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Exhibit 2.19
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") is made and entered into
this 27th day of February 2001 among XXXXXX INTERNATIONAL INC., an Ohio
corporation ("Xxxxxx"), XXXXXXX X. XXXXXXX, XXXXXXX XXXXXXX REVOCABLE TRUST,
XXXXXXX XXXXXXX and XXXXXXX XXXXXXX (collectively the "Sellers"; individually, a
"Seller"). Xxxxxx and the Sellers are referred to herein collectively as the
"Parties".
RECITALS
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A. The Sellers, in the aggregate, own all of the issued and outstanding
capital stock of AAC Consulting Group, Inc., a Maryland corporation ("TARGET").
B. This Agreement contemplates a transaction in which Xxxxxx will
purchase from the Sellers, and the Sellers will sell to Xxxxxx, all of the
issued and outstanding capital stock of TARGET in return for cash and Xxxxxx
Shares.
NOW, THEREFORE, in consideration of the premises and the mutual
undertakings and agreements herein made, the Parties agree as follows:
1. DEFINITIONS.
"AAC BUSINESS" has the meaning set forth in Section 10(a) below.
"ACCREDITED INVESTOR" has the meaning set forth in Regulation D
promulgated under the Securities Act.
"ADVERSE CONSEQUENCES" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, Liabilities, obligations, Taxes, liens, losses, expenses and
fees, including (without limitation) court costs and reasonable attorneys' fees
and expenses.
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"AFFILIATED GROUP" means any affiliated group within the meaning of
Code sec.1504(a) or any similar group defined under a similar provision of
state, local or foreign law.
"AGREEMENT TO PRESERVE GOODWILL" means the document to be executed and
delivered by each Seller pursuant to Section 7(a)(x) herein.
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"AVERAGE XXXXXX SHARE PRICE" has the meaning set forth in Section
2(b)(i) below.
"BASE AMOUNT" has the meaning set forth in Section 2(b)(i) below.
"BASIS" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act or transaction known to Sellers that forms or could
reasonably form the basis for any specified consequence.
"BUSINESS" has the meaning set forth in Section 10(a) below.
"CASH CLOSING PAYMENT" has the meaning set forth in Section 2(b) below.
"CLOSING" has the meaning set forth in Section 2(f) below.
"CLOSING DATE" has the meaning set forth in Section 2(f) below.
"CLOSING SHARES" has the meaning set forth in Section 2(b) below.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COBRA" means the requirements of Part 6 of Subtitle B of Title I of
ERISA and Code sec.4980B.
"CONFIDENTIAL INFORMATION" has the meaning set forth in the
Non-Competition and Non-Disclosure Covenants annexed as Exhibit 7(a)(ix).
"CONTROLLED GROUP" has the meaning set forth in Code sec. 1563.
"DISCLOSURE SCHEDULE" means the disclosure schedule delivered by the
Parties hereto pursuant to Sections 3 and 4 below. Nothing contained in the
Disclosure Schedule shall be deemed adequate to disclose an exception to a
representation or warranty made in this Agreement unless the exception is
identified in the Disclosure Schedule with reasonable particularity, describing
the relevant facts in reasonable detail. Matters disclosed pursuant to one
provision, subprovision, section or subsection of this Agreement or of the
Disclosure Schedule are deemed disclosed for all purposes of the Disclosure
Schedule and the representations and warranties contained in this Agreement, but
only to the extent that it is reasonably apparent that such disclosure would be
responsive to or fulfill the disclosure requirements of the other provisions,
subprovisions, sections or subsections thereof or hereof. Inclusion of a matter
on a Section of the Disclosure Schedule shall expressly not be deemed to
constitute admission by either party, nor otherwise imply, that any such matter
is material or create a measure for materiality for the purpose of this
Agreement.
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"EMPLOYEE BENEFIT PLAN" means any (a) nonqualified deferred
compensation or retirement plan or arrangement, (b) qualified defined
contribution retirement plan or arrangement which is an Employee Pension Benefit
Plan, (c) qualified defined benefit retirement plan or arrangement which is an
Employee Pension Benefit Plan (including any Multiemployer Plan), or (d)
Employee Welfare Benefit Plan or material fringe benefit or other retirement,
bonus, or incentive plan or program.
"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in ERISA
sec.3(2).
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in ERISA
sec.3(1).
"EMPLOYMENT AGREEMENTS" has the meaning set forth in Section 7(a)(vii)
below.
"ENCUMBRANCE" means any Security Interest, warrant, option, purchase
right, preemptive right, or other right or claim of any character that restricts
the transfer of capital stock.
"ENVIRONMENTAL LAW" means any federal, state or local statute, law,
rule, regulation, ordinance, code, policy or rule of common law now or hereafter
in effect and in each case as amended, and any judicial or administrative
interpretation thereof, including any judicial or administrative order, consent
decree or judgment, relating to the environment, health, safety or Hazardous
Materials, including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended ("CERCLA") 42
U.S.C. secs. 9601 ET SEQ.; the Hazardous Materials Transportation Act, as
amended, 49 U.S.C. secs. 1801 ET. SEQ.; the Resource Conservation and Recovery
Act, as amended, 42 U.S.C.secs. 6901 ET SEQ.; the Federal Water Pollution
Control Act, as amended, 33 U.S.C.secs. 1251 ET SEQ.; the Toxic Substances
Control Act, 15 U.S.C. secs. 2601 ET SEQ.; the Clean Air Act, 42 U.S.C.
secs. 7401 ET SEQ.; the Safe Drinking Water Act, 42 U.S.C. secs. 3808 ET SEQ.;
and their counterparts under any state or local laws.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE" means each entity which is treated as a single
employer with TARGET for purposes of Code sec.414.
"ESCROW AGREEMENT" has the meaning set forth in Section 2(b) below.
"ESCROW SHARES" has the meaning set forth in Section 2(b) below.
"FIDUCIARY" has the meaning set forth in ERISA sec. 3(21).
"FINANCIAL STATEMENTS" has the meaning set forth in Section 4(g) below.
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"GAAP" means United States generally accepted accounting principles, as
in effect from time to time.
"HAZARDOUS MATERIALS" means (a) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become friable,
urea formaldehyde foam insulation, transformers or other equipment that contain
dielectric fluid containing polychlorinated biphenyls, and radon gas; (b) any
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 prohibited, limited or regulated by any
governmental authority.
"INDEMNIFIED PARTY" has the meaning set forth in Section 8(d) below.
"INDEMNIFYING PARTY" has the meaning set forth in Section 8(d) below.
"INFORMATION TECHNOLOGY" means computer software, computer firmware,
computer hardware (whether general or specific purpose), and other similar or
related items of automated, computerized, or software system(s) that are used or
relied on by a Person in the conduct of its business.
"INSIDE SHAREHOLDERS" shall mean Xxxxxxx Xxxxxxx and Xxxxxxx Xxxxxxx.
"INTELLECTUAL PROPERTY" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, together with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith, (c) all
copyrightable works, all copyrights, and all applications, registrations, and
renewals in connection therewith, (d) all mask works and all applications,
registrations, and renewals in connection therewith, (e) all trade secrets and
confidential business information (including ideas, research and development,
know-how, formulas, compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information, and business and marketing plans
and proposals), (f) all computer software (including related technical
documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
"XXXXXX" has the meaning set forth in the preface above.
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"XXXXXX BANK CREDITORS" means Keybank National Association, Bank One,
NA, and Fifth Third Bank.
"XXXXXX MATERIAL ADVERSE CHANGE" has the meaning set forth in Section
7(b)(vii) below.
"XXXXXX SHARES" has the meaning set forth in Section 2(b) below.
"KNOWLEDGE" means, unless otherwise indicated, knowledge after
reasonable investigation. For purposes of this definition, "reasonable
investigation" shall not impose an obligation upon TARGET or Sellers to (i)
conduct a survey of state tax laws or (ii) interview or discuss with any third
party with respect to a matter other than an officer, director or key employee
of TARGET or other than other Sellers.
"KNOWLEDGE OF THE TARGET" means Knowledge of Xxxxxxx Xxxxxxx and/or
Xxxxxxx Xxxxxxx.
"LIABILITY" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including (without limitation) any liability for Taxes.
"MARKET VALUE" has the meaning set forth in Section 2(b) below.
"MAXIMUM INDEMNIFICATION OBLIGATION" has the meaning set forth in
Section 8(b)(iii) below.
"MOST RECENT AUDITED FINANCIAL STATEMENTS" has the meaning set forth in
Section 4(g) below.
"MOST RECENT BALANCE SHEET" means the balance sheet contained within
the Most Recent Financial Statements.
"MOST RECENT FINANCIAL STATEMENTS" has the meaning set forth in Section
4(g) below.
"MOST RECENT FISCAL YEAR END" has the meaning set forth in Section 4(g)
below.
"MULTIEMPLOYER PLAN" has the meaning set forth in ERISA sec.3(37).
"NON-COMPETITION TERM" has the meaning set forth in Section 10(a)
below.
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"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with the Person's past custom and practice (including with respect to
quantity and frequency).
"PARTY" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PERSON" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, or a governmental entity (or any
department, agency, or political subdivision thereof).
"PURCHASE PRICE" has the meaning set forth in Section 2(b) below.
"REGISTRATION RIGHTS AGREEMENT" has the meaning set forth in Section
3(a)(v) below.
"RELEASE" has the meaning set forth in Section 7(a)(viii) below.
"REPORTABLE EVENT" has the meaning set forth in ERISA sec.4043.
"SEC" has the meaning set forth in Section 3(b)(v) below.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"SECURITY INTEREST" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar liens, (b) liens for Taxes not yet due and payable or for Taxes that
the taxpayer is contesting in good faith through appropriate proceedings, (c)
purchase money liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of Business and
not incurred in connection with the borrowing of money.
"SELLERS" has the meaning set forth in the preface above.
"SUBSIDIARY" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors.
"TARGET" has the meaning set forth in the first recital above and shall
include all predecessor entities, and its wholly owned subsidiary, AAC
Consulting Ltd.
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"TARGET MATERIAL ADVERSE CHANGE" has the meaning set forth in Section
7(a)(xi) below.
"TARGET SHARE" means any share of the common stock, $.00005 par value,
of TARGET.
"TAX" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code sec.59A),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"TAX RETURN" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"THIRD PARTY CLAIM" has the meaning set forth in Section 8(d) below.
2. PURCHASE AND SALE OF TARGET SHARES.
(a) BASIC TRANSACTION.
On and subject to the terms and conditions of this Agreement, Xxxxxx
agrees to purchase from each of the Sellers, and each of the Sellers agrees to
sell to Xxxxxx, all of his, her or its TARGET Shares for the consideration
specified below in this Section 2.
(b) PURCHASE PRICE.
At the Closing, Xxxxxx shall pay the Sellers a purchase price of
Fifteen Million Two Hundred Fifty Thousand Dollars ($15,250,000) (the "Purchase
Price"), Ten Million Six Hundred Seventy Five Thousand Three Dollars and Fifteen
Cents ($10,675,003.15) (the "Cash Closing Payment") of which shall be paid in
cash at the Closing, Three Million Fifty Thousand One Dollars and Ninety Seven
Cents ($3,050,001.97) of which shall be paid at the Closing to Sellers in shares
of Xxxxxx common stock, no par value ("Xxxxxx Shares"), valued (the value so
established being hereinafter referred to as the "Market Value") as set forth
below (the Xxxxxx Shares to be issued to the Sellers at Closing hereunder being
hereinafter referred to as the "Closing Shares"), which shall be subject to
demand registration rights (as set forth in the Registration Rights Agreement
which shall be in the form of Exhibit 7(b)(vi) hereto), and One Million Five
Hundred Twenty Four Thousand Nine Hundred Ninety Four Dollars and Eighty Eight
Cents ($1,524,994.88) of which shall be paid in Xxxxxx Shares, valued at Market
Value to the Fifth Third Bank, as escrow agent under the Escrow Agreement (which
shall be in the form
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of Exhibit 2(b)(i) hereto), which shall be subject to demand registration rights
subject to the Escrow Agreement (the Xxxxxx Shares to be delivered at Closing to
the Fifth Third Bank under the terms of the Escrow Agreement, being hereinafter
referred to as the "Escrow Shares") (the Closing Shares and the Escrow Shares
collectively, the "Xxxxxx Share Consideration").
The parties agree that for Tax purposes the Cash Closing Payment, the
Closing Shares, the Escrow Shares and any other consideration payable to Sellers
hereunder with respect to their TARGET Shares will be treated as Purchase Price.
The parties also agree that for Tax purposes that the Purchase Price shall be
allocated as set forth on Exhibit 2(b)(ii) to be attached hereto prior to the
Closing.
The Market Value of the Xxxxxx Shares for purposes of determining the
number of Closing Shares and Escrow Shares to be delivered to Sellers and Fifth
Third Bank at Closing shall be determined as set forth below:
(i) If the average closing share price of Xxxxxx
Shares for the twenty (20) trading days preceding five (5)
trading days before Closing ("Average Xxxxxx Share Price") is
between $10.75 per share and $6.75 per share, then the Market
Value shall be $8.75 per share ("Base Amount").
(ii) If the Average Xxxxxx Share Price is between
$5.75 and $6.74 then the Market Value shall be equal to the
Base Amount less the difference between $6.75 and the Average
Xxxxxx Share Price.
(iii) If the Average Xxxxxx Share Price is greater
than $10.75, then the Market Value shall be equal to the
Average Xxxxxx Share Price.
(iv) If the Average Xxxxxx Share Price is less than
$5.75, Xxxxxx and the Sellers shall attempt to renegotiate the
Market Value in good faith, but either Xxxxxx or the Sellers
shall have the right to terminate this Agreement if agreement
on the Market Value is not reached within two (2) business
days after the start of such renegotiation.
(c) INTENTIONALLY LEFT BLANK.
(d) INTENTIONALLY LEFT BLANK.
(e) INTENTIONALLY LEFT BLANK.
(f) THE CLOSING.
The closing of the transactions contemplated by this Agreement (the
"CLOSING") shall, if (and to the extent that) a physical closing is required,
take place at the offices of Xxxxxx, commencing at 9:00 a.m., local time, on
February 27, 2001 or such other later date as the
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conditions to each Party's obligations to close set forth in Section 7 of this
Agreement shall have been satisfied or waived or such other date as Xxxxxx and
the Sellers may mutually determine (the "CLOSING DATE").
(g) DELIVERIES AT THE CLOSING.
