Exhibit 2.1
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STOCK PURCHASE AGREEMENT
among
XXXXXX X. XXXXXXX,
XXXXXXXX X. XXXXXXX
and
GLOBAL HEALTH SUB, INC.
Dated as of December 11, 1998
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TABLE OF CONTENTS
Section Page
ARTICLE I CONSTRUCTION............................................1
SECTION 1.01. Certain Defined Terms....................1
SECTION 1.02. Interpretation...........................7
SECTION 1.03. Captions.................................7
ARTICLE II PURCHASE AND SALE.......................................7
SECTION 2.01. Purchase and Sale of the Shares.......7
SECTION 2.02. Purchase Price........................7
SECTION 2.03. Closing...............................7
SECTION 2.04. Closing Deliveries by Sellers.........7
SECTION 2.05. Closing Deliveries by Purchaser.......8
ARTICLE III REPRESENTATIONS AND WARRANTIES
OF SELLERS..............................................8
SECTION 3.01. Authority of Sellers..................8
SECTION 3.02. Organization, Authority and
Qualification of the Corporation......8
SECTION 3.03. Capital Stock of the Corporation;
Ownership of the Shares...............9
SECTION 3.04. Corporate Books and Records...........9
SECTION 3.05. No Conflict...........................10
SECTION 3.06. Governmental Consents and Approvals...10
SECTION 3.07. Financial Statements..................10
SECTION 3.08. No Undisclosed Liabilities............10
SECTION 3.09. Receivables...........................10
SECTION 3.10. No Material Adverse Change............11
SECTION 3.11. Litigation............................11
SECTION 3.12. Compliance with Laws; Licenses........11
SECTION 3.13. Environmental and Other Permits and
Licenses; Related Matter..............12
SECTION 3.14. Material Contracts....................13
SECTION 3.15. Intellectual Property.................14
SECTION 3.16. Assets................................14
Page
SECTION 3.17. Employee Benefit Matters..............15
SECTION 3.18. Labor Matters.........................16
SECTION 3.19. Taxes.................................17
SECTION 3.20. Insurance.............................17
SECTION 3.21. Employees.............................18
SECTION 3.22. Full Disclosure.......................18
SECTION 3.23. Inventory.............................19
SECTION 3.24. Brokers, Finders, etc.................19
SECTION 3.25. Year 2000 Compliance..................19
ARTICLE IV REPRESENTATIONS AND WARRANTIES
OF PURCHASER............................................19
SECTION 4.01. Organization and Authority of
Purchaser.............................19
SECTION 4.02. No Conflict...........................20
SECTION 4.03. Governmental Consents and Approvals...20
ARTICLE V COVENANTS...............................................20
SECTION 5.01. Conduct of Business Prior to the
Closing...............................20
SECTION 5.02. Access to Information.................22
SECTION 5.03. Confidentiality.......................23
SECTION 5.04. Regulatory and Other Authorizations;
Notices and Consents..................23
SECTION 5.05. Notice of Developments................23
SECTION 5.06. No Solicitation or Negotiation........24
SECTION 5.07. Certain Actions.......................24
SECTION 5.08. Best Efforts..........................24
SECTION 5.09. Section 338(h)(10) Election...........24
SECTION 5.10. S Election............................25
SECTION 5.11. Further Action........................25
SECTION 5.12. Continuing Capital Expenditures.......25
ARTICLE VI CONDITIONS TO CLOSING...................................25
SECTION 6.01. Conditions to Obligations of Sellers..25
SECTION 6.02. Conditions to Obligations of
Purchaser.............................26
Page
ARTICLE VII INDEMNIFICATION.........................................28
SECTION 7.01. Indemnification by Sellers...............28
SECTION 7.02. Indemnification by Purchaser.............28
SECTION 7.03. Notice of Claims ........................29
SECTION 7.04. Offset ..................................29
ARTICLE VIII TERMINATION AND WAIVER..................................30
SECTION 8.01. Termination...........................30
SECTION 8.02. Effect of Termination.................31
SECTION 8.03. Waiver................................31
ARTICLE IX GENERAL PROVISIONS......................................31
SECTION 9.01. Survival of Representations and
Warranties............................31
SECTION 9.02. Expenses..............................31
SECTION 9.03. Notices...............................32
SECTION 9.04. Severability..........................33
SECTION 9.05. Entire Agreement......................33
SECTION 9.06. Assignment............................33
SECTION 9.07. No Third Party Beneficiaries..........33
SECTION 9.08. Amendment ............................33
SECTION 9.09. Governing Law.........................33
SECTION 9.10. Counterparts..........................33
SECTION 9.11. Specific Performance..................33
STOCK PURCHASE AGREEMENT, dated as of December , 1998 (this
"Agreement"), between XXXXXX X. XXXXXXX, XXXXXXXX X. XXXXXXX (together with
Xxxxxx X. Xxxxxxx, "Sellers") and GLOBAL HEALTH SUB, INC., a California
corporation ("Purchaser").
RECITAL
Sellers own and desire to sell to Purchaser, and Purchaser desires
to purchase from Sellers, all of the issued and outstanding shares of common
stock, $100 par value per share, of American Ingredients Inc., a California
corporation (the "Corporation").
In consideration of the foregoing recital and the mutual agreements
hereinafter set forth, Purchaser and Sellers hereby agree as follows:
ARTICLE I
CONSTRUCTION
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
Action: any claim, action, suit, arbitration, inquiry, proceeding
or, to Sellers' knowledge, any investigation by or before any Governmental
Authority.
Affiliate: with respect to any specified Person, any other Person
that directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such specified Person.
Agreement or this Agreement: this Stock Purchase Agreement
(including the Exhibits hereto and the Disclosure Schedule), as it may from time
to time be amended pursuant to Section 9.08 and in force.
AJS: The AJS Company, a sole proprietorship of Xxxxxx X. Xxxxxxx.
Assumed Rate: as specified in Section 5.09(d).
Business: the business of (i) acting as a buyer and seller of raw
materials in the nutraceutical industry, (ii) mixing inventory in the
nutraceutical industry, including, but not limited to, granulate echinacea and
other herbs, to customer density specifications, (iii) providing drum-to-xxxxxx
herbs, and (iv) selling micellized products for skin care.
Business Day: any day that is not a Saturday, a Sunday or other day
on which banks are required or authorized by law to be closed in the City of New
York and Orange County, California.
CERCLA: the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended through the date hereof.
Closing: as specified in Section 2.03.
Closing Date: as specified in Section 2.03.
Code: the Internal Revenue Code of 1986, as amended through the date
hereof.
Common Stock: all of the issued and outstanding shares of capital
stock of the Corporation.
Control (including the terms Controlled by and under common Control
with): with respect to the relationship between or among two or more Persons,
the possession, directly or indirectly or as trustee or executor, of the power
to direct or cause the direction of the affairs or management of a Person,
whether through the ownership of voting securities, as general partner or
manager or trustee or executor, including, without limitation, the ownership,
directly or indirectly, of securities having the power to elect a majority of
the board of directors or similar body governing the affairs of such Person.
Corporate Tax: as specified in Section 5.09(c).
Corporate Tax Estimate: as specified in Section 5.09(c).
Corporation: as specified in the recital to this Agreement.
Disclosure Schedule: the Disclosure Schedule attached hereto.
Employee Benefit Plans: as specified in Section 3.17(a).
Employee Bonuses: as specified in Section 5.14.
Encumbrance: any security interest, pledge, mortgage, lien
(including, without limitation, environmental and tax liens), charge,
encumbrance, adverse claim, preferential arrangement or restriction of any kind,
including, without limitation, any restriction on the use, voting, transfer,
receipt of income or other exercise of any attributes of ownership.
Environment: surface waters, groundwaters, soil, subsurface strata
and ambient air.
Environmental Laws: any Law, now or hereafter in effect and as
amended, and any judicial or administrative interpretation thereof, including
any judicial or administrative order, consent decree or judgment, relating to
the environment, health,
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safety or Hazardous Substances, including, without limitation, CERCLA; the
Resource Conservation and Recovery Act, 42 U.S.C. xx.xx. 6901 et seq.; the
Hazardous Materials Transportation Act, 49 U.S.C. xx.xx. 6901 et seq.; the Clean
Water Act, 33 U.S.C. xx.xx. 1251 et seq.; the Toxic Substances Control Act, 15
U.S.C. xx.xx. 2601 et seq.; the Clean Air Act, 42 U.S.C. xx.xx. 7401 et seq.;
the Safe Drinking Water Act, 42 U.S.C. xx.xx. 300f et seq.; the Atomic Energy
Act, 42 U.S.C. xx.xx. 2011 et seq.; the Federal Insecticide, Fungicide and
Rodenticide Act, 7 U.S.C. xx.xx. 136 et seq.; and the Federal Food, Drug and
Cosmetic Act, 21 U.S.C. xx.xx. 301 et seq.
ERISA: as specified in Section 3.17(a).
ERISA Affiliate: an organization which is a member of a controlled
group of organizations within the meaning of Sections 414(b), (c), (m) or (o) of
the Code which includes the Sellers.
Financial Statements: as specified in Section 3.07.
GAAP: generally accepted accounting principles and practices as in
effect in the United States from time to time and applied consistently
throughout the periods involved.
Governmental Authority: any United States federal, state or local or
any foreign government, governmental, regulatory or administrative authority,
agency or commission or any court, tribunal, or judicial or arbitral body.
Governmental Order: any order, writ, judgment, injunction, decree,
stipulation, determination or award entered by or with any Governmental
Authority.
Group Plans: as specified in Section 3.17(g).
Hazardous Substances: (i) petroleum and petroleum products,
radioactive materials, asbestos in any form that is or could become friable,
urea formaldehyde foam insulation, transformers or other equipment that contain
polychlorinated biphenyls, and radon gas, (ii) any other chemicals, materials or
substances defined as or included in the definition of "hazardous substances",
"hazardous wastes", "hazardous materials", "extremely hazardous wastes",
"restricted hazardous wastes", "toxic substances", "toxic pollutants",
"contaminants" or "pollutants", or words of similar import, under any applicable
Environmental Law, and (c) any other chemical, material or substance exposure to
which is regulated by any Governmental Authority.
HSR Act: as specified in Section 3.06.
Indebtedness: with respect to any Person, (i) all indebtedness of
such Person, whether or not contingent, for borrowed money, (ii) all obligations
of such Person for the
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deferred purchase price of property or services, (iii) all obligations of such
Person evidenced by notes, bonds, debentures or other similar instruments, (iv)
all indebtedness created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person (even
though the rights and remedies of the lender under such agreement in the event
of default are limited to repossession or sale of such property), (v) all
obligations of such Person as lessee under leases that have been or should be,
in accordance with GAAP, recorded as capital leases, (vi) all obligations,
contingent or otherwise, of such Person under acceptance, letter of credit or
similar facilities, (vii) all obligations of such Person to purchase, redeem,
retire, defease or otherwise acquire for value any capital stock of such Person
or any warrants, rights or options to acquire such capital stock, valued, in the
case of redeemable preferred stock, at the greater of its voluntary or
involuntary liquidation preference plus accrued and unpaid dividends, (viii) all
Indebtedness of others referred to in clauses (i) through (vii) above guaranteed
directly or indirectly in any manner by such Person, or in effect guaranteed
directly or indirectly by such Person through an agreement (A) to pay or
purchase such Indebtedness or to advance or supply funds for the payment or
purchase of such Indebtedness, (B) to purchase, sell or lease (as lessee or
lessor) property, or to purchase or sell services, primarily for the purpose of
enabling the debtor to make payment of such Indebtedness or to assure the holder
of such Indebtedness against loss, (C) to supply funds to or in any other manner
invest in the debtor (including any agreement to pay for property or services
irrespective of whether such property is received or such services are rendered)
or (D) otherwise to assure a creditor against loss, and (E) all Indebtedness
referred to in clauses (i) through (vii) above secured by (or for which the
holder of such Indebtedness has an existing right, contingent or otherwise, to
be secured by) any Encumbrance on property (including, without limitation,
accounts and contract rights) owned by such Person, even though such Person has
not assumed or become liable for the payment of such Indebtedness.
Indemnified Purchaser Group: as specified in Section 7.01.
Indemnified Seller Group: as specified in Section 7.02.
Intellectual Property: as specified in Section 3.15(b).
IRS: the Internal Revenue Service of the United States.
Law: any federal, state, local or foreign statute, law, ordinance,
regulation, rule, code, order, other requirement or rule of law, except that any
reference to "Law" in any representation or warranty of Sellers shall include
only such foreign statutes, laws, ordinances, regulations, rules, codes, orders
or other requirements or rules of law as are known to Sellers.
