Exhibit 2.1
Stock Purchase Agreement
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This Stock Purchase Agreement ("Agreement") is made as of November 28,
2001, by and among (i) Encore Medical Corporation, a Delaware corporation
("Buyer"), (ii) Xxxxxxx X. Xxxxx and Xxxxxx X. Xxxxxxxxxxx as Trustees of, and
on behalf of, the Xxxxxx X. XxXxxx, Xx. 1983 Trust, under Trust Agreement dated
November 30, 1983 ("XxXxxx Trust"), (iii) Chatt Investment L.P., a Delaware
limited partnership ("CLIP"), (iv) Xxxx X. Xxxxxxx a resident of Xxxxxxxx
County, Tennessee, Xxxxx X. Xxxxxxxxxx, a resident of Xxxxxxxx County,
Tennessee, Xxxxxxx X. Xxxxxx, a resident of Xxxxxxxx County, Tennessee and Xxxxx
X. Xxxxxxxx a resident of Xxxxxxxx County, Tennessee (collectively, the
"Management Option Holders", and (v) those other shareholders who execute this
Agreement on or before Closing pursuant to Section 12.15 (the "Other
Shareholders") (the XxXxxx Trust, CLIP, the Management Option Holders and the
Other Shareholders are collectively referred to as "Sellers", who, as of the
date of this Agreement, represent 100% of the Class A Shares and at least 80% of
the Class B Shares).
RECITALS
Sellers desire to sell, and Buyer desires to purchase, all of the issued
and outstanding shares of capital stock of Chattanooga Group, Inc., a Delaware
corporation (the "Company"), for the consideration and on the terms set forth in
this Agreement.
AGREEMENT
For good and valuable consideration the receipt and sufficiency of which
is hereby acknowledged, the parties, intending to be legally bound, agree as
follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the meanings specified
or referred to in this Section 1:
"Accounts Receivable" -- as defined in Section 3.8.
"Acquired Companies" -- the Company and its Subsidiaries, collectively.
"Adjustment Amount" -- as defined in Section 2.5.
"Agreement" -- as defined in the first paragraph of this Agreement.
"Applicable Contract" -- any Contract (a) under which any Acquired Company has
or may acquire any rights, (b) under which any Acquired Company has or may
become subject to any obligation or liability, or (c) by which any Acquired
Company or any of the assets owned or used by it is or may become bound.
"Balance Sheet" -- as defined in Section 3.4.
"Best Efforts" -- the efforts that a reasonably prudent Person desirous of
achieving a result would use in similar circumstances to ensure that such result
is achieved as expeditiously as possible, but shall not include any obligation
(a) to make any payment, incur any cost, commit any resource, or forego any
payment, which in each case is material, or (b) to initiate any suit or
proceeding.
"Breach" -- a "Breach" of a representation, warranty, covenant, obligation, or
other provision of this Agreement or any instrument delivered pursuant to this
Agreement will be deemed to have occurred if there is or has been any inaccuracy
in or breach of, or any failure to perform or comply with, such representation,
warranty, covenant, obligation, or other provision, and the term "Breach" means
any such inaccuracy, breach, failure, claim, occurrence, or circumstance.
"Buyer" -- as defined in the first paragraph of this Agreement.
"Class A Shares" -- as defined in Section 3.3.
"Class B Shares" -- as defined in Section 3.3.
"Cleanup" -- any investigation, cleanup, removal, containment, or other
remediation or response action.
"CLIP" -- as defined in the first paragraph of this Agreement.
"Closing" -- as defined in Section 2.3.
"Closing Balance Sheet" -- as defined in Section 2.6.
"Closing Date" -- the date as of which the Closing actually takes place.
"Closing Debt" -- as defined in Section 2.2(b).
"Commitment Letters" -- as defined in Section 4.6.
"Company" -- as defined in the Recitals of this Agreement.
"Consent" -- any approval, consent, ratification, waiver, or other authorization
(including any Governmental Authorization).
"Contemplated Transactions" -- all of the transactions contemplated by this
Agreement, including:
(a) the sale of the Shares by Sellers to Buyer;
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(b) the execution, delivery, and performance of the Employment
Agreements, the Sellers' Releases, the Escrow Agreement and all other documents
or agreements executed, delivered and performed in connection with this
Agreement; and
(c) the performance by Buyer and Sellers of their respective covenants
and obligations under this Agreement.
"Contract" -- any agreement, contract, obligation, promise, or undertaking
(whether written or oral and whether express or implied) that is legally
binding.
"Damages" -- as defined in Section 10.2.
"Department of Commerce Investigation" -- the Department of Commerce
investigation of the Chattanooga Group, Inc. export practices with respect to
(i) unlawfully trading with an embargoed country, and (ii) unlawfully preparing
export documentation.
"Disclosure Letter" -- the disclosure letter delivered by Sellers to Buyer
concurrently with the execution and delivery of this Agreement, as the same may
be amended by Sellers pursuant to Section 5.5 hereof.
"Employment Agreements" -- as defined in Section 7.7.
"Encumbrance" -- any charge, claim, lien, option, pledge, security interest,
right of first refusal, or restriction of any kind, including any restriction on
use, voting, transfer, receipt of income, or exercise of any other attribute of
ownership.
"Environment" -- soil, land surface or subsurface strata, surface waters
(including navigable waters, ocean waters, streams, ponds, drainage basins, and
wetlands), groundwaters, drinking water supply, stream sediments, ambient air
(including indoor air), plant and animal life, and any other environmental
medium or natural resource.
"Environmental, Health, and Safety Liabilities" -- any cost, damages, expense,
liability, obligation, or other responsibility arising from or under
Environmental Law or Occupational Safety and Health Law and consisting of or
relating to:
(a) any environmental, health, or safety matters or conditions
(including on-site or off-site contamination, occupational safety and health,
and regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and response,
investigative, remedial, or inspection costs and expenses arising under
Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law or Occupational
Safety and Health Law for costs of Cleanup or corrective action required by
applicable
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Environmental Law or Occupational Safety and Health Law (whether or not such
Cleanup has been required or requested by any Governmental Body or any other
Person) and for any natural resource damages; or
(d) any other compliance, corrective, investigative, or remedial
measures required under Environmental Law or Occupational Safety and Health Law.
The terms "removal," "remedial," and "response action," include the types of
activities covered by the United States Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. (S). 9601 et seq., as amended
("CERCLA").
"Environmental Law" -- any Legal Requirement that requires or relates to:
(a) advising appropriate authorities, employees, and the public of
intended or actual releases of pollutants or hazardous substances or materials,
violations of discharge limits, or other prohibitions and of the commencements
of activities, such as resource extraction or construction, that could have
significant impact on the Environment;
(b) preventing or reducing to acceptable levels the release of
pollutants or hazardous substances or materials into the Environment;
(c) reducing the quantities, preventing the release, or minimizing the
hazardous characteristics of wastes that are generated;
(d) assuring that products are designed, formulated, packaged, and
used so that they do not present unreasonable risks to human health or the
Environment when used or disposed of;
(e) protecting resources, species, or ecological amenities;
(f) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil, or other potentially
harmful substances;
(g) cleaning up pollutants that have been released, preventing the
threat of release, or paying the costs of such clean up or prevention; or
(h) making responsible parties pay private parties, or groups of them,
for damages done to their health or the Environment, or permitting
self-appointed representatives of the public interest to recover for injuries
done to public assets.
"ERISA" -- the Employee Retirement Income Security Act of 1974 or any successor
law, and regulations and rules issued pursuant to that Act or any successor law.
"Escrow Agent" -- as defined in Section 2.4(d).
"Escrow Agreement" -- as defined in Section 2.4.
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"Escrowed Proceeds" -- as defined in Section 2.2.
"Facilities" -- any real property, leaseholds, or other interests in real
property currently or formerly (within the past 5 years) owned or operated by
any Acquired Company and any buildings, plants or structures currently or
formerly (within the past 5 years) owned or operated by any Acquired Company.
"GAAP" -- generally accepted United States accounting principles, applied on a
basis consistent with the basis on which the Balance Sheet and the other
financial statements referred to in Section 3.4 were prepared.
"Governmental Authorization" -- any approval, consent, license, permit, waiver,
or other authorization issued, granted or given by or under the authority of any
Governmental Body or pursuant to any Legal Requirement.
"Governmental Body" -- any:
(a) federal, state, local, municipal, foreign, or other government;
(b) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or entity and
any court or other tribunal); or
(c) body properly exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory, or taxing
authority or power of any nature.
"Hazardous Activity" -- the distribution, generation, handling, importing,
management, manufacturing, processing, production, refinement, Release, storage,
transfer, transportation, treatment, or use (including any withdrawal or other
use of groundwater) of Hazardous Materials in, on, under, about, or from the
Facilities or any part thereof into the Environment, and any other act,
business, operation, or thing that increases the danger, or risk of danger, or
poses an unreasonable risk of harm to persons or property on or off the
Facilities, or that may affect the value of the Facilities or the Acquired
Companies.
"Hazardous Materials" -- any waste or other substance that is listed, defined,
designated, or classified as, or otherwise determined to be, hazardous,
radioactive, or toxic or a pollutant or a contaminant under or pursuant to any
Environmental Law, including any admixture or solution thereof, and specifically
including petroleum and all derivatives thereof or synthetic substitutes
therefor and asbestos or asbestos-containing materials.
"Intellectual Property Assets" -- as defined in Section 3.22.
"Interim Balance Sheet" -- as defined in Section 3.4.
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"IRC" -- the Internal Revenue Code of 1986, as amended, or any successor law,
and Treasury Regulations.
"IRS" -- the United States Internal Revenue Service or any successor agency,
and, to the extent relevant, the United States Department of the Treasury.
"Joinder Agreement" -- as defined in Section 5.9.
"June 30, 2002 Deferred Tax Asset" -- as defined in Section 2.5.
"Knowledge of Sellers" -- Sellers will be deemed to have "Knowledge" of a
particular fact or other matter if any of the following individuals is actually
aware of such fact or matter: Xxxx X. Xxxxxxx, Xxxxx X. Xxxxxxxxxx, Xxxxxxx X.
Xxxxxx, Xxxxx X. Xxxxxxxx, Xxxxxx X. Xxxxxxxxxx, Xxxxxxx X. Xxxxx, Xxxxxx X.
Xxxxxxxxxxx, D. Xxxxxxxxxxx Xx Xxxx, and Xxxxxx X. XxXxxx, Xx.
"Law" -- any statute, law, rule, regulation, ordinance or other pronouncement
having the effect of law of any Governmental Body.
"Legal Requirement" -- any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, Law,
principle of common law, or treaty.
"Management Option Holders" -- as defined in the first paragraph of this
Agreement.
"XxXxxx Trust" -- as defined in the first paragraph of this Agreement.
"Occupational Safety and Health Law" -- any Legal Requirement designed to
provide safe and healthful working conditions and to reduce occupational safety
and health hazards, and any program, whether governmental or private (including
those promulgated or sponsored by industry associations and insurance
companies), designed to provide safe and healthful working conditions.
