suppliers 11
3.14 Compensation 12
3.15 Employee Benefit Plans. 12
3.16 Labor Relations 14
3.17 Insurance 14
3.18 Conduct of Business; Allowances 14
3.19 Patents, Trademarks, Etc. 15
3.20 Power of Attorney; Bank Accounts 15
3.21 No Foreign Person 15
3.22 Books and Records 15
3.23 Litigation; Disputes 16
3.24 Insider Interests; Intercompany Transactions 16
3.25 Year 2000 Compliance 16
3.26 Brokers 16
3.27 FDA and Related Matters 16
3.28 Disclosure 18
SECTION IV REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS OF THE SHAREHOLDERS 18
4.01 Authority 18
4.02 Ownership of Shares 18
4.03 No Legal Bar; Conflicts 19
SECTION V REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS OF THE PURCHASER 19
5.01 Organization 19
3
5.02 Authority 19
5.03 No Legal Bar; Conflicts 19
5.04 Brokers 20
SECTION VI ADDITIONAL COVENANTS OF THE SHAREHOLDERS,
THE COMPANY AND THE PURCHASER 20
6.01 Publicity 20
6.02 Confidential Information 20
6.03 Tax Matters 21
6.04 Tax Reimbursement 23
6.05 CHCA Agreement 23
SECTION VII CLOSING 24
7.01 Time and Place of Closing 24
7.02 Delivery of Shares 24
SECTION VIII CONDITIONS TO THE SHAREHOLDERS' OBLIGATION TO CLOSE 24
8.01 No Litigation 24
8.02 Representations, Warranties and Covenants 24
SECTION IX CONDITIONS TO THE PURCHASER'S OBLIGATION TO CLOSE 25
9.01 No Litigation 25
9.02 Representations, Warranties and Covenants 25
9.03 Other Certificates 25
9.04 Opinion of the Company's and the Shareholders' Counsel 25
9.05 Sale of All the Shares 25
9.06 Resignations 25
9.07 Consents 25
9.08 Consulting and Employment Agreements 26
9.09 Certain Obligations 26
SECTION X INDEMNIFICATION. 26
10.01 Indemnification by the Shareholders 26
10.02 Indemnification by the Purchaser 26
10.03 Procedure for Indemnification 27
10.04 Subrogation 28
10.05 Validity. 29
10.06 Time Periods for Indemnifications 29
10.07 Limits on Indemnification 29
10.08 Indemnity Escrow Deposit 29
SECTION XI NON-COMPETITION AGREEMENT 30
11.01 Noncompetition 30
11.02 Non-Competition Covenant of CHIC 32
11.03 Equitable Relief. 32
SECTION XII MISCELLANEOUS 33
12.01 Notices 33
12.02 Survival of Representations 34
12.03 Entire Agreement 35
12.04 Further Assurances 35
2
4
12.05 Expenses 35
12.06 Injunctive Relief 35
12.07 Arbitration 36
12.08 Invalidity 36
12.09 Successors and Assigns 36
12.10 Governing Law 36
12.11 Counterparts 37
12.12 Knowledge 37
12.13 Interpretation 37
12.14 Gender and Number 37
12.15 Headings 37
3
5
EXHIBITS
A. Form of Indemnity Escrow Agreements
B. Form of Shareholders and Company Counsel Opinion
C-1. Form of XxXxxxx Consulting Agreement
C-2. Form of Xxxx Employment Agreement
C-3. Form of Valentine Employment Agreement
4
6
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") made as of
the 30th day of June, 1999 by and among Novametrix Medical Systems Inc., a
Delaware corporation (the "Purchaser"), Children's Medical Ventures, Inc., a
Delaware corporation (the "Company"), and the shareholders of the Company listed
on Schedule 3.04 attached hereto (each, a "Shareholder" and collectively, the
"Shareholders"). Capitalized terms used herein and not defined in the specific
Section in which they are used shall have the meanings assigned to such terms in
Annex A hereof.
W I T N E S S E T H:
WHEREAS, the Company is engaged in the business of developing
and marketing neonatal and pediatric medical monitoring products and other
products and services (such activities and all incidental or related businesses
of the Company being herein referred to as the "Business");
WHEREAS, each of the Shareholders is the holder of the number
of shares of Common Stock, $.01 par value, of the Company (the "Common Stock")
set forth opposite such Shareholder's name on Schedule 3.04 hereto, which shares
of Common Stock constitute all of the issued and outstanding shares of capital
stock of the Company (all such shares of Common Stock held by the Shareholders
being hereinafter referred to as the "Shares");
WHEREAS, the Purchaser desires to acquire from each of the
Shareholders, and each of the Shareholders desires to sell to the Purchaser, all
of the Shares held by such Shareholder, on the terms and subject to the
conditions hereinafter set forth; and
WHEREAS, to induce the Purchaser to enter into this Agreement
and perform its obligations hereunder, the Company and each of the Shareholders
have agreed to make the representations, warranties, covenants and agreements
(including without limitation the indemnification and non-competition
agreements) set forth herein.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements hereinafter set forth and intending to be
legally bound, the parties hereto hereby agree as follows:
SECTION I
PURCHASE AND SALE OF THE SHARES
1.01 Purchase and Sale of the Shares. (a) Subject to the terms
and conditions of this Agreement and on the basis of the representations,
warranties, covenants and agreements herein contained, at the Closing (as such
term is defined in
7
Section 7.01), each of the Shareholders agrees to sell, assign and convey to the
Purchaser, free and clear of all Liens, and the Purchaser agrees to purchase,
acquire and accept from each of the Shareholders, all of the Shares held by such
Shareholder and set forth opposite such Shareholder's name in Column B on
Schedule 3.04 hereto.
(b) The parties hereto acknowledge and agree that the
Purchaser may designate a direct or indirect wholly owned subsidiary of the
Purchaser or of its corporate parent to acquire the Shares provided, however,
that the Purchaser's payment obligations hereunder shall not be affected by such
designation by the Purchaser.
SECTION II
ESCROW AGREEMENT; THE PURCHASE PRICE
2.01 Purchase Price. The purchase price for the Shares (the
"Purchase Price") is $8,700,000 in cash. The Purchase Price shall be allocated
among the Shareholders as set forth in Schedule 2.01 attached hereto. The
Purchase Price less the Indemnity Escrow Amounts) (as such term is defined in
Section 2.02), which shall be deposited with the Escrow Agent as provided
below), shall be paid by check or wire transfer at the Closing to an account or
accounts designated by the Shareholders at least two Business Days prior to the
Closing. The deposit of the Indemnity Escrow Amount into escrow by the Purchaser
and the payment by the Purchaser of the remainder of the Purchase Price as
provided above shall constitute full and final payment of the Purchase Price to
the Shareholders regardless of the ultimate disposition of the Indemnity Escrow
Amount.
2.02 The Escrow Deposit. (a) Contemporaneously with the
execution of this Agreement, the Purchaser, the Shareholders and Xxxxxx & Xxxxxx
and Xxxxxxxx, Xxxxxxx & Xxxxxx, P.C., acting jointly (the "Escrow Agent"), will
enter into escrow agreements, in the form attached hereto as Exhibit A (the
"Indemnity Escrow Agreements"), and at the Closing, the Purchaser shall deposit
$550,000 and $25,000, respectively, of the Purchase Price with the Escrow Agent
by wire transfer of immediately available funds (the "Indemnity Escrow Amounts"
and, together with all earnings thereon, collectively, the "Indemnity Escrow
Deposits"). The Indemnity Escrow Deposits will be held, invested and disbursed
as provided herein and in the applicable Indemnity Escrow Agreements.
(b) Subject to the terms and conditions hereof and of the
applicable Indemnity Escrow Agreement, the Indemnity Escrow Deposits shall be
applied as provided in Section 10.08 hereof and in the applicable Indemnity
Escrow Agreement.
(c) Nothing in this Section 2.02, in Section 10.08 or in the
Indemnity Escrow Agreements (including, without limitation, the expiration of
the Indemnity Escrow Agreements in accordance with their terms) or otherwise
shall limit the agreements and obligations of the parties hereto set forth
herein, including, without limitation, pursuant to Section X hereof.
2
8
SECTION III
REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS OF THE COMPANY AND THE SHAREHOLDERS
The Company and each of the Shareholders hereby represent and
warrant to, and covenant and agree with, the Purchaser, as of the date hereof
and as of the Closing Date (as such term is defined in Section 7.01), that,
except as set forth in the Company Disclosure Schedule delivered by the Company
and the Shareholders to the Purchaser in connection with this Agreement:
3.01 Organization and Qualification. The Company is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and has full power and authority to own its
properties and to conduct the businesses in which it is now engaged. The Company
is in good standing in each other jurisdiction wherein the failure so to qualify
could have a Material Adverse Effect. The Company does not have any
subsidiaries, own any capital stock or other proprietary interest, directly or
indirectly, in any other corporation, association, trust, partnership, joint
venture or other entity, nor have any agreement with any person, firm or
corporation or other entity to acquire any such capital stock or other
proprietary interest. Accurate and complete copies of the certificate of
incorporation, including all amendments thereto and restatements thereof, and
by-laws of the Company and of the corporate minutes and the stock record books
of the Company have been delivered to the Purchaser. Complete and accurate
records with respect to the issuance, transfer, redemption and cancellation of
shares of capital stock are set forth in such stock record books. The Company
has full power, authority and legal right and all material and necessary
approvals, permits, licenses and authorizations to own its properties, to
conduct its businesses and to enter into and consummate the transactions
contemplated under this Agreement and under each other instrument and document
required to be executed and delivered by the Company pursuant hereto.
3.02 Authority. The execution and delivery by the Company of
this Agreement and each other instrument or document required to be executed and
delivered by the Company pursuant hereto, the performance by the Company of its
covenants and agreements hereunder and thereunder and the consummation by the
Company of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action. This Agreement and each other
instrument or document required to be executed and delivered by the Company
pursuant hereto constitutes a valid and legally binding obligation of the
Company, enforceable against the Company in accordance with its terms.
3.03 No Legal Bar; Conflicts. Neither the execution and
delivery of this Agreement or any other instrument or document required to be
executed and delivered by the Company pursuant hereto, nor the consummation of
the transactions contemplated hereby or thereby, violates or will violate any
provision of the certificate of incorporation
3
9
or by-laws of the Company or any statute, ordinance, regulation, order, judgment
or decree of any court or other Governmental Authority or other Permit, or
conflicts with or will conflict with or results in or will result in any breach
or modification of any of the terms of or constitutes or will constitute a
default under or results in or will result in the termination of or the creation
of any Lien, acceleration right or other right pursuant to the terms of any
Contract (as defined in Section 3.13) or Permit or will in any way affect the
continuation, validity or effectiveness of any Contract or Permit. No consents,
approvals or authorizations of, or designations, registrations, declarations or
filings with or notices to, any Governmental Authority or any other person or
entity (including, without limitation, pursuant to the terms of any Contract,
Permit or otherwise) are required in connection with the execution and delivery
of this Agreement or any other instrument or document required to be executed
and delivered by the Company pursuant hereto, or the consummation of the
transactions contemplated hereby or thereby.
3.04 Capitalization. The authorized capital stock of the
Company consists of 3,000,000 shares of Common Stock, of which ___ shares are
issued and outstanding. The Shares constitute all of the outstanding shares of
capital stock of the Company. All of the issued and outstanding shares of Common
Stock have been duly and validly authorized and issued, are fully paid and
non-assessable and are owned beneficially and of record by the Shareholders as
set forth in Schedule 3.04, in each case free and clear of all Liens. There are
no outstanding subscriptions, warrants, options, calls, commitments or other
rights or agreements to which the Company or any of the Shareholders is subject
to or bound relating to the issuance, sale, transfer or redemption of shares of
Common Stock or other securities of the Company and no person other than the
Shareholders has any interest in the Common Stock of the Company. No shares of
capital stock or other securities of the Company are reserved for any purpose.
At the Closing, the Shareholders will deliver to the Purchaser good and valid
title to the Shares free and clear of all Liens.