Liabilities: any and all Indebtedness and other debts, liabilities
and obligations, whether accrued or fixed, absolute or contingent, matured or
unmatured or determined or
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determinable, including, without limitation, those arising under any Law
(including, without limitation, any Environmental Law), Action or Governmental
Order and those arising under any contract, agreement, arrangement, commitment
or undertaking,
Line of Credit: that certain Accounts Receivable and Inventory Loan
Agreement, dated as of December 19, 1997, between the Corporation and City
National Bank.
Loss: as specified in Section 7.01.
Material Adverse Effect: any circumstances, change in, or effect on
the Business or the Corporation that, individually or in the aggregate with any
other circumstances, changes in, or effects on, the Business or the Corporation:
(i) is, or could be, materially adverse to the business, operations, assets or
Liabilities, employee relationships, customer or supplier relationships,
prospects, results of operations or the condition (financial or otherwise) of
the Corporation or (ii) could adversely affect the ability of Purchaser or the
Corporation to operate or conduct the Business in the manner in which it is
currently operated or conducted by the Corporation.
Material Contracts: as specified in Section 3.14(a).
Multiemployer Plan: as specified in Section 3.17(a).
Multiple Employer Plan: as specified in Section 3.17(a).
PBGC: as specified in Section 3.17(f).
Person: any individual, partnership, limited partnership, limited
liability company, firm, corporation, association, trust, unincorporated
organization or other entity, as well as any syndicate or group that would be
deemed to be a person for purposes of Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended.
Purchase Price: as specified in Section 2.02.
Purchaser: as specified in the introductory paragraph of this
Agreement.
Purchaser Guaranty: the Guaranty by Purchaser substantially in the
form of Exhibit A.
Purchaser Loan: as specified in Section 5.15.
Qualified Plan: as specified in Section 3.17(c).
Receivables: any and all accounts receivable, notes and other
amounts
5
receivable by the Corporation from third parties, including, without limitation,
customers, arising from the conduct of the Business or otherwise before the
Closing Date, whether or not in the ordinary course, together with all unpaid
financing charges accrued thereon.
Relevant Period: as specified in Section 5.13(a).
S Corporation: a corporation as defined in Section 1361(a)(1) of the
Code.
Seller Employment Agreement: as specified in Section 6.01(b).
Seller Tax: as specified in Section 5.09(d).
Seller Tax Distribution: as specified in Section 5.09(d).
Seller Tax Estimate: as specified in Section 5.09(d).
Sellers: as specified in the introductory paragraph of this
Agreement.
Sellers' 5.09(b) Tax: as specified in Section 5.09(d).
Shares: all of the issued and outstanding shares of capital stock of
the Corporation.
Subsidiary: as to any Person, a corporation, limited liability
company or other Person of which shares or other rights or securities having
voting power to elect a majority of the board of directors or other governing
body are at the time owned, directly or indirectly, through one or more
intermediaries, by such Person.
Tax or Taxes: any and all taxes, fees, levies, duties, tariffs,
imposts and other charges of any kind (together with any and all interest,
penalties, additions to tax and additional amounts imposed with respect thereto)
imposed by any Governmental Authority, including, without limitation: taxes or
other charges on or with respect to income, franchises, windfall or other
profits, gross receipts, property, sales, use, capital stock, payroll,
employment, social security, workers' compensation, unemployment compensation,
or net worth; taxes or other charges in the nature of excise, withholding, ad
valorem, stamp, transfer, value added, or gains taxes; license, registration and
documentation fees; and customs duties, tariffs, and similar charges.
Tax Returns: all returns, declarations, reports, estimates,
information returns and statements required to be filed in respect of any Taxes.
Tissue Research: a name under which the Corporation conducts certain
business.
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Year 2000 Compliant: only with respect to the Corporation's
information technology, the information technology is designed to be used prior
to, during and after the calendar year 2000 A.D., and the information technology
used during each such time period will accurately receive, provide and process
date/time data (including, but not limited to, calculating, comparing and
sequencing) from, into and between the 20th and 21st centuries, including the
years 1999 and 2000, and leap-year calculations and will not malfunction, cease
to function, or provide invalid or incorrect results as a result of date/time
data, to the extent that other information technology, used in combination with
the information technology being acquired, properly exchanges date/time data
with it.
SECTION 1.02. Interpretation. When the context in which words are
used in this Agreement indicates such intent, singular words shall include the
plural and vice versa and masculine words shall include the feminine and the
neuter genders and vice versa. References herein to Articles, Sections,
Exhibits, Schedules or other subdivisions are to the appropriate subdivisions of
this Agreement, unless the context otherwise requires. The words "herein",
"hereof", and "hereunder" and other words of similar import refer to this
Agreement as a whole and not to any particular Article, Section, Exhibit,
Schedule or other subdivision. As used herein, the term "including" shall be
construed in each instance as though it were followed by the phrase "without
limitation."
SECTION 1.03. Captions. Captions contained herein have been inserted
for convenience of reference only and in no way define, limit, extend or
describe the scope of this Agreement or the intent of any provision hereof.
ARTICLE II
PURCHASE AND SALE
SECTION 2.01. Purchase and Sale of the Shares. Upon the terms and
subject to the conditions set forth herein, at the Closing, Sellers shall sell
and Purchaser shall purchase the Shares.
SECTION 2.02. Purchase Price. The purchase price for the Shares
shall be the sum of $36,000,000, subject to adjustment pursuant to Section
5.09(d) (such sum, as so adjusted, the "Purchase Price"), payable as described
in Section 2.05 and Section 5.15.
SECTION 2.03. Closing. The purchase and sale of the Shares shall
take place at a closing (the "Closing") to be held at the offices of Purchaser,
000 X. Xxxxxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxx, on a day fixed by Purchaser which
shall not be later than December 31, 1998, or at such other place or at such
other time or on such other date as Sellers and Purchaser may agree in writing
(the day on which the Closing takes place being herein referred to as the
"Closing Date").
SECTION 2.04. Closing Deliveries by Sellers. At the Closing, Sellers
shall
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deliver or cause to be delivered to Purchaser:
(a) stock certificates evidencing the
Shares, duly endorsed in blank or accompanied by stock powers
duly executed in blank, in form satisfactory to Purchaser;
(b) a receipt for the payments made by
Purchaser at the Closing; and
(c) the opinions, certificates and other
documents required to be delivered by Sellers pursuant to
Section 6.02.
SECTION 2.05. Closing Deliveries by Purchaser. At the Closing,
Purchaser shall deliver to Sellers:
(a) payment of the sum of $30,000,000 in
respect of the Purchase Price by wire transfer of that sum,
subject to adjustment as provided in Section 5.09(c) and
Section 5.16, in immediately available funds to an account
designated by Sellers at least five Business Days prior to the
Closing Date; and
(b) the opinions, certificates and other
documents required to be delivered by Purchaser pursuant to
Section 6.01.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF SELLERS
As an inducement to Purchaser to enter into this Agreement,
the Sellers hereby jointly and severally represent and warrant to Purchaser as
follows:
SECTION 3.01. Authority of Sellers. Each Seller has all
requisite power and authority and legal capacity to enter into this Agreement,
to carry out his or her obligations hereunder and to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by each
Seller, and (assuming due authorization, execution and delivery by Purchaser)
this Agreement constitutes the legal, valid and binding obligation of each
Seller enforceable against each Seller in accordance with its terms.
SECTION 3.02. Organization, Authority and Qualification of the
Corporation. The Corporation is a corporation duly organized, validly existing
and in good standing under the laws of California and has all necessary power
and authority to own, operate or lease the properties and assets now owned,
operated or leased by it and to carry on its business as it has been and is
currently conducted by it. The Corporation is duly licensed
8
or qualified to do business and is in good standing in each jurisdiction in
which the properties owned or leased by it or the operation of its business
makes such licensing or qualification necessary or desirable and all such
jurisdictions are set forth in Section 3.02 of the Disclosure Schedule. All
corporate actions taken by the Corporation have been duly authorized, and the
Corporation has not taken any action that in any respect conflicts with,
constitutes a default under or results in a violation of any provision of its
Articles of Incorporation or By-laws. True and correct copies of the Articles of
Incorporation and By-laws of the Corporation, each as in effect on the date
hereof, have been delivered by Sellers to Purchaser.
SECTION 3.03. Capital Stock of the Corporation; Ownership of
the Shares. (a) The authorized capital stock of the Corporation consists of
10,000 shares of Common Stock. As of the date hereof 1,000 shares of Common
Stock are issued and outstanding, all of which are validly issued, fully paid
and nonassessable. Such shares constitute the "Shares" to be purchased and sold
hereunder. The issued and outstanding Shares were not issued in violation of any
preemptive rights. There are no options, warrants, convertible securities or
other rights, agreements, arrangements or commitments of any character relating
to the capital stock of the Corporation or obligating either Seller or the
Corporation to issue or sell any shares of capital stock of, or any other
interest in, the Corporation. There are no outstanding contractual obligations
of the Corporation to repurchase, redeem or otherwise acquire any shares of the
capital stock of the Corporation or to provide funds to, or make any investment
(in the form of a loan, capital contribution or otherwise) in, any other Person.
The Shares constitute all the issued and outstanding capital stock of the
Corporation and are owned of record and beneficially by Sellers free and clear
of any and all Encumbrances. Upon consummation of the transactions contemplated
by this Agreement, Purchaser will own all the issued and outstanding capital
stock of the Corporation, free and clear of any and all Encumbrances and the
Shares will be fully paid and nonassessable. There are no voting trusts,
stockholder agreements, proxies or other agreements or understandings in effect
with respect to the voting or transfer of any of the Shares.
(b) The stock register of the Corporation accurately records:
(i) the name and address of each Person owning shares of capital stock of the
Corporation and (ii) the certificate number of each certificate evidencing
shares of capital stock issued by the Corporation, the number of shares
evidenced by each such certificate, the date of issuance thereof and, in the
case of cancellation, the date of cancellation. Section 3.03(b) of the
Disclosure Schedule lists the shareholders of the Corporation and the number of
shares held by each shareholder in the Corporation.
SECTION 3.04. Corporate Books and Records. The minute books of
the Corporation contain accurate records of all meetings and accurately reflect
all other actions taken by the stockholders, Boards of Directors and all
committees of the Boards of Directors of the Corporation. Complete and accurate
copies of all such minute books and of the stock register of the Corporation
have been provided by Sellers to Purchaser.
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Section 3.04 of the Disclosure Schedule lists all of the directors and executive
officers of the Corporation.
SECTION 3.05. No Conflict. The execution, delivery and
performance of this Agreement by each Seller does not and will not (i) violate,
conflict with or result in the breach of any provision of the Articles of
Incorporation or By-laws (or similar organizational documents) of the
Corporation, (ii) conflict with or violate (or cause an event which could have a
Material Adverse Effect as a result of) any Law or Governmental Order applicable
to either of the Sellers, the Corporation or any of their respective assets,
properties or businesses, including, without limitation, the Business, or (iii)
except as set forth in Section 3.05(c) of the Disclosure Schedule, conflict
with, result in any breach of, constitute a default (or event which with the
giving of notice or lapse of time, or both, would become a default) under,
require any consent under, or give to others any rights of termination,
amendment, acceleration, suspension, revocation or cancellation of, or result in
the creation of any Encumbrance on any of the Shares or on any of the assets or
properties of either of Sellers or the Corporation pursuant to, any note, bond,
mortgage or indenture, contract, agreement, lease, sublease, license, permit,
franchise or other instrument or arrangement to which either of Sellers or the
Corporation is a party or by which any of the Shares or any of such assets or
properties is bound or affected.
SECTION 3.06. Governmental Consents and Approvals. The
execution, delivery and performance of this Agreement by each Seller does not
and will not require any consent, approval, authorization or other order of,
action by, filing with or notification to any Governmental Authority, except for
the filing of a Notification and Report Form by Sellers under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
Act").
SECTION 3.07. Financial Statements. Sellers have delivered to
Purchaser a copy of the unaudited balance sheets of the Corporation as at August
31, 1998, December 31, 1997 and December 31, 1996 and the related unaudited
statements of income and of cash flows for the periods then ended (such
unaudited statements, including the related notes and schedules thereto, are
referred to herein collectively as the "Financial Statements"). Except as
disclosed in Section 3.07 of the Disclosure Schedule, each of the Financial
Statements is complete and correct in all material respects, has been prepared
in accordance with GAAP and presents fairly the financial position, results of
operations and cash flows of the Corporation as at the dates and for the periods
indicated.
SECTION 3.08. No Undisclosed Liabilities. There are no
Liabilities of the Corporation, other than Liabilities (i) disclosed in Section
3.08 of the Disclosure Schedule or (ii) incurred since August 31, 1998 in the
ordinary course of business, consistent with the past practice of the
Corporation and which do not and could not have a Material Adverse Effect.