At the Closing, (i) the Sellers will deliver to Xxxxxx the various
certificates, instruments and documents referred to in Section 7(a) below, (ii)
Xxxxxx will deliver to the Sellers the various certificates, instruments and
documents referred to in Section 7(b) below, (iii) each of the Sellers will
deliver to Xxxxxx stock certificates representing all of his, hers or its TARGET
Shares, endorsed in blank or accompanied by duly executed assignment documents
as may be reasonably requested by Xxxxxx, and (iv) Xxxxxx will deliver to the
Sellers the consideration specified in Section 2(b) above.
3. REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION.
(a) REPRESENTATIONS AND WARRANTIES OF THE SELLERS.
Each of the Sellers represents and warrants to Xxxxxx that the
statements contained in this Section 3(a) are correct and complete as of the
date of this Agreement with respect to himself, herself or itself (but not with
respect to any other Seller).
(i) INTENTIONALLY LEFT BLANK.
(ii) AUTHORIZATION OF TRANSACTION. The Seller has
full power and authority (including, if the Seller is a trust,
full trust power and authority) to execute and deliver this
Agreement and to perform his, her or its obligations
hereunder. This Agreement constitutes the valid and legally
binding obligation of the Seller, enforceable in accordance
with its terms and conditions. The Seller need not give any
notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency
in order to consummate the transactions contemplated by this
Agreement.
(iii) NONCONTRAVENTION. Neither the execution and the
delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will (A) violate any
constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which the Seller
is subject or, if the Seller is a trust, any provision of its
organizational documents or (B) conflict with, result in a
breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under any
material agreement, contract, lease, license,
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instrument, or other arrangement to which the Seller is a
party or by which he, she or it is bound or to which any of
his, her or its assets is subject.
(iv) BROKERS' FEES. Other than liability or
obligation to Xxxxxx, Xxxxxxxx & Company Inc.(which shall be
satisfied by the Sellers and not TARGET or Xxxxxx), the Seller
has no Liability or obligation to pay any fees or commissions
to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which Xxxxxx
could become liable or obligated.
(v) INVESTMENT. Each Seller receiving Xxxxxx Share
Consideration (A) understands that Xxxxxx Share Consideration
has not been, and will not be, registered under the Securities
Act, or under any state securities laws, other than subsequent
to the Closing pursuant to the terms and conditions set forth
in the Registration Rights Agreement among Xxxxxx and Sellers
to be executed and delivered at Closing in the form of Exhibit
7(b)(vi) hereto (the "Registration Rights Agreement"), and are
being offered and sold in reliance upon federal and state
exemptions for transactions not involving any public offering,
(B) is acquiring Xxxxxx Shares solely for his or her own
account for investment purposes, and not with a view to the
distribution thereof, (C) is a sophisticated investor with
knowledge and experience in business and financial matters,
(D) has received certain information concerning Xxxxxx and has
had the opportunity to obtain additional information as
desired in order to evaluate the merits and the risks inherent
in holding Xxxxxx Shares, and (E) is able to bear the economic
risk and lack of liquidity inherent in holding Xxxxxx Shares.
(vi) TARGET SHARES. The Sellers hold of record and
own beneficially the number of TARGET Shares set forth next to
his, her or its name in Section 4(b) of the Disclosure
Schedule, free and clear of any Encumbrances (other than
restrictions on transfer imposed by federal and state
securities laws and regulations). Each Seller is not a party
to any voting trust, proxy, or other agreement or
understanding with respect to the voting of any capital stock
of TARGET. Each Seller hereby represents that 100% of the
Target Shares outstanding are set forth on Section 4(b) of the
Disclosure Schedule.
(b) REPRESENTATIONS AND WARRANTIES OF XXXXXX.
Xxxxxx represents and warrants to the Sellers that the statements
contained in this Section 3(b) are correct and complete as of the date of this
Agreement.
(i) ORGANIZATION OF XXXXXX. Xxxxxx is a corporation
organized, validly existing and in good standing under the
laws of the State of Ohio. Xxxxxx is duly authorized to
conduct business and is in good standing (or the local law
equivalent) under the laws of each jurisdiction in which the
nature of its business or the ownership or leasing of its
properties makes such authorization necessary, other than in
such
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jurisdictions where the failure to be so qualified will not
result in a Xxxxxx Material Adverse Change. Xxxxxx has full
corporate power and authority and all material licenses,
permits and authorizations necessary to conduct the businesses
in which it is engaged and in which it currently proposes to
engage and to own and use the properties owned and used by it,
except where the failure to have such license, permits and
authorizations would not result in a Xxxxxx Material Adverse
Change.
(ii) AUTHORIZATION OF TRANSACTION. Xxxxxx has full
power and authority (including full corporate power and
authority) to execute and deliver this Agreement and to
perform its obligations hereunder. This Agreement constitutes
the valid and legally binding obligation of Xxxxxx,
enforceable in accordance with its terms and conditions.
Assuming the truth and correctness of the Sellers' statements
in Section 3(a)(v) of this Agreement, Xxxxxx need not give any
notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency
in order to consummate the transactions contemplated by this
Agreement.
(iii) NONCONTRAVENTION. Neither the execution and the
delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will (A) violate any
constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which Xxxxxx is
subject or any provision of its charter or bylaws or (B)
conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the
right to accelerate, terminate, modify, or cancel, or require
any notice under any material agreement, contract, lease,
license, instrument, or other arrangement to which Xxxxxx is a
party or by which it is bound or to which any of its assets is
subject.
(iv) CAPITALIZATION. Xxxxxx'x authorized equity
securities consist of Forty-Five Million (45,000,000) shares
of common stock, no par value per share, and One Hundred
Thousand (100,000) shares of undesignated preferred stock, no
par value per share. As of December 31, 2000, 11,763,307
shares of common stock were issued and outstanding, and no
shares of undesignated preferred stock were issued and
outstanding. There are no outstanding or authorized options,
warrants, purchase rights, subscription rights, conversion
rights, exchange rights or other contracts or commitments that
could require Xxxxxx to issue, sell or otherwise cause to
become outstanding any of its capital stock except pursuant to
Xxxxxx'x employee benefit plans filed with the SEC (defined
below) and the Shareholder Rights Agreement dated August 13,
1999 between Xxxxxx and Fifth Third Bank, as Rights Agent. The
Xxxxxx Shares to be received by the Sellers in connection with
the transactions contemplated hereby will be duly authorized,
validly issued, fully paid and non-assessable shares of common
stock free and clear of any and all Encumbrances other than
restrictions on transfer imposed by federal and state
securities laws and regulations and notifications or filings
required by NASDAQ.
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(v) SEC REPORTS. Xxxxxx has timely filed with the
U.S. Securities and Exchange Commission ("SEC") all materials
and documents required to be filed by it under the Securities
Exchange Act. All the materials and documents filed with the
SEC by Xxxxxx since July 2, 1997, including its initial
Registration Statement on Form S-1, are hereinafter referred
to as the "Xxxxxx SEC Reports." Section 3(b) of the Disclosure
Schedule lists all the Xxxxxx SEC Reports filed on or prior to
the date of this Agreement. The Xxxxxx SEC Reports, copies of
which have been delivered to the Sellers, are true and correct
in all material respects, including the financial statements
and other financial information contained therein, and do not
omit to state any material fact necessary to make the
statements in such Xxxxxx SEC Reports, in light of the
circumstances in which they were made, not misleading. The
financial statements included in the Xxxxxx SEC Reports fairly
present in all material respects the financial condition and
the results of operations, changes in stockholders' equity and
cash flow of Xxxxxx and its subsidiaries as at the respective
dates of and for the periods referred to in such financial
statements, all in accordance with GAAP. Since the date of the
most recent Xxxxxx SEC Report, there has been no Xxxxxx
Material Adverse Change.
(vi) BROKERS' FEES. Xxxxxx has no Liability or
obligation to pay any fees or commissions to any broker,
finder, or agent with respect to the transactions contemplated
by this Agreement for which any Seller could become liable or
obligated.
(vii) INVESTMENT. Xxxxxx is not acquiring TARGET
Shares with a view to or for sale in connection with any
distribution thereof within the meaning of the Securities Act.
(viii) INFORMATION REGARDING TARGET. Xxxxxx confirms
that Sellers have made available to Xxxxxx and its
representatives and agents the opportunity to ask questions of
the officers and management employees of TARGET and to acquire
such additional information about the business and financial
condition of TARGET as Xxxxxx has requested, and all such
information has been received.
4. REPRESENTATIONS AND WARRANTIES CONCERNING TARGET.
The Sellers, jointly and severally, represent and warrant to Xxxxxx
that the statements contained in this Section 4 are correct and complete as of
the date of this Agreement except as set forth in the Disclosure Schedule.
(a) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER.
TARGET is a corporation organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation. TARGET is duly
authorized to conduct business and is in good standing (or the local equivalent)
under the laws of each jurisdiction set forth in Section 4(a) of the Disclosure
Schedule and the failure to so qualify in any other jurisdiction will not
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result in a TARGET Material Adverse Change. Except as set forth in Section 4(a)
of the Disclosure Schedule, TARGET has full corporate power and authority and
all licenses, permits, and authorizations necessary to conduct the businesses in
which it is engaged in the State of Maryland and in which it currently proposes
to engage and to own and use the properties owned and used by it. Section 4(a)
of the Disclosure Schedule lists the directors and officers of TARGET. The
Sellers have delivered to Xxxxxx correct and complete copies of the charter and
bylaws of TARGET (as amended to date). The minute books (containing the records
of meetings of the stockholders, the board of directors and any committees of
the board of directors), the stock certificate books and the stock record books
of TARGET are correct and complete in all material respects. TARGET is not in
default under or in violation of any provision of its charter or bylaws.
(b) CAPITALIZATION.
The authorized capital stock of TARGET consists of six million
(6,000,000) TARGET Shares, of which three million (3,000,000) TARGET Shares are
issued and outstanding and no TARGET Shares are held in treasury. All of the
issued and outstanding TARGET Shares have been duly authorized, are validly
issued, fully paid and nonassessable, and are held of record and beneficially by
the respective Sellers as set forth in Section 4(b) of the Disclosure Schedule.
Except as set forth in Section 4(b) of the Disclosure Schedule, there are no
outstanding or authorized options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights, or other contracts or commitments
that could require TARGET to issue, sell, or otherwise cause to become
outstanding any of its capital stock. There are no outstanding or authorized
stock appreciation, phantom stock, profit participation, or similar rights with
respect to TARGET. TARGET is not a party to any voting trusts, proxies, or other
agreements or understandings with respect to the voting of the capital stock of
TARGET.
(c) NONCONTRAVENTION.
Except as set forth in Section 4(c) of the Disclosure Schedule, neither
the execution and the delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will, except where such violation or failure
would not result in a TARGET Material Adverse Change, (i) violate any
constitution, statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental agency, or
court to which TARGET is subject or any provision of the charter or bylaws of
TARGET or (ii) conflict with, result in a breach of, constitute a default under,
result in the acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under any material
agreement, contract, lease, license instrument to which TARGET is a party or by
which it is bound or to which any of its assets is subject; or (iii) result in
the imposition of any Security Interest upon any of TARGET'S assets. TARGET does
not need to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency in
order for TARGET to consummate the transactions contemplated by this Agreement.
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(d) BROKERS' FEES.
Other than liability or obligation to Xxxxxx, Xxxxxxxx & Company (which
shall be satisfied by Sellers and not TARGET) TARGET has no Liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement.
(e) TITLE TO ASSETS.
Except as set forth on Section 4(e) of the Disclosure Schedule, TARGET
has good title to, or a valid leasehold interest in, the properties and assets
used by it, or shown on the Most Recent Balance Sheet (as defined in Section
4(g)) or acquired after the date thereof, free and clear of all Security
Interests, excepting only properties and assets disposed of in the Ordinary
Course of Business since the date of the Most Recent Balance Sheet and certain
other properties and assets involving in the aggregate more than Twenty Five
Thousand Dollars ($25,000.00) disposed of other than in the Ordinary Course of
Business as disclosed on the Disclosure Schedule.
(f) SUBSIDIARIES.
As more fully disclosed on Section 4(f) of the Disclosure Schedule,
TARGET has one inactive Subsidiary. Section 4(f) of the Disclosure Schedule sets
forth the name and jurisdiction of incorporation or organization of each
corporation or other entity in which TARGET has a direct or indirect equity or
ownership interest in any business and the number of (and percentage of
outstanding) shares or other interests owned by TARGET. All of such shares or
other interests are owned free and clear of any Encumbrances other than
restrictions on transfer imposed by foreign, federal and state securities laws
and regulations and such shares or other interests are duly authorized, validly
issued, fully paid and non-assessable and do not subject the holder thereof to
further liability for capital contributions. Each corporation or other entity
listed on Section 4(f) of the Disclosure Schedule validly exists, has been duly
incorporated or organized under applicable law and is in good standing (or the
local law equivalent). To the Knowledge of the Sellers, each such corporation or
other entity has full corporate or other power and authority and possesses all
material licenses, permits and authorizations necessary for it to conduct the
business in which it is engaged and in which it currently proposes to engage and
to own and use the properties owned and used by it, except where the failure to
have such licenses, permits and authorizations will not result in a TARGET
Material Adverse Change. TARGET is not party to any voting trusts, proxies or
other agreements or understandings with respect to the voting or capital stock
of any such corporation or entity. Prior to Closing, the Sellers shall deliver
to Xxxxxx: (A) true, complete and correct copies of the charter or other
organizational documents of each corporation or other entity listed on Section
4(f) of the Disclosure Schedule;
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and (B) copies of all material financial information with respect to such
corporations or other entities in the possession of or under the control of the
Sellers.
(g) FINANCIAL STATEMENTS.
Attached hereto as Exhibit 4(g) are the following financial statements
(collectively the "Financial Statements"): (i) unaudited balance sheets and
statements of income and changes in stockholders' equity for TARGET as of and
for the fiscal years ended December 31, 1999 and December 31, 1998; (ii) an
audited financial statement, including balance sheet, statement of income,
changes in stockholders equity, cash flow and related notes as of and for the
ten (10) month period ended October 31, 2000 (the "Most Recent Audited Financial
Statements"); and (iii) an unaudited balance sheet ("Most Recent Balance Sheet")
and statement of income, (collectively, the "Most Recent Financial Statements")
as of and for the fiscal year ended December 31, 2000 (the "Most Recent Fiscal
Year End") for TARGET. Except to the extent identified by Deloitte & Touche
LLP's audit of the October 31, 2000 financial statements of TARGET and in
Section 4(g) of the Disclosure Schedule, the Most Recent Audited Financial
Statements have and, to the Knowledge of Sellers, the Most Recent Financial
Statements (including the notes thereto) have in all material respects been
prepared in accordance with GAAP applied on a consistent basis throughout the
periods covered thereby, present fairly in all material respects the financial
condition of TARGET as of such dates and the results of operations of TARGET for
such periods and are consistent with the books and records of TARGET; PROVIDED,
however, that the Most Recent Financial Statements are subject to normal
year-end adjustments (which will not be material individually or in the
aggregate).