3.05 Financial Statements; No Undisclosed Liabilities.
(a) The Company and the Shareholders have delivered to the
Purchaser the Company's balance sheets as at December 31, 1996, December 31,
1997 and December 31, 1998 and the related statements of income, retained
earnings and of cash flows for the 12-month periods then ended (collectively,
the "Annual Financial Statements") and the Company's balance sheet as at May 31,
1999 (the "Balance Sheet") and the related statements of income, retained
earnings, and cash flows for the five-month period then ended (the "Interim
Financial Statements" and collectively with the Annual Financial Statements and
the financial statements required to be delivered prior to the Closing Date, the
"Financial Statements"). The Financial Statements are complete and correct in
all material respects, have been prepared from the books and records of the
Company and in accordance with GAAP consistently applied and maintained
throughout the periods indicated (subject in the case of the Interim Financial
Statements to normal year-end adjustments and the absence of notes), and fairly
present the financial condition of the Company as at their respective dates and
the results of its operations for the periods
4
10
covered thereby. The Financial Statements include all adjustments, which consist
only of normal recurring accruals, necessary for such fair presentation.
(b) Except to the extent set forth in or reserved against in
the Balance Sheet, and except for current liabilities (determined in accordance
with GAAP consistently applied) incurred since the Balance Sheet Date in the
ordinary course of business consistent with past practices (and not materially
different in type or amount), the Company has no material liabilities or
obligations of any nature, whether accrued, absolute, known or unknown,
contingent or otherwise, whether due or to become due, whether properly
reflected under generally accepted accounting principles as a liability or a
charge or reserve against an asset or equity account or not, and whether the
amount thereof is readily ascertainable or not.
3.06 Absence of Certain Changes. Subsequent to December 31,
1998, there has not been with respect to the Company or the Business any (a)
adverse or prospective adverse material change in the condition (financial or
otherwise), results of operation, assets, properties, business or prospects; (b)
damage or destruction (whether or not insured) affecting the assets, properties,
business or operations; (c) labor dispute or threatened labor dispute involving
any employee; (d) actual or threatened dispute with any customer or supplier or
actual or threatened loss of business from any customer or supplier or, to the
knowledge of the Company or any of the Shareholders, any event or circumstance
which could reasonably be expected to result in any such dispute or loss of
business; (e) material change in the methods or procedures for billing or
collection of customer accounts or recording of customer accounts receivable or
reserves for doubtful accounts; (f) sale, assignment or transfer of any of the
assets, except in the ordinary course of business, consistent with past
practice; (g) cancellation of any debts or waivers of any claims or rights of
substantial value; (h) agreements or commitments for capital expenditures in
excess of $10,000 (individually or in the aggregate) for repairs or additions to
property, plant, equipment or tangible capital assets; (i) change in any method
of accounting or accounting principles; (j) increase in the compensation,
commission, bonus or other direct or indirect remuneration payable or to become
payable to any salesman, distributor, agent or employee other than increases in
salary to its employees in the ordinary course of business, consistent with past
practices; (k) any Liens with respect to any of the assets or the Business; (l)
Contracts entered into requiring the payment by the Company of $10,000 or more;
or (m) agreement or commitment to do any of the foregoing.
3.07 Accounts Receivable; Inventories. (a) All accounts
receivable of the Company which are reflected in the Balance Sheet, and all such
accounts receivable which will have arisen since the Balance Sheet Date are
valid and shall have arisen only from bona fide arms-length transactions in the
ordinary course of the business and shall be (or have been) fully collected
within 90 days after it arose, without resort to litigation and without offset
or counterclaim, in the aggregate face amounts thereof. All accounts receivable
are fully and correctly reflected on the Financial Statements or, with respect
to accounts receivable arising after the Balance Sheet Date, on the books and
records of the
5
11
Company, in each case in accordance with GAAP and net of the allowance for
doubtful accounts shown thereon. To the knowledge of the Company and each of the
Shareholders, no basis exists for the assertion of any counterclaim or set-off
or the repayment of any accounts receivable or payments heretofore received by
the Company. Schedule 3.07 hereto accurately sets forth the amount of all
commissions paid or due, and to whom paid or due, with respect to all accounts
receivable by the Company as of the date hereof.
(b) The inventories reflected on the Balance Sheet, or
thereafter acquired by the Company (and not subsequently disposed of in the
ordinary course of business) ("Inventory" or "Inventories"), are sufficient for
the requirements of the Business in the ordinary course and consist of items of
a quality and quantity which are merchantable and fully usable in the normal
course of the Business. The Inventory is salable at prevailing market prices
that are not less than the book value amounts thereof or the price customarily
charged by the Company, conforms to the specifications established therefor, and
has been manufactured in accordance with applicable regulatory requirements.
Subject to the obsolescence reserves shown in the Financial Statements, the
Inventory is not obsolete, damaged, slow-moving, defective or excessive. The
values at which such Inventories are carried on the Balance Sheet, or in the
case of Inventory acquired following the Balance Sheet Date on the books and
records of the Company, reflect the normal inventory valuation policy of the
Company (including the writing down of or reserving against the value of
slow-moving or obsolete inventory) and stating Inventories at the lower of cost
or market (on a first-in, first-out method), in each case in accordance with
GAAP consistently applied.
3.08 No Dividends, Loans, etc. (a) Subsequent to December 31,
1998, the Company has not (i) declared or paid any dividend (whether in cash, in
property or otherwise) or made any other distribution of any kind in respect of
its capital stock, and the Company has no obligation (contingent or otherwise)
to pay any dividends or make any other distribution of any kind, or (ii)
purchased, redeemed or otherwise acquired or disposed of or issued any shares of
capital stock or any notes, bonds or other securities of any kind and has no
obligation (contingent or otherwise) to do any of the foregoing. The Company has
paid on a timely basis (i) all amounts due and payable under Company
Indebtedness, leases and other contractual obligations and (ii) all other
amounts due and payable to any persons or entities. The Company does not have
any outstanding loans or advances to any of the Shareholders or to any family
member of any of the Shareholders, or to any affiliate of any such Shareholder.
(b) The Company has no Company Indebtedness, and as of the
Closing Date all such Company Indebtedness and all Liens relating thereto shall
be repaid in full and terminated.
3.09 Real Property Owned or Leased. (a) The Company owns no
real property. A list and description of all real property leased to the Company
or in which the Company has any interest is set forth in Schedule 3.09 of the
Company Disclosure Schedule (the "Real Property"). All such leased Real Property
is held subject to written
6
12
leases or other agreements which are valid and effective in accordance with
their respective terms, and there are no existing defaults or events of default,
or events which with notice or lapse of time or both would constitute defaults,
thereunder on the part of the Company. True and complete copies of all such
leases, together with any amendments thereto, have been delivered to the
Purchaser. Neither the Company nor any of the Shareholders has any knowledge of
any default or claimed or purported or alleged default or state of facts which
with notice or lapse of time or both would constitute a default on the part of
any other party in the performance of any obligation to be performed or paid by
such other party under any lease referred to in Schedule 3.09 of the Company
Disclosure Schedule. Neither the Company nor any of the Shareholders has
received any written or oral notice to the effect that any lease will not be
renewed at the termination of the term thereof or that any such lease will be
renewed only at a substantially higher rent.
(b) (i) Neither the Company nor any of the Shareholders has
received any written notice of, nor are any of them aware of, any violation of
any laws, rules, regulations or ordinances relating to the Real Property or
requesting or requiring the performance of any repairs, alterations or other
work in order so to comply.
(ii) Neither the Company nor the Shareholders has
received any written notice of, and none of them has any knowledge of, any
currently proposed or pending assessment for public improvements or of any
condemnation, taking by eminent domain or similar proceedings with respect to
any portion of the Real Property.
(iii) The buildings and other improvements
constituting a part of the Real Property have no material structural, roof or
other defects and such buildings and improvements (including, without
limitation, all plumbing, heating, electrical, air conditioning, ventilation and
other mechanical systems and equipment) are in good working order, condition and
repair, normal wear and tear excepted.
(iv) The Real Property (and uses to which it is put)
conforms in all material respects with all applicable laws, rules, ordinances,
regulations and all applicable agreements to which the Company is a party or by
which the Real Property is subject to or bound, including, without limitation,
those relating to zoning, environmental, health and safety standards and the
rules and regulations relating thereto.
3.10 Title to Assets; Condition of Property. (a) The Company
has good, valid and marketable title to all of its properties and assets, real,
personal and mixed, tangible and intangible, including, without limitation, the
properties and assets reflected in the Balance Sheet (except for assets leased
under leases set forth in Schedules 3.09 or 3.13 of the Company Disclosure
Schedule, and except for accounts receivable collected upon and Inventory
disposed of since the Balance Sheet Date in the ordinary course of business
consistent with past practices), free and clear of all Liens except for the
Liens listed on Schedule 3.10 of the Company Disclosure Schedule securing
certain equipment
7
13
used by the Company and described thereon (the "Permitted Equipment Liens") and
Permitted Encumbrances (collectively, "Permitted Liens").
(b) The assets and properties (including, without limitation,
all equipment and the improvements, fixtures and appurtenances on or to the Real
Property) owned or leased by the Company pursuant to written leases set forth in
Schedule 3.13 of the Company Disclosure Schedule are in good operating condition
and repair, normal wear and tear excepted, and have been maintained and serviced
in accordance with the prudent conduct of business, are suitable for the
purposes for which they presently are being used and constitute all of the
assets and properties used in the operations of, and necessary to operate, the
Business as presently conducted. None of the assets or properties owned or
leased by the Company (or uses to which they are put) fails to conform in any
material respect with any applicable agreement, law, ordinance or regulation.
Except with respect to assets leased pursuant to valid leases set forth in
Schedule 3.13 of the Company Disclosure Schedule, the Company owns all the
properties and assets located at or on the Real Property and owns all of the
properties and assets necessary for the conduct of the Business.
(c) There are no defects in the design or manufacture of any
of the Products sold by the Company or on hand to be sold which could give rise
to any liabilities or obligations which could result in a Material Adverse
Effect. Section 3.10(c) of the Company Disclosure Schedule lists all product
recalls by the Company.
3.11 Taxes. (a) The Company has filed or caused to be filed on
a timely basis all federal, state, local, foreign and other tax returns, reports
and declarations (collectively, "Tax Returns") required to be filed by it and
has paid all taxes, including, but not limited to, income, gross receipts,
capital stock, profits, stamp, occupation, transfer, value added, excise,
franchise, sales, use, property (whether real, personal or mixed), employment,
unemployment, disability, withholding, social security and workers' compensation
taxes and estimated income and franchise tax payments, and interest, penalties,
fines, costs and assessments (collectively, "Taxes"), due and payable with
respect to the periods covered by such Tax Returns (whether or not reflected
thereon). All Tax Returns filed by or on behalf of the Company are true,
complete and correct in all material respects. There are no Tax Liens on any of
the properties or assets, real, personal or mixed, tangible or intangible, of
the Company. No deficiency in Taxes of the Company or for any period has been
asserted by any taxing authority which remains unpaid at the date hereof. No Tax
Returns of the Company have ever been audited. No written inquiries or notices
have been received by the Company from a taxing authority with respect to
possible claims for Taxes which have not been resolved prior to the date hereof,
and the Company does not have any reason to believe that such an inquiry or
notice is pending or threatened, and there is no basis for any additional claims
or assessments for Taxes. The Company has not agreed to the extension of the
statute of limitations with respect to any Tax Returns or Tax periods. There are
no assessments relating to the Company's Tax Returns pending or threatened. The
Company has delivered to the Purchaser copies of the federal and state income
(or
8
14
franchise) Tax Returns filed by the Company for the past three years. The
Company has never elected, pursuant to Section 1362 of the Code, to be treated
as an S corporation as that term is defined in Section 1361 of the Code, for
federal and any applicable state and local tax purposes. The Company is not, and
has never been, the common parent or, except with Child Health Investment
Corporation ("CHIC"), a member of any affiliated group of corporations filing a
consolidated federal income tax return, and is not a party to any tax sharing
agreement or other arrangement pursuant to which it could be liable for the
Taxes of any third party.
(b) The accrual for Taxes reflected in the Financial
Statements accurately reflects the total amount of all unpaid Taxes, whether or
not disputed and whether or not presently due and payable, of the Company as of
the close of the period covered by the Financial Statements. Adequate accruals
and reserves have been made in the Financial Statements and the books and
records of the Company for the payment of all unpaid federal, state, local and
other Taxes of the Company for all periods through the respective dates thereof,
and through the Closing Date, whether or not yet due and payable and whether or
not disputed by the Company, and nothing has occurred subsequent to the dates of
such Financial Statements or such accruals or reserves in such books and records
which make such accruals and reserves inadequate.