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SECTION 3.09. Receivables. To the knowledge of Sellers,
Section 3.09 of the Disclosure Schedule sets forth an aged list of the
Receivables of the Corporation as of November 30, 1998 showing separately those
Receivables that as of such date had been outstanding (i) 29 days or less, (ii)
30 to 59 days, (iii) 60 to 89 days, and (iv) more than 90 days. All Receivables
reflected in Section 3.09 of the Disclosure Schedule arose from, and the
Receivables existing on the Closing Date will have arisen from, the sale of
services to Persons not affiliated with either of Sellers or the Corporation and
in the ordinary course of business consistent with past practice and, except as
reserved against in Section 3.09 of the Disclosure Schedule, constitute or will
constitute, as the case may be, only valid, undisputed claims of the Corporation
not subject to valid claims of set-off or other defenses or counterclaims other
than normal cash discounts accrued in the ordinary course of business consistent
with past practice. All Receivables are or will be good and are or will be
collected (net of $200,000 reserved for uncollectible accounts), without resort
to litigation or extraordinary collection activity, within 120 days of the
Closing Date.
SECTION 3.10. No Material Adverse Change. Since August 31,
1998, there has not been any material adverse change in the financial condition,
results of operation or business of the Corporation.
SECTION 3.11. Litigation. Except as set forth in Section 3.11
of the Disclosure Schedule (which, with respect to each Action disclosed
therein, sets forth: the parties, the nature of the proceeding, the date and
method commenced, the amount of damages or other relief sought and, if
applicable, paid or granted), there are no Actions by or against the Corporation
(or by or against either Seller or any Affiliate thereof and relating to the
Business or the Corporation), or affecting any of the assets of the Corporation,
pending before any Governmental Authority (or, to the best knowledge of Sellers
after due inquiry, threatened to be brought by or before any Governmental
Authority). None of the matters disclosed in Section 3.11 of the Disclosure
Schedule has a Material Adverse Effect or could affect the legality, validity or
enforceability of this Agreement or the consummation of the transactions
contemplated hereby. Except as set forth in Section 3.11 of the Disclosure
Schedule, neither the Corporation or any of its assets nor either Seller is
subject to any Governmental Order (and, to the best knowledge of Sellers after
due inquiry, no such Governmental Order is threatened to be imposed by any
Governmental Authority).
SECTION 3.12. Compliance with Laws; Licenses. (a) To the
knowledge of Sellers, except as set forth in Section 3.12(a) of the Disclosure
Schedule, the Corporation has conducted and continues to conduct the Business in
accordance with all Laws and Governmental Orders applicable to the Corporation
or any of its assets or business, and the Corporation is not in violation of any
such Law or Governmental Order.
(b) Section 3.12(b) of the Disclosure Schedule sets forth a
brief description of each Governmental Order applicable to the Corporation or
any of its assets or business.
11
No such Governmental Order has or has had a Material Adverse Effect. Section
3.12(b) of the Disclosure Schedule lists all of the licenses and permits held by
the Corporation. There are no other permits, licenses or other authorizations
which are required under any Law for the lawful conduct of the Business and the
activities customary or incidental thereto.
SECTION 3.13. Environmental and Other Permits and Licenses;
Related Matters. Except as set forth in Section 3.13 of the Disclosure Schedule:
(a) there are no permits, licenses or other authorizations
which are required under Environmental Laws for the lawful conduct of the
Business and the activities customary or incidental thereto;
(b) the Corporation is in compliance with all Environmental
Laws including, without limitation, all restrictions, conditions, standards,
limitations, prohibitions, requirements, obligations, schedules and timetables
contained in Environmental Laws or any regulation, code, plan, order, decree,
judgment, injunction, notice or demand letter issued, entered, promulgated or
approved thereunder;
(c) there is no civil, criminal or administrative action,
suit, demand, claim, hearing, notice of violation, investigation, proceeding,
notice or demand letter existing or, to the best knowledge of Sellers, pending
or threatened, against or relating to the Corporation and relating in any way to
any Environmental Law or any regulation, code, plan, order, decree, judgment,
injunction, notice or demand letter issued, entered, promulgated or approved
thereunder;
(d) the Corporation has not released, placed, stored, buried
or dumped any Hazardous Substance or any other wastes produced by, or resulting
from, any business, commercial or industrial activities, operations or
processes, on, beneath or adjacent to any of the properties owned or leased by
the Corporation, except for inventories of such substances to be used, and
wastes generated therefrom, in the ordinary course of business (which
inventories and wastes, if any, were and are, stored or disposed of in
accordance with applicable Laws and in a manner such that there has been no
release of any such substances into the Environment);
(e) the Corporation has not received notice of any claim that
any employee of the Corporation, in the course of his or her employment with the
Corporation, has been exposed to any Hazardous Substances generated, produced or
used by his or her respective employer which could give rise to any material
claim against the Corporation;
(f) none of the properties owned or leased by the Corporation
contains any: (i) underground storage tanks; (ii) asbestos; (iii) equipment
using PCBs; (iv) underground injection xxxxx; or (v) septic tanks in which
process wastewater or any Hazardous Substances have been disposed, in each case,
which will give rise to material liability to
12
the Corporation; and
(g) there are no agreements which may require the Corporation
to pay to, reimburse, guarantee, pledge, defend, indemnify or hold harmless any
Person from or against any liabilities or obligations arising under
Environmental Laws.
SECTION 3.14. Material Contracts. (a) Section 3.14(a) of the
Disclosure Schedule lists each of the following contracts and agreements
(including, without limitation, oral and informal arrangements) of the
Corporation (all of such contracts and agreements herein collectively referred
to as "Material Contracts"):
(i) all management contracts and contracts
with independent contractors or consultants (or similar
arrangements) to which the Corporation is a party;
(ii) all contracts and agreements relating
to Indebtedness of the Corporation;
(iii) all contracts and agreements with any
Governmental Authority to which the Corporation is a party;
(iv) all contracts and agreements that limit
or purport to limit the ability of the Corporation to compete
in any line of business or with any Person or in any
geographic area or during any period of time;
(v) all contracts and agreements between or
among the Corporation and each Seller or any Affiliate of
either Seller;
(vi) all contracts and agreements providing
for benefits under any Plan;
(vii) all leases and subleases of real or
personal property to which the Corporation is a party;
(viii) all contracts relating to the
management or operation of any real property and all contracts
relating to real estate development, brokerage, leasing or
consulting;
(ix) all severance, collective bargaining
and related agreements to which the Corporation is a party;
(x) all voting trusts, stockholder
agreements, proxies or other agreements with respect to the
voting or transfer of any of the shares of capital stock of
the Corporation;
(xi) all agreements pursuant to which the
Corporation licenses any Intellectual Property either as a
licensor or as a licensee;
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(xii) all agreements with customers to which
the Corporation sold services, raw materials, supplies,
merchandise and other goods with an aggregate purchase price
of $100,000 or more during the 12-month period ended August
31, 1998;
(xiii) all agreements with suppliers from
which the Corporation ordered services, raw materials,
supplies, merchandise and other goods for the Corporation with
an aggregate purchase price of $100,000 or more during the
12-month period ended August 31, 1998; and
(xiv) all other contracts and agreements
whether or not made in the ordinary course of business, which
are material to the Corporation or the conduct of the Business
or the absence of which would have a Material Adverse Effect.
(b) Except as disclosed in Section 3.14(b) of the Disclosure
Schedule, each Material Contract is valid and binding on the respective parties
thereto and is in full force and effect. Sellers have no knowledge that any
party to the Material Contracts intends to terminate any Material Contract or
take any action that would result in an adverse consequence to the Corporation
under any Material Contract upon or following the consummation of the
transactions contemplated hereby. The Corporation is not in breach of, or
default under, any Material Contract.
(c) Except as disclosed in Section 3.14(c) of the Disclosure
Schedule, none of Sellers or the Corporation (i) has received any notice of or
suffered a cancellation or termination of any Material Contract, (ii) has sent
or otherwise given notice of his/her or its intention to terminate or cancel any
Material Contract, (iii) has received notice that any party to any Material
Contract intends to terminate, amend or cancel such Material Contract, (iv) has
amended any Material Contract, or (v) has knowledge that any Material Contracts
will be cancelled within the next 24 months.
(d) Except as disclosed in Section 3.14(d) of the Disclosure
Schedule, no other party to any Material Contract is in breach thereof or
default thereunder.
(e) Except as disclosed in Section 3.14(e) of the Disclosure
Schedule, there is no contract, agreement or other arrangement granting any
Person any right to purchase any of the properties or assets of the Corporation.
SECTION 3.15. Intellectual Property. (a) The Corporation
possesses all material Intellectual Property, know-how, formulae and other
proprietary and trade rights necessary for the conduct of its business as now
conducted, including all rights to the use of the trade name "Tissue Research"
in connection with the Business.
(b) There have been no claims made, and the Corporation has
not received any notice and does not otherwise have knowledge, that the use by
the Corporation of any of the patents, trademarks, trade names, service marks,
brand marks, brand names, trade
14
secrets, software, industrial designs and copyrights used by the Corporation, or
any registration thereof or pending application therefor, or license or other
contract relating thereto (collectively, the "Intellectual Property") conflicts
with, infringes upon, violates or interferes with or constitutes an
appropriation of any right, title, interest or goodwill, including, without
limitation, any intellectual property right, patent, trademark, trade name,
service xxxx, brand xxxx, brand name, computer program, database, industrial
design, copyright or any pending application therefor of any other Person.
Section 3.15 of the Disclosure Schedule sets forth a complete list and
description of all Intellectual Property used by the Corporation in the conduct
of the Business. All of such Intellectual Property is owned or licensed by the
Corporation as described in Schedule 3.15 of the Disclosure Schedule.
SECTION 3.16. Assets. Except as disclosed in Section 3.16 of
the Disclosure Schedule, the Corporation has good title, free and clear of all
Encumbrances, to all of the assets, including, without limitation, any and all
property, whether real or personal, used in the conduct of the Business or
located at any of the offices of the Corporation; since August 31, 1998, the
Corporation has not disposed of or entered into any agreement to dispose of any
assets other than in the ordinary course of business or assets the actual or
proposed disposition of which is disclosed in Section 3.16 of the Disclosure
Schedule. To Seller's knowledge, the book value of the assets of the Corporation
(other than Section 197 intangibles and inventory sold within 30 days after the
Closing) approximates the fair value of such assets.
SECTION 3.17. Employee Benefit Matters. (a) Section 3.17(a) of
the Disclosure Schedule sets forth a complete and correct list of all "employee
benefit plans", as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and any other pension plans or
employee benefit arrangements or payroll practices (including, without
limitation, severance pay, vacation pay, company awards, salary continuation for
disability, sick leave, deferred compensation, bonus or other incentive
compensation, stock purchase arrangements or policies) maintained by the
Corporation or to which the Corporation contributes or is obligated to
contribute with respect to employees of the Corporation ("Employee Benefit
Plans"), and identifies which Employee Benefit Plans are (i) subject to Section
4063 and 4064 of ERISA ("Multiple Employer Plans"), (ii) multiemployer plans (as
defined in Section 4001(a) of ERISA) ("Multiemployer Plans"), or (iii) welfare
plans providing continuing benefits after the termination of employment (other
than as required by Section 4980B of the Code and at the former employee's own
expense).
(b) For each of the Employee Benefit Plans, the Corporation
has delivered or made available to Purchaser true and complete copies of (i) the
plan document, (ii) any related trust agreements, insurance contracts and other
funding agreements, (iii) the summary plan descriptions, (iv) the most recent
IRS determination letter, if any, (v) the most recently filed annual report
(Form 5500 Series) and accompanying schedules filed with the Department of Labor
or IRS, (vi) the most recent financial statements, if any,
15
and (vii) the most recent actuarial reports, if any.
(c) Each such Employee Benefit Plan which is intended to be a
"qualified plan" under section 401(a) of the Code ("Qualified Plan"), has
received a favorable determination letter from the IRS. With respect to any
Employee Benefit Plan which has received such a determination letter, nothing
has occurred since the date of such determination letter that would adversely
affect the qualification of the Employee Benefit Plan under section 401(a) of
the Code or the imposition of any liability, penalty or tax under ERISA or the
Code which liability, penalty or tax could have a Material Adverse Effect.
(d) All amendments and actions required to bring each of the
Employee Benefit Plans into conformity in all material respects with all of the
applicable provisions of ERISA and other applicable Laws have been made or taken
except to the extent that such amendments or actions are not required by Law to
be made or taken until a date after the Closing Date and are disclosed on
Section 3.17(d) of the Disclosure Schedule.
(e) The Corporation has performed and complied with all of its
obligations under or with respect to the Employee Benefit Plans, and the
Employee Benefit Plans have operated in accordance with their respective terms.