"Option" -- the right to acquire a Class B Share at a set price issued pursuant
to the Chattanooga Group Stock Option Plan.
"Option Holders" -- those holders of Options listed on Exhibit A attached
hereto.
"Order" -- any award, decision, injunction, judgment, order, ruling, subpoena,
or verdict entered, issued, made, or rendered by any court, administrative
agency, or other Governmental Body or by any arbitrator.
"Ordinary Course of Business" -- an action taken by a Person will be deemed to
have been taken in the "Ordinary Course of Business" only if such action is
consistent with the past practices of such Person and is taken in the ordinary
course of the normal day-to-day
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operations of such Person.
"Organizational Documents" -- (a) the articles or certificate of incorporation
and the bylaws of a corporation; (b) the partnership agreement and any statement
of partnership of a general partnership; (c) the limited partnership agreement
and the certificate of limited partnership of a limited partnership; (d) any
charter or similar document adopted or filed in connection with the creation,
formation, or organization of a Person; and (e) any amendment to any of the
foregoing.
"Other Shareholders" -- as defined in the first paragraph of this Agreement.
"Outstanding Shares" -- as defined in Section 2.2(a).
"Per Share Closing Proceeds" -- as defined in Section 2.2(a).
"Per Share Escrow Proceeds" -- as defined in Section 2.2(a).
"Person" -- any individual, corporation (including any non-profit corporation),
general or limited partnership, limited liability company, joint venture,
estate, trust, association, organization, labor union, or other entity or
Governmental Body.
"Plan" -- as defined in Section 3.13.
"Pro Rata Share" -- that percentage set forth opposite each Seller's name on
Schedule A hereto, as the same may be amended from time to time, under the
column marked "Pro Rata Share."
"Proceeding" -- any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
"Purchase Price" -- as defined in Section 2.2.
"Related Person" -- with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by such
individual or one or more members of such individual's Family;
(c) any Person in which such individual or members of such individual's
Family hold (individually or in the aggregate) a Material Interest; and
(d) any Person with respect to which such individual or one or more
members of such individual's Family serves as a director, officer, partner,
executor, or trustee (or in
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a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is directly or
indirectly controlled by, or is directly or indirectly under common control with
such specified Person;
(b) any Person that holds a Material Interest in such specified Person;
(c) each Person that serves as a director, officer, partner, executor, or
trustee of such specified Person (or in a similar capacity);
(d) any Person in which such specified Person holds a Material Interest;
(e) any Person with respect to which such specified Person serves as a
general partner or a trustee (or in a similar capacity); and
(f) any Related Person of any individual described in clause (b) or (c).
For purposes of this definition, (a) the "Family" of an individual includes (i)
the individual, (ii) the individual's spouse, (iii) any other natural person who
is related to the individual or the individual's spouse within the second
degree, and (iv) any other natural person who resides with such individual, and
(b) "Material Interest" means direct or indirect beneficial ownership (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934) of voting
securities or other voting interests representing at least 20% of the
outstanding voting power of a Person or equity securities or other equity
interests representing at least 20% of the outstanding equity securities or
equity interests in a Person.
"Release" -- any spilling, leaking, emitting, discharging, depositing, escaping,
leaching, dumping, or other releasing into the Environment, whether intentional
or unintentional.
"Representative" -- with respect to a particular Person, any director, officer,
employee, agent, consultant, advisor, or other representative of such Person,
including legal counsel, accountants, and financial advisors.
"Securities Act" -- the Securities Act of 1933 or any successor law, and
regulations and rules issued pursuant to that Act or any successor law.
"Sellers" -- as defined in the first paragraph of this Agreement.
"Seller's Closing Documents" -- as defined in Section 3.2.
"Sellers' Releases" -- as defined in Section 2.4.
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"Sellers' Representative" -- as defined in Section 12.16.
"Shares" -- as defined in Section 3.3.
"Subsidiary" -- with respect to any Person (the "Owner"), any corporation or
other Person of which securities or other interests having the power to elect a
majority of that corporation's or other Person's board of directors or similar
governing body, or otherwise having the power to direct the business and
policies of that corporation or other Person (other than securities or other
interests having such power only upon the happening of a contingency that has
not occurred) are held by the Owner or one or more of its Subsidiaries; when
used without reference to a particular Person, "Subsidiary" means a Subsidiary
of the Company.
"Tax" -- all federal, state, local, foreign or other governmental net income,
profit, franchise, gross receipts, sales, use, intangibles, ad valorem,
transfer, employment, payroll, withholding, occupation, property, excise,
licenses or stamp taxes, custom duties, or other taxes, together with any
interest and any penalties, additions to tax or additional amounts with respect
thereto.
"Tax Return" -- any return (including any information return), report, statement
or form filed with or submitted to, or required to be filed with or submitted
to, any Governmental Body in connection with the determination, assessment,
collection, or payment of any Tax.
"Tendered Shares" -- as defined in Section 7.8.
"Threatened" -- a claim, Proceeding, dispute, action, or other matter will be
deemed to have been "Threatened" if any demand or statement has been made in
writing or any notice has been given in writing, or if any other event has
occurred or any other circumstances exist, that would lead a reasonably prudent
Person to conclude that such a claim, Proceeding, dispute, action, or other
matter is likely to be asserted, commenced, taken, or otherwise pursued in the
future.
"Treasury Regulations" -- regulations issued by the IRS pursuant to the IRC.
"Update"-- as defined in Section 5.5.
"Warrant" -- the right to acquire 25,000 Class B Shares pursuant to that certain
Warrant Agreement issued by the Company to the XxXxxx Trust and dated August 3,
1999.
"Warrant Holder" -- XxXxxx Trust.
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2. SALE AND TRANSFER OF SHARES; CLOSING
2.1 SHARES
Subject to the terms and conditions of this Agreement, at the Closing, Sellers
will sell, transfer and deliver the Tendered Shares to Buyer, free and clear of
any Encumbrance, and Buyer will purchase the Tendered Shares from Sellers.
2.2 PURCHASE PRICE
(a) The aggregate maximum purchase price (the "Purchase Price") for the
Tendered Shares will be Thirty-One Million Five Hundred Thousand Dollars
($31,500,000) plus the Adjustment Amount. The purchase price to be paid by Buyer
for each of the Tendered Shares (prior to payment of the Adjustment Amount)
shall be the quotient of (i) Thirty-One Million Five Hundred Thousand Dollars
($31,500,000), divided by (ii) the sum of (A) the number of Tendered Shares, and
(B) the number of Class A Shares and Class B Shares outstanding at Closing not
including the Tendered Shares (such sum, the "Outstanding Shares"). Pursuant to
Section 2.4(b)(i), at Closing, the Buyer shall pay (i) to the Sellers'
Representative for the account of each Seller other than CLIP and (ii) to CLIP,
for each Tendered Share (the "Per Share Closing Proceeds") of such Seller an
amount equal to the quotient of (A) Twenty-Nine Million Dollars ($29,000,000),
divided by (B) the Outstanding Shares. The aggregate amount of Purchase Price
paid to the Sellers at Closing (prior to payment of the Adjustment Amount) shall
be a maximum of Twenty-Nine Million Dollars ($29,000,000). Each Seller (other
than CLIP) hereby authorizes Sellers' Representative to apply their respective
share of the Per Share Closing Proceeds to the payment in full of any
indebtedness owed to the Company that was incurred by such Seller in connection
with the exercise of any Option or Warrant related to any Tendered Share and
that is outstanding at Closing. Sellers' Representative will immediately pay to
each such Seller (other than CLIP) the net amount of the Per Share Closing
Proceeds due to such Seller after the payment of such indebtedness owed to the
Company by such Seller. Pursuant to Section 2.4(b)(ii), at Closing, the Buyer
shall pay to the Escrow Agent for each Tendered Share (the "Per Share Escrow
Proceeds") an amount equal to the quotient of (i) Two Million Five Hundred
Thousand Dollars ($2,500,000), divided by (ii) the Outstanding Shares. The
aggregate amount of the Purchase Price paid to the Escrow Agent at Closing (the
"Escrowed Proceeds") shall be a maximum of Two Million Five Hundred Thousand
Dollars ($2,500,000) of the Purchase Price and shall be held and disbursed in
accordance with the terms and conditions of the Escrow Agreement.
(b) In addition to the Purchase Price, Buyer shall at Closing pay off the
outstanding balances on the following debts of the Company (collectively, the
"Closing Debt"):
(i) that certain Revolving Loan pursuant to that certain Loan and
Security Agreement dated July 30, 1999 with Wachovia Bank, N.A. in the original
principal balance of $6,000,000,
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(ii) that certain Term Loan dated September 1, 1999 with Wachovia
National Bank in the original principal balance of $3,731,250,
(iii) that certain Term Loan dated September 1, 1999 with Wachovia
National Bank in the original principal balance of $423,306,
(iv) that Subordinated Promissory Note pursuant to that certain Term
Loan Agreement dated December 31, 1998, as amended, payable to the XxXxxx Trust
in the original principal balance of $650,000, and
(v) the five promissory notes issued pursuant to that certain Term
Loan Agreement, dated as of November 1, 1996, by and between the Company and
Xxxxxx X. XxXxxx, Xx. (d/b/a the Evergreen Company), in an aggregate original
principal balance of $1,300,000.
2.3 CLOSING
The purchase and sale (the "Closing") provided for in this Agreement will take
place at the offices of Buyer's counsel at 000 Xxxxxxxx Xxx., Xxxxx 0000,
Xxxxxx, Xxxxx 00000, at 10:00 a.m. (local time) on December 12, 2001 or at such
other time and place as the parties may agree. The Closing shall be deemed to
have occurred at 11:59 p.m. local time on the Closing Date. Subject to the
provisions of Section 9, failure to consummate the purchase and sale provided
for in this Agreement on the date and time and at the place determined pursuant
to this Section 2.3 will not result in the termination of this Agreement and
will not relieve any party of any obligation under this Agreement.
2.4 CLOSING OBLIGATIONS
At the Closing:
(a) Each Seller will deliver to Buyer:
(i) certificates representing such Seller's Tendered Shares, duly
endorsed (or accompanied by duly executed stock powers), for transfer to Buyer;
(ii) solely with respect to the XxXxxx Trust, CLIP, and each of the
Management Option Holders, a release in the form of Exhibit 2.4(a)(ii) executed
by each such Seller (collectively, "Sellers' Releases"); and
(iii) solely with respect to the XxXxxx Trust, CLIP, and each of the
Management Option Holders, a certificate executed by each such Seller certifying
to Buyer that each of such Seller's representations and warranties in this
Agreement is accurate in all material respects as of the Closing Date as if made
on the Closing Date (after giving full effect to all Updates that were delivered
by Sellers to Buyer, prior to the Closing Date in accordance with Section 5.5).