3.12 Compliance with Applicable Law; Permits; Authorizations.
(a) General. The Company is not in default under, nor has it
failed to comply with or is otherwise in violation of, any law, statute,
ordinance, regulation or any order, judgment or decree of any court or other
Governmental Authority, and the Real Property is in compliance with all laws,
statutes, ordinances, regulations, orders, judgments and decrees of any
Governmental Authority except where such default or failure to comply
(individually or in the aggregate) could not have a Material Adverse Effect.
Neither the Company nor any of the Shareholders has any knowledge of any basis
for assertion of any violation of the foregoing or for any claim for
compensation or damages or otherwise arising out of any violation of the
foregoing. Neither the Company nor any of the Shareholders has received any
notification of any asserted present or past failure to comply with any of the
foregoing which has not been satisfactorily responded to in the time period
required thereunder.
(b) Permits. Set forth in Schedule 3.12 hereto is a complete
and accurate list of all Permits held by the Company. The Permits set forth in
Schedule 3.12 hereto are all the Permits required for the conduct of the
Business. All the Permits set forth in Schedule 3.12 hereto are in full force
and effect and the Company has not engaged in any activity which would cause or
permit revocation or suspension of any such Permit, and no action or proceeding
looking to or contemplating the revocation or suspension of any such Permit is
pending or threatened. There are no existing defaults or events of default or
events or states of fact which with notice or lapse of time or both would
constitute a default by the Company.
9
15
(c) Environmental. (i) The Company, and each of the
Shareholders, has duly complied with, and the Business is conducted and has been
conducted in compliance with, all Environmental Laws.
(ii) The Company has been issued all required federal, state
and local permits, licenses, certificates and approvals relating to (A) air
emissions, (B) discharges to surface water or ground water, (C) noise emissions,
(D) solid or liquid waste disposal, (E) the use, generation, storage,
transportation or disposal of toxic or hazardous substances or wastes (intended
hereby and hereafter to include any and all such materials listed in any
federal, state or local law, code or ordinance and all rules and regulations
promulgated thereunder, as hazardous or potentially hazardous (including,
without limitation, (1) any chemical, compound, material or substance that is
defined, listed in, or otherwise classified pursuant to, any of the
Environmental Laws as a "hazardous substance", "hazardous material", "hazardous
waste", "toxic substance" or "toxic pollutant", (2) petroleum, natural gas,
natural gas liquids, liquified natural gas, synthetic gas usable for fuel and
drilling fluids, produced waters, and other wastes associated with the
exploration, development or production of crude oil, natural gas or geothermal
resources and (3) any "medical waste" as defined in any of the Environmental
Laws or the disposition of which is regulated by any law, ordinance or
regulation)), or (F) other environmental matters (collectively, "Hazardous
Substances").
(iii) Neither the Company nor any of the Shareholders has
received notice of, nor does the Company nor any of the Shareholders know of any
facts which might give rise to, any Environmental Claim made or threatened
against or affecting the Company.
(iv) Neither the Company nor the Shareholders (or any of
them) nor, to the knowledge of the Company and the Shareholders, any other
person or entity has generated, treated, transported, stored, recycled,
discharged, emitted, disposed of or released any Hazardous Substances, arranged
for the generation, treatment, transport, storage, recycling, discharge,
emission, disposal or release of any Hazardous Substances, which might give rise
to any liability or corrective or remedial obligation under any Environmental
Laws, in each case, with respect to the Real Property or any other real
property.
(v) To the knowledge of the Company and the Shareholders, no
polychlorinated biphenyls, radioactive material, urea formaldehyde, lead,
asbestos, asbestos-containing material or underground storage tank (active or
abandoned) is or has been present at the Real Property.
(vi) None of the Real Property, nor any property to which
the Company has, directly or indirectly, transported or arranged for the
transportation of any Hazardous Substances, is listed on the National Priorities
List promulgated pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as
10
16
amended ("CERCLA"), on CERCLIS (as referred to in CERCLA) or on any similar
federal, state or foreign list of sites requiring investigation or clean-up.
3.13 Contractual and Other Obligations; Customers and
Suppliers. (a) Set forth in Schedule 3.13 of the Company Disclosure Schedule is
a correct and complete list of all material contracts, agreements, licenses,
leases, guarantees (or other agreements relating to contingent obligations of
the Company, arrangements (written or oral) and other material documents to
which the Company is a party or by which the Company, any of the assets or
properties of the Company is subject to or bound including, without limitation,
all amendments thereto; all of the foregoing described in this Section 3.13,
together with all other contracts, contingent or other obligations, purchase
orders, leases, licenses, commitments, plans, insurance policies, and other
agreements, instruments or documents to which the Company or any of its assets
or properties is subject to or bound, being herein collectively referred to as
the "Contracts" and singularly referred to as a "Contract." For purposes of this
Section 3.13, "material" shall mean a contract which provides for payments to or
by the Company in excess of an aggregate of $10,000.
(b) The Company is not in default under any Contract
and no claim of such a default has been made and no event has occurred which
with the giving of notice or the lapse of time or both would constitute a
default under any Contract which would have a Material Adverse Effect. To the
knowledge of the Company and each of the Shareholders, no other party to any
Contract is in default thereunder. Each of the Contracts has been entered into
in the ordinary course of business and is at arms' length. The Company has
delivered to the Purchaser true and complete copies of each written, and true
and complete written descriptions of each oral, Contract. Each material Contract
is in full force and effect and is a legal, valid and binding obligation of each
party thereto, subject to bankruptcy and creditors' rights laws and general
principles of equity. The Company is a party to each Contract either directly or
through a legal, valid and effective assignment which has been entered into in
accordance with the terms of such Contract and which is binding and enforceable
against the assignor and each other party to each such Contract.
(c) There exists no actual or, to the knowledge of
the Company or any of the Shareholders, threatened (or facts which might
reasonably be anticipated to result in a) termination, cancellation or
limitation of, or any material modification or change in, the business
relationships of the Company with any of the ten largest customers of the
Company in the conduct of the Business (measured by dollar volume of net sales)
during the 12-month period ended April 30, 1999 or with any of the ten largest
suppliers of the Company in the conduct of the Business (measured by dollar
volume of expenditures by the Company) during the 12-month period ended April
30, 1999. There exists no condition or state of facts or circumstances known to
the Company or any of the Shareholders involving customers or suppliers of or to
the Company which could materially affect the Business after the consummation of
the transactions contemplated by this Agreement.
11
17
3.14 Compensation. Set forth in Schedule 3.14 of the Company
Disclosure Schedule is a complete and accurate list of (a) all agreements,
plans, arrangements or commitments with employees, shareholders, consultants,
independent contractors, sales representatives, agents or any family members of
any employee, shareholder, consultant or agent, with regard to compensation,
benefits or perquisites and (b) all full-time and part-time employees and their
respective positions, job categories and salaries. All bonuses heretofore
granted to employees have been paid in full to such employees. Neither the
execution of this Agreement nor the transactions contemplated by this Agreement
will result in any liability for severance pay or similar payment requirements
to any employee, sales representative, independent contractor, consultant,
distributor agent or affiliate of the Company.
3.15 Employee Benefit Plans. Set forth in Schedule 3.15 of the
Company Disclosure Schedule is a list of all pension, profit-sharing, savings,
bonus, incentive or deferred compensation, severance pay, medical, life
insurance, welfare or other employee benefit plans which the Company maintains
or sponsors or to which the Company contributes. All pension, profit-sharing,
savings, bonus, incentive or deferred compensation, severance pay, medical, life
insurance, welfare or other employee benefit plans within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
(hereinafter referred to as "ERISA"), in which the employees participate (such
plans and related trusts, insurance and annuity contracts, funding media and
related agreements and arrangements being hereinafter referred to as the
"Benefit Plans") comply with all material requirements of the Department of
Labor and the Internal Revenue Service, and with all other applicable law, and
the Company has not taken or failed to take any action with respect to the
Benefit Plans which might create any material liability on the part of the
Company or the Purchaser. Each "fiduciary" (within the meaning of Section
3(21)(A) of ERISA) as to each Benefit Plan has complied with all material
requirements of ERISA and all other applicable laws in respect of each such
Benefit Plan. The Company has furnished to the Purchaser copies of all Benefit
Plans and all financial statements, actuarial reports and annual reports and
returns filed with the Internal Revenue Service with respect to such Benefit
Plans for the three plan years prior to the date hereof, and will furnish the
Purchaser with copies of any of the foregoing so filed after the date hereof.
Such financial statements and actuarial reports and annual reports and returns
are and shall be true, correct and complete and none of the actuarial
assumptions underlying such documents have changed since the respective dates
thereof. In addition:
(i) The Company does not maintain, sponsor or
contribute to, and has never withdrawn from, maintained,
sponsored or contributed to a "defined benefit plan" (within
the meaning of Section 3(35) of ERISA) or a "multiemployer
plan" (within the meaning of Section 3(37) of ERISA);
(ii) Each Benefit Plan intended to be qualified under
Section 401(a) of the Code has received a favorable
determination letter from the
12
18
Internal Revenue Service as to its qualification under Section
401(a) of the Code;
(iii) No "prohibited transaction" (within the meaning
of Section 406 of ERISA or Section 4975(c) of the Code) has
occurred with respect to any Benefit Plan;
(iv) No provision of any Benefit Plan or of any
agreement, and no act or omission of the Company in any way
limits, impairs, modifies or otherwise affects the right of
the Company or the Purchaser unilaterally to amend or
terminate any Benefit Plan after the Closing, subject to the
requirements of applicable law;
(v) No policy, plan, program, arrangement,
understanding or agreement exists which could result in the
payment by the Company or the Purchaser of money or any other
property or rights or accelerate or provide any other rights
or benefits, to any employee of the Company that would not
have been required but for the consummation of the
transactions contemplated herein;
(vi) There are no contributions which are or
hereafter will be required to be made to trusts in connection
with any Benefit Plan that would constitute a "defined
contribution plan" (within the meaning of Section 3(34) of
ERISA);
(vii) Other than claims in the ordinary course for
benefits with respect to the Benefit Plans, there are no
actions, suits or claims (including claims for income taxes,
interest, penalties, fines or excise taxes with respect
thereto) pending with respect to any Benefit Plan, or any
circumstances (including without limitation arising out of the
operation or termination of any Benefit Plan) which might give
rise to any such action, suit or claim (including claims for
income taxes, interest, penalties, fines or excise taxes with
respect thereto);
(viii) All reports, returns and similar documents
with respect to the Benefit Plans required to be filed with
any Governmental Authority have been so filed on or before
their due date or, if not currently due, will be filed when
due;
(ix) The Company has no obligation to provide health
or other welfare benefits to former, retired or terminated
employees, except as specifically required under Section 4980B
of the Code or Section 601 of ERISA. The Company has complied
with the notice and continuation requirements of Section 4980B
of the Code and Section 601 of ERISA and the regulations
thereunder; and
13
19
(x) The Company is not a party to any agreement,
contract or arrangement that would result, separately or in
the aggregate, in any payment (whether or not in connection
with any termination of employment or otherwise) of any
"excess parachute payment" within the meaning of Section 280G
of the Code.
3.16 Labor Relations. There have been no violations, such as
would have a Material Adverse Effect, of any Federal, state or local statutes,
laws, ordinances, rules, regulations, orders or directives with respect to the
employment of individuals by, or the employment practices or work conditions of,
the Company, or the terms and conditions of employment, wages and hours. The
Company is not engaged in any unfair labor practice or other unlawful employment
practice and there are no charges of unfair labor practices or other
employee-related complaints pending or threatened against the Company before the
National Labor Relations Board, the Equal Employment Opportunity Commission, the
Occupational Safety and Health Review Commission, the Department of Labor or any
other Governmental Authority. There is no strike, picketing, slowdown or work
stoppage or organizational attempt pending, threatened against or involving the
Company or the Business. No issue with respect to union representation is
pending or threatened with respect to the employees of the Company. No union or
collective bargaining unit or other labor organization has ever been certified
or recognized by the Company as the representative of any of the employees of
the Company. The Company has complied with the Workers Adjustment and Retraining
Notification Act, to the extent applicable.