All Employee Benefit Plans have operated in accordance with the applicable
requirements of ERISA and the Code and other applicable laws, rules and
regulations, and all reports required by any Governmental Authority with respect
to an Employee Benefit Plan have been timely filed.
(f) With respect to each Employee Benefit Plan that is covered
by Title IV of ERISA, the present value of benefit liabilities (within the
meaning of section 4001(a)(16) of ERISA) valued on a termination basis as of the
Closing Date using the actuarial assumptions that would be used by the Pension
Benefit Guaranty Corporation ("PBGC") does not exceed the value of the assets of
such Employee Benefit Plan.
(g) No reportable event (as defined in section 4043(e) of
ERISA), prohibited transaction (as defined in section 406 of ERISA or section
4975 of the Code), accumulated funding deficiency (as defined in section 302 of
ERISA) or plan termination (as defined in Title IV of ERISA or section 411(d) of
the Code) has occurred with respect to any of the Employee Benefit Plans or with
respect to any employee benefit plan (as defined in section 3(3) of ERISA) of an
ERISA Affiliate (the Employee Benefit Plans and the employee benefit plans of
ERISA Affiliates are collectively referred to as the "Group Plans").
(h) Except as set forth in Section 3.17(h) of the Disclosure
Schedule, none of the Group Plans is a multiemployer plan (as defined in section
3(37) of ERISA) and the Corporation does not have any actual or potential
liability with respect to any multiemployer plan or a past or present withdrawal
therefrom.
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(i) Each Employee Benefit Plan which constitutes a welfare
benefit plan within the meaning of section 3(1) of ERISA has complied and
continues to comply with the health care continuation coverage requirements of
section 4980B of the Code and Part 6 of Subtitle B of Title I of ERISA. Other
than the coverage referred to in the immediately preceding sentence, there are
no benefits to be provided to current retirees under any of the Employee Benefit
Plans which constitutes a welfare benefit plan.
(j) No action, suit or proceeding, hearing, or investigation
with respect to the administration or investment of the assets of any Group Plan
is pending or threatened. None of Sellers or the directors or officers of the
Corporation has any knowledge of any basis for any such action, suit,
proceeding, hearing or investigation.
SECTION 3.18. Labor Matters. Except as set forth in Section
3.18 of the Disclosure Schedule, (i) the Corporation is not a party to any
collective bargaining agreement or other labor union contract applicable to
persons employed by the Corporation, and currently there are no organizational
campaigns, petitions or other unionization activities seeking recognition of a
collective bargaining unit which could affect the Corporation; (ii) there are no
controversies, strikes, slowdowns or work stoppages pending or threatened
between the Corporation and any of its employees, and the Corporation has not
experienced any such controversy, strike, slowdown or work stoppage within the
past three years; (iii) the Corporation has not breached or otherwise failed to
comply with the provisions of any collective bargaining agreement or other labor
union contract and there are no grievances outstanding against the Corporation
under any such agreement or contract; (iv) there are no unfair labor practice
complaints pending against the Corporation before the National Labor Relations
Board or any other Governmental Authority or any current union representation
questions involving employees of the Corporation; (v) the Corporation is
currently in compliance with all applicable Laws relating to the employment of
labor, including those related to wages, hours, collective bargaining and the
payment and withholding of Taxes and other sums as required by the appropriate
Governmental Authority and has withheld and paid to the appropriate Governmental
Authority or is holding for payment not yet due to such Governmental Authority
all amounts required to be withheld from its employees and is not liable for any
arrears of wages, Taxes, penalties or other sums for failure to comply with any
of the foregoing; (vi) the Corporation has paid in full to all of its employees
or adequately accrued for in accordance with GAAP all wages, salaries,
commissions, bonuses, benefits and other compensation due to or on behalf of
such employees; (vii) there is no claim with respect to payment of wages, salary
or overtime pay that has been asserted or is now pending or threatened before
any Governmental Authority with respect to any persons currently or formerly
employed by the Corporation; (viii) the Corporation is not a party to, or
otherwise bound by, any consent decree with, or citation by, any Governmental
Authority relating to employees or employment practices; (ix) there is no charge
or proceeding with respect to a violation of any occupational safety or health
standards that has been asserted or is now pending or threatened with respect to
the Corporation; and (x) there is no charge of discrimination in employment or
employment
17
practices, for any reason, including, without limitation, age, gender, race,
religion, sexual harassment or other legally protected category, which has been
asserted or is now pending or threatened before the United States Equal
Employment Opportunity Commission, or any other Governmental Authority in any
jurisdiction in which the Corporation has employed or currently employs any
person.
SECTION 3.19. Taxes. (a) Except as disclosed on Section 3.19
of the Disclosure Schedule, the Corporation has timely filed (taking into
account extensions of time to file) with the appropriate Governmental
Authorities all Tax Returns required to be filed by or with respect to it, its
operations and its assets. As of the time of filing, such Tax Returns correctly
reflected the facts regarding the income, business, assets, operations,
activities, status, and other matters of the Corporation and any other
information required to be shown thereon. In particular, such Tax Returns are
not subject to penalties under Section 6662 of the Code or any predecessor
provision of law or any other provision of the Code. An extension of time within
which to file any Tax Return that has not been filed has not been requested or
granted.
(b) Except as disclosed on Section 3.19(b) of the Disclosure
Schedule, the Corporation has timely paid or reserved for all Taxes that were
reported as being due and payable on Tax Returns filed with respect to all prior
taxable periods.
(c) Except as disclosed on Section 3.19(c) of the Disclosure
Schedule, the Corporation has complied with all applicable Laws relating to the
payment and withholding of Taxes.
(d) The Corporation is not a party to, bound by or subject to
any obligation under any tax sharing or similar agreement.
(e) The Corporation has not filed a consent pursuant to
Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply
to any disposition of a subsection (f) asset (as such term is defined in Section
341(f)(4) of the Code) owned by the Corporation.
(f) The Corporation (i) has not agreed to or is not required
to make any adjustment pursuant to Section 481(a) of the Code by reason of a
change in accounting method initiated by the Corporation, or (ii) except as
disclosed on Section 3.19(f) of the Disclosure Schedule, does not have any
knowledge that the IRS has proposed any such adjustment or change in accounting
method.
(g) There is no contract, agreement, plan or arrangement
covering any Person that, individually or collectively, could give rise to the
payment of any amount that would not be deductible by the Corporation by reason
of Section 280G of the Code.
(h) The Corporation is an S Corporation and has made an
election under
18
Section 1362(a)(1) of the Code which is currently valid and which has been valid
at all times since December 1, 1988. As of the date hereof, none of Sellers or
the Corporation has taken any action that would cause the Corporation to forfeit
or terminate its status as an S Corporation.
(i) As of the date hereof, the Corporation has not requested,
executed or filed with the IRS or any other Governmental Body any agreement or
other document extending or having the effect of extending the period for
assessment or collection of any Taxes for which the Corporation could be liable.
(j) No issues have been communicated to the Corporation (and
are currently pending) by any Governmental Body in connection with any of the
Tax Returns filed by the Corporation, and, to the knowledge of Sellers, neither
the Corporation, nor any director, officer or employee of the Corporation
responsible for Tax matters, expects any Governmental Body to assess any
additional Taxes against the Corporation for any period for which such Tax
Returns have been filed.
(k) There are no liens for Taxes (other than for current Taxes
not yet due and payable) on the assets of the Corporation.
(l) The Corporation is not a party to any joint venture,
partnership, or other arrangement or contract that could be treated as a
partnership for federal income tax purposes.
SECTION 3.20. Insurance. To the knowledge of Sellers, all
material assets, properties and risks of the Corporation are, and for the past
five years have been, covered by valid and currently effective insurance
policies or binders of insurance (including, without limitation, general
liability insurance including appropriate product liability coverage, property
insurance and workers compensation insurance) issued in favor of the Corporation
in each case with responsible insurance companies, in such types and amounts and
covering such risks as are consistent with customary practices and standards of
companies engaged in businesses and operations similar to the Business. Section
3.20 of the Disclosure Schedule sets forth the following information with
respect to each insurance policy (including policies providing property,
casualty, liability, workers' compensation, and bond and surety arrangements)
under which the Corporation has been an insured, a named insured or otherwise
the principal beneficiary of coverage at any time within the past three years:
(i) the name, address and telephone number of the agent or broker; (ii) the name
of the insurer and the names of the principal insured and each named insured;
(iii) the policy number and the period of coverage; (iv) the type, scope
(including an indication of whether the coverage was on a claims made,
occurrence or other basis) and amount (including a description of how
deductibles, retention and aggregates are calculated and operate) of coverage;
and (v) the premium charged for the policy, including, without limitation, a
description of any retroactive premium adjustments or other loss-sharing
arrangements. The Corporation has heretofore furnished to Purchaser
19
a complete and correct copy as of the date hereof of the policies listed on
Section 3.20 of the Disclosure Schedule. All current policies are in full force
and effect and all premiums due thereon have been paid to the date hereof. The
Corporation has complied in all material respects with the provisions of all
such policies (including the timely notification of any occurrence as necessary
to assert or preserve the right to assert a claim thereunder). The Corporation
has not received a notice of cancellation of any of the policies listed in
Section 3.20 of the Disclosure Schedule.
SECTION 3.21. Employees. Section 3.21 of the Disclosure
Schedule lists the name, place of employment, the current annual salary rates,
bonuses, deferred or contingent compensation, pension, accrued vacation and
other like benefits paid or payable (in cash or otherwise) since January 1,
1998, the date of employment and a description of position and job function of
each current salaried employee, officer, director, consultant or agent of the
Corporation. Since January 1, 1998, there have been no increases in the
compensation or benefits of any of the persons listed in Section 3.21 of the
Disclosure Schedule except as disclosed in Section 3.21 of the Disclosure
Schedule. The Corporation is not party to any written or oral employment
agreement, severance agreement or similar agreement with any person other than
as set forth in Section 3.21 of the Disclosure Schedule.
SECTION 3.22. (a) Full Disclosure. Sellers are not aware of
any facts pertaining to the Corporation or the Business which could have a
Material Adverse Effect on the Corporation or the Business or which are likely
in the future to affect adversely the Corporation or the Business and which have
not been disclosed in this Agreement, the Disclosure Schedule or the Financial
Statements.
(b) None of the representations or warranties of Sellers in
this Agreement and no certificate furnished or to be furnished by Sellers to
Purchaser pursuant to this Agreement or in connection with the transactions
contemplated hereby contains or will contain any untrue statement of a material
fact, or omits or will omit to state a material fact necessary to make the
statements contained herein or therein not misleading.
SECTION 3.23. Inventory. Section 3.23 of the Disclosure
Schedule contains a true and complete schedule of the inventory of the
Corporation at November 30, 1998. All items of inventory reflected in Section
3.23 of the Disclosure Schedule or acquired after November 30, 1998 and on or
before the Closing Date consist, or will consist, of items of a quality and
quantity usable or salable in the ordinary course of business, except for
reserves of $100,000 for obsolete or slow moving inventory. Without limitation
of the generality of the foregoing, all inventory shown on the Financial
Statements is carried at the lower of cost or market and is usable by the
Corporation or saleable in the ordinary course of business for the amount
carried on the books of the Corporation plus a customary profit margin.
SECTION 3.24. Brokers, Finders, etc. All negotiations relating
to this Agreement and the transactions contemplated hereby have been carried on
without the
20
participation of any Person acting on behalf of either Seller or the Corporation
in such manner as to give rise to any valid claim against the Corporation or
Purchaser for any brokerage or finder's fee, commission or similar compensation.
SECTION 3.25. Year 2000 Compliance The Corporation is Year
2000 Compliant (as defined in Article I).
SECTION 3.26. Customers. Section 3.26 of the Disclosure
Schedule lists the names and addresses of the ten most significant customers (by
revenue) of the Corporation for the 12 month period ended August 31, 1998 and
the amount for which each such customer was invoiced during such period. Except
as disclosed in Section 3.26 of the Disclosure Schedule, none of the Corporation
or Sellers has received any notice (written, oral or otherwise) that any
significant customer of the Corporation has ceased, or will cease, to use the
products, equipment, goods or services of the Corporation, or has substantially
reduced, or will substantially reduce, the use of such products, equipment,
goods or services at any time.
SECTION 3.27. Suppliers. Listed in Section 3.27 of the
Disclosure Schedule are the names and addresses of all the suppliers from which
the Corporation ordered services, raw materials, supplies, merchandise and other
goods with an aggregate purchase price of $100,000 or more during the
twelve-month period ended August 31, 1998 and the amount for which each such
supplier invoiced the Corporation during such period. Except as disclosed in
Section 3.27 of the Disclosure Schedule, none of the Corporation or Sellers has
received any notice (written, oral or otherwise) that any such supplier will not
sell services, raw materials, supplies, merchandise and other goods to the
Corporation at any time before or after the Closing Date, on terms and
conditions substantially similar to those used in its current sales to the
Corporation, subject only to general and customary price increases.