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(b) Buyer will deliver:
(i) to (A) Sellers' Representative for the account of each Seller
other than CLIP and (B) to CLIP, the Per Share Closing Proceeds for each
Tendered Share of such Seller pursuant to Section 2.4(a) by bank cashier's or
certified check payable to the order of or by wire transfer to accounts
specified by the Sellers' Representative or CLIP;
(ii) to the Escrow Agent, the aggregate Per Share Escrowed Proceeds
by bank cashier's or certified check or by wire transfer to an account specified
by the Escrow Agent; and
(iii) a certificate executed by Buyer certifying to Sellers that each
of Buyer's representations and warranties in this Agreement is accurate in all
material respects as of the Closing Date as if made on the Closing Date.
(c) Buyer will pay off the Closing Debt by wire transfer to the accounts
specified by each respective lender of the Closing Debt.
(d) Buyer, Sellers' Representative and CLIP will enter into an escrow
agreement in the form of Exhibit 2.4(d) (the "Escrow Agreement") with XX Xxxxxx
Xxxxx Bank (the "Escrow Agent").
2.5 ADJUSTMENT AMOUNT
The Purchase Price will be increased or decreased by the Adjustment Amount, as
applicable. The Adjustment Amount (which may be a positive or negative number)
will be equal to (a) the consolidated stockholders' equity of the Acquired
Companies as of the Closing determined in accordance with GAAP, minus (b) the
consolidated stockholders' equity of the Acquired Companies as of September 30,
2001, determined in accordance with GAAP. Notwithstanding the foregoing, the
consolidated stockholders' equity of the Acquired Companies as of the Closing,
and the Closing Balance Sheet, shall treat as an asset (i) the cash or notes
paid in satisfaction of the exercise price of the Warrant and any Options
exercised at or prior to Closing (including any exercise of the Warrant or
Options that is contingent upon the occurrence of the Closing), and the Warrant
and all Options exercised by a Seller at or prior to Closing (including the
Warrant and any Options exercised contingent upon the occurrence of the Closing)
shall be deemed for all purposes of this Agreement to have been exercised
immediately prior to the Closing, and (ii) a deferred tax asset in an amount
equal to one-twelfth of the previously unrecorded June 30, 2002 deferred tax
asset in the amount of $500,000 (the "June 30, 2002 Deferred Tax Asset") for
each month or any portion thereof beginning July 1, 2001 and continuing up until
and including the Closing Date.
2.6 ADJUSTMENT PROCEDURE
(a) Sellers' Representative will prepare the consolidated balance sheet
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("Closing Balance Sheet") of the Company as of 11:59 p.m. local time on the
Closing Date, including a computation of consolidated stockholders' equity as of
11:59 p.m. local time on the Closing Date. The Closing Balance Sheet, including
the computation of consolidated stockholders' equity of the Acquired Companies
as of the Closing, shall reflect the exercise of the Warrant and of all Options
exercised at or before the Closing (including any exercise of the Warrant or
Options that is contingent upon the Closing) and shall also reflect all other
transactions relating to the Acquired Companies that occur on the Closing Date,
except that (i) any transaction relating to the Acquired Companies that Buyer
causes to occur on the Closing Date after the actual signing of the Closing
documents shall be deemed to occur after the Closing on the Closing Date and
shall not be reflected on the Closing Balance Sheet and (ii) no adjustment shall
be made to the Closing Balance Sheet by reason of the sale of the Tendered
Shares by Sellers to Buyer or a reduction in liabilities by reason of the payoff
of the Closing Debt. Subject to Section 2.5, the Closing Balance Sheet
(including the computation of consolidated stockholders' equity of the Acquired
Companies as of the Closing) shall be prepared in accordance with GAAP
consistent with the principles, practices and procedures used in preparation of
the Balance Sheet. Sellers' Representative will deliver the Closing Balance
Sheet to Buyer within sixty (60) days after the Closing Date. Buyer, the
Acquired Companies and their officers and employees shall provide Sellers, their
officers and employees with access to the books and records of each Acquired
Company, and will cooperate and assist in the preparation of the Closing Balance
Sheet. If within thirty (30) days following delivery of the Closing Balance
Sheet (the "Review Period"), Buyer has not given Sellers' Representative notice
of its objection to the Closing Balance Sheet (such notice must contain a
statement of the basis of Buyer's objection), then the consolidated
stockholders' equity reflected in the Closing Balance Sheet will be used in
computing the Adjustment Amount. If Buyer gives such notice of objection, then
the issues in dispute will be submitted to the Accountants (as hereinafter
defined) for resolution in accordance with the terms of this Agreement. The
Memphis, Tennessee office of Ernst & Young, certified public accountants, shall
serve as the "Accountants", provided, that at such time, Ernst & Young has no
actual or perceived conflict of interest; and provided, further, that if Ernst &
Young is unable to serve as the Accountants, then the Accountants shall be
another independent certified public accounting firm of recognized regional or
national standing mutually agreeable to Buyer and Sellers' Representative. If
issues in dispute are submitted to the Accountants for resolution, (i) each
party will furnish to the Accountants such work papers and other documents and
information relating to the disputed issues as the Accountants may request and
are available to that party or its Subsidiaries (or its independent public
accountants), and will be afforded the opportunity to present to the Accountants
any material relating to the determination and to discuss the determination with
the Accountants; (ii) the determination by the Accountants, as set forth in a
notice delivered to both parties by the Accountants, will be binding and
conclusive on the parties; and (iii) Buyer and Sellers will each bear 50% of the
fees of the Accountants for such determination, provided that Sellers' portion
of such fees shall be paid first by deducting such amount from the Adjustment
Amount and, if Sellers' portion has not been fully satisfied, second by each
Seller paying its Pro Rata Share of such fees. The consolidated stockholders'
equity reflected in the Closing Balance Sheet, as revised to give effect to the
Accountants' resolution of any disputed issues submitted to it, will be
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used in computing the final Adjustment Amount.
(b) Any portion of the Adjustment Amount that is not disputed shall be
paid to Buyer or the Sellers, as applicable, within three (3) business days of
the end of the Review Period. On the third business day following the final
determination of any disputed portion of the Adjustment Amount by the
Accountants pursuant to Section 2.6(a), if the Purchase Price is greater than
the aggregate of the payments made pursuant to Sections 2.4(b)(i) and
2.4(b)(ii), Buyer will pay the difference to Sellers, and if the Purchase Price
is less than such aggregate amount, Sellers will pay the difference to Buyer.
All payments will be made together with interest at six percent (6%) compounded
daily beginning on the Closing Date and ending on the date of payment. Payments
must be made in immediately available funds. Payments to Sellers must be made in
the manner set forth in Section 2.4(b)(i) and each Seller shall be paid its Pro
Rata Share thereof. Payments to Buyer must be made by wire transfer to such bank
account as Buyer will specify and each Seller shall pay its Pro Rata Share of
such payment.
3. REPRESENTATIONS AND WARRANTIES OF SELLERS
Subject to the limitations of liability set forth in Section 10, (i) each Seller
represents and warrants to Buyer, with respect to itself only and not with
respect to any other Seller as to the matters set forth in Sections 3.2 (a),
3.2(c), 3.3(b), 3.17(b), 3.24 and 3.25 (provided that the representations and
warranties made in Section 3.24 are only made by the XxXxxx Trust, CLIP and the
Management Option Holders) and (ii) all Sellers severally, but not jointly,
represent and warrant to Buyer with respect to the Acquired Companies as to the
matters set forth in Sections 3.1, 3.2(b), 3.3(a), 3.3(c) and 3.4 through 3.23
(other than Section 3.17(b)), as follows:
3.1 ORGANIZATION AND GOOD STANDING
(a) Part 3.1 of the Disclosure Letter contains a complete and accurate
list for each Acquired Company of its name, its jurisdiction of incorporation,
other jurisdictions in which it is authorized to do business, and its
capitalization (including for each Acquired Company other than the Company, the
identity of each stockholder, option holder and warrant holder and the number of
shares, options and warrants held by each). Each Acquired Company is a
corporation duly organized, validly existing, and in good standing under the
laws of its jurisdiction of incorporation, with full corporate power and
authority to conduct its business as it is now being conducted, to own or use
the properties and assets that it owns or uses, and to perform all its
obligations under Applicable Contracts. Each Acquired Company is duly qualified
to do business as a foreign corporation and is in good standing under the laws
of each state or other jurisdiction in which either the ownership or use of the
properties owned or used by it, or the nature of the activities conducted by it,
requires such qualification, except where the failure to be so qualified or in
good standing would not have a material adverse effect on the Acquired Companies
taken as a whole.
(b) Sellers have delivered or made available to Buyer copies of the
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Organizational Documents of each Acquired Company, as currently in effect.
3.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and binding obligation of
such Seller, enforceable against such Seller in accordance with its terms. Upon
the execution and delivery by such Seller of the Escrow Agreement, the Seller's
Release and all other documents or agreements executed by such Seller in
connection herewith, (collectively, the "Seller's Closing Documents"), the
Seller's Closing Documents will constitute the legal, valid, and binding
obligations of such Seller, enforceable against such Seller in accordance with
their respective terms. Such Seller has the absolute and unrestricted right,
power, authority, and capacity to execute and deliver this Agreement and the
Sellers' Closing Documents and to perform its obligations under this Agreement
and the Sellers' Closing Documents.
(b) Except as set forth in Part 3.2 of the Disclosure Letter, the
consummation or performance of any of the Contemplated Transactions by the
Acquired Companies will not directly or indirectly (with or without notice or
lapse of time):
(i) contravene, conflict with, or result in a violation of (A) any
provision of the Organizational Documents of any Acquired Company, or (B) any
resolution adopted by the board of directors or the stockholders of any Acquired
Company;
(ii) contravene, conflict with, or result in a violation of, or give
any Governmental Body or other Person the right to challenge any of the
Contemplated Transactions or to exercise any remedy or obtain any relief under,
any Legal Requirement or any Order to which any Acquired Company, or any of the
assets owned or used by any Acquired Company, may be subject;
(iii) contravene, conflict with, or result in a violation of any of
the terms or requirements of, or give any Governmental Body the right to revoke,
withdraw, suspend, cancel, terminate, or modify, any Governmental Authorization
that is held by any Acquired Company;
(iv) contravene, conflict with, or result in a violation or breach
of any material provision of, or give any Person the right to declare a default
or exercise any remedy under, or to accelerate the maturity or performance of,
or to cancel, terminate, or modify, any material Applicable Contract; or
(v) result in the imposition or creation of any Encumbrance upon or
with respect to any of the assets owned or used by any Acquired Company.
Except as set forth in Part 3.2 of the Disclosure Letter, no Acquired Company is
or will be required to give any notice to or obtain any Consent from any Person
in connection with the execution and delivery of this Agreement or the
consummation or performance
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of any of the Contemplated Transactions, except for such notices or Consents,
the failure of which to give or obtain would not have a material adverse effect
on the Acquired Companies taken as a whole.