(h) EVENTS SUBSEQUENT TO OCTOBER 31, 2000.
Except as set forth in Section 4(h) of the Disclosure Schedule, since
October 31, 2000, there has not been any TARGET Material Adverse Change. Without
limiting the generality of the foregoing, since that date:
(i) TARGET has not sold, leased, transferred, or
assigned any of its assets, tangible or intangible, involving
in the aggregate more than Twenty Five Thousand Dollars
($25,000.00) other than for a fair consideration in the
Ordinary Course of Business;
(ii) other than agreements and contracts with
customers, as to which One Hundred Thousand Dollars ($100,000)
shall be the disclosure threshold for Section 4(h) of the
Disclosure Schedule, TARGET has not entered into any
agreement, contract, lease, or license (or series of related
agreements, contracts, leases, and licenses) either involving
more than Twenty Five Thousand Dollars ($25,000) or outside
the Ordinary Course of Business;
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(iii) no party (including TARGET) has accelerated,
terminated, modified, or canceled any agreement, contract,
lease, or license (or series of related agreements, contracts,
leases, and licenses) involving more than Twenty Five Thousand
Dollars ($25,000) to which TARGET is a party or by which it is
bound;
(iv) TARGET has not imposed or permitted to be
imposed any Security Interest upon any of its assets, tangible
or intangible;
(v) TARGET has not made any capital expenditure (or
series of related capital expenditures) either involving more
than Twenty Five Thousand Dollars ($25,000) or outside the
Ordinary Course of Business;
(vi) TARGET has not made any capital investment in,
any loan to, or any acquisition of the securities or assets
of, any other Person (or series of related capital
investments, loans, and acquisitions) either involving more
than Twenty Five Thousand Dollars ($25,000) or outside the
Ordinary Course of Business;
(vii) TARGET has not issued any TARGET Share, bond,
or other debt security or created, incurred, assumed, or
guaranteed any indebtedness for borrowed money or capitalized
lease obligation either involving more than Twenty Five
Thousand Dollars ($25,000) singly or Twenty Five Thousand
Dollars ($25,000) in the aggregate;
(viii) TARGET has not delayed or postponed the
payment of accounts payable and other Liabilities outside the
Ordinary Course of Business;
(ix) TARGET has not canceled, compromised, waived, or
released any right or claim (or series of related rights and
claims) either involving more than Twenty Five Thousand
Dollars ($25,000) or outside the Ordinary Course of Business,
other than the note due TARGET from Xxxxxxx Xxxxxxx in the
amount of One Hundred Seventy One Thousand Fifty-Four and
18/100 Dollars ($171,054.18) (the "AC Note") and from Xxxxxxx
Xxxxxxx in the amount of Sixteen Thousand Eight Hundred
Eighty-Three and 34/100 Dollars ($16,883.34) (the "MC Note");
(x) TARGET has not granted any license or sublicense
of any rights under or with respect to any Intellectual
Property;
(xi) there has been no change made or authorized in
the charter or bylaws of TARGET;
(xii) TARGET has not declared, set aside, or paid any
dividend or made any distribution with respect to its capital
stock (whether in cash or in kind) or redeemed, purchased, or
otherwise acquired any of its capital stock;
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(xiii) TARGET has not experienced any damage,
destruction, or loss (whether or not covered by insurance) to
its property in excess of Twenty Five Thousand Dollars
($25,000);
(xiv) TARGET has not made any loan (that will remain
outstanding on the Closing Date) to or with any of its
directors, officers, and employees outside the Ordinary Course
of Business;
(xv) TARGET has not entered into any employment
contract or collective bargaining agreement, written or oral,
or changed or modified the terms of any existing such contract
or agreement;
(xvi) TARGET has not granted any increase in the base
compensation of any of its directors, officers, and employees
outside the Ordinary Course of Business, except that TARGET
has paid discretionary one-time bonuses to certain of its
employees as disclosed on Section 4(h) of the Disclosure
Schedule and discretionary bonuses to all of the Sellers,
other than Xxxxxxx Xxxxxxx;
(xvii) TARGET has not adopted, amended, modified, or
terminated any bonus, profit-sharing, incentive, severance, or
other plan, contract, or commitment for the benefit of any of
its directors, officers, and employees (or taken any such
action with respect to any other Employee Benefit Plan);
(xviii) TARGET has not made or pledged to make any
charitable or other capital contribution outside the Ordinary
Course of Business;
(xix) there has not been any other material
occurrence, event or transaction outside the Ordinary Course
of Business; and,
(xx) TARGET has not committed to any of the
foregoing.
(i) UNDISCLOSED LIABILITIES.
TARGET has no Liability, including but not limited to Liabilities
relating to its wholly owned subsidiary, AAC Consulting Ltd., and there is no
Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against any of them giving
rise to any Liability, that individually or in the aggregate is material to the
results of operations or the financial or other condition of TARGET except for
(i) Liabilities reflected or reserved against on the Most Recent Balance Sheet
or described on Section 4(i) of the Disclosure Schedule or in the notes to the
Most Recent Financial Statements; or (ii) Liabilities which have arisen after
the Most Recent Fiscal Year End in the Ordinary Course of Business (none of
which results from, arises out of or was caused by any breach by TARGET of any
contract or warranty, by any TARGET tort or infringement or by any violation of
law by TARGET).
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(j) LEGAL COMPLIANCE.
TARGET has complied with all applicable laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder) of federal, state, local, and foreign governments (and all
agencies thereof), except where such failure to comply would not, individually
or in the aggregate, create a TARGET Material Adverse Change; and to the
Knowledge of the Sellers, no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand, or notice has been filed or commenced against
any of them alleging any such failure to comply.
(k) TAX MATTERS.
Except as disclosed on Section 4(k) of the Disclosure Schedule:
(i) TARGET has filed all Tax Returns that it was
required to file. All such Tax Returns were correct and
complete in all material respects. All Taxes owed by TARGET
(whether or not shown on any Tax Return) except for Taxes not
yet due and payable have been paid and appropriate and
adequate reserves with respect to all Taxes have been made in
TARGET's books and records. TARGET is not currently the
beneficiary of any extension of time within which to file any
Tax Return. No written claim has ever been made to TARGET by
an authority in a jurisdiction where TARGET does not file Tax
Returns that it is or may be subject to taxation by that
jurisdiction. There are no Security Interests on any of the
assets of TARGET that arose in connection with any failure (or
alleged failure) to pay any Tax.
(ii) TARGET has withheld and paid all Taxes required
to have been withheld and paid in connection with amounts paid
or owing to any employee, independent contractor, creditor,
stockholder, or other third party.
(iii) TARGET does not expect any authority to assess
any additional Taxes for any period for which Tax Returns have
been filed. There is no dispute or claim concerning any Tax
Liability of TARGET either (A) claimed or raised by any
authority in writing or (B) as to which any of the Sellers and
the directors and officers of TARGET has Knowledge based upon
personal contact with any agent of such authority. Section
4(k) of the Disclosure Schedule lists all federal, state,
local, and foreign income Tax Returns filed with respect to
TARGET (including Tax Returns filed by a Seller relating to
TARGET activities) for taxable periods ended on or after
December 31, 1997, indicates those Tax Returns that have been
audited, and indicates those Tax Returns that currently are
the subject of audit. The Sellers have delivered to Xxxxxx
correct and complete copies of all federal income Tax Returns,
examination reports, and statements of deficiencies assessed
against or agreed to by TARGET since December 31, 1997.
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(iv) TARGET has not waived any statute of limitations
in respect of Taxes or agreed to any extension of time with
respect to a Tax assessment or deficiency.
(v) TARGET has not filed a consent under Code
sec.341(f) concerning collapsible corporations. TARGET has not
made any payments, is obligated to make any payments, nor is a
party to any agreement that under certain circumstances could
obligate it to make any payments that will not be deductible
under Code sec.280G. TARGET has not been a United States real
property holding corporation within the meaning of Code
sec.897(c)(2) during the applicable period specified in Code
sec.897(c)(1)(A)(ii). TARGET has disclosed on its federal
income Tax Returns all positions taken therein that could give
rise to a substantial understatement of federal income Tax
within the meaning of Code sec.6662. TARGET is not a party to
any Tax allocation or sharing agreement. TARGET (A) has not
been a member of an Affiliated Group filing a consolidated
federal income Tax Return (other than a group the common
parent of which was TARGET) or (B) does not have any Liability
for the Taxes of any Person (other than of TARGET) under Reg.
sec.1.1502-6 (or any similar provision of state, local, or
foreign law), as a transferee or successor, by contract, or
otherwise.
(vi) Intentionally Left Blank
(vii) No tax authority in any jurisdiction in which
TARGET does not file Tax Returns has made or asserted to
TARGET a claim that TARGET (or any Seller) is subject to
taxation in that jurisdiction based on the activities of
TARGET.
(viii) TARGET has not agreed to, and is not required
to include in its income, any adjustment pursuant to Code
Section 481(c) (or comparable provisions of any state or local
law) by reason of a change in accounting method or otherwise.
(ix) To the Knowledge of Sellers, the unpaid Taxes of
TARGET (A) did not, as of the Most Recent Fiscal Year End,
exceed the reserve for Tax Liability (including any reserve
for deferred Taxes established to reflect timing differences
between book and Tax income) set forth on the face of the Most
Recent Balance Sheet (including any notes thereto) and (B) do
not exceed that reserve as adjusted for the passage of time
through the Closing Date in accordance with the past custom
and practice of TARGET in filing their Tax Returns.
(l) REAL PROPERTY.
(i) TARGET owns no real property.
(ii) Section 4(l)(ii) of the Disclosure Schedule
lists all real property leased or subleased to TARGET. The
Sellers have delivered to Xxxxxx correct and complete copies
of the leases and subleases listed in Section 4(l)(ii) of the
Disclosure
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Schedule (as amended to date). With respect to each lease and
sublease listed in Section 4(l)(ii) of the Disclosure
Schedule:
(A) to the Knowledge of the Sellers, except
as disclosed on Section 4(l)(ii) of the Disclosure
Schedule, the lease or sublease is in full force and
effect and will continue to be in full force and
effect on identical terms following the consummation
of the transactions contemplated hereby;
(B) TARGET is not in material breach or
material default and has not repudiated and to the
Knowledge of Sellers no other party to the lease or
sublease is in material breach or material default
and no such other party has notified TARGET that it
is repudiating such lease or sublease, and no event
has occurred which, with notice or lapse of time,
would constitute a material breach or material
default by TARGET or permit termination,
modification, or acceleration thereunder;
(C) TARGET has not assigned, transferred,
conveyed, mortgaged, deeded in trust, or encumbered
any interest in such leasehold or subleasehold;
(D) all facilities leased or subleased
thereunder are supplied with utilities and other
services and to the Knowledge of the Sellers (without
duty to further investigate) have all licenses and
permits that are material for the operation of
TARGET's business as currently conducted thereat and
as currently proposed to be conducted thereat; and,
(E) to the Knowledge of the Sellers (without
duty to further investigate), the owner of each
facility leased or subleased to TARGET has good and
marketable title to the parcel of real property free
and clear of any Security Interest other than
Security Interests that do not materially impair
TARGET's use of such facility.
(iii) TARGET has no Liability relating to its real
property lease for the property located at 0000 Xxxxxxxxx
Xxxxxx, Xxxxx 000, Xxxxxxxx, Xxxxxxxx 00000.
(m) INTELLECTUAL PROPERTY.
(i) Except as set forth on Section 4(m) of the
Disclosure Schedule, TARGET owns or has the right to use
pursuant to license, sublicense, agreement, or permission all
Intellectual Property that is material to the operation of the
businesses of TARGET as currently conducted and as currently
proposed to be conducted. Except as set forth on Section 4(m)
of the Disclosure Schedule, each such material item of
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Intellectual Property will be owned or available for use by
TARGET on identical terms and conditions immediately
subsequent to the Closing hereunder.
(ii) To the Knowledge of Sellers and of TARGET,
TARGET has never received any written charge, complaint,
claim, demand, or notice alleging any interference,
infringement, misappropriation, or violation by TARGET
(including any claim that TARGET must license or refrain from
using) of any Intellectual Property rights of any third party.
To the Knowledge of any of the Sellers and the directors and
officers of TARGET, no third party has interfered with,
infringed upon, misappropriated, or otherwise come into
conflict with any Intellectual Property rights of TARGET.
(iii) Section 4(m)(i) of the Disclosure Schedule
identifies each patent or registration which has been issued
to TARGET with respect to any of its Intellectual Property,
identifies each pending patent application or application for
registration which TARGET has made with respect to any of its
Intellectual Property, and identifies each material license,
agreement, or other permission which TARGET has granted to any
third party with respect to any of its Intellectual Property
(together with any exceptions). The Sellers have delivered to
Xxxxxx correct and complete copies of all such patents,
registrations, licenses, agreements, and permissions (as
amended to date) and have made available to Xxxxxx correct and
complete copies of all other written documentation evidencing
ownership and prosecution (if applicable) of each such item
and will on the Closing Date deliver to Xxxxxx correct and
complete copies of all such applications. Section 4(m)(i) of
the Disclosure Schedule also identifies each trade name or
unregistered trademark used by TARGET in connection with any
of its businesses. With respect to each item of Intellectual
Property required to be identified in Section 4(m)(i) of the
Disclosure Schedule:
(A) TARGET has all right, title, and
interest in and to the item, free and clear of any
Security Interest, license, or other restriction;
(B) the item is not subject to any
outstanding injunction, judgment, order, decree,
ruling, or charge;
(C) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is
pending against TARGET or, to the Knowledge of any of
the Sellers and the directors and officers of TARGET,
is threatened against TARGET which challenges the
legality, validity, enforceability, use, or ownership
of the item; and
(D) TARGET has not agreed to indemnify any
Person for or against any interference, infringement,
misappropriation, or other conflict with respect to
such item.