SECTION 3.28. Key Employees. Section 3.28 of the Disclosure
Schedule lists the name, place of employment, the current annual salary rates,
bonuses, deferred or contingent compensation, pension, accrued vacation, "golden
parachute" and other like benefits paid or payable (in cash or otherwise) in
1996, 1997 and 1998, the date of employment and a description of position and
job function of each current salaried employee, officer, director, consultant or
agent of the Corporation whose annual compensation exceeded in 1997 (or, in
1998, is expected to exceed) $100,000.
SECTION 3.29. Conduct of Business. Except as disclosed in
Section 3.29 of the Disclosure Schedule, since August 31, 1998, the Corporation
has complied with all of the provisions of Section 5.01 as if such provisions
(excluding the proviso thereto) had become effective on September 1, 1998 and
had been in effect with respect to the period from September 1, 1998 until the
date hereof.
SECTION 3.30. Conduct of Business of AJS. Section 3.31 of the
Disclosure
21
Schedule contains a complete and correct statement of income and expenditures
for the period commencing January 1, 1998 and ending November 30, 1998, which
present fairly the cash position and net cash results of operation of AJS as of
the date and for the period indicated.
SECTION 3.31. Contribution of AJS. Except as disclosed in
Section 3.31 of the Disclosure Schedule, all of the income earned by AJS
subsequent to January 1, 1998 and prior to the Closing has been contributed to
the Corporation.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PURCHASER
As an inducement to Sellers to enter into this Agreement,
Purchaser hereby represents and warrants to Sellers as follows:
SECTION 4.01. Organization and Authority of Purchaser.
Purchaser is a corporation duly organized, validly existing and in good standing
under the laws of the State of California and has all necessary corporate power
and authority to enter into this Agreement, to carry out its obligations
hereunder and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by Purchaser, the performance by Purchaser of its
obligations hereunder and the consummation by Purchaser of the transactions
contemplated hereby have been duly authorized by all requisite action on the
part of Purchaser. This Agreement has been duly executed and delivered by
Purchaser, and (assuming due authorization, execution and delivery by each
Seller) this Agreement constitutes a legal, valid and binding obligation of
Purchaser enforceable against Purchaser in accordance with its terms.
SECTION 4.02. No Conflict. Except as may result from any facts
or circumstances relating solely to either Seller, the execution, delivery and
performance of this Agreement by Purchaser does not and will not (i) violate,
conflict with or result in the breach of any provision of the Certificate of
Incorporation or By-laws of Purchaser, (ii) conflict with or violate any Law or
Governmental Order applicable to Purchaser or (iii) conflict with, or result in
any breach of, constitute a default (or event which with the giving of notice or
lapse or time, or both, would become a default) under, or require any consent
under, any note, bond, mortgage or indenture, contract, agreement, lease,
sublease, license, permit, franchise or other instrument or arrangement to which
Purchaser is a party or by which any of its assets or properties are bound or
affected, except to the extent that any such breach or default or the failure to
procure such consent would not have a material adverse effect on the ability of
Purchaser to consummate the transactions contemplated hereby.
22
SECTION 4.03. Governmental Consents and Approvals. The
execution, delivery and performance of this Agreement by Purchaser does not and
will not require any consent, approval, authorization or other order of, action
by, filing with, or notification to any Governmental Authority, except for the
filing of a Notification and Report Form by Purchaser under the HSR Act.
SECTION 4.04. Brokers, Finders, etc. All negotiations relating
to this Agreement and the transactions contemplated hereby have been carried on
without the participation of any Person acting on behalf of Purchaser in such
manner as to give rise to any valid claim against the Corporation or Purchaser
for any brokerage or finder's fee, commission or similar compensation.
SECTION 4.05. Solvency of Purchaser. Purchaser does not intend
to, nor does it believe it will, incur debts beyond its ability to pay such
debts as they mature. The present fair saleable value of the assets of Purchaser
on a consolidated basis exceeds the amount that will be required to be paid on
or in respect of the existing debts and other liabilities of Purchaser as they
become absolute and matured.
ARTICLE V
COVENANTS
SECTION 5.01. Conduct of Business Prior to the Closing. From
the date hereof until the Closing Date, except with the prior written consent of
Purchaser, Sellers will cause the Corporation to:
(a) carry on its business in, and only in,
the ordinary course in the same manner as heretofore conducted
and, to the extent consistent with such business, use all
reasonable efforts to preserve intact its present business
organization, keep available the services of its present
officers and employees, and preserve its goodwill and its
relationships with customers, suppliers and others having
business dealings with it;
(b) maintain all of its structures,
equipment and other tangible personal property in good repair,
order and condition, except for depletion, depreciation,
ordinary wear and tear and damage by unavoidable casualty;
(c) keep in full force and effect insurance
comparable in amount and scope of coverage to the insurance
now carried by it;
(d) perform in all respects all of its
obligations under agreements, contracts and instruments
relating to or affecting its properties, assets and business;
23
(e) continue to collect accounts receivable
and pay accounts payable utilizing its past business practice
and without discounting or accelerating payment of such
accounts except in the ordinary course of business consistent
with past practice;
(f) maintain its books of account and
records in the usual, regular and ordinary manner consistent
with past practice and not make any change to its accounting
(including tax accounting) methods, principles or practices,
except as may be required by GAAP or by applicable tax laws;
(g) comply in all material respects with all
statutes, laws, ordinances, rules and regulations applicable
to it and to the conduct of its business;
(h) not amend its Articles of Incorporation
or By-Laws;
(i) unless provided for in this Agreement or
disclosed in the Disclosure Schedule, not increase the annual
level of compensation of any of its employees, increase the
annual level of compensation payable or to become payable by
it to any of its executive officers or directors, or grant any
unusual or extraordinary bonus, benefit or other direct or
indirect compensation to any employee, officer, director or
consultant;
(j) unless provided for in this Agreement or
disclosed in the Disclosure Schedule, not enter into, assume
or amend in any respect any employment agreement or any
agreement, contract or commitment of the character referred to
in clauses (i) through (xiv) of Section 3.14;
(k) not merge or consolidate with, or agree
to merge or consolidate with, or purchase substantially all
the assets of, or otherwise acquire any business or any
corporation, partnership, limited liability company,
association or other business organization or division
thereof;
(l) unless provided for in this Agreement or
disclosed in the Disclosure Schedule, not acquire any
properties or assets or sell, assign, transfer, convey, lease
or otherwise dispose of any of its properties or assets,
except in the ordinary course of business consistent with past
practice;
(m) not purchase for cash and cancel any
options outstanding under stock option plans of the
Corporation or otherwise amend such plans;
(n) promptly notify Purchaser in writing of
any materially adverse change in the financial condition,
operations, prospects or business of the Corporation;
(o) not declare or pay dividends (cash or
otherwise) or make any distribution on, or directly or
indirectly redeem, purchase or otherwise acquire, any
24
of its outstanding capital stock;
(p) not effect any recapitalization or any
split or other reclassification of shares;
(q) not authorize the creation or issuance
of or issue, sell or dispose of, or create any obligation to
issue, sell or dispose of, any of its capital stock or any
securities or obligations convertible into or exchangeable
for, any of its capital stock (other than pursuant to stock
options or warrants heretofore outstanding);
(r) not issue any press releases unless
agreed to in writing by Sellers and Purchaser;
(s) not create, incur, assume, guarantee or
otherwise become directly or indirectly liable with respect to
any Indebtedness, other than Indebtedness incurred in the
ordinary course of business consistent with past practice
under agreements existing on the date hereof and identified in
writing to Purchaser;
(t) not subject any of its properties or
assets (whether tangible or intangible) to any Encumbrance,
other than in the ordinary course of business and except as
set forth in this Agreement;
(u) not enter into any agreement with any
Affiliates of either Seller without the prior written consent
of Purchaser;
(v) unless provided for in this Agreement or
disclosed in the Disclosure Schedule, not enter into any
agreement or understanding to do or engage in any of the
foregoing; and
(w) not borrow or become liable for any
obligations under the Line of Credit;
provided, however, that the Corporation may (i) pay the Employee Bonuses, (ii)
make a distribution to Sellers prior to the Closing in an amount equal to the
reasonable legal and accounting fees incurred by Sellers (not to exceed
$110,000) in connection with the transactions contemplated by this Agreement,
and (iii) make a distribution to Sellers prior to the Closing in an amount equal
to the Seller Tax Distribution.
SECTION 5.02. Access to Information. From the date hereof to
the Closing Date, Sellers shall cause the Corporation to give to Purchaser and
its representatives reasonable access during normal business hours to the
personnel, properties, books, records, Tax Returns, contracts and commitments of
the Corporation and will furnish to Purchaser and its representatives all such
information and documents relating to the properties and business of the
Corporation as Purchaser may reasonably request. In order that Purchaser
25
may have full opportunity to make such physical, business, accounting and legal
review, examination or investigation as it may reasonably request of the affairs
of the Corporation, Sellers shall cause the Corporation to cause its officers,
employees, consultants, agents, accountants, attorneys and other
representatives, and shall use their best efforts to cause the Corporation's
lenders, clients, customers and other Persons reasonably requested by Purchaser,
to cooperate fully with such representatives in connection with such review and
examination.
SECTION 5.03. (a) Confidentiality. Each Seller agrees, and
shall cause his/her agents, representatives and Affiliates, to (i) treat and
hold as confidential (and not disclose or provide access to any Person to) all
information relating to trade secrets, processes, patent and trademark
applications, product development, price, customer and supplier lists, pricing
and marketing plans, policies and strategies, details of client and consultant
contracts, operations methods, product development techniques, business
acquisition plans, new personnel acquisition plans and all other confidential
information with respect to the Corporation, (ii) in the event that either
Seller or any such agent, representative or Affiliate becomes legally compelled
to disclose any such information, provide Purchaser with prompt written notice
of such requirement so that Purchaser or the Corporation may seek a protective
order or other remedy or waive compliance with this Section 5.03, and (iii) in
the event that such protective order or other remedy is not obtained, or
Purchaser waives compliance with this Section 5.03, furnish only that portion of
such confidential information which is legally required to be provided;
provided, however, that this sentence shall not apply to any information that,
at the time of disclosure, is available publicly and was not disclosed in breach
of this Agreement by any of Sellers or their respective agents or
representatives.
(b) The Letter Agreement regarding confidential information
between Seller and Global, dated August 21, 1998, shall remain in full force and
effect in accordance with its terms; provided, however, that any reference to
Global in such letter agreement shall include all of Global, Purchaser and their
respective Affiliates.
SECTION 5.04. Regulatory and Other Authorizations; Notices and
Consents. (a) Sellers shall use their best efforts to obtain (or cause the
Corporation to obtain) all authorizations, consents, orders and approvals of all
Governmental Authorities and officials that may be or become necessary for their
execution and delivery of, and the performance of their obligations pursuant to,
this Agreement and will cooperate fully with Purchaser in promptly seeking to
obtain all such authorizations, consents, orders and approvals.
(b) Sellers shall or shall cause the Corporation to give
promptly such notices to third parties and use their best efforts to obtain all
such third party consents and estoppel certificates as Purchaser may in its sole
and absolute discretion deem necessary or desirable in connection with the
transactions contemplated hereby.
26
SECTION 5.05. Notice of Developments. Prior to the Closing,
Sellers shall promptly notify Purchaser in writing of (i) all events,
circumstances, facts and occurrences arising subsequent to the date of this
Agreement which could result in any breach of a representation or warranty or
covenant of either Seller or which could have the effect of making any
representation or warranty of either Seller untrue or incorrect in any respect
and (ii) all other material developments affecting the assets, Liabilities,
business, financial condition, operations, results of operations, customer or
supplier relations, employee relations, projections or prospects of the
Corporation or the Business.
SECTION 5.06. No Solicitation or Negotiation. Each Seller
agrees that between the date of this Agreement and the earlier of (i) the
Closing or (ii) the termination of this Agreement, none of Sellers, the
Corporation or any of their respective Affiliates, officers, directors,
representatives or agents will (A) solicit, initiate, consider, encourage or
accept any other proposals or offers from any Person (1) relating to any
acquisition or purchase of all or any portion of the capital stock or assets of
the Corporation, (2) to enter into any business combination with the Corporation
or (3) to enter into any other extraordinary business transaction involving or
otherwise relating to the Corporation or its assets, or (B) participate in any
discussions, conversations, negotiations or other communications regarding, or
furnish to any other Person any information with respect to, or otherwise
cooperate in any way, assist or participate in, facilitate or encourage any
effort or attempt by any other Person to seek to do any of the foregoing. Each
Seller immediately shall cease and cause to be terminated all existing
discussions, conversations, negotiations and other communications with any
Persons conducted heretofore with respect to any of the foregoing. Sellers shall
notify Purchaser promptly if any such proposal or offer, or any inquiry or other
contact with any Person with respect thereto, is made and shall, in any such
notice to Purchaser, indicate in reasonable detail the identity of the Person
making such proposal, offer, inquiry or contact and the terms and conditions of
such proposal, offer, inquiry or other contact. Sellers agree not to, and to
cause the Corporation not to, without the prior written consent of Purchaser,
release any Person from, or waive any provision of, any confidentiality or
standstill agreement to which either Seller or the Corporation is a party.