(c) Except as set forth in Part 3.2 of the Disclosure Letter, neither the
execution and delivery of this Agreement or such Seller's Closing Documents by
such Seller nor the consummation or performance of any of the Contemplated
Transactions by such Seller will, directly or indirectly (with or without notice
or lapse of time):
(i) contravene, conflict with, or result in a violation of, or give
any Governmental Body or other Person the right to challenge any of the
Contemplated Transactions or to exercise any remedy or obtain any relief under,
any Legal Requirement or any Order to which such Seller may be subject;
(ii) cause Buyer or any Acquired Company to become subject to, or to
become liable for the payment of, in each case with respect to the transfer of
the Tendered Shares, any share transfer tax or real property transfer tax based
upon the transfer of a controlling interest in real property, in each case to
the United States or any State or municipality thereof;
(iii) result in the imposition or creation of any Encumbrance upon or
with respect to the Tendered Shares of such Seller.
Except as set forth in Part 3.2 of the Disclosure Letter, such Seller is not or
will not be required to give any notice to or obtain any Consent from any Person
in connection with the execution and delivery of this Agreement by such Seller
or the consummation or performance of any of the Contemplated Transactions by
such Seller, except for such notices or Consents, the failure of which to give
or obtain would not have a material adverse effect on the Acquired Companies
taken as a whole.
3.3 CAPITALIZATION
(a) The authorized equity securities of the Company consist of 100,000
shares of Class A Common Stock ("Class A Shares"), par value $0.25 per share and
3,900,000 shares of Class B Common Stock ("Class B Shares"), par value $0.25 per
share, of which 56,269 shares of Class A Shares and 2,033,307 shares of Class B
Shares are issued and outstanding (collectively, the "Shares"). There are 25,000
Warrants outstanding and 238,000 Options outstanding as of the date of this
Agreement, all of which will either have been exercised or extinguished at or
immediately prior to Closing, in accordance with the respective terms thereof.
With the exception of the Shares, Options and Warrants, all of the outstanding
equity securities and other securities of each Acquired Company are owned of
record and beneficially by one or more of the Acquired Companies, free and clear
of all Encumbrances. All of the outstanding equity securities of each Acquired
Company have been duly authorized and validly issued and are fully paid and
nonassessable. Except for the Chattanooga Group Stock Option Plan, the Options
and the Warrants or as set forth on Part 3.3 of the Disclosure Letter, there are
no
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Contracts to which any Acquired Company is a party relating to the issuance,
sale, or transfer of any equity securities of any Acquired Company or other
securities of any Acquired Company. None of the outstanding equity securities or
other securities of any Acquired Company was issued in violation of the
Securities Act or any other Legal Requirement.
(b) Each Seller represents that (i) on the Closing Date it will be the
record and beneficial owner and holder of the Tendered Shares set forth opposite
their name on Schedule A, free and clear of all Encumbrances, (ii) as of the
date hereof, Schedule A contains a complete list of the number of shares,
Options (if any) and Warrants (if any) owned by such Seller, and (iii) except
for this Agreement, the Chattanooga Group Stock Option Plan, the Options and the
Warrants or as set forth on Part 3.3 of the Disclosure Letter, there are no
Contracts to which such Seller is a party relating to the sale or transfer of
any equity securities or other securities of any Acquired Company.
(c) No Acquired Company owns, or has any Contract to acquire, any equity
securities or other securities of any Person (other than Acquired
Companies) or any direct or indirect equity or ownership interest in any other
business.
3.4 FINANCIAL STATEMENTS
The Acquired Companies have delivered to Buyer: (a) audited consolidated balance
sheets of the Acquired Companies as at June 30 in each of the years 2000 and
2001 (the balance sheet for the calendar year ended June 30, 2001, being
hereinafter referred to as the "Balance Sheet"), and the related audited
consolidated statements of income, changes in stockholders' equity, and cash
flow for each of the fiscal years then ended (including the notes thereto),
together with the report thereon of Xxxxxx Xxxxxxxx LLP, independent certified
public accountants, (b) an unaudited consolidated balance sheet of the Acquired
Companies as at September 30, 2001 (the "Interim Balance Sheet") and the related
unaudited consolidated statements of income and cash flow for the three (3)
months then ended. Except as set forth in Part 3.4 of the Disclosure Schedule,
such financial statements and notes fairly present in all material respects the
financial condition and the results of operations, changes in stockholders'
equity, and cash flow of the Acquired Companies as at the respective dates of
and for the periods referred to in such financial statements, all in accordance
with GAAP, subject, in the case of interim financial statements, to normal
recurring year-end adjustments (the effect of which will not, individually or in
the aggregate, be materially adverse) and the absence of notes. Except as set
forth in Part 3.4 of the Disclosure Schedule, the financial statements referred
to in this Section 3.4 reflect the consistent application of such accounting
principles throughout the periods involved, except as disclosed in the notes to
such financial statements. No financial statements of any Person other than the
Acquired Companies are required by GAAP to be included in the consolidated
financial statements of the Company.
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3.5 BOOKS AND RECORDS
Except as set forth on Part 3.5 of the Disclosure Letter, the books of account,
minute books, stock record books, and other records of the Acquired Companies
(other than with respect to any committees of the Boards of Directors of the
Acquired Companies), all of which have been made available to Buyer, (i) are
complete and correct in all material respects, and (ii) since July 1, 1999, have
been maintained pursuant to an adequate system of internal accounting controls.
To the Knowledge of Sellers, the minute books of the Acquired Companies contain
materially accurate and complete records of all meetings held of, and corporate
action taken by, the stockholders and the Boards of Directors of the Acquired
Companies, and no meeting of any such stockholders or Boards of Directors has
been held for which minutes have not been prepared and are not contained in such
minute books. To the Knowledge of the Sellers, the minute book of the Company
contains materially accurate and complete records of all meetings held of, and
corporate actions taken by, (i) the audit committee of the Company for the past
3 years, and (ii) the compensation committee of the Company since June 20, 2001.
To the Knowledge of the Sellers, no other committee of the Company has existed
during the past 3 years. At the Closing, all of those books and records will be
in the possession of the Acquired Companies.
3.6 TITLE TO PROPERTIES; ENCUMBRANCES
Part 3.6 of the Disclosure Letter contains a complete and accurate list of all
real property, leaseholds, or other real property interests therein owned by any
Acquired Company. The Acquired Companies have delivered or made available to
Buyer copies of the deeds and other instruments (as recorded) by which the
Acquired Companies acquired such real property and interests, and copies of all
title insurance policies, opinions, abstracts, and surveys in the possession of
Sellers or the Acquired Companies and relating to such property or interests.
Except as set forth in Part 3.6 of the Disclosure Letter, the Acquired Companies
own, lease or have the right to use (with good and marketable title in the case
of real property, subject only to the matters permitted by the following
sentence) all of the properties and assets (whether real, personal, or mixed and
whether tangible or intangible) located in the facilities owned or operated by
the Acquired Companies or reflected as owned in the books and records of the
Acquired Companies, including all of the properties and assets reflected in the
Balance Sheet and the Interim Balance Sheet (except for assets held under
capitalized leases disclosed or not required to be disclosed in Part 3.6 of the
Disclosure Letter and personal property sold since the date of the Balance Sheet
and the Interim Balance Sheet, as the case may be, in the Ordinary Course of
Business, and the personal assets of employees and vendor-owned assets used to
provide services to or by an Acquired Company in the Ordinary Course of
Business). All subsequently purchased or acquired properties and assets were
acquired in the Ordinary Course of Business, except as listed in Part 3.6 of the
Disclosure Letter. Except as set forth in Part 3.6 of the Disclosure Letter, all
material tangible personal properties and assets reflected in the Balance Sheet
and the Interim Balance Sheet are free and clear of all Encumbrances except for
(a) assets held under capital leases disclosed, or not required to be disclosed,
in Part 3.6 of the Disclosure Letter, (b) mortgages or security
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interests shown on the Balance Sheet or the Interim Balance Sheet as securing
specified liabilities or obligations, with respect to which no material default
(or event that, with notice or lapse of time or both, would constitute a
material default) exists, (c) mortgages or security interests incurred in
connection with the purchase of tangible personal property or assets after the
date of the Interim Balance Sheet (such mortgages and security interests being
limited to the tangible personal property or assets so acquired), with respect
to which no default (or event that, with notice or lapse of time or both, would
constitute a default) exists, and (d) liens for current taxes not yet due. To
the Knowledge of Sellers, except (x) as set forth in Part 3.6 of the Disclosure
Letter, (y) with respect to any Encumbrance of record or (z) as noted on the
title policy issued by Chicago Title and Insurance Company, dated August 19,1999
(policy #43 001 107-00008211) and the survey prepared by Xxxxxxx Surveying
Group, dated July 1, 1999, (A) all real properties reflected in the Balance
Sheet and the Interim Balance Sheet are free and clear of all Encumbrances
except for (i) minor imperfections of title, if any, none of which is
substantial in amount, materially detracts from the value or impairs the use of
the property subject thereto, or impairs the operations of any Acquired Company,
and (ii) zoning laws and other land use restrictions that do not materially
impair the present use of the property subject thereto, and (B) all buildings,
plants, and structures owned by the Acquired Companies lie wholly within the
boundaries of the real property owned by the Acquired Companies and do not
encroach upon the property of, or otherwise conflict with the property rights
of, any other Person. Sellers have no actual or beneficial ownership interest in
any of the foregoing real property.
3.7 CONDITION AND SUFFICIENCY OF ASSETS
Except as disclosed in Part 3.7 of the Disclosure Schedule, to the Knowledge of
Sellers, the buildings, plants, structures, and equipment of the Acquired
Companies are in reasonable operating condition and repair, and are adequate for
the uses to which they are being put, and none of such buildings, plants,
structures, or equipment is in need of maintenance or repairs except for
ordinary, routine maintenance and repairs. The building, plants, structures, and
equipment owned or leased by the Acquired Companies or that the Acquired
Companies have the right to use are sufficient for the continued conduct of the
Acquired Companies' businesses after the Closing in substantially the same
manner as conducted prior to the Closing.
3.8 ACCOUNTS RECEIVABLE
To the Knowledge of Sellers, all accounts receivable of the Acquired Companies
that are reflected on the Balance Sheet or the Interim Balance Sheet or that
will be reflected on the Closing Balance Sheet, as applicable, (collectively,
the "Accounts Receivable") represent or will represent valid obligations arising
from sales actually made or services actually performed in the Ordinary Course
of Business other than extended warranty contracts billing accounted for in
accordance with GAAP. To the Knowledge of Sellers, the Accounts Receivable
referred to on the Closing Balance Sheet will be collectible in the Ordinary
Course of Business, net of the respective reserves shown on the Closing Balance
Sheet (which reserves are adequate and calculated consistent with past practice
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and will not represent a material adverse change in the composition of such
Accounts Receivable in terms of aging). Except as disclosed in Part 3.8 of the
Disclosure Schedule, there is no contest, claim, or right of set-off in excess
of the reserves and other accruals recorded on the Balance Sheet or the Interim
Balance Sheet, or that will be recorded on the Closing Balance Sheet, other than
returns in the Ordinary Course of Business, under any Contract with any obligor
of an Accounts Receivable relating to the amount or validity of such Accounts
Receivable. Part 3.8 of the Disclosure Letter contains a complete and accurate
list of all accounts receivable of the Acquired Companies as of the date of the
Interim Balance Sheet, which list sets forth the aging of such accounts
receivable.