3.17 Insurance. The Company maintains insurance policies
covering all of the assets and properties of the Company (including, without
limitation, all of the Real Property) and the various occurrences which may
arise in connection with the operation of the Business. Such policies are in
full force and effect, all premiums due thereon have been paid in full and the
Company has complied in all material respects with the provisions of such
policies. A complete and accurate list of all insurance policies of the Company
is set forth in Schedule 3.17 of the Company Disclosure Schedule. There are no
notices of any pending or threatened termination or premium increases with
respect to any of such policies. The Company has not had any casualty loss or
other occurrence which may give rise to any claim of any kind not covered by
insurance and neither the Company nor any of the Shareholders is aware of any
occurrence which may give rise to any claim of any kind not covered by
insurance. No third party has filed any claim against the Company for personal
injury, property damage or other occurrence of a kind for which liability
insurance is generally available which is not fully insured. All claims against
the Company covered by insurance have been reported to the insurance carrier on
a timely basis and are listed on Schedule 3.17 of the Company Disclosure
Schedule.
3.18 Conduct of Business; Allowances. The Company is not
restricted from conducting the Business in any manner or location by agreement
or court decree. The Company has no obligation outside of the ordinary course of
business to make allowances to any customers. The Business is conducted entirely
through the Company
14
20
(and not through any other subsidiary, affiliate, partner or any other person or
entity) and the Company conducts no other business other than the Business.
3.19 Patents, Trademarks, Etc. Set forth in Schedule 3.19 of
the Company Disclosure Schedule is a list and brief description of each of the
Company's patents, registered and common law trademarks, service marks, trade
names, copyrights and other similar rights and applications for and all
contracts, agreements, licenses or other rights with respect to each of the
foregoing. The Company owns all unencumbered right, title and interest in and to
all such proprietary rights of the Company. The proprietary rights listed on
Schedule 3.19 of the Company Disclosure Schedule are all such rights necessary
to the conduct of the Business as currently conducted; no adverse claims have
been made and no dispute has arisen with respect to any of said proprietary
rights; the operation of the Company and the use by the Company of its
proprietary rights do not involve infringement of any patent, trademark, service
xxxx, trade name, copyright, agreement, license or similar right; and neither
the Company nor any of the Shareholders has received any notice or has any
knowledge of any claimed conflict with respect to any of the foregoing, nor is
the Company or any of the Shareholders aware of any claim or assertion that any
of the foregoing proprietary rights are invalid or defective in any way or aware
of any facts or prior act upon which such a claim or assertion could be based.
Neither the execution of this Agreement nor the consummation of the transactions
contemplated by this Agreement will in any way affect the continuation, validity
or effectiveness of any such proprietary rights or any contract, agreement,
license or other right referred to in Schedule 3.19 or require the consent,
waiver, approval, authorization of, notice to, or designation, registration,
declaration or filing with, any party or third party in respect of any such
proprietary rights, contract, agreement, license or other right.
3.20 Power of Attorney; Bank Accounts. The Company has not
granted any power of attorney (revocable or irrevocable) to any person, firm or
corporation for any purpose whatsoever. Set forth in Schedule 3.20 of the
Company Disclosure Schedule is a complete and accurate list of (i) the name of
each institution in which the Company has a bank account, securities account,
safe-deposit box, lockbox account or any other account, the title and number of
such accounts and the names of all persons authorized to draw thereon or have
access thereto and (ii) all marketable securities and all other notes or other
obligations evidenced by written instruments and attributable to, or utilized
in, any aspect of the Business and reflected in the Financial Statements or
thereafter acquired by the Company.
3.21 No Foreign Person. None of the Shareholders is a foreign
person within the meaning of Section 1445(b)(2) of the Code.
3.22 Books and Records. The books and records of the Company
are complete and correct in all material respects, have been maintained in
accordance with GAAP consistently applied and in accordance with good business
practices and accurately reflect the basis for the financial position and
results of operations of the
15
21
Company set forth in the Financial Statements. True and complete copies of all
of such books and records have been made available for inspection by the
Purchaser and its representatives.
3.23 Litigation; Disputes. Set forth in Schedule 3.23 of the
Company Disclosure Schedule is a list of claims, disputes, actions, suits,
investigations or proceedings pending or, to the knowledge of the Company or any
of the Shareholders, threatened against or affecting the Company, the Business,
any of the Real Property or any of the other properties or assets of the
Company, or in respect of any Environmental Claim. None of the matters set forth
in Schedule 3.23 could (individually or in the aggregate), if adversely
determined against the Company, have a Material Adverse Effect. To the knowledge
of the Company and the Shareholders, there is no reasonable basis for any such
claim, dispute, action, suit, investigation or proceeding. The Company is not in
default in respect of any judgment, order, writ, injunction or decree of any
Governmental Authority.
3.24 Insider Interests; Intercompany Transactions. No present
or former shareholder, partner, principal, officer, director, employee or
affiliate of the Company or any immediate or other family member of any such
person or any person, corporation, partnership, trust or other entity in which
any such person is an officer, director, principal, partner or stockholder (a)
is presently a party to any transaction or arrangement with the Company, (b)
owns any interest in any of the assets or properties of the Company, (c) owns
any interest in, controls or is an employee, officer, director or agent of, or
consultant to any other entity which is a competitor, supplier, customer,
vendor, landlord or tenant of the Company or (d) is indebted or liable to, owns
any interest in, or owns, holds or has guaranteed any obligation or debt of the
Company.
3.25 Year 2000 Compliance. The Company has conducted a review
and assessment of its computer hardware and software and has implemented a
program to analyze and address the risk that its computer hardware and software
may be unable to recognize and properly execute data-sensitive functions
involving certain dates prior to and any dates after December 31, 1999 (the
"Year 2000 Problem"). Its computer hardware and software are and will be able to
process all date information prior to and after December 31, 1999, without any
errors, aborts, delays or other interruptions in operations associated with the
Year 2000 Problem that could result in a Material Adverse Effect.
3.26 Brokers. No broker, investment banker or other person,
other than Xxxxx Brothers Xxxxxxxx & Co. (the fees and expenses of which will be
paid by the Shareholders), is entitled to any broker's, finder's or other
similar fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of the Company.
3.27 FDA and Related Matters. (a) The Company has obtained all
consents, approvals, certifications, authorizations and permits of, and has made
all filings
16
22
with, or notifications to, the Food and Drug Administration ("FDA") or any other
governmental entity that is concerned with the safety, efficacy, reliability or
manufacturing of the medical products sold by the Company (hereinafter in this
Section 3.27 "Medical Device Regulatory Agencies") pursuant to applicable
requirements of all FDA laws, rules and regulations, and all corresponding state
and foreign laws, rules and regulations applicable to the Company and the
Business. All representations made by the Company in connection with any such
consents, approvals, certifications, authorizations, permits, filings and
notifications were true and correct in all material respects at the time such
representations and warranties were made, and the Company's products comply
with, and perform in accordance with the specifications described in, such
representations. The Company is in compliance with all applicable FDA laws,
rules and regulations, and all corresponding applicable FDA laws, rules and
regulations (including Good Manufacturing Practices and Medical Device Reporting
requirements) relating to medical device manufacturers and distributors or
otherwise applicable to Business, except where any such non-compliance would not
have a Material Adverse Effect. The Company has no reason to believe that any of
the consents, approvals, authorizations, registrations, certifications, permits,
filings or notifications that it has received or made to operate the Business
has been revoked or challenged. There are no investigations or inquiries pending
or, to the knowledge of the Company and the Shareholders, threatened relating to
the operation of the Business or the Company's compliance with applicable laws
relating to the Business.
(b) Schedule 3.27 of the Company Disclosure Schedule sets
forth a complete and accurate list, referencing relevant records and documents,
for the last five years, of (i) all Regulatory or Warning Letters, Notices of
Adverse Findings and Section 305 notices and similar letters or notices issued
by any Medical Device Regulatory Agencies; (ii) all United States Pharmacopoeia
product problem reporting program complaints or reports, MedWatch FDA forms 3500
and device experience network complaints received by the Company and all Medical
Device Reports filed by the Company, which complaints or reports (A) pertain to
any incident involving death or serious injury, and for which incident there has
been any of (x) a notice or follow-up inquiry to the Company by the FDA, (y) a
litigation or arbitration claim or cause of action commenced, or (z) a notice to
any insurance carrier or the Company tendering the defense or giving any notice
of a possible or actual claim again the Company, and (B) or are material to the
conduct of the Business; (iii) all product recalls and safety alerts conducted
by or issued to the Company and any requests from the FDA or any Medical Device
Regulatory Agency requesting the Company to cease to investigate, test or market
any product, which recalls, safety alerts or requests are in the aggregate
material to the conduct of the Business; (iv) any civil penalty actions begun by
FDA or any Medical Device Regulatory Agency against the Company and known about
by the Company and all consent decrees issued with respect to the Company; and
(v) any other written communications between the Company, on the one hand, and
the FDA or any Medical Device Regulatory Agency, on the other hand, which
communications are material to the conduct of the Business. The Company has
delivered to the Purchaser copies of all documents referred to in Schedule 3.27
of the Company Disclosure Schedule as well as
17
23
copies of the complaints and other information required to be maintained by the
Company pursuant to 21 CFR Section 820, to the extent that such complaints or
other information relate to events that would in the aggregate have a Material
Adverse Effect.
(c) For purposes of this Section 3.27, the term "Material
Adverse Effect" includes (i) any material injunction or criminal action or
proceeding against or involving the Company and (ii) any requirement that
executive officers of the Company or the Purchaser be subjected to a consent
decree or become individually involved in any proceeding in clause (i) above.
3.28 Disclosure. No representation or warranty made under this
Agreement (including the Exhibits and Schedules hereto) or any certificate or
other document delivered by the Company or any of the Shareholders or any
representative thereof pursuant hereto, and none of the information furnished by
the Company or any of the Shareholders set forth herein, including the Exhibits
or Schedules hereto, or in any document delivered by the Company, any of the
Shareholders or any representative thereof to the Purchaser or any
representative of the Purchaser, contains any untrue statement of a material
fact or omits to state a material fact necessary to make the statements herein
or therein not misleading.
SECTION IV
REPRESENTATIONS, WARRANTIES, COVENANTS
AND AGREEMENTS OF THE SHAREHOLDERS
Except as set forth in the Company Disclosure Schedule, each
of the Shareholders, severally and not jointly, hereby represents and warrants
to, and covenants and agrees with, the Purchaser, as of the date hereof and as
of the Closing Date that:
4.01 Authority. Such Shareholder has all necessary power,
authority and legal right to execute and deliver this Agreement and each other
instrument or document required to be executed and delivered by such Shareholder
pursuant hereto and to perform such Shareholder's covenants and agreements
hereunder and thereunder, and this Agreement and each other instrument or
document required to be executed and delivered by such Shareholder pursuant
hereto constitutes a valid and legally binding obligation of such Shareholder,
enforceable against such person in accordance with its terms.
4.02 Ownership of Shares. Such Shareholder owns all of the
shares of Common Stock set forth opposite such Shareholder's respective name in
Column B on Schedule 3.04 hereto. The shares listed on Schedule 3.04 represent
all of the issued and outstanding shares of Common Stock, free and clear of all
Liens (including without limitation any restriction on the right to vote, sell
or otherwise dispose of the Shares). Each of the Shareholders has the
unrestricted right to transfer the Shares owned by such Shareholder to the
Purchaser and, upon transfer of such Shares to the Purchaser hereunder, the
Purchaser will acquire good, valid and marketable title to such Shares, free and
clear of all Liens.
18
24
4.03 No Legal Bar; Conflicts. Neither the execution and
delivery of this Agreement or any other instrument or document required to be
executed and delivered by such Shareholder pursuant hereto, nor the consummation
of the transactions contemplated hereby or thereby, violates any statute,
ordinance, regulation, order, judgment or decree of any court or other
Governmental Authority or other Permit, or conflicts with or will result in any
breach or modification of any of the terms of or constitute a default under or
result in the termination of or the creation of any Lien, acceleration right or
other right pursuant to the terms of or will in any way affect the continuation,
validity or effectiveness of any contract or agreement to which such Shareholder
is a party or by which such Shareholder's or any of such Shareholder's assets or
properties is bound or any Permit. No consents, approvals or authorizations of,
or filings with, any Governmental Authority or any other person or entity are
required in connection with the execution and delivery of this Agreement or any
other instrument or document required to be executed and delivered by such
Shareholder pursuant hereto, or the consummation of the transactions
contemplated hereby or thereby.