SECTION 5.07. Certain Actions. Sellers agree to take any
action (including the omission of any action) reasonably necessary or
appropriate to cause each of the representations and warranties of each Seller
contained herein to be true and correct as of the Closing Date as if such
representations and warranties were made on and as of the Closing Date.
SECTION 5.08. Best Efforts. Each Seller agrees to use his/her
best efforts to cause the timely satisfaction of the conditions to Purchaser's
obligations as set forth in Section 6.02.
SECTION 5.09. Certain Tax Matters; Section 338(h)(10)
Election.(a) Purchaser shall prepare and file all Tax Returns with respect to
the activities of the Corporation for
27
all tax years and periods ending after the Closing Date. Sellers shall cooperate
with Purchaser in the preparation of all such Tax Returns. Sellers shall prepare
and file all Tax Returns with respect to the activities of the Corporation and
AJS for all tax years and periods ending on or before the Closing Date and shall
provide copies of all such returns to Purchaser for its review and approval a
reasonable time prior to the dates when such returns are required to be filed.
Such returns shall reflect the transactions contemplated by this Agreement in a
manner consistent with the provisions hereof.
(b) (i) Sellers and Purchaser shall each
make elections under Section 338(h)(10) of the Code with
respect to the Corporation. Purchaser shall prepare IRS Form
8023: Corporate Qualified Stock Purchases, including any
required amendments or supplements thereto ("Form 8023") with
respect to each election in accordance with this Section
5.09(b). Purchaser shall deliver such Form 8023 to Sellers
within 45 days after the Closing Date so that Sellers may
review and approve such Form 8023 (but such approval shall not
be unreasonably withheld, conditioned or delayed). After
Sellers approve such Form 8023, Purchaser and each Seller
shall execute the approved Form 8023 and file the executed
Form 8023 with their respective federal income tax returns.
For all tax purposes, Purchaser and Sellers shall report the
transactions contemplated hereby in a manner consistent with
the terms of this Agreement, and none of them shall take any
position inconsistent therewith in any tax return, refund
claim, litigation, or otherwise.
(ii) The Purchase Price with respect to the Corporation shall
be allocated among the assets of the Corporation, in amounts
equal to their values, as follows: (A) inventory on hand at
the Closing Date which is delivered to customers within 30
days following the Closing Date shall be valued at its
third-party sales price minus a handling cost of five percent
and any commissions payable with respect to the sale; (B)
inventory on hand at the Closing Date which is not delivered
to customers within 30 days following the Closing Date shall
be valued at the lower of book value or the price at which it
is held for sale; (C) all other assets of the Corporation as
of the Closing Date other than Section 197 intangibles, as
defined in Section 197 of the Code, shall be valued at book
value; and (D) the Section 197 intangibles of the Corporation
as of the Closing Date shall be valued at an amount equal to
the balance of the Purchase Price.
(c) All accrued but unpaid Taxes imposed on the Corporation up
to and including the Closing Date (including, (i) any interest or penalties
associated with any Tax obligations of the Corporation at or prior to the
Closing Date, and (ii) any California income or franchise taxes imposed on the
Corporation, including as a result of Purchaser's purchase of the Shares and the
election under Section 338(h)(10) of the Code made pursuant to Section 5.09(b))
(the "Corporate Tax") shall be the obligation of Sellers. Sellers shall deliver
to Purchaser at least five days prior to the Closing Date an estimate (the
"Corporate Tax Estimate") reasonably satisfactory to Purchaser of the amount of
the Corporate Tax and, to the extent that the Corporate Tax has not been paid as
of the
28
Closing Date, the Corporate Tax Estimate shall be deducted from the cash payment
payable by Purchaser to Sellers on the Closing Date and applied by the
Corporation to the payment of the Corporate Tax. If the actual amount due with
respect to the Corporate Tax is greater than the Corporate Tax Estimate, then
Purchaser, upon notice to Sellers, shall be entitled to recover such excess from
Sellers (who shall pay the amount thereof on demand). If the actual amount due
with respect to the Corporate Tax is less than the Corporate Tax Estimate, then,
promptly following determination of the difference, Purchaser shall refund such
difference to Sellers.
(d) Sellers shall deliver to Purchaser at least five days
prior to the Closing Date an estimate (the "Seller Tax Estimate") reasonably
satisfactory to Purchaser of the amount equal to the amount of Sellers' federal
and California income tax obligations (calculated at the assumed aggregate rate
of 45.58% (the "Assumed Rate") regardless of the actual rate) with respect to
the income of the Corporation and AJS for the tax period from January 1, 1998 to
and including the time on the Closing Date immediately prior to completion of
the Closing, but not including such tax obligations resulting from the election
under Section 338(h)(10) of the Code made pursuant to Section 5.09(b) ("Sellers'
5.09(b) Tax"), any interest or penalties imposed on Sellers relating to Taxes,
or the amount of any distribution by the Corporation to Sellers after January 1,
1998 and on or prior to the day preceding the Closing Date (such amount, the
"Seller Tax"). After approval of the Seller Tax Estimate by Purchaser and
immediately prior to the Closing, Sellers shall cause the Corporation to make a
distribution to Sellers in an amount equal to the Seller Tax Estimate (such
amount, the "Seller Tax Distribution"). If the Seller Tax (calculated at the
Assumed Rate on the amount of the reported taxable income of the Corporation and
AJS for such period, as it may be adjusted) is greater than the Seller Tax
Distribution, then Sellers, upon notice to Purchaser, shall be entitled to
recover such excess from Purchaser (who shall pay the amount thereof at least
five days prior to the date the greater amount of Seller Tax is required to be
paid). If the Seller Tax (as so calculated) is increased subsequent to the
filing of the Corporation's Tax Returns for such period as a result of
adjustments in the amount of the Corporation's reported taxable income made by
the IRS or any other Governmental Authority to Sellers' Tax Returns, the amount
Sellers shall be entitled to recover from Purchaser pursuant to the preceding
sentence shall be reduced by the amount equal to the corresponding reduction, if
any, in Sellers' 5.09(b) Tax (calculated at the assumed rate of 27.44%
regardless of the actual rate). If the Seller Tax (calculated at the Assumed
Rate on the amount of the reported taxable income of the Corporation and AJS for
such period, as it may be adjusted) is less than the Seller Tax Distribution,
then, promptly following determination of the difference, Sellers shall refund
such difference to Purchaser.
SECTION 5.10. S Election. Sellers agree not to, and to cause
the Corporation not to, engage in any conduct or activity, or take any action,
that would cause the Corporation to forfeit or terminate its status as an S
Corporation.
SECTION 5.11. Further Action. Each of the parties shall use
all reasonable
29
efforts to take, or cause to be taken, all appropriate action, do or cause to be
done all things necessary, proper or advisable under applicable Law, and execute
and deliver such documents and other papers, as may be required or appropriate
to carry out the provisions of this Agreement and consummate and make effective
the transactions contemplated hereby, including, without limitation, the
termination at or prior to the Closing Date of all Employee Benefit Plans of the
Corporation.
SECTION 5.12. Continuing Capital Expenditures. Sellers agree
to cause the Corporation to timely perform and pay for the equipment acquisition
and installation program previously initiated by the Corporation as described on
Exhibit B, in accordance with the schedule of performance set forth in Exhibit
B.
SECTION 5.13. Non-Competition. (a) For the period of five
years commencing on the Closing Date (the "Relevant Period"), each of Sellers
agrees that he/she shall not directly or indirectly, alone or as an officer,
agent, employee, director, member, manager, stockholder, partner of or investor
in any Person other than the Corporation, Purchaser or any of its Affiliates
(except as to the acquisition of not more than two percent of the outstanding
stock of any corporation the securities of which are traded on a regular basis
on a recognized securities exchange or in over-the-counter markets) own, manage,
operate or Control, or participate in the ownership, management, operation or
Control of, or work for or permit the use of their name by, any business or
activity which is at the time competitive with the business of the Corporation,
Purchaser or any of its Affiliates as carried on as of the date hereof. In
addition to, and not in limitation of, the foregoing, throughout the Relevant
Period, neither of Sellers, alone, or as a member, manager, officer, employee or
agent of any partnership or limited liability company, or as an officer, agent,
employee or director of any corporation (other than the Corporation, Purchaser
or its Affiliates) shall, for himself/herself or for others, solicit or accept
business of the nature of that in which any of the Corporation, Purchaser or its
Affiliates is then engaged from any Person which shall have been a customer,
client or supplier of the Corporation, Purchaser or its Affiliates at any time
within the two years preceding any such solicitation. While the restrictions set
forth above are considered by the parties to be reasonable in all the
circumstances, it is recognized that restrictions of the nature in question may
fail for technical reasons unforeseen, and accordingly if any of such
restrictions shall be adjudged to be void as going beyond what is reasonable in
all the circumstances for the protection of the interests of Purchaser or any of
its Affiliates but would be valid if part of the wording thereof were deleted or
the periods (if any) thereof reduced or the range of activities or areas dealt
with thereby reduced in scope, the said restriction shall apply with such
modifications as may be necessary to make it valid and effective.
(b) Other than pursuant to their respective duties, if any, as
employees of the Corporation, Sellers shall not, at any time during the Relevant
Period, without the prior written consent of Purchaser, directly or indirectly
offer employment to, or retain as a consultant, or offer consulting services to,
or be employed by, or engage in
30
consulting services with, Persons (other than secretarial and clerical
personnel) who were employed (as a payroll employee of such entity) by the
Corporation, Purchaser or its Affiliates within the 12 months preceding such
time.
(c) Notwithstanding the foregoing, nothing in this Section
5.13 shall restrict Xxxxxx X. Xxxxxxx from owning up to 49% of the outstanding
capital stock of Yelm Processing, Inc. or acting as a director and officer of
Yelm Processing, Inc., provided, that (i) Yelm Processing, Inc. continues to
generally engage only in the business in which it is presently engaged (as
described in Section 5.13(c) of the Disclosure Schedule) and other directly
related business activities which do not compete with the business of Purchaser
and its Affiliates as currently conducted or as it may in the future be
conducted, and (ii) Xx. Xxxxxxx devotes substantially all of his business time
and energy to the performance of his duties under the Seller Employment
Agreement during the Term thereof and does not during the Relevant Period
actively engage in the conduct of business (including by making business
contacts or referrals or selling efforts) by Yelm Processing, Inc; provided,
however, that Purchaser hereby acknowledges that Xxxxxx X. Xxxxxxx may
occasionally make business contacts, referrals and selling efforts on behalf of
Yelm Processing, Inc.
SECTION 5.14. Employee Bonuses. Notwithstanding anything
contained herein to the contrary, prior to the Closing, the Corporation may pay
up to $6,000,000 (less any required withholding of Taxes or other obligations)
as compensation accrued on the books of the Corporation in favor of certain
employees, consultants and/or advisors of the Corporation for services rendered
by them to the Corporation in 1998 as set forth in Exhibit H (the "Employee
Bonuses").
SECTION 5.15. Purchaser Loan. If and to the extent that the
Corporation does not have sufficient cash on hand to make the Seller Tax
Distribution and/or up to $6,000,000 of additional payments and distributions
allowed to be made by the Corporation hereunder prior to the Closing, Purchaser
shall, upon request by Sellers, make a loan (the "Purchaser Loan") to the
Corporation prior to the Closing in an amount sufficient to enable the
Corporation to make such payments and distributions. The Purchaser Loan shall
(i) be personally guaranteed by Sellers, (ii) mature on the earlier of the day
after the Closing Date and January 2, 1999, (iii) bear interest at the interest
rate chargeable on a loan in equal amount made to the Corporation under the Line
of Credit, and (iv) have such other terms as shall be mutually agreed by the
Corporation and Purchaser, acting in good faith and in a commercially reasonable
manner. In the event that a separate guaranty is not executed by Sellers with
respect to the Purchaser Loan, the guaranty provided for in clause (i) above
shall expire and have no force or effect upon the consummation of the Closing.