3.9 INVENTORY
To the Knowledge of Sellers, all inventory of the Acquired Companies, reflected
in the Balance Sheet, the Interim Balance Sheet or that will be reflected on the
Closing Balance Sheet, as applicable, consists of, or will consist of, a quality
and quantity usable and salable in the Ordinary Course of Business, net of
respective reserves shown on the Balance Sheet, Interim Balance Sheet, or that
will be shown on the Closing Balance Sheet, as applicable, which reserves are
adequate and calculated consistent with past practices. All inventories have
been recorded consistent with past practices at the lower of cost or market on a
first in, first out basis.
3.10 NO UNDISCLOSED LIABILITIES
Except as set forth in Part 3.10 of the Disclosure Letter, to the Knowledge of
Sellers, the Acquired Companies have no material liabilities or obligations
required to be disclosed in a balance sheet or related footnotes prepared in
accordance with GAAP except for liabilities or obligations reflected or reserved
against in the Balance Sheet (including the footnotes thereto) or the Interim
Balance Sheet and liabilities incurred in the Ordinary Course of Business since
the respective dates thereof. Except as set forth in Part 3.10 of the Disclosure
Schedule, neither the Company nor any of its Subsidiaries (i) has any
outstanding indebtedness for borrowed money except as reflected in the Balance
Sheet, the Interim Balance Sheet or on the accounting records of the Acquired
Companies as of the Closing Date, or (ii) is a guarantor or otherwise
contingently liable on such indebtedness of any other Person.
3.11 TAXES
(a) The Acquired Companies have filed or caused to be filed (on a timely
basis since 1996), or will file or cause to be filed on or before the Closing
Date, all Tax Returns that are or were required by Law to be filed by or with
respect to any of them, either separately or as a member of a group of
corporations, for all taxable years or periods ending on or prior to the Closing
Date (taking into account any extension of time to file granted to or on behalf
of any of them) and all such Tax Returns are, or will be on or prior to the
Closing Date, true, correct and complete in all material respects. Part 3.11 of
the Disclosure Letter contains a complete and accurate list of, all such income,
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property and franchise Tax Returns filed for all taxable periods ending after
January 1, 1996 (copies of which have been delivered or made available to Buyer)
and a list of all jurisdictions in which sales and use Tax Returns have been
filed for all taxable periods ending after January 1, 1996. All Taxes due and
payable by the Acquired Companies with respect to such Tax Returns (i) have
been, or will be on or prior to the Closing Date, paid or (ii) have been
provided for as a liability on the Interim Balance Sheet or, to the extent such
Taxes become due and payable after the date of the Interim Balance Sheet, will
be provided for as a liability on the Closing Balance Sheet. To the Knowledge of
Sellers, there is no investigation pending or threatened by any Governmental
Body for any jurisdiction where the Acquired Companies do not file Tax Returns
with respect to a given Tax that may lead to an assertion by such Governmental
Body that the Acquired Companies are or may be subject to such Tax in such
jurisdiction.
(b) Part 3.11 of the Disclosure Letter contains a complete and accurate
list of all audits of all such Tax Returns, including a reasonably detailed
description of the nature and outcome of each audit. All deficiencies proposed
as a result of such audits have been paid, reserved against, settled, or, as
described in Part 3.11 of the Disclosure Letter, are being contested in good
faith by appropriate proceedings. Part 3.11 of the Disclosure Letter describes
all adjustments proposed by the IRS to the United States federal income Tax
Returns filed by any Acquired Company or any group of corporations including any
Acquired Company for all taxable years since July 1, 1996, and the resulting
deficiencies (if any) proposed by the IRS. Except as described in Part 3.11 of
the Disclosure Letter, since July 1, 1996, no Acquired Company has given or been
requested to give waivers or extensions (or is or would be subject to a waiver
or extension given by any other Person) of any statute of limitations relating
to the payment of Taxes of any Acquired Company or for which any Acquired
Company may be liable.
(c) The charges, accruals, and reserves with respect to Taxes on the
respective books of each Acquired Company are determined in accordance with
GAAP. No Acquired Company has been informed of any proposed assessment of Tax
against it by a Governmental Body except as disclosed in the Interim Balance
Sheet or in Part 3.11 of the Disclosure Letter. No Acquired Company has made
with respect to it, or any property held by it, any consent to the application
of Section 341(f)(2) of the IRC, nor has any Acquired Company made any election
under Section 197(f)(9)(B) of the IRC. All Taxes that any Acquired Company is or
was required by Law to withhold or collect prior to the Closing Date have been
or will, on or before the Closing Date, be duly withheld or collected and, to
the extent required, have been paid to the proper Governmental Body or other
Person or, if not yet due, set aside in accounts for such purposes and accrued
on the books of the Acquired Companies, as applicable.
(d) There is no tax sharing agreement to which any Acquired Company is a
party or by which it is bound that will require any payment of Taxes by any
Acquired Company after the date of this Agreement. No Acquired Company is, or
within the five-year period preceding the Closing Date has been, an "S"
corporation.
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(e) There is no contract, agreement, plan, or arrangement that requires a
payment by any of the Acquired Companies solely by reason of the transactions
contemplated by this Agreement (and without regard to any change in ownership or
in effective control occurring after the Closing and without regard to any bonus
payments required to be made to any Management Option Holder pursuant to his
Employment Agreement following termination of such Management Option Holder's
employment thereunder) of any amount that would not be deductible by reason of
IRC Section 280G.
(f) To the Knowledge of Sellers, there are no outstanding requests by the
Acquired Companies for rulings with any Governmental Body that would affect the
Acquired Companies for periods after the Closing Date. None of the Acquired
Companies has (i) executed, become subject to, or entered into any closing
agreement pursuant to IRC Section 7121 or any similar or predecessor provision
thereof under the IRC or other Tax Law, or (ii) since June 30, 1999, received
approval to make or agreed to a change in accounting method, which closing
agreement or change in accounting method would materially affect any taxable
period of the Acquired Companies ending after the Closing Date. None of the
Acquired Companies has any application pending with any Governmental Body
requesting permission for any change in accounting method.
3.12 NO MATERIAL ADVERSE CHANGE
Since June 30, 2001, there has not been any material adverse change in the
business, operations, properties, assets, or condition of any Acquired Company,
and other than changes in the general economic conditions or acts of war or
terrorism, to the Knowledge of Sellers, no event has occurred or circumstance
exists that would reasonably be expected to result in such a material adverse
change.
3.13 EMPLOYEE BENEFITS
(a) As used in this Section 3.13, the following terms have the meanings
set forth below.
"Company Other Benefit Obligation" means an Other Benefit Obligation owed,
adopted, or followed by an Acquired Company or an ERISA Affiliate of an Acquired
Company.
"Company Plan" means all Plans of which an Acquired Company or an ERISA
Affiliate of an Acquired Company is or was a Plan Sponsor, or to which an
Acquired Company or an ERISA Affiliate of an Acquired Company otherwise
contributes or has contributed, or in which an Acquired Company or an ERISA
Affiliate of an Acquired Company otherwise participates or has participated. All
references to Plans are to Company Plans unless the context requires otherwise.
"Company VEBA" means a VEBA whose members include employees of any Acquired
Company or any ERISA Affiliate of an Acquired Company.
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"ERISA Affiliate" means, with respect to an Acquired Company, any other person
that, together with the Company, would be treated as a single employer under IRC
(S)414.
"Multi-Employer Plan" has the meaning given in ERISA (S)3(37)(A).
"Other Benefit Obligations" means all obligations, arrangements, or customary
practices, whether or not legally enforceable, to provide benefits, other than
salary, as compensation for services rendered, to present or former directors,
employees, or agents, other than obligations, arrangements, and practices that
are Plans. Other Benefit Obligations include consulting agreements under which
the compensation paid does not depend upon the amount of service rendered,
sabbatical policies, severance payment policies, and fringe benefits within the
meaning of IRC (S)132.
"PBGC" means the Pension Benefit Guaranty Corporation, or any successor thereto.
"Pension Plan" has the meaning given in ERISA (S)3(2)(A).
"Plan" has the meaning given in ERISA (S)3(3).
"Plan Sponsor" has the meaning given in ERISA (S)3(16)(B).
"Qualified Plan" means any Plan that meets or purports to meet the requirements
of IRC (S)401(a).
"Title IV Plans" means all Pension Plans that are subject to Title IV of XXXXX,
00 X.X.X. (X)0000 et seq., other than Multi-Employer Plans.
"VEBA" means a voluntary employees' beneficiary association under IRC
(S)501(c)(9).
"Welfare Plan" has the meaning given in ERISA (S)3(1).
(a) Except as set forth on Part 3.13(a) of the Disclosure Letter, no
Acquired Company nor any ERISA Affiliate maintains, participates in or has ever
maintained or participated in any Company VEBA, any Multi-Employer Plan or any
defined benefit pension plan or other Title IV Plan, or is subject to any
collective bargaining agreement pursuant to which contributions have been made
or obligations incurred to any Company Plan or Company Other Benefit Obligation.
(b) (i) Part 3.13(b)(i) of the Disclosure Letter contains a complete and
accurate list of all Company Plans and Company Other Benefit Obligations, and
identifies as such all Company Plans that are Qualified Plans.
(ii) Part 3.13(b)(ii) of the Disclosure Letter contains a
complete and accurate list of (A) all ERISA Affiliates of each Acquired Company,
and (B) all Plans of which any such ERISA Affiliate is or was a Plan Sponsor, in
which any such ERISA
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Affiliate participates or has participated, or to which any such ERISA Affiliate
contributes or has contributed.
(iii) Part 3.13(b)(iii) of the Disclosure Letter sets forth a
calculation of the reasonably anticipated liability of the Acquired Companies
for post-retirement benefits other than pensions, made in accordance with
Financial Accounting Statement 106 of the Financial Accounting Standards Board,
regardless of whether any Acquired Company is required by this Statement to
disclose such information.
(vi) Part 3.13(b)(iv) of the Disclosure Letter sets forth the
reasonably anticipated financial cost of all obligations owed under any Company
Plan or Company Other Benefit Obligation that is not subject to the disclosure
and reporting requirements of ERISA.