SECTION V
REPRESENTATIONS, WARRANTIES, COVENANTS
AND AGREEMENTS OF THE PURCHASER
The Purchaser hereby represents and warrants to, and covenants
and agrees with, the Company and the Shareholders, as of the date hereof and as
of the Closing Date that:
5.01 Organization. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has full corporate power and authority to purchase the Shares.
5.02 Authority. The execution and delivery of this Agreement
by the Purchaser, the performance by the Purchaser of its covenants and
agreements hereunder and the consummation by the Purchaser of the transactions
contemplated hereby have been duly authorized by all necessary corporate action,
and this Agreement constitutes a valid and legally binding obligation of the
Purchaser, enforceable against the Purchaser in accordance with its terms.
5.03 No Legal Bar; Conflicts. Neither the execution and
delivery of this Agreement or any other instrument or document required to be
executed and delivered by the Purchaser pursuant hereto, nor the consummation of
the transactions contemplated hereby or thereby, violates or will violate any
provision of the certificate of incorporation or by-laws of the Purchaser or any
statute, ordinance, regulation, order, judgment or decree of any court or other
Governmental Authority or other Permit, or conflicts with or will conflict with
or results in or will result in any breach or modification of any of the terms
of or constitutes or will constitute a default under or results in or will
result in the termination of or the creation of any Lien, acceleration right or
other right pursuant to the
19
25
terms of any contract or Permit or will in any way affect the continuation,
validity or effectiveness of any contract or Permit. No consents, approvals or
authorizations of, or designations, registrations, declarations or filings with
or notices to, any Governmental Authority or any other person or entity
(including, without limitation, pursuant to the terms of any contract, Permit or
otherwise) are required in connection with the execution and delivery of this
Agreement or any other instrument or document required to be executed and
delivered by the Purchaser pursuant hereto, or the consummation of the
transactions contemplated hereby or thereby.
5.04 Brokers. No broker, investment banker or other person,
other than Xxxxxx Xxxxxxx Xxxxxx Gull (the fees and expenses of which will be
paid by the Purchaser), is entitled to any broker's, finder's or other similar
fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of the Purchaser.
SECTION VI
ADDITIONAL COVENANTS OF THE SHAREHOLDERS,
THE COMPANY AND THE PURCHASER
6.01 Publicity. The Company and each of the Shareholders
covenant and agree that any and all publicity (whether written or oral) and
notices to third parties concerning the sale of the Shares, and other
transactions contemplated by this Agreement shall be subject to the prior
written approval of the Purchaser. All of the parties hereto agree that there
shall be no publicity (whether written or oral) containing the name of CHIC
without the prior written approval of CHIC, except where such publicity is
required by law.
6.02 Confidential Information. The Shareholders acknowledge
that after the Closing the Purchaser and the Company could be irreparably
damaged if the Shareholders' Confidential Knowledge of the Company or the
Business were disclosed to or utilized on behalf of any person, firm,
corporation or other business entity other than the Purchaser or its affiliates,
and each of the Shareholders covenants and agrees that none of them will,
following the Closing Date, without the prior written consent of the Purchaser,
disclose (or permit to be disclosed) or use in any way any such confidential
information, unless compelled to disclose such confidential information by
judicial or administrative process or, in the opinion of its counsel, by other
requirements of law. "Confidential Knowledge" shall mean any trade secrets,
processes, policies, budgets, plans, records, customer lists, employee lists,
market reports, business manuals, and other information regarding the Business
of the Company which is treated as confidential information of the Company and
which is not generally available to the public. "Confidential Knowledge" does
not include (a) information which is or becomes generally available to the
public other than as a result of a disclosure by the Shareholders in violation
of this Agreement, or (b) any information which any Shareholder is required
20
26
by law to disclose to any governmental authority or in connection with any
judicial proceedings.
In the event that any of the Shareholders is requested or
required (by deposition, interrogatory, request for information or documents in
legal proceedings, subpoena, civil investigative demand or other similar
process) to disclose any Confidential Knowledge, such Shareholder shall provide
the Purchaser with prompt written notice of any such request or requirement so
that the Purchaser may seek a protective order or other appropriate remedy
and/or waive compliance with the provisions of this Section 6.02. If, in the
absence of a protective order or other remedy or the receipt of a waiver from
the Purchaser, such Shareholder is nonetheless legally compelled to disclose
Confidential Knowledge to any tribunal or else stand liable for contempt or
suffer other censure or penalty, such Shareholder may, without liability
hereunder, disclose to such tribunal that portion of Confidential Knowledge
which such Shareholder is legally required to disclose.
6.03 Tax Matters. (a) The Shareholders and the Purchaser
acknowledge and agree that, for Federal income tax purposes, the taxable year of
the Company will close on the Closing Date and that, for certain state income
tax purposes, the taxable year of the Company may also close on the Closing
Date. CHIC shall be responsible for preparing and filing any and all of the
income Tax Returns, reports and declarations that include the Company for the
periods ending on or before the Closing Date, and shall be responsible for and
shall pay all Taxes payable by the Company with respect to such Tax Returns, the
determination of which income taxes shall be solely within CHIC's control;
provided, however, that all such Tax Returns shall be prepared, and all Taxes
shall be calculated, lawfully and in a manner consistent with past practice and
CHIC shall not make any Tax elections or change any Tax accounting methods (to
the extent such changes would be binding on the Purchaser) without the express
written consent of the Purchaser. Purchaser shall cooperate with and assist CHIC
(including, without limitation, allowing access by CHIC and its representatives
(including its counsel and independent auditors) to the books and records
(written and computer) of the Company and allowing CHIC at its sole cost to make
copies thereof) in connection with the preparation by CHIC of any income Tax
Returns, reports and declarations required to be prepared by CHIC hereunder.
(b) Except as provided in clause (a) of this Section 6.03, the
Purchaser agrees to cause the Company to file all Tax Returns, reports and
declarations not related to income taxes required to be filed by the Company
after the Closing Date and to pay all Taxes due and payable by the Company after
the Closing Date, including any Taxes (other than income taxes) that accrued
prior to the Closing Date or that are otherwise allocable to any Seller Tax
Period that does not end on or before the Closing Date. CHIC shall be given the
opportunity to review, comment upon and suggest changes or corrections to, any
Tax Returns, reports and declarations covered by this Section 6.03(b) which
include any Seller Tax Period (and the work papers of the Company and its
accountants used in the preparation thereof), in each case prior to the
21
27
filing thereof (but in no event less than 30 days prior to such filing), if such
Tax Return requires payment of any Taxes in excess of the amount accrued
therefor by the Company as of the Closing.
(c) Any refunds or credits of Taxes of the Company for any
Seller Tax Period shall be for the account of CHIC. Applications for refunds of
Taxes, and the filing of amended Tax Returns with respect to any Seller Tax
Period shall be made and prosecuted only by CHIC. The Purchaser shall provide
and shall cause the Company to provide to CHIC full cooperation and assistance
in connection with any application for refund or amendment made or proposed to
be made by CHIC as shall be requested by CHIC, including by causing the Company
to authorize by appropriate powers of attorney such person as CHIC shall
designate to represent the Company with respect to such refund claim, without
charge for any cost or expense for assistance rendered by officers and employees
of the Company in connection therewith. CHIC shall not seek any Tax refund, or
amend any Tax Return, which would have the effect of increasing the Taxes of the
Company for any taxable period (or portion thereof) beginning after the Closing
Date. Neither the Purchaser nor the Company shall amend, or take any similar
action with respect to, any Tax Return filed by CHIC or by the Company with
respect to any Seller Tax Period without the prior written consent of CHIC;
provided that the foregoing shall not apply to any amended Tax Return which may
be required by law following resolution of a Tax dispute conducted in accordance
with this Agreement. The Purchaser shall or shall cause the Company to forward
to CHIC any refund of Taxes of the Company allocable to any Seller Tax Period
within five days after such refund is received (or reimburse CHIC for any credit
within five days after the credit is allowed or applied against other Tax
liability). Notwithstanding anything contained herein to the contrary, nothing
herein shall preclude the Purchaser from carrying back losses to pre-Closing Tax
periods to the extent that such action does not reduce any attributes or Tax
benefits of CHIC.
(d) The Purchaser shall not file an election (or cause a
deemed election) under Section 338 of the Code with respect to its acquisition
of the Company.
(e) Except as required by law, without CHIC's prior written
consent, neither the Purchaser nor the Company shall take any position on any
Tax Return, report or other declaration for any taxable period which might
result in any:
(1) increase in Tax (over accruals therefor on the
books and records of the Company as of the Balance Sheet Date)
for any Seller Tax Period in:
(A) the liability of CHIC or the Company in
respect of the consolidated Federal income Tax
liabilities, or any state consolidated, combined or
unitary income Tax liabilities, of
22
28
CHIC's tax group, as applicable, for periods while
the Company was part thereof; or
(B) the liability of CHIC or the Company in
respect of any separate state, local or foreign Tax
of the Company; or
(2) reduction in any Tax attributes to which CHIC or
the Company may be entitled with respect to any Seller Tax
Period.
(f) All Taxes with respect to the income, property or
operations of the Company that relate to any taxable year or period beginning
before and ending after the Closing Date shall be apportioned between the Seller
Tax Period and the period beginning the day after the Closing Date as follows:
(A) in the case of Taxes other than income and sales or use Taxes, on a per diem
basis, and (B) in the case of income Taxes (including income Taxes based on
capital or other alternative bases) and sales or use Taxes, as determined from
the books and records of CHIC and the Company in question, as though the taxable
year of the Company terminated on the Closing Date, and based on the accounting
methods, elections and conventions used by CHIC and the Company in prior years.
6.04 Tax Reimbursement. Within 90 days following the Closing,
the Purchaser shall pay to CHIC the portion of Company Indebtedness attributable
to tax liabilities of the Company through the Closing Date, subject to
documentation of such amount by CHIC to the reasonable satisfaction of the
Purchaser.
6.05 CHCA Agreement. In order to induce the Purchaser to enter
into this Agreement, Child Health Corporation of America ("CHCA"), an affiliate
of CHIC, agrees with Purchaser and the Company to (a) use its best efforts to
continue purchases of Products by CHCA member hospitals from the Company
consistent with past practices and, in furtherance thereof, agrees to use its
best efforts to enter into an agreement with the Company and the Purchaser
providing that the Company shall be the exclusive provider to CHCA member
hospitals of products which are within the line of Products sold by the Company,
(b) for a period of one (1) year commencing on the date of the Closing, not
enter into any contracts for the purchase of pulse oximeter products other than
with the Purchaser, (c) negotiate a contract with the Purchaser for the
Purchaser to be the exclusive provider to CHCA member hospitals of certain
products including non-invasive cardiac output monitors (NICO), respiratory
profile monitors (COSMO Plus!) and transcutaneous monitors, provided that such
product purchases will not conflict with existing contracts of CHCA, and (d)
continue current Company educational programs for CHCA neonatal intensive care
units and the continued funding of such programs at $10,000 per year for three
years following the Closing. The Purchaser shall issue to CHCA warrants
("Warrants") to purchase 25,000 shares of common stock, $.01 par value, of the
Purchaser (the "Purchaser Common Stock") in order to induce CHIC, which is an
affiliate of CHCA, to enter into this Agreement and to consummate the purchase
and sale of the Common Stock contemplated by this Agreement, such Warrants to
(i) have an
23
29
exercise price equal to the fair market value of the Purchaser Common Stock on
the date of Closing (determined by averaging the closing price of the Purchaser
Common Stock on the NASDAQ Stock Market over the ten (10) day period ending on
the date hereof, (ii) have a term of five (5) years from the date of Closing;
and (iii) be exercisable in whole or in part at any time during the term of the
Warrants.
SECTION VII
CLOSING
7.01 Time and Place of Closing. The closing of the purchase
and sale of the Shares (the "Closing") shall be held at 10:00 A.M. at the
offices of Xxxxxx & Xxxxxx, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx on the later of
(a) June 30, 1999 or (b) within five (5) Business Days after the conditions
precedent set forth in Sections VIII and IX hereof have been satisfied or
waived, or, in any event, at such other time, date and place as the parties
shall mutually agree (the "Closing Date").