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(iv) Section 4(m)(iv) of the Disclosure Schedule
identifies each material item of Intellectual Property that
any third party owns and that TARGET uses pursuant to license,
sublicense, agreement, or permission. The Sellers have
delivered to Xxxxxx correct and complete copies of all such
licenses, sublicenses, agreements, and permissions (as amended
to date). With respect to each item of Intellectual Property
required to be identified in Section 4(m)(iv) of the
Disclosure Schedule:
(A) to the Knowledge of the Sellers, the
license, sublicense, agreement, or permission
covering the item is in full force and effect and
will continue to be in full force and effect on
identical terms following the consummation of the
transactions contemplated hereby (including the
assignments and assumptions referred to in Section 2
above);
(B) to the Knowledge of the Sellers, no
party to the license, sublicense, agreement, or
permission is in material breach or material default
or has repudiated such license, sublicense, agreement
or permission, and no event has occurred which with
notice or lapse of time would constitute a material
breach or material default or permit termination,
modification, or acceleration thereunder;
(C) to the Knowledge of Sellers the
underlying item of Intellectual Property is not
subject to any outstanding injunction, judgment,
order, decree, ruling, or charge;
(D) to the Knowledge of any of the Sellers
and the directors and officers (and employees with
responsibility for Intellectual Property matters) of
TARGET no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand,
is pending or is threatened which challenges the
legality, validity, or enforceability of the
underlying item of Intellectual Property; and
(E) TARGET has not granted any sublicense or
similar right with respect to the license,
sublicense, agreement, or permission.
(v) To the Knowledge of any of the Sellers and the
directors and officers of TARGET, TARGET will not interfere
with, infringe upon, misappropriate, or otherwise come into
conflict with, any Intellectual Property rights of third
parties as a result of the continued operation of its
businesses as currently conducted and as currently proposed to
be conducted.
(vi) To the Knowledge of Sellers, the Information
Technology of TARGET is "Year 2000 compliant" in that it
correctly performs all date-related operations (A) without
human intervention, other than original data entry of any
date, (B) without regard to whether any date involved in the
operation occurs in the twentieth or twenty-first centuries
and (C) without regard to the system date at the time the
calculation
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is performed. Without limiting the foregoing, such technology
must (1) accept as input (by key entry or otherwise) fully
specified dates (four-digit year, month and day of month), (2)
if two-digit year specifications are accepted as input,
correctly translate such dates without human intervention into
fully specified dates in a manner that unambiguously preserves
the user's intent in light of the application context, (3)
perform all date-related arithmetic and logical operations
correctly (for example, January 2, 2000 is greater than
December 31, 1999; January 2, 2000 minus December 31, 1999
equals two days), (4) sort date-related information in correct
chronological order, (5) otherwise correctly process (update,
maintain, report) dates, and (6) store internal, date-related
information (including all interim date-related results) in a
manner that is unambiguous (in the context of software
processing) as to century and permits all of the foregoing to
occur correctly without human intervention.
(n) TANGIBLE ASSETS.
TARGET owns or leases all facilities, machinery, equipment, and other
tangible assets necessary for the conduct of its businesses as currently
conducted and as currently proposed to be conducted. Each such tangible asset
having a net book value of greater than Five Hundred Dollars ($500) is in
reasonable operating condition and a reasonable state of repair (ordinary wear
and tear excepted), and is suitable for the purposes for which it currently is
used and currently is proposed to be used. Section 4(n) of the Disclosure
Schedule identifies each such item of tangible personal property having a net
book value of greater than Five Hundred Dollars ($500).
(o) CONTRACTS.
Section 4(o) of the Disclosure Schedule lists the following contracts
and other agreements to which TARGET is a party:
(i) any agreement (or group of related agreements)
for the lease of personal property (other than capitalized
lease obligations) to or from any Person providing for lease
payments in excess of Twenty Five Thousand Dollars ($25,000)
per annum;
(ii) other than agreements and contracts with
customers, as to which Fifty Thousand Dollars ($50,000) shall
be the disclosure threshold for Section 4(o) of the Disclosure
Schedule, any agreement (or group of related agreements) for
the purchase or sale of raw materials, commodities, supplies,
products, or other personal property, or for the furnishing or
receipt of services, the performance of which will extend over
a period of more than one year, result in a material loss to
TARGET, or involve consideration in excess of Twenty Five
Thousand Dollars ($25,000);
(iii) any agreement concerning a partnership or joint
venture;
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(iv) any agreement (or group of related agreements)
under which it has created, incurred, assumed, or guaranteed
any indebtedness for borrowed money, or any capitalized lease
obligation, in excess of Twenty Five Thousand Dollars
($25,000);
(v) any agreement concerning confidentiality or
non-competition other than standard provisions in contracts
with TARGET's customers or suppliers or employees;
(vi) any agreement with any of the Sellers and their
Affiliates (other than TARGET);
(vii) any profit sharing, stock option, stock
purchase, phantom stock, stock appreciation, deferred
compensation, severance, or other material plan or arrangement
for the benefit of its current or former directors, officers,
and employees;
(viii) any collective bargaining agreement;
(ix) any agreement for the employment of any
individual on a full-time, part-time, consulting, or other
basis providing annual compensation in excess of Twenty Five
Thousand Dollars ($25,000), or providing severance benefits in
excess of Twenty Five Thousand Dollars ($25,000), or providing
for payment in the event of a change of control of TARGET;
(x) any agreement under which it has advanced or
loaned any amount to any of its directors, officers, and
employees outside the Ordinary Course of Business;
(xi) any agreement under which the consequences of a
default or termination could have a TARGET Material Adverse
Change;
(xii) other than agreements or contracts with
customers, any other agreement (or group of related
agreements) the performance of which involves consideration in
excess of Twenty Five Thousand Dollars ($25,000); and
(xiii) any agreement which by its terms will
terminate upon a change in control of TARGET.
The Sellers have delivered to Xxxxxx a correct and complete copy of each written
agreement listed in Section 4(o) of the Disclosure Schedule (as amended to date)
and a written summary setting forth the terms and conditions of each oral
agreement referred to in Section 4(o) of the Disclosure Schedule. With respect
to each such agreement: (A) to the Knowledge of the Sellers, the agreement is in
full force and effect; (B) to the Knowledge of the Sellers, the agreement will
continue to be in full force and effect on identical terms following the
consummation of the transactions contemplated hereby; (C) to the Knowledge of
the Sellers, no party is in material
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breach or material default, and no event has occurred which with notice or lapse
of time would constitute a material breach or material default by either party
to such agreement, or permit termination, modification, or acceleration, under
the agreement; and (D) TARGET has not repudiated and to the Knowledge of the
Sellers, no other party has repudiated any provision of the agreement. Except as
listed on Section 4(o) of the Disclosure Schedule, TARGET is not a party to any
contract or agreement, relating to provision by TARGET of services, with any
federal, state or local government, governmental agency or other governmental
authority.
(p) NOTES AND ACCOUNTS RECEIVABLE.
Except as set forth on Section 4(p) of the Disclosure Schedule, all
notes and all accounts receivable of TARGET are reflected properly on their
books and records, have been recorded in accordance with GAAP, are valid
receivables subject to no setoffs or counterclaims, and are current and subject
to the reserves shown on the Most Recent Balance Sheet.
(q) POWERS OF ATTORNEY.
There are no outstanding powers of attorney executed on behalf of
TARGET.
(r) INSURANCE.
Section 4(r) of the Disclosure Schedule sets forth the following
information with respect to each insurance policy (including policies providing
property, casualty, liability, and workers' compensation coverage and bond and
surety arrangements) to which TARGET has been a party, a named insured, or
otherwise the beneficiary of coverage at any time within the past year:
(i) the name, address, and telephone number of the
agent;
(ii) the name of the insurer, the name of the
policyholder, and the name of each covered insured; and
(iii) the policy number and the period of coverage.
With respect to each such insurance policy: (A) to the Knowledge of the Sellers,
the policy is in full force and effect; (B) to the Knowledge of the Sellers,
except as otherwise set forth on Section 4(r) of the Disclosure Schedule and
subject to the acts of Xxxxxx, the policy will continue to be in full force and
effect on identical terms following the consummation of the transactions
contemplated hereby; (C) to the Knowledge of the Sellers, TARGET, and to the
Knowledge of Sellers (without duty to further investigate) no other party to the
policy is in material breach or material default (including with respect to the
payment of premiums or the giving of notices), and to the Knowledge of Sellers
no event has occurred which, with notice or the lapse of time, would constitute
such a material breach or material default by TARGET, or permit termination,
modification, or acceleration, under the policy; and (D) TARGET has not and to
the Knowledge
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of Sellers (without duty to further investigate) no other party to the policy
has repudiated any provision thereof. TARGET has been covered during the past
five (5) years by insurance in scope and amount reasonable for the businesses in
which it has engaged during the aforementioned period. Section 4(r) of the
Disclosure Schedule describes any self-insurance arrangements affecting TARGET.
TARGET has provided Xxxxxx, prior to the Closing Date, with copies of the
insurance policies listed on Section 4(r) of the Disclosure Schedule together
with copies (to the extent in TARGET'S possession or under TARGET'S control) of
any other insurance policies purchased or maintained by TARGET and relating to
the three (3) year period prior to the date of this Agreement.
(s) LITIGATION.
Section 4(s) of the Disclosure Schedule sets forth each instance in
which TARGET (i) is subject to any outstanding injunction, judgment, order,
decree, ruling, or charge or (ii) is a party or, to the Knowledge of any of the
Sellers and the directors and officers of TARGET, is threatened to be made a
party to any action, suit, proceeding, hearing, or investigation of, in, or
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator. None of the
actions, suits, proceedings, hearings, and investigations set forth in Section
4(s) of the Disclosure Schedule is likely, if adversely determined, to result in
any TARGET Material Adverse Change. None of the Sellers and the directors and
officers of TARGET has any reason to believe that any such action, suit,
proceeding, hearing, or investigation may be brought or threatened against
TARGET.
(t) EMPLOYEE BENEFITS.
(i) Section 4(t) of the Disclosure Schedule lists
each Employee Benefit Plan that TARGET maintains or to which
TARGET contributes or has any obligation to contribute.
(A) Each such Employee Benefit Plan (and
each related trust, insurance contract, or fund)
complies in form and in operation in all respects
with the applicable requirements of ERISA, the Code,
COBRA and other applicable laws, except as to such
matters where failure to comply would not result in a
TARGET Material Adverse Change.
(B) Except as set forth in Section 4(t) of
the Disclosure Schedule, all required reports and
descriptions (including Form 5500 Annual Reports,
summary annual reports, PBGC-1's, and summary plan
descriptions) have been filed and distributed
appropriately with respect to each such Employee
Benefit Plan.
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(C) All contributions (including all
employer contributions and employee salary reduction
contributions) which are due have been paid to each
such Employee Benefit Plan which is an Employee
Pension Benefit Plan and all contributions for any
period ending on or before the Closing Date which are
not yet due have been paid to each such Employee
Pension Benefit Plan or accrued in accordance with
the past custom and practice of TARGET. All premiums
or other payments for all periods ending on or before
the Closing Date have been paid with respect to each
such Employee Benefit Plan which is an Employee
Welfare Benefit Plan.
(D) Except as set forth in Section 4(t) of
the Disclosure Schedule, each Employee Benefit Plan
which is an Employee Pension Benefit Plan has
received, within the last two years, a favorable
determination letter from the Internal Revenue
Service that it is a "qualified plan," and Seller is
not aware of any facts or circumstances that could
result in the revocation of such determination
letter.
(E) The market value of assets under each
such Employee Benefit Plan which is an Employee
Pension Benefit Plan subject to Title IV of ERISA
(other than any Multiemployer Plan) equals or exceeds
the present value of all vested and nonvested
Liabilities thereunder determined in accordance with
PBGC methods, factors, and assumptions applicable to
an Employee Pension Benefit Plan terminating on the
date for determination.
(F) Except as set forth in Section 4(t) of
the Disclosure Schedule, the Sellers have delivered
to Xxxxxx correct and complete copies of the plan
documents and, to the extent applicable to such plan,
summary plan descriptions, the most recent
determination letter received from the Internal
Revenue Service, the most recent Form 5500 Annual
Report, and all related trust agreements, insurance
contracts, and other funding agreements which
implement each such Employee Benefit Plan.
(ii) With respect to each Employee Benefit Plan that
TARGET maintains or ever has maintained or to which TARGET
contributes, ever has contributed, or ever has been required
to contribute:
(A) No such Employee Benefit Plan which is
an Employee Pension Benefit Plan subject to Title IV
of ERISA (other than any Multiemployer Plan) has been
completely or partially terminated within the five
(5) year period preceding the date of this Agreement,
or been the subject of a Reportable Event as to which
notices would be required to be filed with the PBGC.
No proceeding by the PBGC to terminate any such
Employee Pension Benefit Plan (other than any
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Multiemployer Plan) has been instituted or , to the
Knowledge of any of the Sellers and the directors and
officers of TARGET or of TARGET, threatened.
(B) No Fiduciary has any Liability for
breach of fiduciary duty or any other failure to act
or comply in connection with the administration or
investment of the assets of any such Employee Benefit
Plan that could result in any material Liability to
Xxxxxx. No action, suit, proceeding, hearing, or
investigation with respect to the administration or
the investment of the assets of any such Employee
Benefit Plan (other than routine claims for benefits)
is pending or , to the Knowledge of any of the
Sellers and the directors and officers of TARGET,
threatened. None of the Sellers and the directors and
officers of TARGET has any Knowledge of any Basis for
any such action, suit, proceeding, hearing, or
investigation.
(C) TARGET has not incurred, and none of the
Sellers and the directors and officers of TARGET has
any reason to expect that TARGET will incur, any
Liability to the PBGC (other than PBGC premium
payments) or otherwise under Title IV of ERISA
(including any withdrawal liability as defined in
ERISA sec.4201) or under the Code with respect to any
such Employee Benefit Plan which is an Employee
Pension Benefit Plan, other than a Liability to pay
benefits or make contributions to such plan in
accordance with its terms.
(iii) TARGET does not contribute to, nor has ever
contributed to, nor has ever been required to contribute to
any Multiemployer Plan or has any Liability (including
withdrawal liability as defined in ERISA sec.4201) under any
Multiemployer Plan.
(iv) TARGET does not maintain or ever has maintained
and does not contribute, ever has contributed, or ever has
been required to contribute, to any Employee Welfare Benefit
Plan providing medical, health, or life insurance or other
welfare-type benefits for retired or terminated employees
(current or future), their spouses, or their dependents (other
than benefit continuation rights in accordance with COBRA).
(u) GUARANTEES.