(c) The Acquired Companies have delivered to Buyer, or will deliver to
Buyer within ten (10) days of the date of this Agreement:
(i) all documents that set forth the terms of each Company Plan and
Company Other Benefit Obligation and of any related trust, including (A) all
plan descriptions and summary plan descriptions of Company Plans for which
Sellers or the Acquired Companies are required to prepare, file, and distribute
plan descriptions and summary plan descriptions, and (B) all summaries and
descriptions furnished to participants and beneficiaries regarding Company Plans
and Company Other Benefit Obligations for which a plan description or summary
plan description is not required;
(ii) all personnel, payroll, and employment manuals and policies;
(iii) a written description of any Company Plan or Company Other
Benefit Obligation that is not otherwise in writing;
(iv) all registration statements filed with respect to any Company
Plan;
(v) all insurance policies purchased by or to provide benefits
under any Company Plan;
(vi) all contracts with third party administrators, actuaries,
investment managers, consultants, and other independent contractors that relate
to any Company Plan or Company Other Benefit Obligation;
(vii) all reports submitted within the four (4) years preceding the
date of this Agreement by third party administrators, actuaries, investment
managers, consultants, or other independent contractors with respect to any
Company Plan or Company Other Benefit Obligation;
(viii) all notifications to employees of their rights under
ERISAss.601 et seq. and IRC (S)4980B;
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(ix) the Form 5500 filed in each of the most recent three plan years
with respect to each Company Plan, including all schedules thereto and the
opinions of independent accountants;
(x) all notices that were given by any Acquired Company or any
ERISA Affiliate of an Acquired Company or any Company Plan to the IRS or any
participant or beneficiary, pursuant to statute, within the four (4) years
preceding the date of this Agreement, excluding notices that are expressly
mentioned elsewhere in this Section 3.13;
(xi) all notices that were given by the IRS or the Department of
Labor to any Acquired Company, any ERISA Affiliate of an Acquired Company, or
any Company Plan within the four years preceding the date of this Agreement; and
(xii) with respect to Qualified Plans, the most recent determination
letter for each Plan of the Acquired Companies that is a Qualified Plan.
(d) To the Knowledge of Sellers, except as set forth in Part 3.13(d) of
the Disclosure Letter:
(i) The Acquired Companies have performed all of their respective
obligations under all Company Plans and Company Other Benefit Obligations. The
Acquired Companies have made appropriate entries in their financial records and
statements for all obligations and liabilities under such Plans, and Obligations
that have accrued but are not due.
(ii) No statement, either written or oral, has been made by any
Acquired Company to any Person with regard to any Plan or Other Benefit
Obligation that was not in accordance with the Plan or Other Benefit Obligation
and that could have a material adverse economic consequence to any Acquired
Company or to Buyer.
(iii) The Acquired Companies, with respect to all Company Plans and
Company Other Benefits Obligations, are, and each Company Plan and Company Other
Benefit Obligation is, in full compliance with ERISA, the IRC, and other
applicable Laws including the provisions of such Laws expressly mentioned in
this Section 3.13.
(A) No transaction prohibited by ERISA (S)406 and no
"prohibited transaction" under IRC (S)4975(c) have occurred with respect to any
Company Plan.
(B) No Seller or Acquired Company has any liability to the
IRS with respect to any Plan, including any liability imposed by Chapter 43 of
the IRC.
(C) All filings required by ERISA and the IRC as to each Plan
have been timely filed, and all notices and disclosures to participants required
by either
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ERISA or the IRC have been timely provided.
(D) All contributions and payments made or accrued with
respect to all Company Plans and Company Other Benefit Obligations are
deductible under IRC (S).162 or (S)404. No amount, or any asset of any Company
Plan or Company VEBA, is subject to tax as unrelated business taxable income.
(iv) Each Company Plan can be terminated within thirty days, without
payment of any additional contribution or amount and without the vesting or
acceleration of any benefits promised by such Plan.
(v) Since January 1, 2000, there has been no establishment or
amendment of any Company Plan or Company Other Benefit Obligation except for the
Chattanooga Group 2000 Stock Option Plan and as required by Law.
(vi) No event has occurred or circumstance exists that could result
in a material increase in premium costs of Company Plans and Company Other
Benefit Obligations that are insured, or a material increase in benefit costs of
such Plans and Obligations that are self-insured.
(vii) Other than claims for benefits submitted by participants or
beneficiaries, no claim against, or legal proceeding involving any Company Plan
or Company Other Benefit Obligation is pending or, to the Knowledge of Sellers,
is Threatened.
(viii) No Company Plan is a stock bonus, pension, or
profit-sharing plan within the meaning of IRC (S)401(a) except for the Company's
401(k) plan.
(ix) Each Qualified Plan of each Acquired Company is qualified in
form and operation under IRC (S)401(a); each trust for each such Plan is exempt
from federal income tax under IRC (S)501(a). No event has occurred or
circumstance exists that will or could give rise to disqualification or loss of
tax-exempt status of any such Plan or trust.
(x) Each Acquired Company and each ERISA Affiliate has made
all contributions required under each Company Plan.
(xi) No Company Plan is subject to Title IV of ERISA.
(xii) No Acquired Company or any ERISA Affiliate of an Acquired
Company has ever established, maintained, or contributed to or otherwise
participated in, or had an obligation to maintain, contribute to, or otherwise
participate in, any Multi-Employer Plan.
(xiii) Except to the extent required under ERISA (S)601 et seq. and
IRC (S)4980B, no Acquired Company provides health or welfare benefits for any
retired or
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former employee or is obligated to provide health or welfare benefits to any
active employee following such employee's retirement or other termination of
service.
(xiv) Each Acquired Company has the right to modify and terminate
benefits to retirees (other than pensions) with respect to both retired and
active employees.
(xv) Sellers and all Acquired Companies have complied with the
provisions of ERISA (S)601 et seq. and IRC (S)4980B.
(xvi) The consummation of the Contemplated Transactions will not
result in the payment, vesting, or acceleration of any benefit.
3.14 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS
(a) Except as set forth in Part 3.14 of the Disclosure Letter:
(i) to the Knowledge of Sellers, each Acquired Company is, and at
all times since June 30, 1999 has been, in full compliance with each material
Legal Requirement that is or was applicable to it or to the conduct or operation
of its business or the ownership or use of any of its assets;
(ii) to the Knowledge of Sellers, no event has occurred since June
30, 1999, or circumstance exists that (with or without notice or lapse of time)
(A) would reasonably be expected to constitute or result in a violation by any
Acquired Company of, or a failure on the part of any Acquired Company to comply
with, any material Legal Requirement, or (B) would reasonably be expected to
give rise to any obligation on the part of any Acquired Company to undertake, or
to bear a material portion of the cost of, any remedial action of any nature;
and
(iii) to the Knowledge of Sellers, no Acquired Company has received,
at any time since June 30, 1999, any written notice or other written
communication from any Governmental Body or any other Person regarding (A) any
actual or potential violation of, or failure to comply with, any material Legal
Requirement, or (B) any actual or potential obligation on the part of any
Acquired Company to undertake, or to bear a material portion of the cost of, any
remedial action of any nature.
(b) Part 3.14 of the Disclosure Letter contains a complete and accurate
list of each Governmental Authorization that is held by any Acquired Company and
that is material to the operation of the business of the Acquired Companies as
currently conducted. To the Knowledge of Sellers, each Governmental
Authorization listed or required to be listed in Part 3.14 of the Disclosure
Letter is valid and in full force and effect. To the Knowledge of Sellers,
except as set forth in Part 3.14 of the Disclosure Letter:
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(i) each Acquired Company is, and at all times since June 30,
1999, has been, in material compliance with all of the terms and requirements of
each Governmental Authorization identified or required to be identified in Part
3.14 of the Disclosure Letter;
(ii) no event has occurred or circumstance exists that would
reasonably be expected to (with or without notice or lapse of time) (A)
constitute or result directly or indirectly in a violation of or a failure to
comply with any material term or requirement of any Governmental Authorization
listed or required to be listed in Part 3.14 of the Disclosure Letter, or (B)
result directly or indirectly in the revocation, withdrawal, suspension,
cancellation, or termination of, or any modification to, any Governmental
Authorization listed or required to be listed in Part 3.14 of the Disclosure
Letter;
(iii) no Acquired Company has received, at any time since June 30,
1999, any written notice or other written communication from any Governmental
Body or any other Person regarding (A) any actual or potential violation of or
failure to comply with any term or requirement of any Governmental
Authorization, or (B) any actual or potential revocation, withdrawal,
suspension, cancellation, termination of, or modification to any Governmental
Authorization; and
(iv) all applications required to have been filed for the renewal
of the Governmental Authorizations listed or required to be listed in Part 3.14
of the Disclosure Letter have been duly filed on a timely basis with the
appropriate Governmental Bodies.
To the Knowledge of Sellers, the Governmental Authorizations listed in Part 3.14
of the Disclosure Letter collectively constitute all of the material
Governmental Authorizations necessary to permit the Acquired Companies to
lawfully conduct and operate their businesses in the manner they currently
conduct and operate such businesses and to permit the Acquired Companies to own
and use their assets in the manner in which they currently own and use such
assets.
(c) No representation or warranty is made by Sellers in this Section 3.14
with respect to Tax, ERISA and environmental matters. The only representation
and warranties made by Sellers with respect to Tax, ERISA and environmental
matters are made in Sections 3.11 and 3.13 and 3.19, respectively.
3.15 LEGAL PROCEEDINGS; ORDERS
(a) Except as set forth in Part 3.15 of the Disclosure Letter, at the
date hereof there is no pending Proceeding:
(i) that has been commenced by or against any Acquired Company; or
(ii) to which any Acquired Company is a party that challenges any of
the Contemplated Transactions.
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To the Knowledge of Sellers, except as set forth in Part 3.15 of the Disclosure
Letter, no other such Proceeding has been Threatened. Except for documents
protected by the attorney-client, attorney work product or other privilege
related to the Department of Commerce Investigation, and except as set forth in
Part 3.15 of the Disclosure Letter, the Acquired Companies have delivered or
made available to Buyer copies of all pleadings, correspondence, and other
documents relating to each Proceeding listed in Part 3.15 of the Disclosure
Letter. To the Knowledge of Sellers, the Proceedings listed in Part 3.15 of the
Disclosure Letter would not reasonably be expected to have a material adverse
effect on the business, operations, assets or condition of any Acquired Company.
(b) Except as set forth in Part 3.15 of the Disclosure Letter, to the
Knowledge of Sellers:
(i) there is no Order to which any of the Acquired Companies is
subject; and
(ii) no officer, director, agent, or employee of any Acquired
Company is subject to any Order that prohibits such officer, director, agent, or
employee from engaging in or continuing any conduct, activity, or practice
relating to the business of any Acquired Company.
(c) Except as set forth in Part 3.15 of the Disclosure Letter, to the
Knowledge of Sellers:
(i) each Acquired Company is, and at all times since June 30, 1999,
has been, in full compliance with all of the material terms and requirements of
each Order to which it is or has been subject;
(ii) no event has occurred since June 30, 1999, or circumstance
exists that would reasonably be expected to constitute or result in (with or
without notice or lapse of time) a violation of or failure to comply with any
material term or requirement of any Order to which any Acquired Company is
subject; and
(iii) no Acquired Company has received, at any time since June 30,
1999, any written notice or other written communication from any Governmental
Body or any other Person regarding any actual or potential violation of, or
failure to comply with, any material term or requirement of any Order to which
any Acquired Company is or has been subject.