SECTION 5.16. Assets of AJS. Prior to the Closing, Sellers
shall contribute to the Corporation, as a contribution to capital of the
Corporation, all of the assets of AJS, except that $60,528.00 of cash of AJS (i)
shall be retained by Sellers and (ii) shall be
31
deducted from the cash payment payable by Purchaser to Sellers on the Closing
Date. Such contribution shall be deemed to be effective as of September 1, 1998
for the purposes of the covenants, representations and warranties of Sellers
contained in Article III and Article V.
ARTICLE VI
CONDITIONS OF CLOSING
SECTION 6.01. Conditions to Obligations of Sellers. The
obligations of Sellers to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment, at or prior to the Closing, of
each of the following conditions:
(a) The representations and warranties of
Purchaser contained herein shall have been true and correct
when made and shall be true and correct in all material
respects as of the Closing, with the same force and effect as
if made as of the Closing Date, other than such
representations and warranties as are made as of another date,
the covenants and agreements contained herein to be complied
with by Purchaser on or before the Closing Date shall have
been complied with in all material respects, and Sellers shall
have received a certificate from Purchaser to such effect
signed by a duly authorized officer thereof.
(b) The Corporation shall have (i) entered
into an employment agreement with Xxxxxx X. Xxxxxxx
substantially in the form of Exhibit C (the "Seller Employment
Agreement"), and (ii) entered into an employment agreement
with Xxxxx Xxxxxxx substantially in the form of Exhibit D.
(c) No Action shall have been commenced by
or before any Governmental Authority against Sellers or either
of them or Purchaser, seeking to restrain or materially and
adversely alter the transactions contemplated by this
Agreement which, in the reasonable, good faith determination
of Sellers, is likely to render it impossible or unlawful to
consummate such transactions; provided, however, that the
provisions of this Section 6.01(c) shall not apply to any such
Action that either Seller has directly or indirectly solicited
or encouraged.
(d) All notifications required pursuant to
the HSR Act, if any, to carry out the transactions
contemplated by this Agreement shall have been made, and the
applicable waiting period and any extensions thereof shall
have expired or been terminated.
(e) Sellers shall have received a
certificate of the Secretary or Assistant Secretary of
Purchaser certifying the names and signatures of the officers
of Purchaser authorized to sign this Agreement and the other
documents to be delivered hereunder.
32
(f) Sellers shall have received from
Purchaser's counsel a legal opinion, addressed to Sellers and
dated the Closing Date, substantially in the form of Exhibit
E.
(g) Sellers shall have received from
Purchaser a good standing certificate for Purchaser issued by
the Secretary of State of California as of a date not earlier
than five Business Days prior to the Closing Date.
(h) Purchaser shall have executed and
delivered to Sellers the Purchaser Guaranty substantially in
the form of Exhibit A.
SECTION 6.02. Conditions to Obligations of Purchaser. The
obligations of Purchaser to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment, at or prior to the Closing, of
each of the following conditions:
(a) The representations and warranties of
each Seller contained herein shall have been true and correct
when made and shall be true and correct in all material
respects as of the Closing with the same force and effect as
if made as of the Closing Date, other than such
representations and warranties as are made as of another date,
the covenants and agreements contained in this Agreement to be
complied with by each Seller on or before the Closing Date
shall have been complied with in all material respects, and
Purchaser shall have received a certificate of each Seller to
such effect signed by such Seller.
(b) (i) Xxxxxx X. Xxxxxxx shall have
executed and delivered to Purchaser the Seller Employment
Agreement, and (ii) Xxxxx Xxxxxxx shall have executed and
delivered to Purchaser an employment agreement with the
Corporation substantially in the form of Exhibit D.
(c) At the Closing Sellers shall own all
of the Shares free and clear of any Encumbrances.
(d) No Action shall have been commenced or
threatened by or before any Governmental Authority against
Sellers or either of them or Purchaser, seeking to restrain or
materially and adversely alter the transactions contemplated
hereby which Purchaser believes, in its sole and absolute
discretion, is likely to render it impossible or unlawful to
consummate the transactions contemplated hereby or which could
have a Material Adverse Effect or otherwise render
inadvisable, in the sole and absolute discretion of Purchaser
reasonably exercised, the consummation of such transactions;
provided, however, that the provisions of this Section 6.02(d)
shall not apply to any such Action that Purchaser has
solicited or encouraged.
(e) Purchaser shall have received from
Sellers' Counsel a legal opinion, addressed to Purchaser and
dated the Closing Date, substantially in the form of
33
Exhibit F.
(f) Purchaser and Sellers shall have
received, each in form and substance satisfactory to Purchaser
in its sole and absolute discretion reasonably exercised, all
authorizations, consents, orders and approvals of all
Governmental Authorities and officials (including the
expiration of the applicable waiting period under the HSR Act)
and all third party consents and estoppel certificates which
Purchaser in its sole and absolute discretion, reasonably
exercised, deems necessary or desirable for the consummation
of the transactions contemplated hereby.
(g) Purchaser shall have received the
resignations, effective as of the Closing, of all the
directors of the Corporation, except for such persons as shall
have been designated by Purchaser in writing prior to the
Closing.
(h) Purchaser shall have received a copy of
(i) the Articles of Incorporation (or similar organizational
documents), as amended, of the Corporation, certified by the
secretary of state of the jurisdiction in which the
Corporation is incorporated or organized, as of a date not
earlier than five Business Days prior to the Closing Date and
accompanied by a certificate of the Secretary or Assistant
Secretary of the Corporation, dated as of the Closing Date,
stating that no amendments have been made to such Articles of
Incorporation (or similar organizational documents) since such
date, and (ii) the By-Laws (or similar organizational
documents) of the Corporation, certified by the Secretary or
Assistant Secretary of each such entity.
(i) Purchaser shall have received the
original minute book and stock register of the Corporation,
certified by the Corporation's Secretary or Assistant
Secretary as of the Closing Date.
(j) Purchaser shall have received from
Sellers a good standing certificate for the Corporation issued
by the Secretary of State of California and from the secretary
of state in each other jurisdiction in which the properties
owned or leased by the Corporation, or the operation of its
business in such jurisdiction, requires the Corporation to
qualify to do business as a foreign corporation, in each case
as of a date not earlier than five Business Days prior to the
Closing Date.
(k) No events shall have occurred, or be
reasonably likely to occur, which, individually or in the
aggregate, have, or could have, a Material Adverse Effect.
(l) Sellers shall have caused any and all
licenses held by the Corporation to be transferred, amended or
modified so that after giving effect to the transactions
contemplated hereby, the Corporation will be able to conduct
the Business in accordance with all applicable Laws.
(m) A&J, LLC, as landlord, and the
Corporation, as tenant, shall have
34
entered into a lease of the premises currently occupied by the
Corporation (covering approximately 40,000 square feet of
usable space at 2929 and 2931 White Star Avenue, City of
Anaheim, Orange County, California 92806) substantially in the
form of Exhibit G.
ARTICLE VII
INDEMNIFICATION
SECTION 7.01. (a) Indemnification by Sellers. Sellers, jointly
and severally, agree to defend, indemnify and hold harmless Purchaser, any
subsidiary or Affiliate thereof and the respective officers, directors,
shareholders and controlling persons, employees, agents, successors and assigns
of each of such Persons (the "Indemnified Purchaser Group") from and against any
and all liabilities, losses, damages, claims, costs, expenses, judgments,
interest and penalties (including, without limitation, attorneys', accountants'
and outside advisors' fees and disbursements) (collectively, "Losses") incurred
as a result of or arising out of (i) the breach of any representation or
warranty made by Sellers herein, or (ii) the breach of any covenant or agreement
of Sellers contained herein, or the failure of Sellers to comply or cause the
Corporation to comply with any covenant or agreement of Sellers, contained
herein.
(b) Except for inaccuracies in the representations and
warranties contained in Sections 3.01, 3.02, 3.03 and 3.12, Sellers shall not be
required to indemnify the Indemnified Buyer Group with respect to any claim for
indemnification pursuant to Section 7.01(a)(i), unless and until the aggregate
amount of all such claims against Sellers under this Section 7.01 exceeds
$250,000, and only for amounts in excess of $250,000, provided that the
aggregate liability of Sellers to the Indemnified Buyer Group hereunder shall
not exceed the sum of $36,000,000.
SECTION 7.02. (a) Indemnification by Purchaser. Purchaser
agrees to defend, indemnify and hold harmless Sellers, their agents and their
successors and assigns (the "Indemnified Seller Group") from and against any and
all Losses incurred as a result of or arising out of (i) the breach of any
representation or warranty made by Purchaser herein, or (ii) the breach of any
covenant or agreement of Purchaser, or the failure of Purchaser to comply with
any covenant or agreement of Purchaser, contained herein.
(b) Except for inaccuracies in the representations and
warranties contained in Section 4.01, Purchaser shall not be required to
indemnify the Indemnified Seller Group with respect to any claim for
indemnification pursuant to Section 7.02(a)(i), unless and until the aggregate
amount of all such claims against Purchaser under this Section 7.02 exceeds
$250,000, and only for amounts in excess of $250,000, provided that the
aggregate liability of Purchaser to the Indemnified Seller Group hereunder shall
not exceed the sum $36,000,000.
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SECTION 7.03. Notice of Claims. An indemnified party shall
give prompt written notice to the indemnifying party of any claim against the
indemnified party which might give rise to a claim by the indemnified party
against the indemnifying party under the indemnification provisions contained
herein (including claims for less than $250,000 in the aggregate), stating the
nature and basis of the claim and the actual or estimated amount thereof,
provided, however, that failure to give such notice will not effect the
obligation of the indemnifying party to provide indemnification in accordance
with the terms of Section 7.01 or 7.02 unless, and only to the extent that, the
indemnifying party is actually prejudiced thereby. In the event that any action,
suit or proceeding is brought against any indemnified party with respect to
which the indemnifying party may have liability under the indemnification
provisions contained herein, the indemnifying party shall, upon written
acknowledgment by the indemnifying party that such action, suit or proceeding is
an indemnifiable Loss pursuant to Section 7.01 or 7.02, have the right, at the
cost and expense of the indemnifying party, to defend such action in the name
and on behalf of the indemnified party (using counsel satisfactory to the
indemnified party), and, in connection with any such action, the indemnified
party and the indemnifying party shall render to each other such assistance as
may reasonably be required in order to ensure proper and adequate defense of
such action, provided, however, that an indemnified party shall have the right
to retain its own counsel, with fees and expenses paid by the indemnifying
party, if representation of such indemnified party by counsel retained by the
indemnifying party would be inappropriate because of actual or potential
differing interests between such indemnified party and the indemnifying party.
If the indemnifying party shall fail to defend such action, suit or proceeding,
then the indemnified party shall have the right to defend the same without
prejudice to its rights to indemnification under Section 7.01 or 7.02 and, in
connection therewith, the indemnified party and the indemnifying party shall
render to each other such assistance as may reasonably be required in order to
ensure proper and adequate defense of such action. Neither the indemnified party
nor the indemnifying party shall make any settlement of any claim which might
give rise to Liability of the indemnifying party under the indemnification
provisions contained herein without the written consent of each party, which
consent shall not be unreasonably withheld, delayed or conditioned.
SECTION 7.04. Insurance. The Purchaser Indemnified Group or
the Seller Indemnified Group, as the case may be, shall make a claim under any
applicable insurance policy prior to making a claim for indemnity hereunder. The
amount of any indemnity payment required by this Article VII shall be reduced by
any related recovery of insurance proceeds by the Persons entitled to indemnity.
SECTION 7.05. Limitations on Indemnification. Any claim for
indemnification arising under Section 7.01(a)(i) or Section 7.02(a)(i) must be
asserted in writing by the indemnified party and received by the indemnifying
party not later than three years after Closing, except with respect to claims
arising from or relating to fraud by the indemnifying party or any breach under
Section 3.13 or Section 3.19 (as to which the limitations contained in this
Section 7.05 shall not apply). Any claim for indemnification
36
arising under Section 7.01(a)(i) or Section 7.02(a)(i) (except with respect to
claims arising from or relating to fraud by the indemnifying party or any breach
under Section 3.13 or Section 3.19) received after the third anniversary of the
Closing shall be void and of no effect.