TARGET is not a guarantor or otherwise liable for any Liability or
obligation (including indebtedness) of any other Person.
(v) ENVIRONMENTAL, HEALTH, AND SAFETY MATTERS.
Except as disclosed in Section 4(v) of the Disclosure Schedule:
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(i) TARGET has not at any time generated, used,
treated or stored Hazardous Materials in violation in any
material respect of any applicable Environmental Law, or in
any way which will hereafter require material remedial action
under any applicable Environmental law, and TARGET has not
received any notice of any such violation with respect to
Hazardous Materials;
(ii) to the Knowledge of the Sellers (without duty to
further investigate), there has been no spill, discharge,
leak, emission, injection, escape, dumping or release of any
kind onto any property owned or leased by TARGET of Hazardous
Materials, other than releases permissible under applicable
Law or allowable under applicable permits;
(iii) TARGET, its operations and any property owned
by it are in compliance in all material respects with (i) all
applicable Environmental Laws, and (ii) the requirements of
any permits issued under such laws; and
(iv) there are no pending or threatened claims
against TARGET relating to Hazardous Materials or
environmental matters affecting any property owned or leased
by TARGET.
None of the environmental circumstances, conditions or occurrences disclosed in
Section 4(v) of the Disclosure Schedule or reflected in the Financial Statements
involves or will result in any material liability to TARGET.
(w) CERTAIN BUSINESS RELATIONSHIPS WITH TARGET.
Except as contemplated or permitted by this Agreement, disclosed in
Section 4(w) of the Disclosure Statement or reflected in the Financial
Statements, none of the Sellers is involved in any business arrangement or
relationship with TARGET, and none of the Sellers owns any material asset,
tangible or intangible, which is used in the business of TARGET.
(x) DISCLOSURE.
The representations and warranties contained in this Section 4 do not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements and information contained in this
Section 4, in light of the circumstances under which they were made, not
misleading.
(y) FINANCIAL PROJECTIONS.
The Sellers have no knowledge of any fact or circumstance (other than
changes in the national or regional economy and general developments in the
United States pharmaceutical, medical device, food products or biotechnology
industry or in the consulting services industry)
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30
which Sellers reasonably believe will result in the financial projections of
TARGET for the period from Closing to December 31, 2001 (a copy of which is set
out in Exhibit 4(y) hereto) not being achieved in any material respect causing a
TARGET Material Adverse Change.
5. INTENTIONALLY LEFT BLANK.
6. POST-CLOSING COVENANTS.
The Parties agree as follows with respect to the period following the
Closing.
(a) GENERAL.
If at any time after the Closing any further action is necessary or
desirable to carry out the purposes of this Agreement, each of the Parties will
take such further action (including the execution and delivery of such further
instruments and documents) as any other Party reasonably may request, all at the
sole cost and expense of the requesting Party (unless the requesting Party is
entitled to indemnification therefor under Section 8 below). The Sellers
acknowledge and agree that, from and after the Closing, Xxxxxx will be entitled
to possession of all documents, books, records (including Tax records),
agreements, and financial data of any sort within the possession of, or under
the control of, any Seller or TARGET, relating to TARGET (other than such
documents, books, records (including Tax records), agreements and financial data
that solely relate to one or more Sellers personally), provided, however, that
for a period of six (6) years after the Closing Date, (i) Xxxxxx shall cause
TARGET to retain all of such books and records, and (ii) provide Sellers and
their representatives with reasonable access to, and the right to make copies
of, all of the books and records transferred to Xxxxxx hereunder to the extent
that such access may reasonably be required by any Seller in connection with
matters relating to or affected by the operations of TARGET prior to the Closing
Date, including, but not limited to, in connection with the preparation of the
Tax Returns pursuant to Section 9(c) of this Agreement. Such access shall be
afforded by Xxxxxx upon receipt of reasonable advance notice and during normal
business hours. Sellers shall be solely responsible for any costs or expenses
incurred by it pursuant to this Section 6(a). If Xxxxxx shall desire to dispose
of any of such books and records prior to the expiration of such six year
period, Xxxxxx shall, before such disposition, provide Sellers a reasonable
opportunity (in any event not less than thirty (30) days), at Sellers' expense,
to segregate and remove such books and records as Sellers may select.
(b) LITIGATION SUPPORT.
In the event and for so long as any Party actively is contesting or
defending against any action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand in connection with (i) any transaction contemplated
under this Agreement or (ii) any fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction on or prior to the Closing Date involving TARGET,
each of the other
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Parties will cooperate with him, her or it and his, her or its counsel in the
contest or defense, make available their personnel, and provide such testimony
and access to their books and records as shall be reasonably necessary in
connection with the contest or defense, all at the sole cost and expense of the
contesting or defending Party (unless the contesting or defending Party is
entitled to indemnification therefor under Section 8 below).
(c) TRANSITION.
None of the Sellers will take any action that is designed or intended
to have the effect of discouraging any lessor, licensor, customer, supplier, or
other business associate of TARGET from maintaining the same business
relationships with TARGET after the Closing as it maintained with TARGET prior
to the Closing. Each of the Sellers will refer all customer inquiries relating
to the businesses of TARGET to Xxxxxx from and after the Closing.
(d) CONFIDENTIALITY.
Each of the Sellers (or if the Closing does not occur, Xxxxxx) will
treat and hold as confidential all of the Confidential Information of TARGET,
refrain from using any of the Confidential Information of TARGET (other than in
the case of Sellers, Confidential Information that solely relates to the Sellers
personally) except in connection with this Agreement and prior to the Closing
Date, by Sellers, in connection with the business of TARGET. Sellers will if the
Closing occurs deliver promptly to Xxxxxx or destroy, at the request of Xxxxxx,
all copies of the Confidential Information of TARGET which are in his, her or
its possession. If the Closing does not occur, Xxxxxx will deliver promptly to
TARGET or destroy, at the request of TARGET, all copies of the Confidential
Information of TARGET, provided, however, that Xxxxxx'x counsel may maintain a
single copy of all Confidential Information in confidence in its legal files
notwithstanding any of the foregoing, so long as Xxxxxx does not and causes such
counsel not to disclose such information to any third party or use such
information for any purpose. In the event that any of the Sellers (if a Closing
occurs) or Xxxxxx (if a Closing does not occur) is requested or required (by
oral question or request for information or documents in any legal proceeding,
interrogatory, subpoena, civil investigative demand, or similar process) to
disclose any Confidential Information of TARGET, that Seller will notify Xxxxxx
or Xxxxxx will notify TARGET, as the case may be, promptly of the request or
requirement so that the other Person may seek an appropriate protective order or
waive compliance with the provisions of this Section 6(d). If, in the absence of
a protective order or the receipt of a waiver hereunder, a Person subject to
confidentiality obligations hereunder is compelled to disclose such Confidential
Information of TARGET, such Person may disclose the Confidential Information to
the tribunal; PROVIDED, HOWEVER, that the disclosing Person shall use his, her
or its reasonable best efforts to obtain, such reasonable request of the other
Person and an order or other assurance that confidential treatment will be
accorded to such portion of the Confidential Information required to be
disclosed as the other Person shall designate.
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(e) XXXXXX SHARES.
Each Seller hereby covenants and agrees that, without the prior written
consent of Xxxxxx, he, she or it may not sell, assign, convey or otherwise
transfer any of the Xxxxxx Shares received hereunder during a period of ninety
(90) days beginning on the Closing Date ("Lockout Period"). Each Xxxxxx Share
will be imprinted with a legend substantially in the following form: "The shares
evidenced by this certificate were originally issued on February 27, 2001, and
have not been registered under the Securities Act of 1933, as amended. The
transfer of the shares evidenced by this certificate is subject to the
restrictions set forth in Section 6 of the Stock Purchase Agreement dated
February 27, 2001. The issuer of the shares evidenced by this certificate will
furnish a copy of these provisions to the holder hereof without charge upon
written request.
Each holder desiring to transfer a Xxxxxx Share first must furnish Kendle with
(i) a written opinion reasonably satisfactory to Xxxxxx in form and substance
from counsel reasonably satisfactory to Xxxxxx by reason of experience to the
effect that the holder may transfer Xxxxxx Shares as desired without
registration under the Securities Act and (ii) a written undertaking executed by
the desired transferee reasonably satisfactory to Xxxxxx in form and substance
agreeing to be bound by the restrictions on transfer contained herein. The
provisions of this paragraph shall not be applicable to a transfer of a Xxxxxx
Share which has been registered pursuant to the terms of the Registration Rights
Agreement.
(f) OPENING BALANCE SHEET AUDIT.
Pre-Closing, Xxxxxx'x independent public auditors ("Xxxxxx Auditors")
shall audit the Opening Balance Sheet provided by Sellers in accordance with
Section 7(a)(xx) below and deliver to Sellers and Xxxxxx no more than sixty (60)
days after the Closing a copy of their report thereof (the "Report"). Should the
Xxxxxx Auditors determine that TARGET's net asset amount on the Closing Date
(determined in accordance with GAAP and TARGET's past practices) (the amount so
determined being hereinafter referred to as the "Xxxxxx Net Asset Amount") is
less than Eight Hundred Thousand Dollars ($800,000), then Sellers shall pay to
Xxxxxx, on a dollar-for-dollar basis and without giving effect to the provisions
of Section 8(b)(iv) hereof, the difference between the Xxxxxx Net Asset Amount
and $800,000 within thirty (30) days after receiving such Report. Should the
Xxxxxx Auditors determine that TARGET'S net asset amount on the Closing Date is
greater than Eight Hundred Thousand Dollars ($800,000), then Xxxxxx shall pay to
Sellers, on a dollar-for-dollar basis, the difference between the Xxxxxx Net
Asset Amount and $800,000 within thirty (30) days after receiving such Report.
In determining the Xxxxxx Net Asset Amount, the Xxxxxx Auditors shall take into
account any notes or accounts receivable on TARGET's books and records as of the
Closing Date that become uncollectible after the Closing Date and any reserve
shown on the Most Recent Balance Sheet that remains after giving effect to notes
or accounts receivable which are on the books and records of TARGET as of the
Closing Date and collected after the Closing and notes and accounts
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receivable (if any) which are on the books and records of TARGET as of the
Closing Date that become uncollectible after the Closing Date. Notwithstanding
the provisions of this Section 6(f) to the contrary, if the Sellers dispute the
Xxxxxx Net Asset Amount, and the Sellers deliver to Xxxxxx within fifteen (15)
days of their receipt of the Report a letter specifying in reasonable detail the
Sellers' objections to the determination of the Xxxxxx Net Asset Amount, (a) the
parties shall try to in good faith resolve the matters set forth in Sellers'
letter and if the parties fail to reach an agreement in good faith on or before
the fifteenth (15th) day after receipt by Xxxxxx of Sellers' letter then the
dispute shall be referred for final binding resolution to a mutually acceptable
partner at a mutually acceptable firm of certified public accountants
("Independent Auditors") (whose determination shall be made in accordance with
GAAP and TARGET's past practices and shall be conclusive and binding on the
parties), and (b) no payment shall be due hereunder on the 30th day following
receipt of the Report, but the Sellers shall pay to Xxxxxx or Xxxxxx shall pay
to Sellers, as appropriate, the difference, if any, between the Xxxxxx Net Asset
Amount, as modified, by the final determination of the Independent Auditors, and
$800,000 within thirty (30) days of such final determination. If the dispute is
resolved by the Independent Auditors in favor of the Sellers, Kendle shall pay
the costs and fees charged by the Independent Auditors in connection with such
resolution; if the dispute is resolved by the Independent Auditors in favor of
Xxxxxx, the Sellers shall pay the costs and fees charged by the Independent
Auditors in connection with such resolution.
(g) KEY MAN LIFE INSURANCE.
If either of the Insider Shareholder's employment is terminated for any
reason prior to the second anniversary of the Closing Date and Xxxxxx has
obtained Key Man Life Insurance for such Inside Shareholder, Xxxxxx agrees that
it will, at such Insider Shareholder's option, either (i) cancel the Key Man
Life Insurance policy under which it has paid premiums or (ii) transfer such
policy to such Insider Shareholder with no further obligation on the part of
Xxxxxx to make any premium payments.
(h) LIABILITIES IN CONNECTION WITH TERMINATION OF 401(k)
PLAN
In connection with the termination of the 401(k) Plan (defined in
Section 7(a)(xv) below) Xxxxxx covenants that it will bear all costs and
expenses required to terminate the 401(k) Plan and will assume any Liabilities
that arise after the Closing in connection with the 401(k) Plan to the extent
such Liabilities do not arise as a result of a breach by Sellers of the
representations and warranties concerning TARGET contained in Section 4(t) of
this Agreement.
7. CONDITIONS TO OBLIGATION TO CLOSE.
(a) CONDITIONS TO OBLIGATION OF XXXXXX.
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The obligation of Xxxxxx to consummate the transactions to be performed
by it in connection with the Closing is subject to satisfaction of the following
conditions:
(i) the representations and warranties set forth in
Section 3(a) and Section 4 above shall be true and correct in
all material respects (other than representations and
warranties having materiality qualifiers, which shall be true
and correct in all respects) at and as of the Closing Date;
(ii) the Sellers shall have performed and complied
with all of their covenants hereunder in all material respects
through the Closing;
(iii) no action, suit, or proceeding shall be pending
or threatened before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would
(A) prevent consummation of any of the transactions
contemplated by this Agreement, (B) cause any of the
transactions contemplated by this Agreement to be rescinded
following consummation, (C) affect adversely the right of
Xxxxxx to own TARGET Shares and to control TARGET, or (D)
affect adversely the right of TARGET to own its assets and to
operate its businesses (and no such injunction, judgment,
order, decree, ruling, or charge shall be in effect);
(iv) the Sellers shall have delivered to Xxxxxx a
certificate to the effect that each of the conditions
specified above in Section 7(a)(i)-(iii) is satisfied in all
respects;
(v) [Intentionally Left Blank];
(vi) Xxxxxx'x bank lenders shall have given their
written consent to the transaction contemplated by this
Agreement;
(vii) Xxxxxxx Xxxxxxx and Xxxxxxx Xxxxxxx shall have
entered into Employment Agreements substantially in the form
of Exhibit 7(a)(vii) hereto (the "Employment Agreements");
(viii) each of the Sellers shall have executed and
delivered a release in the form of Exhibit 7(a)(viii) hereto
(the "Releases");
(ix) each of the Sellers shall have executed and
delivered a Non-Competition and Non-Disclosure Covenant in the
form of Exhibit 7(a)(ix) hereto (the "Covenants");
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(x) each of the Sellers shall have executed and
delivered an Agreement to Preserve Goodwill in the form of
Exhibit 7(a)(x) hereto ("Agreement to Preserve Goodwill").