3.16 ABSENCE OF CERTAIN CHANGES AND EVENTS
Except as set forth in Part 3.16 of the Disclosure Letter, for the period from
the date of the Balance Sheet to the date hereof, the Acquired Companies have
conducted their businesses only in the Ordinary Course of Business and there has
not been any:
(a) change in any Acquired Company's authorized or issued capital stock;
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grant of any stock option or right to purchase shares of capital stock of any
Acquired Company; issuance of any security convertible into such capital stock;
grant of any registration rights; purchase, redemption, retirement, or other
acquisition by any Acquired Company of any shares of any such capital stock; or
declaration or payment of any dividend or other distribution or payment in
respect of shares of capital stock;
(b) amendment to the Organizational Documents of any Acquired Company;
(c) payment or increase by any Acquired Company of any bonuses, salaries,
or other compensation to any stockholder, director, officer, or (except in the
Ordinary Course of Business) employee or any entry into any employment,
severance, or similar Contract with any director, officer, or employee;
(d) adoption of, or increase in the payments to or benefits under, any
profit sharing, bonus, deferred compensation, savings, insurance, pension,
retirement, or other employee benefit plan for or with any employees of any
Acquired Company;
(e) damage to or destruction or loss of any asset or property of any
Acquired Company, whether or not covered by insurance, materially and adversely
affecting the properties, assets, business, financial condition, of the Acquired
Companies, taken as a whole;
(f) entry into, termination of, or receipt of notice of termination of (i)
any material license, distributorship, dealer, sales representative, joint
venture, credit, or similar agreement, or (ii) any Contract or transaction
involving a total remaining commitment by or to any Acquired Company of at least
$100,000, other than purchase orders given or received by any Acquired Company
for the purchase or sale of inventory in the Ordinary Course of Business;
(g) sale (other than sales of inventory in the Ordinary Course of
Business), lease, or other disposition of any material asset or property of any
Acquired Company or mortgage, pledge, or imposition of any lien or other
encumbrance on any material asset or property of any Acquired Company, including
the sale, lease, or other disposition of any of the material Intellectual
Property Assets;
(h) to the Knowledge of Sellers, cancellation or waiver in writing of any
claims or rights with a value to any Acquired Company in excess of $25,000
except to the extent reserved for in the Balance Sheet or Interim Balance Sheet,
or that will be reserved for in the Closing Balance Sheet;
(i) material change in the accounting methods used by any Acquired
Company; or
(j) written agreement, by any Acquired Company to do any of the foregoing.
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3.17 CONTRACTS; NO DEFAULTS
(a) Part 3.17(a) of the Disclosure Letter contains a complete and
accurate list, and the Acquired Companies have delivered or made available to
Buyer true and complete copies, of:
(i) each executory Applicable Contract that involves performance
of services or delivery of goods or materials by one or more Acquired Companies
of an outstanding amount or value in excess of $50,000 other than purchase
orders given or received by an Acquired Company for the purchase or sale of
inventory in the Ordinary Course of Business of an outstanding amount or value
of less than $200,000;
(ii) each executory Applicable Contract that involves performance
of services or delivery of goods or materials to one or more Acquired Companies
of an outstanding amount or value in excess of $50,000 other than purchase
orders given or received by an Acquired Company for the purchase or sale of
inventory in the Ordinary Course of Business of an outstanding amount or value
of less than $200,000;
(iii) each executory Applicable Contract that was not entered into
in the Ordinary Course of Business since June 30, 1999, and that involves
expenditures or receipts of one or more Acquired Companies in excess of $50,000;
(iv) each lease, rental or occupancy agreement, license,
installment and conditional sale agreement, and other material Applicable
Contract affecting the ownership of, leasing of, title to, use of, or any
leasehold or other interest in, any real or tangible personal property (except
tangible personal property leases and installment and conditional sales
agreements having a value per item or aggregate payments of less than $25,000 or
with terms of less than one year);
(v) each executory licensing agreement (excluding off-the-shelf
software or licenses requiring no further payment or payments to or from an
Acquired Company of more than $10,000 per year) and, to the Knowledge of
Sellers, each other material Applicable Contract with respect to patents,
trademarks, copyrights, or other intellectual property, including agreements
with current or former employees, consultants, or contractors regarding the
appropriation or the non-disclosure of any of the Intellectual Property Assets;
(vi) each collective bargaining agreement and other material
Applicable Contract to or with any labor union or other employee representative
of a group of employees;
(vii) each joint venture, partnership, and other Applicable Contract
(however named) involving a sharing of profits, losses, costs, or liabilities by
any Acquired Company with any other Person;
(viii) each Applicable Contract containing covenants that purport to
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materially restrict the business activity of any Acquired Company or materially
limit the freedom of any Acquired Company to engage in any line of business or
to compete with any Person;
(ix) each executory Applicable Contract (other than with
employees) providing for the payment of commissions, royalties or other payments
based on the volume of purchases or sales or magnitude of profits other than
Applicable Contracts where the payment to or by an Acquired Company is less than
$10,000 per year;
(x) each power of attorney that is currently effective and
outstanding excluding those given in connection with freight forwarding or
intellectual property registration or filing;
(xi) to the Knowledge of Sellers, each material Applicable
Contract entered into other than in the Ordinary Course of Business that
contains or provides for an express undertaking by any Acquired Company to be
responsible for consequential damages;
(xii) each executory Applicable Contract for capital expenditures
in excess of $25,000;
(xiii) each written warranty, guaranty, and or other similar
undertaking with respect to contractual performance extended by any Acquired
Company other than in the Ordinary Course of Business; and
(xiv) each written amendment, supplement, and modification in
respect of any of the foregoing.
(b) Each Seller represents that, except as set forth in Part 3.17(b) of
the Disclosure Letter, such Seller (and any Related Person of such Seller) has
no rights under, and such Seller has not become subject to any obligation or
liability under, any Contract listed on Part 3.17(a) of the Disclosure Letter.
(c) to the Knowledge of Sellers, except as set forth in Part 3.17(c) of
the Disclosure Letter, each Contract identified in Part 3.17(a) of the
Disclosure Letter is in full force and effect and is valid and enforceable in
accordance with its terms.
(d) To the Knowledge of Sellers, except as set forth in Part 3.17(d) of
the Disclosure Letter:
(i) each Acquired Company is in full compliance with all material
terms and requirements of each Contract listed on Part 3.17(a) of the Disclosure
Schedule;
(ii) each other Person that has or had any obligation or liability
under any Contract listed on Part 3.17(a) of the Disclosure Schedule is in full
compliance with
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all material terms and requirements of such Contract; and
(iii) no Acquired Company has given to or received from any
other Person, at any time since June 30, 1999, any written notice or other
written communication regarding any actual or potential material violation or
breach of, or default under, any Contract listed on Part 3.17(a) of the
Disclosure Schedule.
(e) To the Knowledge of Sellers, other than with respect to the purchase
of inventory in the Ordinary Course of Business, there are no attempts to
renegotiate or outstanding rights to renegotiate any material amounts paid or
payable to any Acquired Company under current or completed material Contracts
with any Person.
3.18 INSURANCE
(a) The Acquired Companies have delivered or made available to Buyer
true and complete copies of all policies of insurance purchased by any Acquired
Company or to which any Acquired Company is a party within the five (5) years
preceding the date of this Agreement.
(b) To the Knowledge of Sellers, Part 3.18(b) of the Disclosure Letter
describes:
(i) any formal self-insurance arrangement (which in no event shall
include the deductible portion of any insurance policy, any uninsured amounts
above the limits of any insurance policy, or areas of risks not covered by
insurance) of any Acquired Company, including any reserves established
thereunder; and
(ii) the name of each third party that an Acquired Company has
listed as an additional insured under an Acquired Company insurance policy.
(c) Part 3.18(c) of the Disclosure Letter sets forth, by year, for the
current policy year and each of the five (5) preceding policy years:
(i) a summary of the loss experience under each product liability,
property and casualty, general liability, directors & officers, and workers'
compensation insurance policy; and
(ii) a statement describing each claim under a product liability,
property and casualty, general liability, directors & officers, and workers'
compensation insurance policy for an amount in excess of $5,000, which sets
forth:
(A) the name of the claimant;
(B) a description of the policy by insurer, type of
insurance, and period of coverage; and
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(C) the amount and a brief description of the claim.
(d) Except as set forth on Part 3.18(d) of the Disclosure Letter:
(i) To the Knowledge of Sellers, all policies to which any
Acquired Company is a party or that provide coverage to any Acquired Company or
any director or officer of an Acquired Company:
(A) are valid, outstanding, and enforceable; and
(B) will continue in full force and effect following the
consummation of the Contemplated Transactions other than policies which will
expire in accordance with their terms.
(ii) To the Knowledge of Sellers, since June 30, 1999, no Seller or
Acquired Company has received any written notice of cancellation or any written
notice that any insurance policy is no longer in full force or effect or will
not be renewed or that the issuer of any policy is not willing or able to
perform its obligations thereunder (other than expiration by the terms of the
applicable policy).
(iii) The Acquired Companies have paid all premiums due, and have
otherwise performed all of their respective material obligations, under each
policy to which any Acquired Company is a party.
(iv) To the Knowledge of Sellers, the Acquired Companies have given
notice to the insurer of all material claims that may be insured thereby.
3.19 ENVIRONMENTAL MATTERS
Except as set forth in part 3.19 of the Disclosure Letter:
(a) To the Knowledge of Sellers, each Acquired Company is, and at all
times has been, in material compliance with, and has not been and is not in
material violation of any Environmental Law. To the Knowledge of Sellers, no
Seller or Acquired Company has any reasonable basis to expect, nor has any of
them or any other Person for whose conduct the Acquired Companies are
responsible received, any written order, notice, or other written communication
from (i) any Governmental Body or private citizen acting in the public interest,
or (ii) the current or prior owner or operator of any Facilities, of any actual
violation by the Acquired Companies or the Acquired Companies' failure to comply
with any Environmental Law, or of the Acquired Companies' actual obligation to
undertake or bear the cost of any Environmental, Health, and Safety Liabilities
with respect to any of the Facilities or any other properties or assets (whether
real, personal, or mixed) in which any Acquired Company has had a material
interest, or with respect to any property or Facility at or to which Hazardous
Materials were generated, manufactured, refined, transferred, imported, used, or
processed by any Acquired Company, or any other Person for whose conduct the
Acquired Companies are
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responsible, or from which Hazardous Materials have been transported, treated,
stored, handled, transferred, disposed, recycled, or received by the Acquired
Companies.
(b) To the Knowledge of Sellers, there are no pending claims,
Encumbrances, or other restrictions of any nature, resulting from any
Environmental, Health, and Safety Liabilities or arising under or pursuant to
any Environmental Law, with respect to or affecting any of the Facilities or any
other properties and assets (whether real, personal, or mixed) in which any
Acquired Company has or had a material interest.
(c) To the Knowledge of Sellers, no Seller or Acquired Company, or any
other Person for whose conduct the Acquired Companies are responsible, has any
material Environmental, Health, and Safety Liabilities with respect to the
Facilities or with respect to any other properties and assets (whether real,
personal, or mixed) in which any Acquired Company (or any predecessor), has or
had a material interest, or at any property geologically or hydrologically
adjoining the Facilities.