ARTICLE VIII
TERMINATION AND WAIVER
SECTION 8.01. Termination. This Agreement may be terminated at
any time prior to the Closing:
(a) by Purchaser upon notice to Sellers if
(i) any material default under or material breach of any
covenant of Sellers hereunder shall have occurred and shall
not have been cured within five days after receipt of such
notice, or (ii) any representation or warranty contained
herein on the part of Sellers shall not have been true and
correct in any material respect at and as of the date made, or
(iii) any of the conditions of Sellers' obligations hereunder
shall not have been satisfied (other than as a result of any
fault of Purchaser or Purchaser's failure to perform
hereunder) on or prior to December 31, 1998; or
(b) by Sellers upon notice to Purchaser if
(i) any material default under or material breach of any
covenant of Purchaser hereunder shall have occurred and shall
not have been cured within five days after receipt of such
notice, or (ii) any representation or warranty contained
herein on the part of Purchaser shall not have been true and
correct in any material respect at and as of the date made, or
(iii) any of the conditions of Sellers' obligations hereunder
shall not have been satisfied (other than as a result of any
fault of Sellers or Sellers' failure to perform hereunder) on
or prior to December 31, 1998; or
(c) by Purchaser upon notice to Sellers if
(i) an event or condition occurs that has resulted in or that
may result in a Material Adverse Effect or (ii) either Seller
or the Corporation makes a general assignment for the benefit
of creditors, or any proceeding shall be instituted by or
against either Seller or the Corporation seeking to adjudicate
any of them a bankrupt or insolvent, or seeking liquidation,
winding up or reorganization, arrangement, adjustment,
protection, relief or composition of their debts under any Law
relating to bankruptcy, insolvency or reorganization; or
(d) by either Purchaser or Sellers upon
notice to the other in the event that any Governmental
Authority shall have issued an order, decree or ruling or
taken any other action restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement
and such order, decree, ruling or other action shall have
become final and nonappealable; or
37
(e) by either Purchaser or Sellers upon
notice to the other party in the event that the Closing shall
not have occurred on or prior to December 31, 1998; or
(f) by written consent of Sellers and
Purchaser.
SECTION 8.02. Effect of Termination. (a) In the event of
termination of this Agreement as provided in Section 8.01, this Agreement shall
forthwith become void and there shall be no liability on the part of any party
hereto except (i) as set forth in Sections 8.02(b) and 9.02 and (ii) that
nothing herein shall relieve either party from liability for any breach of this
Agreement.
(b) Notwithstanding the termination of this Agreement, and
without limitation, if the Closing does not occur because of the termination of
this Agreement due to the failure to satisfy the conditions of Purchaser's
obligation to effect the Closing contained in Xxxxxxxx 0.00 (x), (x), (x), (x),
(x), (x), (x), (x), (x) and (m), then Sellers shall, upon demand, reimburse
Purchaser for the reasonable costs and expenses, including, without limitation,
fees and disbursements of counsel, financial advisors, financing sources and
accountants, incurred by Purchaser in connection with the preparation,
negotiation and performance of this Agreement and the transactions contemplated
hereby.
SECTION 8.03. Waiver. Either party may (i) extend the time for
the performance of any of the obligations or other acts of the other party, (ii)
waive any inaccuracies in the representations and warranties of the other party
contained herein or in any document delivered by the other party pursuant
hereto, (iii) waive compliance with any of the covenants of the other party
contained herein, or (iv) waive compliance with all or any of the conditions of
its obligations contained herein. Any such extension or waiver shall be valid
only if set forth in an instrument in writing signed by the party to be bound
thereby. Any waiver of any term or condition shall not be construed as a waiver
of any subsequent breach or a subsequent waiver of the same term or condition,
or a waiver of any other term or condition. The failure of any party to assert
any of its rights hereunder shall not constitute a waiver of any of such rights.
Upon consummation of the Closing, all conditions set forth in Article VI of the
respective obligations of the parties shall be deemed satisfied or waived, but
such waiver shall not be extended to any breach of representations, warranties
or covenants, whether or not such breach shall be known as of the time of the
Closing.
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ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Survival of Representations and Warranties.
Except for Sections 3.13 and 3.19, the representations and warranties contained
herein shall survive the Closing until the third anniversary of the Closing
Date, regardless of any investigation made by Purchaser or Sellers or on their
behalf. The representations and warranties contained in Sections 3.13 and 3.19
shall survive the Closing until the statute of limitations applicable to matters
referred to therein shall have expired so that no loss or liability could be
occasioned by the inaccuracy of such representation or warranty.
SECTION 9.02. Expenses. (a) Except as otherwise specified in
this Agreement, all costs and expenses, including, without limitation, fees and
disbursements of counsel, financial advisors and accountants, incurred in
connection with the making and performance of this Agreement and the
consummation of the transactions contemplated hereby shall be paid by the party
incurring such costs and expenses, whether or not the Closing shall have
occurred.
(b) Sellers' reasonable costs and expenses (not to exceed
$110,000), including fees and disbursements of counsel, financial advisors and
accountants, incurred in connection with the making and performance of this
Agreement and the consummation of the transactions contemplated hereby shall be
paid by the Corporation prior to or at the Closing.
SECTION 9.03. Notices. All notices, requests, claims, demands
and other communications hereunder shall be in writing and shall be given or
made by delivery in person, by telecopy, or by registered or certified mail
(postage prepaid, return receipt requested) or, with a written receipt, by
courier service or overnight service such as Federal Express (and shall be
deemed to have been duly given or made (i) upon receipt if delivered in person,
by courier or overnight service, (ii) upon transmission if delivered by
telecopy, and (iii) two days after mailing if delivered by registered or
certified mail) to the respective parties at the following addresses (or at such
other address for a party as shall be specified in a notice given in accordance
with this Section 9.03):
(a) if to Sellers:
Xxxxxx X. Xxxxxxx and Xxxxxxxx X. Xxxxxxx
0000 Xxx Xxxxxx Xxxxx
Xxxxx Xxxx, XX 00000
Telecopy: (000) 000-0000
with a copy to:
Xxxx X. Xxxxxxxxx & Associates
39
000 Xxxxx Xxxxx Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Telecopy: (000) 000-0000
Attention: Xxxx X. Xxxxxxxxx
(b) if to Purchaser:
Global Health Sub, Inc.
000 X. Xxxxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Telecopy: (714)
Attention: Xxxxxx X. Xxxxx
with a copy to:
Kronish Xxxx Xxxxxx & Xxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx
SECTION 9.04. Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any Law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner in
order that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
SECTION 9.05. Entire Agreement. This Agreement constitutes the
entire agreement of the parties hereto with respect to the subject matter hereof
and, except as otherwise herein expressly provided, supersedes all prior
agreements and undertakings, both written and oral, between Sellers and
Purchaser with respect to the subject matter hereof.
SECTION 9.06. Assignment. This Agreement may not be assigned
by operation of law or otherwise without the express written consent of Sellers
and Purchaser (which consent may be granted or withheld in the sole discretion
of Sellers or Purchaser).
SECTION 9.07. No Third Party Beneficiaries. This Agreement
shall be binding upon and inure solely to the benefit of the parties hereto and
their permitted assigns and
40
nothing herein, express or implied, is intended to or shall confer upon any
other Person any legal or equitable right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.
SECTION 9.08. Amendment. This Agreement may not be amended or
modified except by an instrument in writing executed by Sellers and Purchaser.
SECTION 9.9. Governing Law. This Agreement is made under and
shall be governed by, and construed in accordance with, the laws of the State of
California, applicable to contracts executed and to be performed entirely within
that state.
SECTION 9.10. Counterparts. This Agreement may be executed in
one or more counterparts each of which when executed shall be deemed to be an
original but all of which taken together shall constitute one and the same
agreement.
SECTION 9.11. Specific Performance. The parties hereto agree
that irreparable injury would occur in the event any provision hereof is not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity or obtained through the mediation or arbitration
procedures provided below. The exercise of any right or remedy in any instance
shall not preclude the exercise of any other remedy in the same or any other
instance. Each of the parties acknowledges that the Shares are unique and that
the remedies available to the parties at law for failure by Sellers to satisfy
the conditions of Purchaser's obligations hereunder are inadequate. Accordingly,
(i) each Seller further expressly acknowledges and agrees that in the event of
any threatened or actual breach by Sellers, Purchaser shall be entitled to seek
and obtain temporary and permanent injunctive or other mandatory relief, in any
court of competent jurisdiction, without being required to establish the
likelihood of irreparable injury and without posting bond or other security.
SECTION 9.12. Mediation. Except as provided herein, no civil
action or arbitration under Section 9.13 with respect to any dispute, claim or
controversy arising out of or relating to this Agreement may be commenced until
the matter has been submitted to JAMS/ENDISPUTE or its successor for mediation
in Orange County, California. Either party may commence mediation by providing
to JAMS/ENDISPUTE and the other party a written request for mediation, setting
forth the subject of the dispute and the relief requested. The parties will
cooperate with JAMS/ENDISPUTE and with one another in selecting a mediator from
JAMS/ENDISPUTE's panel of neutrals, and in scheduling the mediation proceedings.
The parties covenant that they shall participate in the mediation in good faith,
and that they shall share equally in its costs. All offers, promises, conduct
and statements, whether oral or written, made in the course of the mediation by
any of the parties, their agents, employees, experts and attorneys, and by the
mediator and any JAMS/ENDISPUTE employees, are confidential, privileged and
inadmissible for any purpose, including impeachment, in any litigation or other
proceeding
41
involving the parties, provided that evidence that is otherwise admissible or
discoverable shall not be rendered inadmissible or non-discoverable as a result
of its use in the mediation. Either party may seek equitable relief prior to the
mediation to preserve the status quo pending the completion of that process.
Except for such an action to obtain equitable relief, neither party may commence
a civil action with respect to the matters submitted to mediation until after
the completion of the initial mediation session, or until 45 days after the date
of filing the written request for mediation, whichever occurs first. Mediation
may continue after the commencement of a civil action, if the parties so desire.
The provisions of this Section 9.12 may be enforced by any court of competent
jurisdiction, and the party seeking enforcement shall be entitled to an award of
all costs, fees and expenses, including attorneys fees, to be paid by the party
against whom enforcement is ordered.
SECTION 9.13. Arbitration. BY EXECUTING THIS AGREEMENT, THE
PARTIES ARE AGREEING TO HAVE ANY MATTER WHICH IS THE SUBJECT OF ARBITRATION
PURSUANT TO THIS SECTION 9.13 DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY
CALIFORNIA LAW AND ARE GIVING UP ANY RIGHTS THEY MIGHT POSSESS TO HAVE THE
DISPUTE LITIGATED IN A COURT OR JURY TRIAL. BY EXECUTING THIS AGREEMENT, THE
PARTIES ARE GIVING UP JUDICIAL RIGHTS TO DISCOVERY AND APPEAL, UNLESS SUCH
RIGHTS ARE SPECIFICALLY INCLUDED IN THE ARBITRATION PROVISION, OR ARE OTHERWISE
PROVIDED BY CODE OF CIVIL PROCEDURE SECTION 1280 ET SEQ. IF ANY OF THE PARTIES
REFUSES TO SUBMIT TO ARBITRATION IT MAY BE COMPELLED TO ARBITRATE UNDER THE
CALIFORNIA CODE OF CIVIL PROCEDURE. A PARTY'S AGREEMENT TO THIS ARBITRATION
PROVISION IS VOLUNTARY. BY EXECUTING THIS AGREEMENT, EACH OF THE PARTIES
ACKNOWLEDGES THAT IT HAS READ AND UNDERSTOOD THE FOREGOING AND HAS AGREED TO
SUBMIT DISPUTES ARISING OUT OF MATTERS INCLUDED IN THIS SECTION 9.13 TO NEUTRAL
ARBITRATION.
The parties agree that any and all disputes, claims or
controversies arising out of or relating to this Agreement that are not resolved
by their mutual agreement or mediation pursuant to Section 9.12, shall be
submitted to final and binding arbitration in Orange County, California before
JAMS/ENDISPUTE or its successor pursuant to the United States Arbitration Act, 9
U.S.C., Sec. 1 et seq. Either party may commence the arbitration process called
for in this Agreement by filing a written demand for arbitration with
JAMS/ENDISPUTE, with a copy to the other party. The arbitration will be
conducted in accordance with the provisions of JAMS/ENDISPUTE's Streamlined
Arbitration Rules and Procedures in effect at the time of filing of the demand
for arbitration. The parties will cooperate with JAMS/ENDISPUTE and with one
another in selecting an arbitrator from JAMS/ENDISPUTE's panel of neutrals, and
in scheduling the arbitration proceedings. The parties covenant that they shall
participate in the arbitration in good faith, and that they shall share equally
in its costs. The provisions of this Section
42
9.13 may be enforced by any court of competent jurisdiction, and the party
seeking enforcement shall be entitled to an award of all costs, fees and
expenses, including attorneys fees, to be paid by the party against whom
enforcement is ordered.
43
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
/s/ Xxxxxx X. Xxxxxxx
-----------------------------------
XXXXXX X. XXXXXXX
/s/ Xxxxxxxx X. Xxxxxxx
-----------------------------------
XXXXXXXX X. XXXXXXX
GLOBAL HEALTH SUB, INC.
By: /s/ Xxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxx X. Xxxxx
Title: Chief Financial Officer
44