(xi) no material adverse change in the business,
assets, liabilities, income, financial condition, operations,
results of operations or business prospects of TARGET ("TARGET
Material Adverse Change") shall have occurred since October
31, 2000 (the parties expressly agree and acknowledge that
TARGET shall prior to Closing extend to certain of its
employees (but not pay) and accrue for on its balance sheet,
certain discretionary one-time bonuses set forth on Section
4(h) of the Disclosure Schedule and the bonuses paid to the
Sellers (other than Xxxxxxx Xxxxxxx) and that such accrual and
bonuses shall not be deemed to constitute for purposes of this
Section 7(a)(xi), a TARGET Material Adverse Change); provided,
however, if a TARGET Material Adverse Change shall have
occurred, Xxxxxx and the Sellers shall negotiate in good faith
with respect to a reasonable adjustment of the Purchase Price.
If agreement is not reached with respect to such an
adjustment, Xxxxxx may terminate this Agreement for failure of
a condition precedent;
(xii) the Parties and TARGET shall have received all
authorizations, consents, and approvals of governments and
governmental agencies referred to in Section 3(a)(ii), Section
3(b)(ii) and Section 4(c) above;
(xiii) Xxxxxx shall have received from Xxxxxx,
Xxxxxxx & Xxxxxxx counsel to the Sellers an opinion in form
and substance as set forth in Exhibit 7(a)(xiii) attached
hereto, addressed to Xxxxxx, and dated as of the Closing Date
(which opinion assumes that the laws of Maryland are the same
as the laws of New York);
(xiv) Xxxxxx shall have received the resignations,
effective as of the Closing, of each director and officer of
TARGET other than those whom Xxxxxx shall have specified in
writing at least five business days prior to the Closing;
(xv) TARGET shall adopt resolutions to terminate its
401(k) Plan (the "401(k) Plan") immediately prior to the
Closing Date and Xxxxxx shall receive from TARGET evidence
that TARGET's Board of Directors has adopted resolutions to
terminate the 401(k) Plan effective as of the day immediately
preceding the Closing Date;
(xvi) Intentionally Left Blank;
(xvii) Intentionally Left Blank;
(xviii) each of the Sellers shall have executed and
delivered the Escrow Agreement;
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(xix) all actions required by the terms hereof to be
taken by the Sellers in connection with consummation of the
transactions contemplated hereby and all certificates,
opinions, instruments, and other documents necessary or
reasonably required to effect the transactions contemplated
hereby will be reasonably satisfactory in form and substance
to Xxxxxx.
(xx) Sellers shall have delivered an estimated
unaudited balance sheet (the "Opening Balance Sheet") for the
period ended February 28, 2001 which reflects a minimum net
asset amount of Eight Hundred Thousand Dollars ($800,000).
Xxxxxx may waive any condition specified in this Section 7(a) if it executes a
writing so stating at or prior to the Closing.
(b) CONDITIONS TO OBLIGATION OF THE SELLERS.
The obligation of the Sellers to consummate the transactions to be
performed by them in connection with the Closing is subject to satisfaction of
the following conditions:
(i) the representations and warranties set forth in
Section 3(b) above shall be true and correct in all material
respects (other than representations and warranties having
materiality qualifiers, which shall be true and correct in all
respects) at and as of the Closing Date;
(ii) Xxxxxx shall have performed and complied with
all of its covenants hereunder in all material respects
through the Closing;
(iii) no action, suit, or proceeding shall be pending
or threatened before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would
(A) prevent consummation of any of the transactions
contemplated by this Agreement or (B) cause any of the
transactions contemplated by this Agreement to be rescinded
following consummation (and no such injunction, judgment,
order, decree, ruling, or charge shall be in effect);
(iv) Xxxxxx shall have delivered to the Sellers a
certificate to the effect that each of the conditions
specified above in Section 7(b)(i)-(iii) is satisfied in all
respects;
(v) Xxxxxx shall have entered into Employment
Agreements with Xxxxxxx Xxxxxxx and Xxxxxxx Xxxxxxx in the
form of Exhibit 7(a)(vii) hereto;
(vi) Xxxxxx shall have executed and delivered the
Registration Rights Agreement in the form of Exhibit 7(b)(vi)
hereto;
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(vii) no material adverse change in the business,
assets, liabilities, income, financial condition, operations,
results of operations or business prospects of Xxxxxx ("Xxxxxx
Material Adverse Change") shall have occurred since the date
of the latest Xxxxxx SEC Report; provided, however, that if a
Xxxxxx Material Adverse Change shall have occurred, the Seller
and Xxxxxx shall negotiate in good faith with respect to a
reasonable adjustment to the Purchase Price. If agreement is
not reached with respect to such an adjustment, the Sellers
may terminate this Agreement for failure of a condition
precedent;
(viii) Intentionally Left Blank.
(ix) the Parties and TARGET shall have received all
authorizations, consents, and approvals of governments and
governmental agencies referred to in Section 3(a)(ii), Section
3(b)(ii), and Section 4(c) above;
(x) the Sellers shall have received from counsel to
Xxxxxx an opinion in form and substance as set forth in
Exhibit 7(b)(x) attached hereto, addressed to the Sellers, and
dated as of the Closing Date (which opinion assumes that the
laws of Ohio are the same as the laws of Maryland);
(xi) Xxxxxx and Fifth Third Bank shall have executed
and delivered the Escrow Agreement;
(xii) all actions required by the terms hereof to be
taken by Xxxxxx in connection with consummation of the
transactions contemplated hereby and all certificates,
opinions, instruments, and other documents necessary or
reasonably required hereunder to effect the transactions
contemplated hereby will be reasonably satisfactory in form
and substance to the Sellers; and
(xiii) the Sellers shall have been released and
discharged from and with respect to any of their obligations,
debts, agreements, Guarantees and promises under the Sellers'
personal Guarantees of the obligations of TARGET (the
"Guarantees"). In the event that one or more of the Guarantees
have not been released and discharged by the Closing then the
Sellers agree to waive this condition and complete the Closing
so long as TARGET agrees in writing to indemnify and hold the
Sellers harmless from all cost, liability and expense related
to such Guarantees.
The Sellers may waive any condition specified in this Section 7(b) if they
execute a writing so stating at or prior to the Closing.
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8. REMEDIES FOR BREACHES OF THIS AGREEMENT.
(a) SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
All of the representations and warranties of the Sellers contained in
Sections 4(a)-4(j), Sections 4(l)-4(u) and Sections 4(w)-4(y) above shall
survive the Closing hereunder and continue in full force and effect through and
until two (2) years following the Closing. All of the representations and
warranties of Xxxxxx contained in Section 3(b) above shall survive the Closing
hereunder and continue in full force and effect through and until two (2) years
following the Closing with the exception of Section 3(b)(iv) and 3(b)(v), which
shall survive the Closing and continue in full force and effect through and
until four (4) years following the Closing. All of the representations and
warranties of the Sellers contained in this Agreement in Section 3(a) shall
survive the Closing and continue in full force and effect forever thereafter
(subject to any applicable statute of limitations). All of the representations
and warranties of the Sellers contained in this Agreement in Section 4(v) above
shall survive the Closing hereunder and continue in full force and effect
through and until ten (10) years following the Closing and all of the
representations and warranties in Section 4(k) of this Agreement shall survive
Closing hereunder and continue in full force and effect through and until six
(6) years following the Closing.
(b) INDEMNIFICATION PROVISIONS FOR BENEFIT OF XXXXXX
(i) In the event any of the Sellers breaches (or in
the event any third party alleges facts that, if true, would
mean any of the Sellers has breached) any of their
representations, warranties, and covenants contained herein
(other than the covenants in Section 2(a) above and the
representations and warranties in Section 3(a) above), and, if
there is an applicable survival period pursuant to Section
8(a) above, provided that Xxxxxx makes a written claim for
indemnification against any of the Sellers pursuant to Section
11(h) below within such survival period, then each of the
Sellers agrees, on a joint and several basis, to indemnify
Xxxxxx from and against the entirety of any Adverse
Consequences Xxxxxx may suffer through and after the date of
the claim for indemnification (including any Adverse
Consequences Xxxxxx may suffer after the end of any applicable
survival period) resulting from, arising out of, relating to,
in the nature of, or caused by the breach (or the alleged
breach).
(ii) In the event any Seller breaches (or in the
event any third party alleges facts that, if true, would mean
any of the Sellers has breached) any of his, her or its
covenants in Section 2(a) above or any of his, her or its
representations and warranties in Section 3(a) above, and, if
there is an applicable survival period pursuant to Section
8(a) above, provided that Xxxxxx makes a written claim for
indemnification against the Seller pursuant to Section 11(h)
below within such survival period, then the Seller agrees to
indemnify Xxxxxx from and against any Adverse Consequences
Xxxxxx may suffer
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through and after the date of the claim for indemnification
(including any Adverse Consequences Xxxxxx may suffer after
the end of any applicable survival period) resulting from,
arising out of, relating to, or caused by the breach (or the
alleged breach).
(iii) The maximum aggregate liability of the Sellers
for indemnification under Section 8(b)(i), Section 8(b)(ii),
Section 8(g) or any other provision of this Agreement or
otherwise in connection with the transactions contemplated by
this Agreement, shall be limited to seventy-five percent (75%)
of the Purchase Price (the "Maximum Indemnification
Obligation").
(iv) In no event shall Sellers be obligated to
indemnify Xxxxxx under Section 8(b)(i) or Section 8(b)(ii)
unless and until the aggregate Adverse Consequences for which
Xxxxxx would otherwise be entitled to indemnification under
either Section 8(b)(i) or Section 8(b)(ii), or both, exceeds
One Hundred Thousand and 00/100 Dollars ($100,000). Once the
aggregate Adverse Consequences, for which Xxxxxx would
otherwise be entitled to indemnification under either Section
8(b)(i) or Section 8(b)(ii), or both, exceeds One Hundred
Thousand and 00/100 Dollars ($100,000) of Adverse
Consequences, Xxxxxx and Sellers shall bear the next Fifty
Thousand and 00/100 Dollars ($50,000) of Adverse Consequences
on a fifty percent (50%)/fifty percent (50%) basis. Once the
aggregate Adverse Consequences for which Xxxxxx would
otherwise be entitled to indemnification under either Section
8(b)(i) or Section 8(b)(ii), or both, exceeds One Hundred
Fifty Thousand and 00/100 Dollars ($150,000), Xxxxxx shall be
entitled to indemnification for all Adverse Consequences in
excess of One Hundred Fifty Thousand and 00/100 ($150,000),
regardless of dollar value, subject to the limitation of the
Maximum Indemnification Obligation.
(v) Xxxxxx shall satisfy Sellers' indemnification
obligations first by recourse to the Escrow Assets held by the
Fifth Third Bank, as escrow agent, pursuant to the Escrow
Agreement (if indemnification obligations are satisfied out of
the Escrow Shares, the Escrow Shares shall be valued at the
then prevailing market price calculated as the average closing
price of Xxxxxx Shares for the twenty (20) trading days
preceding the five (5) trading days before the date on which
the amount of the indemnification obligations hereunder is
established), and then, and only to the extent, that any given
claim or claims being asserted in good faith by Xxxxxx could
not be satisfied out of the Escrow Assets being held under the
Escrow Agreement, Xxxxxx may satisfy Sellers' indemnification
obligations by direct recourse against the Sellers, provided,
however, that with respect to Sellers' indemnification
obligations under Section 2(a) and 3(a), if such obligations
are satisfied by recourse pursuant to the terms of this
Section 8(b)(v) to the Escrow Assets, only the breaching
Seller's or Sellers' prorated portion of the Escrow Assets may
be used to satisfy such indemnification obligations.
(c) INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE
SELLERS.
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In the event Xxxxxx breaches any of its representations, warranties,
and covenants contained herein (or in the event any third party alleges facts
that, if true, would mean Xxxxxx has breached), and, if there is an applicable
survival period pursuant to Section 8(a) above, provided that any of the Sellers
makes a written claim for indemnification against Xxxxxx pursuant to Section
11(h) below within such survival period, then Xxxxxx agrees to indemnify each of
the Sellers from and against the entirety of any Adverse Consequences the Seller
may suffer through and after the date of the claim for indemnification
(including any Adverse Consequences the Seller may suffer after the end of any
applicable survival period) resulting from, arising out of, relating to, in the
nature of, or caused by the breach (or the alleged breach). Xxxxxx shall also
indemnify any Seller from and against the entirety of any Adverse Consequences
such Seller may suffer as a result of any obligations or liability of TARGET or
any TARGET Subsidiary (other than this Agreement) guaranteed by such Seller.
(d) MATTERS INVOLVING THIRD PARTIES.
(i) If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a "Third
Party Claim") which may give rise to a claim for
indemnification against any other Party (the "Indemnifying
Party") under this Section 8, then the Indemnified Party shall
promptly notify each Indemnifying Party thereof in writing;
PROVIDED, HOWEVER, that no delay on the part of the
Indemnified Party in notifying any Indemnifying Party shall
relieve the Indemnifying Party from any obligation hereunder
unless (and then solely to the extent) the Indemnifying Party
thereby is prejudiced.
(ii) Any Indemnifying Party will have the right to
defend the Indemnified Party against the Third Party Claim
with counsel of its choice reasonably satisfactory to the
Indemnified Party so long as (A) the Indemnifying Party
notifies the Indemnified Party in writing within 15 days after
the Indemnified Party has given notice of the Third Party
Claim that the Indemnifying Party will defend the Indemnified
Party from and against the Third Party Claim, (B) the
Indemnifying Party provides the Indemnified Party with
reasonably acceptable evidence that the Indemnifying Party
will have the financial resources to defend against the Third
Party Claim and fulfill any related indemnification
obligations hereunder, (C) the Third Party Claim involves only
money damages and does not seek an injunction or other
equitable relief, (D) settlement of, or an adverse judgment
with respect to, the Third Party Claim is not reasonably
likely to establish a precedential custom or practice
materially adverse to the continuing business interests of the
Indemnified Party, and (E) the Indemnifying Party conducts the
defense of the Third Party Claim actively and diligently.