7.02 Delivery of Shares. Delivery of the Shares shall be made
by each of the Shareholders to the Purchaser at the Closing by delivering one or
more original certificates in negotiable form, representing the Shares. Each
such certificate evidencing the Shares shall be duly endorsed in blank, or be
accompanied by stock transfer powers duly executed in blank, and shall be
accompanied by all requisite documentary or stock transfer taxes affixed thereto
and cancelled.
SECTION VIII
CONDITIONS TO THE SHAREHOLDERS' OBLIGATION TO CLOSE
The obligations of each of the Shareholders to sell the Shares
and for each of them to otherwise consummate the transactions contemplated by
this Agreement at the Closing are subject to the following conditions precedent,
any or all of which may be waived by the Shareholders (acting jointly) in their
sole discretion, and each of which the Purchaser hereby agrees to use its best
efforts to satisfy at or prior to the Closing:
8.01 No Litigation. No action, suit or proceeding against the
Company, the Business or any of the Shareholders relating to the consummation of
any of the transactions contemplated by this Agreement including, without
limitation any governmental action seeking to delay or enjoin any such
transactions shall be pending or threatened.
8.02 Representations, Warranties and Covenants. The Purchaser
shall deliver to the Shareholders a certificate dated the date of the Closing to
the effect that the representations and warranties made by the Purchaser herein
are true and correct in all material respects as of the date hereof.
24
30
SECTION IX
CONDITIONS TO THE PURCHASER'S OBLIGATION TO CLOSE
The obligation of the Purchaser to purchase the Shares and
otherwise consummate the transactions contemplated by this Agreement at the
Closing is subject to the following conditions precedent, any or all of which
may be waived by the Purchaser in its sole discretion, and each of which the
Company and the Shareholders hereby agree to use their respective best efforts
to satisfy at or prior to the Closing:
9.01 No Litigation. No action, suit or proceeding against the
Company, the Business, any of the Shareholders or the Purchaser relating to the
consummation of any of the transactions contemplated by this Agreement shall be
pending or threatened.
9.02 Representations, Warranties and Covenants. The Company
and each of the Shareholders shall deliver to the Purchaser a certificate of the
Chief Financial Officer of the Company dated the date of the Closing to the
effect that the representations and warranties set forth in Section 3.05 are
true and correct in all material respects as of the date hereof. The Company and
each of the Shareholders shall deliver to the Purchaser a certificate of an
appropriate officer of the Company dated the date of the Closing to the effect
that all other representations and warranties made by the Company and each of
the Shareholders herein are true and correct in all material respects as of the
date hereof.
9.03 Other Certificates. The Purchaser shall have received
such other certificates (including good standing and tax clearance certificates
and certified copies of the Company's certificate of incorporation and by-laws),
instruments and other documents, in form and substance reasonably satisfactory
to the Purchaser and counsel for the Purchaser, as it shall have reasonably
requested in connection with the transactions contemplated hereby.
9.04 Opinion of the Company's and the Shareholders' Counsel.
The Purchaser shall have received opinions of Xxxxxx, Xxxxx & Seksay, P.C. and
Xxxxxxxx, Thomson & Xxxxxx, P.C., counsel for the Company and the Shareholders,
in each case delivered to the Purchaser pursuant to the instructions of the
Company and the Shareholders, dated the date of the Closing, in form and
substance satisfactory to the Purchaser and its counsel, and substantially in
the form of Exhibit B hereto.
9.05 Sale of All the Shares. All the Shares shall be sold and
delivered to the Purchaser (or its designee) at the Closing free and clear of
all Liens.
9.06 Resignations. The Company shall have delivered to the
Purchaser resignations of all the officers and directors of the Company, such
resignations to be effective as of the Closing.
9.07 Consents. The Purchaser shall have received evidence
satisfactory to the Purchaser of receipt by the Company and the Shareholders of
the consents of third
25
31
parties as set forth in Schedules 3.03 and 4.03 hereto, in each case which
consents shall not provide for the acceleration of any liabilities or any other
detriment to the Purchaser, the Company or the Business and shall be in form and
substance reasonably satisfactory to the Purchaser.
9.08 Consulting and Employment Agreements. Read XxXxxxx shall
have entered into a consulting agreement with the Purchaser in the form attached
hereto as Exhibit C-1 and Xxxxxxxxx X. Xxxx and Xxxx X. Xxxxxxxxx shall have
entered into employment agreements with the Purchaser in the form attached
hereto as Exhibits C-2 and C-3, respectively.
9.09 Certain Obligations. The Shareholders shall have paid, or
caused to be terminated, in either case on terms satisfactory to the Purchaser,
all obligations of the Company for the payment of (a) severance payments to
employees of the Company, in excess of one week's salary per year of service
(subject to minimum severance of two (2) weeks' salary), (b) retention bonuses
to employees of the Company and (c) success fees to employees of the Company.
SECTION X
INDEMNIFICATION
10.01 Indemnification by the Shareholders. From and after the
Closing Date, each of the Shareholders, severally in accordance with their
respective Percentage Interests set forth in Schedule 3.04 hereto, shall
indemnify and hold harmless each of the Purchaser Indemnified Parties from and
against any and all Damages which are sustained or incurred by any of the
Purchaser Indemnified Parties in connection with or by reason of (a) the breach
by the Company or any of the Shareholders of any of their covenants, agreements
or obligations hereunder or under any of the other certificates, agreements or
other documents delivered by any such person in connection herewith, (b) the
breach or inaccuracy of any of the representations or warranties made by the
Company or any of the Shareholders herein (including in any Exhibit or Schedule
hereto) or in any certificate, agreement or other document delivered pursuant
hereto by the Company or any of the Shareholders or (c) the claim described in
the first paragraph of Section 3.23 of the Company Disclosure Schedule (the
"Section 3.23 Claim").
10.02 Indemnification by the Purchaser. From and after the
Closing Date, the Purchaser shall indemnify and hold harmless each of the
Shareholder Indemnified Parties from and against any and all Damages sustained
or incurred by any of the Shareholder Indemnified Parties in connection with or
by reason of (a) the breach by the Purchaser of any of its covenants, agreements
or obligations hereunder or under any of the other certificates, agreements or
other documents delivered by the Purchaser in connection herewith or (b) the
breach or inaccuracy of any of the representations or warranties made by the
Purchaser herein or in any certificate, agreement or other document delivered
pursuant hereto by the Purchaser.
26
32
10.03 Procedure for Indemnification. (a) In the event that any
Shareholder Indemnified Party, on the one hand, or any Purchaser Indemnified
Party, on the other hand, shall sustain or incur any Damages in respect of which
indemnity may be sought by such party pursuant to this Section X or any other
provision of this Agreement (each, an "Indemnification Matter"), the party
indemnified hereunder (the "Indemnitee") shall notify the party(s) providing
indemnification (collectively, the "Indemnitor") by sending written notice to
the Indemnitor (each, an "Indemnity Notice"). In the case of an Indemnification
Matter involving a third party claim, which, if successful, could result in an
indemnity payment hereunder, an Indemnity Notice shall be given within 60 days
after the discovery by an Indemnitee of the filing or assertion of any claim
against the Indemnitee stating the nature and basis of such claim; provided,
however, that any delay or failure to notify any Indemnitor of any claim shall
not relieve it from any liability except to the extent that the defense of such
action is materially prejudiced or materially adversely affected by such delay
or failure to notify.
(b) In the case of third party claims, the Indemnitee shall
give the Indemnitor a reasonable opportunity (i) to conduct any proceedings or
negotiations in connection therewith and necessary or appropriate to defend the
Indemnitee (provided such are pursued in a professional and diligent manner),
(ii) to take all other reasonable steps or proceedings to settle or defend any
such claims, provided that the Indemnitor shall not settle any such claim which
is solely for money damages without the prior written consent of the Indemnitee,
which consent shall not be unreasonably withheld or delayed, and shall not
settle any other such third party claim without the prior written consent of the
Indemnitee (including, without limitation, if such claim seeks or such
settlement imposes equitable remedies or injunctive relief on the Indemnitee),
and (iii) to employ counsel designated by the Indemnitor (which counsel shall
not be an employee of the Indemnitor or any affiliate thereof) and reasonably
satisfactory to the Indemnitee to contest any such claim or liability in the
name of the Indemnitee or otherwise. In the case of third party claims, the
Indemnitor shall, within 20 days of receipt of an Indemnity Notice of such claim
(the "Indemnity Notice Period"), give written notice to the Indemnitee of its
intention to assume the defense of such claim. If defendants in any action
include any Indemnitee and any Indemnitor and any Indemnitee shall have been
advised by its counsel that there may be legal defenses available to such
Indemnitee which are different from or in addition to those available to any
Indemnitor, or if a conflict of interest exists between any Indemnitee and any
Indemnitor, then in either case, the Indemnitee shall have the right to employ
its own counsel in such action, and, in such event (or in the event that the
Indemnitor does not timely assume the defense within the Indemnity Notice Period
as provided in the immediately succeeding sentence), the reasonable fees and
expenses of the Indemnitee's counsel shall be borne by the Indemnitor and shall
be paid by the Indemnitor from time to time within 20 days of receipt of
appropriate invoices therefor. If the Indemnitor does not deliver to the
Indemnitee within the Indemnity Notice Period written notice that the Indemnitor
shall assume the defense of any such claim or litigation resulting therefrom
pursuant to and in accordance with the provisions of this Section X, the
Indemnitee may defend against any such claim or litigation in such manner as it
may deem appropriate and the Indemnitee
27
33
may settle such claim or litigation on such terms as it may deem appropriate,
all at the expense of the Indemnitor. The costs and expenses of all proceedings,
contests or lawsuits and all other Damages sustained or incurred with respect to
such claims, proceedings or litigations shall be borne solely by the Indemnitor.
In the event that the Indemnitor does timely assume the defense as provided
above, the Indemnitee shall have the right to fully participate in such defense
(including, without limitation, with counsel of its choice), at its sole expense
(except as otherwise provided herein), and the Indemnitor shall reasonably
cooperate with the Indemnitee in connection with such participation, and in all
cases the Indemnitor shall keep the Indemnitee fully informed as to all matters
concerning each third party claim and shall promptly notify the Indemnitee in
writing of any and all significant developments relating thereto. Within ten
Business Days after the occurrence of an order or other determination with
respect to each third party claim by any court, panel of arbitrator(s) or
Governmental Authority having jurisdiction thereof, the Indemnitor shall pay the
Indemnitee the amount of Damages sustained or incurred by the Indemnitee which
have not theretofore been paid to the Indemnitee as provided above.
(c) In the event that an Indemnification Matter does not
involve a third party claim, the Indemnitee shall give an Indemnity Notice to
the Indemnitor setting forth in reasonable detail the basis of such claim
against the Indemnitor. If the Indemnity Notice relates to a claim by the
Purchaser which can be paid in whole or part from the applicable Indemnity
Escrow Deposit, the claim shall be resolved in accordance with the applicable
Indemnity Escrow Agreement. In the case of all other claims, the Indemnitor
shall within thirty (30) days after the date of an Indemnity Notice pay to the
Indemnitee the amount of Damages payable pursuant to Section 10.01 or 10.02
hereof, as the case may be, and which are at the time sustained or incurred by
the Indemnitee and shall thereafter pay any other Damages payable pursuant to
Section 10.01 or 10.02 hereof, as the case may be, and related to the same
Indemnity Notice on demand. In the event that the Indemnitor shall dispute the
Indemnity Notice, the dispute shall be resolved in accordance with the
applicable Indemnity Escrow Agreement to the extent that the Indemnity Notice
relates to a claim by the Purchaser which can be paid from the applicable
Indemnity Escrow Deposit, or by arbitration pursuant to Section 12.07, to the
extent that the Indemnity Notice relates to a claim by the Shareholders or to a
claim by the Purchaser which cannot be paid in full from the applicable
Indemnity Escrow Deposit.
10.04 Subrogation. None of the Shareholders shall be
subrogated to any or all rights of any Purchaser Indemnified Party(s) with
respect to any Damages for which the Purchaser Indemnified Party(s) has been
indemnified by the Shareholders hereunder (all of which rights of subrogation
are expressly hereby irrevocably and unconditionally waived and released by each
of the Shareholders). Without limiting the generality of the foregoing, it is
expressly understood and agreed that no Shareholder shall be entitled to any
indemnification, right of contribution or other right of recovery from the
Company in connection with any claim made by any Purchaser Indemnified Party(s)
against the Shareholders (or any of them) hereunder, all of which are hereby
irrevocably and
28
34
unconditionally waived and released by each of the Shareholders. No Purchaser
Indemnified Party shall be required to make any claim against any other person
or entity or to take any other action in order to pursue any claim against the
Shareholders (or any of them).