(iii) So long as the Indemnifying Party is conducting
the defense of the Third Party Claim in accordance with
Section 8(d)(ii) above, (A) the Indemnified Party may retain
separate co-counsel at its sole cost and expense and
participate in the defense
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of the Third Party Claim, (B) the Indemnified Party will not
consent to the entry of any judgment or enter into any
settlement with respect to the Third Party Claim without the
prior written consent of the Indemnifying Party (not to be
withheld unreasonably), and (C) the Indemnifying Party will
not consent to the entry of any judgment or enter into any
settlement with respect to the Third Party Claim without the
prior written consent of the Indemnified Party (not to be
withheld unreasonably).
(iv) In the event any of the conditions in Section
8(d)(ii) above is or becomes unsatisfied, however, (A) the
Indemnified Party may, except in the case of a condition set
forth in Section 8(d)(ii)(C) and Section 8(d)(ii)(D) (in which
case the provisions of Section 8(d)(iii) shall apply), defend
against, and consent to the entry of any judgment or enter
into any settlement with respect to, the Third Party Claim in
any manner it reasonably may deem commercially appropriate
(and the Indemnified Party need not consult with, or obtain
any consent from, any Indemnifying Party in connection
therewith), (B) the Indemnifying Parties will (unless they are
disputing that indemnification is required) reimburse the
Indemnified Party promptly and periodically for the reasonable
costs of defending against the Third Party Claim (including
reasonable attorneys' fees and expenses), and (C) the
Indemnifying Parties will remain responsible for any Adverse
Consequences the Indemnified Party may suffer resulting from,
arising out of, relating to, in the nature of, or caused by
the Third Party Claim to the fullest extent provided in this
Section 8.
(e) DETERMINATION OF ADVERSE CONSEQUENCES.
With respect to all expenses directly incurred and fees directly paid
by Xxxxxx only, which are indemnifiable Adverse Consequences under this Section
8, the Parties shall take into account the time cost of money (using the Prime
Rate as then reported in the Midwest edition of the WALL STREET JOURNAL as the
interest rate) in determining Adverse Consequences for purposes of this Section
8. All indemnification payments under this Section 8 shall be deemed adjustments
to the Purchase Price.
(f) OTHER MATTERS.
Notwithstanding any of the provisions of this Section 8 to the
contrary, Sellers jointly and severally covenant that they shall (i) bear on a
dollar-for-dollar, first dollar basis all costs, obligations and expenses
(including (without limitation) reasonable attorneys' fees and filing charges)
incurred or associated with the dissolution and winding up of the affairs of AAC
Consulting Limited and all Adverse Consequences arising therefrom; (ii)
reimburse Xxxxxx on a dollar-for-dollar, first dollar basis for all Adverse
Consequences arising from any claims made in connection with the matters
disclosed on Disclosure Schedule Section 4(s) relating to DD Products, Inc.; and
(iii) reimburse Xxxxxx on a dollar-for-dollar, first dollar basis for all
Adverse Consequences it may incur in connection with authorizing or qualifying
TARGET to conduct
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business in any of the following jurisdictions: California, Delaware, District
of Columbia, Florida, Louisiana, Massachusetts, Michigan, New Jersey, Xxxxx
Xxxxxxxx, Xxxxxxxxxxxx, Xxxxxx Xxxx, Xxxxx and Virginia. The obligations of
Sellers set forth in this Section 8(f) shall not be subject to any of the
limitations provided elsewhere in Section 8.
(g) SOLE REMEDY.
Xxxxxx and the Sellers acknowledge and agree that the foregoing
indemnification provisions of this Section 8 are the Sellers', and Xxxxxx'x sole
and exclusive remedy against Xxxxxx and each Seller, as the case may be, for any
claim with respect to a breach of a representation or warranty by the Sellers or
Xxxxxx. Notwithstanding the foregoing, the limitations contained in this Section
8(g) shall not apply and the Parties shall have their full rights and remedies
at law and equity in the event of any claim or allegation of common law fraud
and also as provided in the Covenants and the Agreements to Preserve Goodwill.
(h) OTHER INDEMNIFICATION PROVISIONS.
The amount of Adverse Consequences for which indemnification is
provided under this Section 8 shall be net of (i) any net amounts recovered by
the Indemnified Party pursuant to any indemnification by or indemnification
agreement with any third party, after taking into account all expenses thereof,
(ii) any net insurance proceeds or other cash receipts or sources of
reimbursement actually received as an offset against such Adverse Consequences
(and no right of subrogation shall accrue to any insurer or third party
indemnitor hereunder), after taking into account all expenses thereof, and (iii)
an amount equal to the net present value of the Tax benefit, if any,
attributable to such Adverse Consequences, after taking into account all
expenses thereof. The Indemnified Party agrees that with respect to any Adverse
Consequences for which the Indemnified Party gets payment from the Indemnifying
Party and for which indemnification is available under an agreement between the
Indemnified Party and a third party or under the insurance policies of the
Indemnified Party, the Indemnifying Party shall have the right to directly
pursue and bring appropriate claims against such additional sources of
indemnification and the Indemnified Party shall fully and in good faith
cooperate (including by making available to the Indemnifying Party all documents
pursuant to the terms of which such additional indemnification is available)
with the Indemnifying Party in its efforts thereto. If the amount to be netted
hereunder from any payment required under Section 8 is determined after payment
by the Indemnifying Party hereunder of any amount otherwise required to be paid
to an Indemnified Party under this Section 8, the Indemnified Party shall repay
to the Indemnifying Party, promptly after such determination, any amount that
the Indemnifying Party would not have had to pay pursuant to this Section 8 had
such determination been made at the time of such payment. The increased cost of
any insurance premiums and the cost of pursuing any Tax benefit and/or insurance
recovery shall be taken into account in determining the amount offsetting
Adverse Consequences hereunder.
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9. TAX COVENANTS.
(a) VALUATION OF XXXXXX SHARES.
For tax purposes, the fair market value of the Xxxxxx common stock
transferred under Section 2 shall be the mean between the highest and lowest
selling price of such shares on the Closing Date respectively, as determined by
the Nasdaq National Market System.
(b) PAYMENT OF TAXES AND FEES.
The Sellers shall pay or reserve for payment when due out of the
Purchase Price (a) any documentary, stamp, sales, excise, transfer or other
taxes (including income Taxes) payable in respect of the transfer of the TARGET
shares and (b) all fees and charges that were incurred by the Sellers in
connection with the transactions contemplated hereby. The Sellers shall cause to
be prepared and filed any and all returns and other filings relating to any such
Taxes.
(c) TAXES - SELLERS.
The Sellers shall cause to be timely (giving effect to any extensions
timely filed) and properly prepared, and Xxxxxx shall cause to be executed and
timely filed (provided such income Tax Return has been timely and properly
prepared), all income Tax Returns of TARGET relating to all taxable periods of
TARGET ending on or before the Closing Date, and the Sellers shall be
responsible for the timely payment of all Taxes to which such Returns relate.
All such Returns shall be prepared, and all elections with respect to such
Returns shall be made, in a manner consistent with past practice with respect to
TARGET and at the expense of the Sellers. The Sellers shall not amend any
previously filed Tax Return without the prior written consent of Xxxxxx, which
consent shall not be unreasonably withheld or delayed.
(d) OPTION TO RETURN CASH OR CLOSING SHARES.
Both Xxxxxx and the Sellers acknowledge that Section 483 of the Code,
Interest on Certain Deferred Payments, will apply to any payments made under
this Agreement due more than six months after the Closing Date.
10. NON-COMPETITION COVENANT.
(a) BASIC COVENANT.
The Sellers agree that for a period of four years from and after the
Closing Date (the "Non-Competition Term") they shall not, directly or
indirectly, as an officer, director, employee, consultant, principal, partner,
member, shareholder or otherwise, except on behalf of Xxxxxx or its subsidiaries
or assigns or for its or their benefit: (i) engage in the business of a contract
research organization (within the meaning of 21 CFR Part 312.3), providing
clinical research and
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drug development services to pharmaceutical and biotechnology companies (the
"Business"), or engage in the business of providing regulatory consulting
services to pharmaceutical, medical device and food products companies ("AAC
Business"), in any state of the United States of America or in any other
jurisdiction or country outside the United States of America: (x) in which
TARGET or any of its subsidiaries or affiliates conducted business or had
operations immediately prior to consummation of the transactions contemplated by
this Agreement; or (y) in which TARGET or Xxxxxx, at any time during the
Non-Competition Term, engages in the Business; (ii) solicit or accept orders
that relate specifically to the Business from any customer or active potential
customer of Target existing on the Closing Date; or (iii) hire, solicit or
endeavor to entice away from TARGET or Xxxxxx any person who is or was employed
by TARGET or Xxxxxx at any time during the Non-Competition Term or approach any
such person for any such purpose or authorize or knowingly cooperate with the
taking of any such action by any other individual, person or entity; provided,
however, that the parties acknowledge and agree that the Sellers shall be able
to accept employment with a pharmaceutical, biotechnology, medical device or
food products company and no violation of this Section 10 shall have occurred if
any Seller accepts employment with and/or becomes an employee of a
pharmaceutical, biotechnology, medical device or food products company to the
extent that such Seller does not provide regulatory consultant services for
third parties (I.E., parties other than the Seller's pharmaceutical,
biotechnology, medical device or food products company employer) (the
obligations contained in this Section 10(a) being hereinafter referred to as the
"Non-Competition Covenant").
(b) REMEDIES FOR BREACH OF NON-COMPETITION COVENANT.
The Sellers hereby agree and acknowledge that the restrictions
contained in the Non-Competition Covenant are reasonable and necessary to
protect the legitimate interests of Xxxxxx and its Affiliates and that Xxxxxx
would not enter into this Agreement without such Non-Competition Covenant. If
Xxxxxx believes that the Sellers are in breach of their obligations set forth in
Section 10(a), then Xxxxxx shall deliver notice of such breach to Sellers, and
Sellers shall have thirty (30) days to cure such breach or such longer time as
may be reasonably necessary to cure such breach provided Sellers are diligently
pursuing such cure and does not exceed sixty (60) days. The Parties agree that
if the Sellers breach their Non-Competition Covenant and do not cure such breach
pursuant to the provisions of the foregoing sentence, continuing and irreparable
harm will be caused to Xxxxxx thereby and that Xxxxxx shall be entitled to
obtain injunctive or other equitable relief to restrain any breach or threatened
breach or otherwise to specifically enforce the provisions of Section 10(a) of
this Agreement. The Parties further agree that if an arbitrator shall have made
a final, binding and non-appealable ruling that such a breach has occurred (or
if a court of competent jurisdiction shall have so found, and the time for
appeal shall have expired and no appeal shall be pending), Xxxxxx shall, be
entitled to liquidated damages as set forth below in Section 10(c) below,
provided, however, that this provision shall apply with respect to a breach by
an Inside Shareholder only if the liquidated damages provision in Section 4 of
such Seller's Non-Competition and Non-Disclosure Agreement is not also applied.
The Parties hereby instruct any arbitrator or court that may find any provision
of this
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Non-Competition Covenant to be unenforceable because it is over broad or in
violation of public policy to modify this Non-Competition Covenant to the
minimum extent needed to permit enforcement thereof.
(c) LIQUIDATED DAMAGES.
If an arbitrator shall have made a final binding and non-appealable
ruling that either of the Inside Shareholders has violated the restrictions set
forth in Section 10(a) and not cured such breach pursuant to the terms of
Section 10(b) hereof (or if a court of competent jurisdiction shall have so
found, and the time for appeal shall have expired and no appeal shall be
pending), the breaching Inside Shareholder shall pay Xxxxxx liquidated damages
in the amount of Three Million Dollars ($3,000,000.00) for any breach or
breaches, provided, however, that in no event shall the maximum aggregate amount
of damages recoverable under this Section for any and all breaches exceed Six
Million Dollars ($6,000,000).
11. MISCELLANEOUS.
(a) NATURE OF CERTAIN OBLIGATIONS.
(i) The covenants of each of the Sellers in Section
2(a) above concerning the sale of his, her or its TARGET
Shares to Xxxxxx and the representations and warranties of
each of the Sellers in Section 3(a) above concerning the
transaction are several obligations. This means that the
particular Seller making the representation, warranty, or
covenant will be solely responsible to the extent provided in
Section 8 above for any Adverse Consequences Xxxxxx may suffer
as a result of any breach thereof.
(ii) The remainder of the representations,
warranties, and covenants in this Agreement are joint and
several obligations. This means that each Seller will be
responsible to the extent provided in Section 8 above for the
entirety of any Adverse Consequences Xxxxxx may suffer as a
result of any breach thereof.
(b) PRESS RELEASES AND PUBLIC ANNOUNCEMENTS.
No Party shall issue any press release or make any public announcement
relating to the subject matter of this Agreement prior to the Closing without
the prior written approval of Xxxxxx and the Sellers (which approval shall not
be unreasonably withheld or delayed); PROVIDED, HOWEVER, that any Party may make
any public disclosure it believes in good faith is required by applicable law or
any listing or trading agreement concerning its publicly-traded securities (in
which case the disclosing Party will use its reasonable best efforts to advise
the other Parties prior to making the disclosure).
(c) NO THIRD-PARTY BENEFICIARIES.
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This Agreement shall not confer any rights or remedies upon any Person
other than the Parties and their respective successors and permitted assigns.
(d) ENTIRE AGREEMENT.
This Agreement, the Disclosure Schedule and the Exhibits and other
documents annexed hereto or referred to herein constitutes the entire agreement
among the Parties and supersedes any prior understandings, agreements, or
representations by or among the Parties, written or oral, including, but not
limited to, the Exclusive Negotiating Agreement by and between Xxxxxx and TARGET
entered into as of January 10, 2001, to the extent they relate in any way to the
subject matter hereof.
(e) SUCCESSION AND ASSIGNMENT.
This Agreement shall be binding upon and inure to the benefit of the
Parties named herein and their respective successors and permitted assigns. No
Party may assign either this Agreement or any of his, her or its rights,
interests, or obligations hereunder without the prior written approval of Xxxxxx
and the Sellers; provided, however, that Xxxxxx may (i) assign any or all of its
rights and interests hereunder to one or more of its Affiliates and (ii)
designate one or more of its Affiliates to perform its obligations hereunder (in
any or all of which cases Xxxxxx nonetheless shall remain responsible for the
performance of all of its obligations hereunder).
(f) COUNTERPARTS.
This Agreement may be executed in one or more counterparts and by
facsimile, each of which shall be deemed an original but all of which together
will constitute one and the same instrument.
(g) HEADINGS.
The section headings contained in this Agreement are inserted for
convenience only and shall not affect in any way the meaning or interpretation
of this Agreement.
(h) NOTICES.
All notices, requests, demands, claims, and other communications
hereunder will be in writing. Any notice, request, demand, claim, or other
communication hereunder shall be deemed duly given if (and then two business
days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, or nationally recognized courier and addressed to
the intended recipient as set forth below:
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IF TO THE SELLERS: AAC CONSULTING GROUP, INC.
0000 Xxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx Xxxxxxx
COPY TO: XXXXXX, XXXXXXX & XXXXXXX
0 Xxxx Xxxxxx
Xxx Xxxx , Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxx, Esq.
IF TO XXXXXX: XXXXXX INTERNATIONAL INC.
000 Xxxx Xxxxxx
0000 Xxxxx Xxxxx
Xxxxxxxxxx, Xxxx 00000
Attention: Xxxx X. Xxxxxx, Esq.
General Counsel
COPY TO: XXXXXXX, XXXXXXXX & XXXXXXX, P.L.L.
Xxx Xxxx Xxxxxx Xxxxxx
0000 Xxxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Parties
notice in the manner herein set forth.
(i) GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with
the domestic laws of the State of Maryland without giving effect to any choice
or conflict of law provision or rule (whether of the State of Maryland or any
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Maryland. The parties hereby consent to
service of process, and to be sued, in the State of Maryland and consent to the
non-exclusive jurisdiction of the courts of the State of Maryland and the United
States District court for the District of Maryland, in either case, sitting in
the City of Baltimore, as well as to the jurisdiction of all courts from which
an appeal may be taken from such courts, for the purpose of any suit, action or
other proceeding arising out of any obligations hereunder, or with respect to
the
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transactions contemplated hereby, and expressly waive any and all objections any
of them may have as to venue in any such courts. Each of TARGET, Xxxxxx and the
Sellers hereby consents to the service of process upon him or it by mailing to
the addresses set forth in Section 11(h).
(j) AMENDMENTS AND WAIVERS.
No amendment of any provision of this Agreement shall be valid unless
the same shall be in writing and signed by Xxxxxx and the Sellers. No waiver by
any Party of any default, misrepresentation, or breach of warranty or covenant
hereunder, whether intentional or not, shall be deemed to extend to any prior or
subsequent default, misrepresentation, or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.
(k) SEVERABILITY.
Any term or provision of this Agreement that is invalid or
unenforceable in any situation in any jurisdiction shall not affect the validity
or enforceability of the remaining terms and provisions hereof or the validity
or enforceability of the offending term or provision in any other situation or
in any other jurisdiction.
(l) EXPENSES.
Each of the Parties and TARGET will bear his, her or its own costs and
expenses (including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby. The Sellers agree that
TARGET shall not bear any of the Sellers' costs and expenses (including any of
their legal fees and expenses or any brokerage fees) in connection with this
Agreement or any of the transactions contemplated hereby.
(m) CONSTRUCTION.
The Parties have participated jointly in the negotiation and drafting
of this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the Parties and no presumption or burden of proof shall arise favoring or
disfavoring any Party by virtue of the authorship of any of the provisions of
this Agreement. Any reference to any federal, state, local, or foreign statute
or law shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise. The word "including" shall
mean including without limitation. The Parties intend that each representation,
warranty and covenant contained herein shall have independent significance. If
any Party has breached any representation, warranty or covenant contained herein
in any respect, the fact that there exists another representation, warranty or
covenant relating to the same subject matter (regardless of relative levels of
specificity) which the Party has not breached
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shall not detract from or mitigate the fact that the Party is in breach of the
first representation, warranty or covenant.
(n) INCORPORATION OF EXHIBITS, ANNEXES, AND SCHEDULES.
The Exhibits, Annexes, and Schedules identified in this Agreement are
incorporated herein by reference and made a part hereof.
(o) SPECIFIC PERFORMANCE.
Each of the Parties acknowledges and agrees that the other Parties
would be damaged irreparably in the event any of the covenants contained in of
this Agreement are not performed in accordance with their specific terms or
otherwise are breached. Accordingly, each of the Parties agrees that the other
Parties shall be entitled to an injunction or injunctions to prevent breaches of
the covenants contained in this Agreement and to enforce specifically such
covenants in any action instituted in any court of the United States or any
state thereof having jurisdiction over the Parties and the matter in addition to
any other remedy to which they may be entitled, at law or in equity.
(p) DISPUTE RESOLUTION.
(i) If there is a dispute, claim, demand, or
controversy arising out of or relating to this Agreement (or
any transaction contemplated thereby) or the formation,
interpretation, performance, breach, termination or validity
hereof (in each case, whether or not this Agreement has been
terminated) (a "Dispute"), the Parties covenant and agree as
follows:
(A) Unless this Agreement specifically
provides for another method of dispute resolution for
a particular type of Dispute, the parties shall first
use their commercially reasonable best efforts to
resolve such Dispute among themselves as provided in
this Section. The party alleging the Dispute shall
give written notice to the other party, specifying in
reasonable detail the circumstances of the alleged
Dispute (a "Dispute Notice"). Within thirty (30) days
after the receipt of the Dispute Notice,
representatives of the Parties shall meet or confer
by telephone, and shall thereafter meet or confer as
often as they reasonably deem necessary to resolve
such Dispute amicably. All negotiations and
discussions pursuant to this paragraph shall be
treated as compromise and settlement negotiations for
purposes of applicable rules of evidence and
procedure.
(B) If the disputing parties fail to resolve
the Dispute within the thirty (30) day period
specified above, and if this Agreement requires that
the Dispute be submitted to binding arbitration, the
Parties shall submit such dispute
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within thirty (30) days to binding arbitration, and
the arbitration shall be conducted in accordance with
the provisions in Section (C) below. If this
Agreement does not require that the specific type of
Dispute be submitted to binding arbitration, the
Parties may submit the Dispute to binding arbitration
by mutual agreement of the Parties, but failing such
agreement, the Parties shall have the right to
enforce any and all rights they may have at law or in
equity with respect to such Dispute.
(C) Any arbitration required (or undertaken
by agreement of the Parties) under this Agreement
shall be conducted by a single arbitrator, who shall
be appointed pursuant to the rules of the American
Arbitration Association ("AAA"). The arbitration
shall be held in Bethesda, Maryland, and shall be
conducted in accordance with the commercial
arbitration rules of the AAA. Upon written notice by
a party to the other parties of a request for
arbitration hereunder, the parties shall use their
reasonable best efforts to cause the arbitration to
be conducted in an expeditious manner. The
determination of the arbitrators shall be final and
binding on the parties. Judgment upon the award
rendered by the arbitrators may be entered in any
court having jurisdiction. The parties shall each be
responsible for their own expenses in connection with
such arbitration, including, without limitation,
counsel fees and fees for experts; provided, however,
that the parties shall share equally in the expense
of the arbitrators and of the AAA.
(q) TERMINATION OF THIS AGREEMENT.
This Agreement may be terminated at any time prior to the Closing:
(i) by the written agreement of all of the parties
hereto;
(ii) by Sellers if there has been a material
violation or breach by Xxxxxx of any covenant, agreement,
representation or warranty contained in this Agreement;
(iii) by Xxxxxx if there has been a material
violation or breach by any of the Sellers of any covenant,
agreement, representation or warranty contained in this
Agreement; or
(iv) by either Xxxxxx or Sellers if the Closing of
the transactions contemplated by this Agreement shall not have
been consummated on or before February 28, 2001, provided,
however, that termination pursuant to this subsection shall
not relieve any party of the liabilities contemplated by the
paragraph below, if applicable.
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In the event of termination of this Agreement and abandonment
of the transactions contemplated hereby by any of the parties
pursuant to (ii), (iii) or (iv) of this Section 11(q), written
notice thereof shall forthwith be given by the terminating
party to the other parties and this Agreement shall terminate
and the transactions contemplated hereby shall be abandoned,
without further action by any of the parties hereto. If this
Agreement is terminated, none of the parties hereto nor any of
their respective directors, officers or affiliates, as the
case may be, shall have any liability or further obligation to
any of the other parties or any of their respective directors,
officers or affiliates, as the case may be, pursuant to this
Agreement; provided, however, that if such termination shall
result from the willful breach of a warranty or the willful
failure of a party to fulfill a condition to the performance
of the obligations of the other parties or to perform a
covenant or agreement contained in this Agreement or from any
other willful breach by any party to this Agreement, such
party shall be solely liable for any and all damages, costs
and expenses (including, but not limited to, counsel's fees)
sustained or incurred by the other party or parties as a
result of such failure or breach, or for specific performance
pursuant to Section 11(o) hereof if permitted thereunder. The
provisions of Sections 6(d), 11(h), 11(i), 11(k), 11(l),
11(o), 11(p) and 11(q) shall survive any termination hereof.
(r) ACQUISITION PROPOSALS.
Prior to the Closing Date, each of the Sellers agrees that:
(i) she/he shall not initiate, solicit or encourage,
directly or indirectly, any inquiries or the making or
implementation of any proposal or offer (including, without
limitation, any proposal or offer to its shareholders) with
respect to a merger, acquisition, tender offer, exchange
offer, consolidation, sale of assets or similar transaction
involving all or substantially all of the assets or any equity
securities of TARGET, other than the transactions contemplated
by this Agreement (any such proposal or offer being
hereinafter referred to as an "Acquisition Proposal") or
engage in any negotiations concerning or provide any
confidential information or data to, or have any discussion
with, any person relating to an Acquisition Proposal, or
otherwise facilitate any effort or attempt to make or
implement an Acquisition Proposal;
(ii) she/he will use her/his reasonable best efforts
not to permit any of the officers, employees, agents or
financial advisors of TARGET to engage in any of the
activities described in Section 11(r)(i);
(iii) she/he will immediately cease and cause to be
terminated any existing activities, discussions or
negotiations with any parties conducted heretofore with
respect to any of the foregoing and will take the necessary
steps to inform the individuals or entities referred to in
Section 11(r)(ii) of the obligations undertaken in this
Section 11(r); and
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(iv) she/he will notify Xxxxxx immediately if TARGET
receives any such inquiries or proposals, or any requests for
such information, or if any such negotiations or discussions
are sought to be initiated or continued with it.
(Remainder of page intentionally blank)
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
Xxxxxx:
XXXXXX INTERNATIONAL INC.,
By:_____________________________________________
Xxxxxxx X. Xxxxxx
Assistant Secretary and Director, Taxation
________________________________________________
XXXXXXX X. XXXXXXX
________________________________________________
XXXXXXX XXXXXXX
________________________________________________
XXXXXXX XXXXXXX
XXXXXXX XXXXXXX REVOCABLE TRUST
By:_____________________________________________
Xxxxxxx Xxxxxxx, as Trustee
By:_____________________________________________
Xxxxxxx X. Xxxxxxx, as Trustee
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TABLE OF CONTENTS
-----------------
1. DEFINITIONS................................................................1
2. PURCHASE AND SALE OF TARGET SHARES.........................................7
(a) Basic Transaction................................................7
(b) Purchase Price...................................................7
(c) Intentionally Left Blank.........................................8
(d) Intentionally Left Blank.........................................8
(e) Intentionally Left Blank.........................................8
(f) The Closing......................................................8
(g) Deliveries at the Closing........................................9
3. REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION..................9
(a) Representations and Warranties of the Sellers....................9
(b) Representations and Warranties of Xxxxxx........................10
4. REPRESENTATIONS AND WARRANTIES CONCERNING TARGET..........................12
(a) Organization, Qualification, and Corporate Power................12
(b) Capitalization..................................................13
(c) Noncontravention................................................13
(d) Brokers' Fees...................................................14
(e) Title to Assets.................................................14
(f) Subsidiaries....................................................14
(g) Financial Statements............................................15
(h) Events Subsequent to October 31, 2000...........................15
(i) Undisclosed Liabilities.........................................17
(j) Legal Compliance................................................18
(k) Tax Matters.....................................................18
(l) Real Property...................................................19
(m) Intellectual Property...........................................20
(n) Tangible Assets.................................................23
(o) Contracts.......................................................23
(p) Notes and Accounts Receivable...................................25
(q) Powers of Attorney..............................................25
(r) Insurance.......................................................25
(s) Litigation......................................................26
(t) Employee Benefits...............................................26
(u) Guarantees......................................................28
(v) Environmental, Health, and Safety Matters.......................28
(w) Certain Business Relationships with TARGET......................29
(x) Disclosure......................................................29
(y) Financial Projections...........................................29
5. INTENTIONALLY LEFT BLANK..................................................30
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6. POST-CLOSING COVENANTS....................................................30
(a) General.........................................................30
(b) Litigation Support..............................................30
(c) Transition......................................................31
(d) Confidentiality.................................................31
(e) Xxxxxx Shares...................................................32
(f) Opening Balance Sheet Audit.....................................32
(g) Key Man Life Insurance..........................................33
7. CONDITIONS TO OBLIGATION TO CLOSE.........................................33
(a) Conditions to Obligation of Xxxxxx..............................33
(b) Conditions to Obligation of the Sellers.........................36
8. REMEDIES FOR BREACHES OF THIS AGREEMENT...................................38
(a) Survival of Representations and Warranties......................38
(b) Indemnification Provisions for Benefit of Xxxxxx................38
(c) Indemnification Provisions for Benefit of the Sellers...........39
(d) Matters Involving Third Parties.................................40
(e) Determination of Adverse Consequences...........................41
(f) Sole Remedy.....................................................42
(g) Other Indemnification Provisions................................42
9. TAX COVENANTS.............................................................43
(a) Valuation of Xxxxxx Shares......................................43
(b) Payment of Taxes and Fees.......................................43
(c) Taxes - Sellers.................................................43
(d) Option to Return Cash or Closing Shares.........................43
10. NON-COMPETITION COVENANT.................................................43
(a) Basic Covenant..................................................43
(b) Remedies for Breach of Non-Competition Covenant.................44
(c) Liquidated Damages..............................................45
11. MISCELLANEOUS............................................................45
(a) Nature of Certain Obligations...................................45
(b) Press Releases and Public Announcements.........................45
(c) No Third-Party Beneficiaries....................................45
(d) Entire Agreement................................................46
(e) Succession and Assignment.......................................46
(f) Counterparts....................................................46
(g) Headings........................................................46
(h) Notices.........................................................46
(i) Governing Law...................................................47
(j) Amendments and Waivers..........................................48
(k) Severability....................................................48
(l) Expenses........................................................48
(m) Construction....................................................48
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(n) Incorporation of Exhibits, Annexes, and Schedules...............49
(o) Specific Performance............................................49
(p) Dispute Resolution..............................................49
(q) Termination of this Agreement...................................50
(r) Acquisition Proposals...........................................51