10.05 Validity. The indemnification agreements provided for in
this Section X shall apply notwithstanding any investigation made at any time by
or on behalf of any party hereto.
10.06 Time Periods for Indemnifications. The representations
and warranties contained in or made pursuant to this Agreement shall expire on
the first anniversary of the Closing, provided that the representations and
warranties contained in Sections 3.02 and 3.11 hereunder shall survive for the
applicable statute of limitations and the representations and warranties
contained in Sections 3.04, 3.10(a), 3.12(c), 3.15 and 4.02 shall survive
indefinitely, and provided further that if written notice is properly given
under this Section X with respect to any alleged breach or inaccuracy of a
representation or warranty to which such party is entitled to be indemnified
hereunder prior to the applicable expiration date, such representation or
warranty shall continue indefinitely until the applicable claim is finally
resolved. The covenants and agreements set forth in Sections 6.01, 6.02, 6.05,
11.01, 11.02, 11.03, 12.04 and 12.05 shall survive for the period provided for
in each such section, or if no period is provided for, for the applicable
statute of limitations.
10.07 Limits on Indemnification. Subject to the exceptions set
forth in this Section 10.07, neither the Shareholders nor the Purchaser shall be
required to pay more than $875,000 in the aggregate to fulfill their respective
indemnification obligations under this Section X. Subject to the exceptions set
forth in this Section 10.07, no party shall be entitled to indemnification
pursuant to this Section X unless and until the aggregate amount of Damages
sustained or incurred by such party exceeds an aggregate amount equal to $50,000
(the "Basket Amount"). If Damages exceed the Basket Amount, then the
Shareholders or the Purchaser, as the case may be, shall be entitled to recover
the full amount of such Damages, including the first $50,000 of Damages.
Notwithstanding anything herein to the contrary, the parties shall not be
subject to any limitation under this Section X, and shall be entitled to
dollar-for-dollar recovery with respect to (a) Damages arising from fraud on the
part of the Purchaser or any of the Company or the Shareholders, (b) Damages
arising from breach of the representations and warranties contained in Sections
3.04, 3.26 and 4.02, (c) Damages for breach of covenants contained in Sections
6.01, 6.02, 6.05, 11.01, 11.02, 11.03, 12.04 and 12.05 and (d) Damages
attributable to the Section 3.23 Claim.
10.08 Indemnity Escrow Deposits. The Purchaser shall first
satisfy any claims for Damages under Section X of this Agreement or otherwise by
recourse to the applicable Indemnity Escrow Deposit pursuant to and in
accordance with the terms hereof and of the applicable Indemnity Escrow
Agreement (but the applicable Indemnity Escrow Deposit and the applicable
Indemnity Escrow Agreement shall not limit or affect any
29
35
other right to indemnification or remedy which the Purchaser might have
hereunder or otherwise). The Escrow Agent shall, on the date which is twelve
(12) months after the Closing Date (or earlier date provided in the applicable
Indemnity Escrow Agreement), remit to each of the Shareholders an amount equal
to the remaining balance of the Indemnity Escrow Deposit, if any, less amounts
in respect of which the Purchaser has delivered an Indemnity Notice as provided
in and subject to the terms and conditions of this Agreement and the applicable
Indemnity Escrow Agreement, multiplied by the respective Percentage Interest of
each such Shareholder.
SECTION XI
NON-COMPETITION AGREEMENT
11.01 Noncompetition. (a) Each of Xxxxxxxxx X. Xxxx and Xxxx
X. Xxxxxxxxx (each, an "Individual") hereby covenants and agrees, for the
benefit of the Purchaser and its successors and assigns, that such Individual
will not, during the period of such Individual's employment with the Purchaser
(the "Term") and thereafter for the Applicable Period (as hereinafter defined):
(i) engage, directly or indirectly, anywhere in the
United States of America, whether as principal, agent, distributor,
representative, consultant, employee, partner, stockholder, limited partner or
other investor (other than an investment of not more than (x) five percent (5%)
of the stock or equity of any corporation the capital stock of which is publicly
traded or (y) five percent (5%) of the ownership interest of any limited
partnership or other entity) or otherwise, in the development, manufacture,
sale, distribution, provision, supply, purchase, procurement or acquisition of
(1) any products or services which compete with the products or services offered
by the Company at any time during the Term or (2) any infant/pediatric
developmental care products; or
(ii) solicit or entice or endeavor to solicit or
entice away from the Purchaser any person who was an employee of the Purchaser,
either for such Individual's own account or for any individual, firm or
corporation, or employ, directly or indirectly, any person who was at any time
during the one (1) year period ending on the date of termination of such
Individual's employment an employee of the Purchaser; or
(iii) solicit or entice or endeavor to solicit or
entice away from the Purchaser (x) any customer of the Purchaser or (y) any
corporation, individual or firm with which the Purchaser is, or has been during
the last six months of such Individual's employment with the Purchaser, in
active negotiations towards becoming a customer, either for his or her own
account or for any individual, firm or corporation.
As used in this Section 11.01(a), the term "Applicable Period"
shall mean (i) in the event that during the Term such Individual's employment
with the Purchaser shall be terminated by the Purchaser without cause, six (6)
months or (ii) in all other cases, twelve (12) months. Notwithstanding the
foregoing, the Purchaser may, in its sole discretion by notice given to such
Individual not less than three (3) months prior to the
30
36
end of the six-month or twelve-month period referred to in the preceding
sentence, extend the Applicable Period by (x) a period of up to eighteen (18)
additional months in the case of clause (i) or (y) a period of up to twelve (12)
additional months in the case of clause (ii), provided that the Purchaser pays
such Individual severance during such additional period in an amount per month
equal to 80% of the monthly rate of such Individual's salary with the Purchaser
in effect on the date of termination of such Individual's employment with the
Purchaser, such severance to be paid in equal biweekly installments.
(b) Read X. XxXxxxx hereby covenants and agrees to the
benefit of the Purchaser and its successors and assigns, that he will not during
the period commencing on the Closing Date and ending on the third anniversary of
the Closing Date:
(i) engage, directly or indirectly, anywhere in the
United States of America, whether as principal, agent, distributor,
representative, consultant, employee, partner, stockholder, limited partner or
other investor (other than an investment of not more than (x) five percent (5%)
of the stock or equity of any corporation the capital stock of which is publicly
traded or (y) five percent (5%) of the ownership interest of any limited
partnership or other entity) or otherwise, in the development, manufacture,
sale, distribution, provision, supply, purchase, procurement or acquisition of
(1) any products or services which compete with the products or services
offered, or under development on the date hereof, by the Company, or with any
product listed in Exhibit A to the consulting agreement between him and the
Purchaser or (2) any infant/pediatric developmental care products; or
(ii) solicit or entice or endeavor to solicit or
entice away from the Purchaser Group any person who is an employee of the
Purchaser Group, either for his own account or for any individual, firm or
corporation, or employ, directly or indirectly, any person who was during the
one (1) year period ending on the date of his engagement as a Consultant an
employee of the Purchaser; or
(iii) solicit or entice or endeavor to solicit or
entice away from the Purchaser (x) any customer of the Purchaser Group or (y)
any corporation, individual or firm with which the Purchaser Group is, or has
been during the last six (6) months of his engagement with the Purchaser Group,
in active negotiations towards becoming a customer, either for such Individual's
own account or for any individual, firm or corporation; or
(iv) acquire, offer to acquire, or agree to acquire,
directly or indirectly, by purchase or otherwise, any voting securities or
direct or indirect rights to acquire any voting securities of any entity listed
on Exhibit A or any subsidiary thereof, or of any successor thereof as a result
of the reincorporation or any similar corporate reorganization of such entity or
any subsidiary thereof, or any assets of such entity or any subsidiary or
division thereof or of any such successor, or form, join or in any way
31
37
participate in a "group" as defined in Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended, in connection with any of the foregoing.
The restrictions set forth in this Section 11.01(a) and (b)
are in addition to any restrictive covenant set forth in the respective
employment and consulting agreements of Xxxxxxxxx X. Xxxx, Xxxx X. Xxxxxxxxx and
Read X. XxXxxxx with the Purchaser.
11.02 Non-Competition Covenant of CHIC. CHIC hereby covenants
and agrees, for the benefit of the Purchaser and its successors and assigns,
that CHIC will not:
(a) during the period commencing on the Closing Date and
ending on the third anniversary of the Closing Date, engage, whether as
principal, consultant, manager, operator, partner, limited partner, member,
agent, owner, stockholder or investor, in any activity or business venture which
is in competition with the Business of the Company as conducted on the Closing
Date; provided, however, that no portfolio investment held by CHIC on the
Closing Date and disclosed by CHIC to the Purchaser on Schedule 11.02 shall be
considered to be violative of this covenant; and provided further, that no
future portfolio investment shall be considered to be violative of this covenant
with respect to products or lines of business entered into by the portfolio
business or fund more than thirty (30) days after the date of CHIC's investment
therein. For purposes of this paragraph, a "portfolio investment" of CHIC shall
be any investment in any business or fund which is not controlled by, or under
common control with, CHIC; or
(b) at any time, use, divulge or transfer to any person,
partnership, corporation or other entity any trade secrets, customer lists or
other Confidential Knowledge with respect to the Company; or
(c) during the period commencing on the Closing Date and
ending on the third anniversary of the Closing Date, directly or indirectly,
through any agent or otherwise, solicit or entice or endeavor to solicit or
entice the employment of any person who is or was an employee of the Company on
the Closing Date, either for its own account or for any individual, firm,
corporation or other entity.
11.03 Equitable Relief. In the event of a breach or threatened
breach of any of the provisions of this Section XI, each of the Shareholders
hereby consents and agrees that the Purchaser shall be entitled to an injunction
or similar equitable relief from any court of competent jurisdiction restraining
him from committing or continuing any such breach or threatened breach or
granting specific performance of any act required to be performed by him under
any of such provisions, without the necessity of showing any actual damage or
that money damages would not afford an adequate remedy and without the necessity
of posting any bond or other security. Nothing herein shall be construed as
prohibiting the Purchaser from pursuing any other remedies at law or in equity
which it may have.
32
38
The parties hereto agree that if in any proceeding the court
or other authority shall refuse to enforce the covenants herein set forth
because such covenants cover too extensive a geographic area or too long a
period of time, any such covenant shall be deemed appropriately amended and
modified in keeping with the intention of the parties to the maximum extent
permitted by law.
SECTION XII
MISCELLANEOUS
12.01 Notices. All notices, requests or instructions hereunder
shall be in writing and delivered personally, sent by telecopy, sent by Federal
Express or other nationally recognized overnight carrier, or sent by registered
or certified mail, postage prepaid, as follows:
(1) If to the Shareholders:
Child Health Investment Corporation
0000 Xxxx 00xx Xxxxxx, Xxxxx 000
Xxxxxxx Xxxxxxx, Xxxxxx 00000
Attention: Xxx Xxxxx
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
Read X. XxXxxxx
00 Xxxxxxxx Xxxx
Xxxxxxx, Xxxxxxxxxxxxx 00000
Xxxxxxxxx X. Xxxx
000 Xxxxxx Xxxx
Xxxxxxx, Xxxxxxxxxxxxx 00000
Xxxx X. Xxxxxxxxx
00 Xxxxxxxxxx Xxx
Xxxx Xxxxxxxx, Xxxxxxxxxxxxx 00000
33
39
with copies to:
Xxxxxxx, Xxxxxxx & Xxxxxx
00 Xxxxxxxxx Xxxxx
000 Xxxx 00xx Xxxxxx
Xxxxxx Xxxx, Xxxxxxxx 00000
Attention: Xxxxxx Xxxxxxxx, Esq.
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
Xxxxxx, Xxxxx & Seksay, P.C.
Xxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
(2) If to the Purchaser or to the Company:
Novametrix Medical Systems Inc.
0 Xxxxxxxxxx Xxxxx
Xxxxxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxxxxx
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
with copies to:
Xxxxxx & Xxxxxx
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxx, Esq.
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
Any of the above addresses may be changed at any time by notice given as
provided above; provided, however, that any such notice of change of address
shall be effective only upon receipt. All notices, requests or instructions
given in accordance herewith shall be deemed received on the date of delivery,
if hand delivered, telecopied or by overnight courier, and three (3) Business
Days after the date of mailing, if mailed by certified mail, return receipt
requested.
12.02 Survival of Representations. Except as provided in
Section 10.06 hereof, each representation, warranty, covenant and agreement of
the parties hereto herein contained shall survive the Closing, notwithstanding
any investigation at any time made by or on behalf of any party hereto.
34
40
12.03 Entire Agreement. This Agreement (including Annex A, the
Exhibits and Schedules hereto) and the documents referred to herein contain the
entire agreement among the parties hereto with respect to the transactions
contemplated hereby and supersedes all prior agreements, understandings,
negotiations and discussions, whether written or oral, of the parties, and no
amendment or modification hereof shall be effective unless in writing and signed
by the party against which it is sought to be enforced.
12.04 Further Assurances. Each of the Shareholders and the
Company, on the one hand, and the Purchaser, on the other hand, shall use such
party's best efforts to take such actions as may be necessary or reasonably
requested by the other to carry out and consummate the transactions contemplated
by this Agreement.
12.05 Expenses. Except as specifically set forth herein, each
of the parties hereto shall bear such party's own expenses in connection with
this Agreement and the transactions contemplated hereby whether or not the
Closing occurs. The Shareholders shall pay any and all out-of-pocket costs and
expenses incurred by the Company and/or the Shareholders in connection with the
negotiation of this Agreement and consummation of the transactions contemplated
hereby (including, without limitation, all legal, investment banking, accounting
and other professional fees and expenses) in connection with the sale of the
Shares and the other transactions contemplated hereby (it being understood and
agreed that such out-of-pocket costs and expenses shall not include salaries of
the employees of the Company); provided, however, that the Company may pay
expenses in the aggregate not in excess of $5,000 in connection with this
Agreement and the transactions contemplated hereby.
12.06 Injunctive Relief. Notwithstanding the provisions of
Section 12.07 hereof, in the event of a breach or threatened breach by any of
the Shareholders of any of their other obligations hereunder, including, without
limitation, the Shareholders obligations to close the transactions contemplated
hereby, each of the Shareholders hereby consents and agrees that the Purchaser
shall be entitled to an injunction or similar equitable relief restraining such
Shareholder from committing or continuing any such breach or threatened breach
or granting specific performance of any act required to be performed by the
Shareholders under any such provision, without the necessity of showing any
actual damage or that money damages would not afford an adequate remedy and
without the necessity of posting any bond or other security. The parties hereto
hereby consent to the non-exclusive jurisdiction of the Federal courts for the
District of Massachusetts for any proceedings under this Section 12.06, and each
of the Shareholders further agrees that the service of process or of any other
papers upon them or any of them by registered mail at their respective addresses
set forth herein shall be deemed good, proper and effective service upon them.
The parties hereto agree that the availability of arbitration in Section 12.07
hereof shall not be used by any party as grounds for the dismissal of any
injunctive actions instituted by the Purchaser pursuant to this Section 12.06.
Nothing herein shall be construed as prohibiting the Purchaser from pursuing any
other remedies at law or in equity which it may have.
35
41
12.07 Arbitration. Any controversy or claim arising out of or
relating to this Agreement, or any breach hereof, shall, except as provided in
Section 11.03 or Section 12.06 hereof, be settled by arbitration in Boston,
Massachusetts in accordance with the rules of the American Arbitration
Association then in effect. Judgment upon the award rendered by the arbitrators
may be entered in any court having jurisdiction thereof.
12.08 Invalidity. Should any provision of this Agreement be
held by a court or arbitration panel of competent jurisdiction to be enforceable
only if modified, such holding shall not affect the validity of the remainder of
this Agreement, the balance of which shall continue to be binding upon the
parties hereto with any such modification to become a part hereof and treated as
though originally set forth in this Agreement. The parties further agree that
any such court or arbitration panel is expressly authorized to modify any such
unenforceable provision of this Agreement in lieu of severing such unenforceable
provision from this Agreement in its entirety, whether by rewriting the
offending provision, deleting any or all of the offending provision, adding
additional language to this Agreement, or by making such other modifications as
it deems warranted to carry out the intent and agreement of the parties as
embodied herein to the maximum extent permitted by law. The parties expressly
agree that this Agreement as modified by the arbitration panel shall be binding
upon and enforceable against each of them. In any event, should one or more of
the provisions of this Agreement be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provisions hereof, and if such provision or provisions are not
modified as provided above, this Agreement shall be construed as if such
invalid, illegal or unenforceable provisions had never been set forth herein.
12.09 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the successors and permitted assigns of the
Company and the Purchaser, respectively, and the successors, permitted assigns,
legal representatives and heirs of the Shareholders. Prior to the Closing, the
Purchaser's rights or interests under this Agreement (but not its obligations)
may be assigned to any member of the Purchaser Group, and after the Closing, the
Purchaser's rights or interest under this Agreement (but not its obligations)
may be assigned (a) to any member of the Purchaser Group, (b) in connection with
a sale of all or substantially all of the assets of the Purchaser or any of its
corporate parents, or direct or indirect consolidated subsidiaries or (c) to any
bank or other financial institution which has extended credit to any member of
the Purchaser Group. Neither the Company nor any of the Shareholders may assign
any of their respective rights, interests or obligations under this Agreement.
Any attempted assignment in violation of this Section 12.09 shall be null and
void.
12.10 Governing Law. The validity of this Agreement and of any
of its terms or provisions, as well as the rights and duties of the parties
under this Agreement, shall be construed pursuant to and in accordance with the
laws of the State of Massachusetts, without regard to the conflicts of laws
provisions thereof.
36
42
12.11 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument.
12.12 Knowledge. Whenever used in this Agreement, the words
"to the knowledge of the Company," "to the knowledge of the Shareholders" or
similar words or phrases shall mean the knowledge or awareness of the Company or
any of the Shareholders which the Company or the Shareholders would obtain in
the exercise of reasonable diligence and after due inquiry, and shall include,
without limitation, the knowledge of the officers and directors of the Company
and its key employees, it being understood and agreed that such knowledge or
awareness of the Company or the Shareholders, for purposes hereof, shall also be
attributed to the others.
12.13 Interpretation. The parties hereto agree that this
Agreement is the product of negotiations between sophisticated parties and
individuals, all of whom were represented by counsel, and each of whom had an
opportunity to participate in, and did participate in, the drafting of each
provision hereof. Accordingly, ambiguities in this Agreement, if any, shall not
be construed strictly or in favor of or against any party hereto but rather
shall be given a fair and reasonable construction without regard to the rule of
contra proferentum.
12.14 Gender and Number. All pronouns used herein shall be
deemed to refer to the masculine, feminine or neuter, singular or plural, as the
identity or number of the person, persons, entity or entities may require.
12.15 Headings. The headings to the Sections of this Agreement
have been inserted solely for convenience of reference and shall not modify,
define or limit the express provisions of this Agreement.
* * *
37
43
IN WITNESS WHEREOF, this Agreement has been duly executed by
the parties hereto as of the date first above written.
CHILDREN'S MEDICAL VENTURES, INC.
By:
Name: Read X. XxXxxxx
Title: President and Chief Executive Officer
SHAREHOLDERS:
CHILD HEALTH INVESTMENT CORPORATION
By:
Name:
Title:
Read X. XxXxxxx
Xxxxxxxxx X. Xxxx
Xxxx X. Xxxxxxxxx
NOVAMETRIX MEDICAL SYSTEMS INC.
By:
Name: Xxxxxxx X. Xxxxxxxxxxx
Title: President and Chief Executive Officer
Agreed as to Section 6.05
CHILD HEALTH CORPORATION
OF AMERICA
By:
Name:
Title:
38
44
Annex A
Index of Definitions
Certain Definitions. The following terms when used herein shall have
the meanings assigned to them below (certain other terms are defined elsewhere
in this Agreement):
"Balance Sheet Date" shall mean May 31, 1999.
"Business Day" shall mean a day other than a Saturday or Sunday or
other day on which commercial banks in New York, New York are authorized or
required to close.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company Indebtedness" shall mean any obligations and liabilities
created, issued or incurred by the Company for borrowed money, including without
limitation, bank loans, mortgages, notes payable, capital lease obligations,
guarantees of indebtedness of others and loans from the Shareholders, and all
principal, interest, fees, prepayment penalties or other amounts due or owing
with respect thereto.
"Damages" shall mean any and all losses, claims, assessments, demands,
damages, liabilities, obligations, costs and expenses, including without
limitation, reasonable fees and disbursements of counsel sustained or incurred
by the Purchaser Indemnified Parties (or any of them) or the Shareholder
Indemnified Parties (or any of them), as the case may be, in any action,
dispute, claim or proceeding between any of the Purchaser Indemnified Parties,
on the one hand, and any of the Shareholder Indemnified Parties, on the other
hand, or involving a third-party claim against any of the Purchaser Indemnified
Parties or any of the Shareholder Indemnified Parties, as the case may be, and
other out-of-pocket costs and expenses incurred in connection with
investigating, preparing or defending or preventing any action, suit or
proceeding, commenced or threatened, or any claim whatsoever.
"Environmental Claim" means any notice or claim by any person or entity
alleging potential liability (including potential liability for investigatory
costs, cleanup costs, governmental response costs, natural resource damages,
property damages, personal injuries or penalties) arising out of, based on or
resulting from (i) the generation, treatment, storage, transportation or
recycling of any Hazardous Substance or the presence, or release, discharge,
disposal or emission into the environment, of any Hazardous Substances at the
Real Property or any other real property, whether or not presently or formerly
owned or leased by the Company or any affiliate of the Company or the
Shareholders or (ii) any violation, or alleged violation, of any Environmental
Laws.
"Environmental Laws" means all federal, state, local and foreign laws,
rules and regulations relating to environmental health and safety matters, the
pollution or protection
45
of the environment (including ambient air, surface water, ground water, land
surface or subsurface strata) or the protection of human health and safety from
environmental hazards, including laws and regulations relating to emissions,
discharges, releases or threatened releases of Hazardous Substances, or
otherwise relating to the manufacturer, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Substances.
"GAAP" shall mean generally accepted accounting principles.
"Governmental Authority" shall mean the collective reference to any
court, tribunal, government, or governmental or administrative agency, authority
or instrumentality, federal, state or local, or domestic or foreign.
"Liens" shall mean all liens, mortgages, charges, security interests,
covenants, easements, restrictions, adverse claims or other encumbrances of any
kind whatsoever and howsoever arising.
"Material Adverse Effect" shall mean an economic effect of $10,000 or
more on the businesses, properties, assets, condition (financial or other),
results of operations or prospects of the Company or the Business.
"Percentage Interest" of any Shareholder shall mean the percentage set
forth opposite such Shareholder's name in Column C of Schedule 3.04.
"Permits" shall mean all permits, licenses, approvals, franchises,
notices and authorizations issued by any Governmental Authority.
"Permitted Encumbrances" shall mean, with respect to the Real Property,
(a) laws, rules, regulations and ordinances of general applicability which are
not violated by the existing improvements at the Real Property or the current
use thereof, (b) easements, rights of way, covenants, conditions and other
matters set forth in Schedule 3.09 attached hereto and which, individually or in
the aggregate, do not materially affect the Real Property or the use thereof,
and (c) encumbrances for taxes and assessments either not yet due and payable or
being contested in good faith and in a timely and appropriate manner.
"Products" shall mean any and all products (including parts,
accessories and components) of the Company (used in the conduct of the
Business).
"Purchaser Group" shall mean, collectively, the Purchaser, the Company
and the Purchaser's and the Company's subsidiaries, affiliates and parent
entities.
"Purchaser Indemnified Parties" shall mean the Purchaser, the Company
and each of their respective employees, officers, directors, stockholders,
affiliates, agents and representatives.
2
46
"Seller Tax Period" shall mean and include any and all periods ending
on or before the Closing Date, and in addition, the portion of any taxable
period that includes, but does not end on or before, the Closing Date that
consists of a partial period deemed to end on the Closing Date; provided that in
the case of any Seller Tax Period that does not end on or before the Closing
Date, for purposes hereof the books and records of the Company shall be deemed
to have been closed at and as of the Closing Date.
"Shareholder Indemnified Parties" shall mean the Shareholders and each
of their respective employees, officers, directors, affiliates (other than the
Company), agents and representatives.
3