(d) To the Knowledge of Sellers, there are no Hazardous Materials
present on or in the Environment at the Facilities, including any Hazardous
Materials contained in barrels, above or underground storage tanks, landfills,
land deposits, dumps, equipment (whether moveable or fixed) or other containers,
either temporary or permanent, and deposited or located in land, water, sumps,
or any other part of the Facilities, or incorporated into any structure therein
or thereon in material violation of any Environmental Law. To the Knowledge of
Sellers, no Seller, Acquired Company or any other Person for whose conduct the
Acquired Companies are responsible, has permitted or conducted, or is aware of,
any Hazardous Activity conducted with respect to the Facilities or any other
properties or assets (whether real, personal, or mixed) in which any Acquired
Company has or had a material interest, except in material compliance with all
applicable Environmental Laws.
(e) To the Knowledge of Sellers, there has been no Release caused by
the Acquired Companies, or any other Person for whose conduct the Acquired
Companies are responsible, of any Hazardous Materials in violation of any
Environmental Law at or from the Facilities or at any other locations where any
Hazardous Materials were generated, manufactured, refined, transferred,
produced, imported, used, or processed from or by the Facilities, or from or by
any other properties and assets (whether real, personal, or mixed) in which any
Acquired Company has or had a material interest or any geologically or
hydrologically adjoining property.
(f) Sellers have delivered to Buyer true and complete copies and
results of any reports, studies, analyses, tests, or monitoring possessed or
initiated by Sellers or, since 1994 any Acquired Company pertaining to Hazardous
Materials or Hazardous Activities in, on, or under the Facilities, or concerning
compliance by any Acquired Company, or any other Person for whose conduct the
Acquired Companies are responsible, with Environmental Laws.
Sellers and Buyer hereby agree that the Facilities and other properties or
assets (whether
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real, personal, or mixed) in which any Acquired Company have a material interest
for purposes of this Section 10.19 include the Facilities located at 0000 Xxxxx
Xxxx, Xxxxxx, Xxxxxxxxx (a/k/a Xxxxx Drive, Chattanooga, Tennessee) and 000
Xxxxxxxx Xxxxx, Xxx Xxxx, Xxxxxxxxx.
3.20 EMPLOYEES
(a) To the Knowledge of Sellers, Part 3.20 of the Disclosure Letter
contains a materially complete and accurate list as of the date hereof of the
following information for each employee of the Acquired Companies, including
each employee on leave of absence status: employer; name; job title; current
compensation paid or payable and any change in compensation since July 1, 2001;
vacation accrued (for hourly employees only), and start date.
(b) To the Knowledge of Sellers, no employee of any Acquired Company is
a party to, or is otherwise bound by, any written agreement or arrangement,
including any confidentiality, noncompetition, or proprietary rights agreement,
between such employee and any other Person ("Proprietary Rights Agreement") that
in any way could reasonable be expected to adversely affect (i) the performance
of his current duties as an employee of the Acquired Companies, (ii) the ability
of any Acquired Company to conduct its business as currently conducted,
including any Proprietary Rights Agreement with Sellers or the Acquired
Companies by any such employee, or (iii) such Persons' ability to assign any
rights to any invention, improvement, or discovery to any Acquired Company or to
any other Person. To the Knowledge of Sellers, no officer or other key employee
of any Acquired Company intends to terminate his employment with such Acquired
Company.
(c) To the Knowledge of Sellers, Part 3.20 of the Disclosure Letter
also contains a materially complete and accurate list of the following
information for each retired employee of the Acquired Companies, or their
dependents, receiving benefits or scheduled to receive benefits in the future:
name, pension benefit, pension option election, retiree medical insurance
coverage, retiree life insurance coverage, and other benefits.
3.21 LABOR RELATIONS; COMPLIANCE
Since June 30, 1999, no Acquired Company has been or is a party to any
collective bargaining or other similar labor Contract. Since June 30, 1999,
there has not been, there is not presently pending or existing at the date
hereof, and to the Knowledge of Sellers there is not Threatened, (a) any strike,
slowdown or work stoppage, (b) any application for certification of a collective
bargaining agent. To the Knowledge of Sellers, no event has occurred or
circumstance exists that could reasonably be expected to provide the basis for
any work stoppage or other labor dispute. There is no lockout of any employees
by any Acquired Company, and no such action is contemplated by any Acquired
Company.
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3.22 INTELLECTUAL PROPERTY
(a) Intellectual Property Assets. The term "Intellectual Property Assets"
----------------------------
includes, for the United States and worldwide:
(i) the Company's name, all fictional business names, trade names,
registered and unregistered (solely to the extent used as current product names)
trademarks, service marks, and applications for the registration of trademarks
and service marks (collectively, "Marks");
(ii) all patents and patent applications (collectively, "Patents");
(iii) all registered copyrights (collectively, "Copyrights");
(iv) all know-how, trade secrets, confidential information, customer
lists, software, technical information, data, process technology, plans,
drawings, and blue prints (collectively, "Trade Secrets"); in each case, owned,
used, or licensed by any Acquired Company as licensee or licensor.
(b) Patents.
-------
(i) Part 3.22(b) of the Disclosure Letter contains a complete
and accurate list of all Patents. Except as set forth in Part 3.22(b) of the
Disclosure Letter, one or more of the Acquired Companies has the right to use or
is the owner of all right, title, and interest in and to each of the Patents,
free and clear of all liens, security interests, charges, encumbrances and, to
the Knowledge of Sellers, other adverse claims.
(ii) Except as set forth in Part 3.22(b) of the Disclosure
Letter, to the Knowledge of Sellers all of the issued Patents are currently in
material compliance with formal legal requirements (including payment of filing,
examination, and maintenance fees and proofs of working or use). To the
Knowledge of Sellers, the issued Patents are valid and enforceable.
(iii) Except as set forth in Part 3.22(b) of the Disclosure
Letter, to the Knowledge of Sellers no Patent is now involved in any
interference, reissue, reexamination, or opposition proceeding. To the Knowledge
of Sellers, there is no potentially interfering patent or patent application of
any third party.
(iv) Except as set forth in Part 3.22(b) of the Disclosure
Letter, to the Knowledge of Sellers no Patent is being infringed. Except as set
forth in Part 3.22(b) of the Disclosure Letter, to the Knowledge of Sellers the
Acquired Companies have not received any written notice of any challenge to any
Patent. Except as set forth in Part 3.22(b) of the Disclosure Letter, to the
Knowledge of Sellers the Acquired Companies have not received written notice
that products manufactured and sold, or any process or know-how used, by any
Acquired Company infringes or is alleged to infringe any patent
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or other proprietary right of any other Person.
(v) Except as set forth in Part 3.22(b) of the Disclosure Letter,
to the Knowledge of Sellers all products made, used, or sold under one or more
of the Patents have been marked with the proper patent notice.
(c) Trademarks.
----------
(i) Part 3.22(c) of Disclosure Letter contains a complete and
accurate list of all Marks. Except as set forth in Part 3.22(c) of the
Disclosure Letter, to the Knowledge of Sellers, one or more of the Acquired
Companies has the right to use or is the owner of all right, title, and interest
in and to each of the Marks, free and clear of all liens, security interests,
charges, encumbrances and other adverse claims.
(ii) To the Knowledge of Sellers, all registered Marks are currently
in material compliance with all formal legal requirements (including the timely
post-registration filing of affidavits of use and incontestability and renewal
applications). To the Knowledge of Sellers, the Marks that have been registered
by the United States Patent and Trademark Office are valid and enforceable.
(iii) Except as set forth in Part 3.22(c) of the Disclosure Letter,
to the Knowledge of Sellers no Xxxx is now involved in any opposition,
invalidation, or cancellation and no such action is Threatened with the respect
to any of the Marks.
(iv) Except as set forth in Part 3.22(c) of the Disclosure Letter,
to the Knowledge of Sellers there is no potentially interfering trademark or
trademark application of any third party.
(v) Except as set forth in Part 3.22(c) of the Disclosure Letter,
to the Knowledge of Sellers no Xxxx is being infringed. Except as set forth in
Part 3.22(c) of the Disclosure Letter, to the Knowledge of Sellers the Acquired
Companies have not received any written notice of any challenge to any Xxxx.
Except as set forth in Part 3.22(c) of the Disclosure Letter, to the Knowledge
of Sellers the Acquired Companies have not received any written notice that the
Marks used by any Acquired Company infringes or is alleged to infringe any trade
name, trademark, or service xxxx of any third party.
(vi) Except as set forth in Part 3.22(c) of the Disclosure Letter,
to the Knowledge of Sellers all products and advertising materials containing a
registered Xxxx xxxx the proper federal registration notice.
(d) Copyrights.
----------
(i) Part 3.22(d) of the Disclosure Letter contains a complete and
accurate list of all Copyrights. Except as set forth in Part 3.22(d) of the
Disclosure Letter, one or more of the Acquired Companies has the right to use or
is the owner of all
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right, title, and interest in and to each of the Copyrights, free and clear of
all liens, security interests, charges, encumbrances and, to the Knowledge of
Sellers, other adverse claims.
(ii) To the Knowledge of Sellers, all the Copyrights are currently in
material compliance with formal legal requirements. To the Knowledge of Sellers,
the Copyrights that have been registered with the Register of Copyrights of the
United States are valid and enforceable.
(iii) Except as set forth in Part 3.22(d) of the Disclosure Letter, to
the Knowledge of Sellers no Copyright is being infringed. Except as set forth in
Part 3.22(d) of the Disclosure Letter, to the Knowledge of Sellers the Acquired
Companies have not received any written notice of any challenge to any
copyright. Except as set forth in Part 3.22(ed of the Disclosure Letter, to the
Knowledge of Sellers the Acquired Companies have not received any written notice
that the subject matter of any of the Copyrights infringes or is alleged to
infringe any known copyright of any third party or is a derivative work based on
the work of a third party.
(iv) Except as set forth in Part 3.22(d) of the Disclosure Letter, to
the Knowledge of Sellers all works encompassed by the Copyrights have been
marked with any required copyright notice.
(e) Trade Secrets.
-------------
(i) To the Knowledge of Sellers, the Acquired Companies have
documented the quality, design and manufacturing practices of the Acquired
Companies in accordance with EN ISO 9001 and EN 46001 requirements.
(ii) Sellers and the Acquired Companies have taken all reasonable
precautions to protect the secrecy, confidentiality, and value of their Trade
Secrets.
(iii) To the Knowledge of Sellers, the Trade Secrets have not been
used, divulged, or appropriated either for the benefit of any Person (other than
one or more of the Acquired Companies) or to the detriment of the Acquired
Companies. To the Knowledge of Sellers, no Trade Secret is subject to any
adverse claim or has been challenged or threatened in any way.
3.23 CERTAIN PAYMENTS
To the Knowledge of Sellers, since June 30, 1999, no Acquired Company or
director, officer, agent, or employee of any Acquired Company, or any other
Person associated with or acting for or on behalf of any Acquired Company, has
directly or indirectly (a) made any contribution, gift, bribe, rebate, payoff,
influence payment, kickback, or other payment to any Person, private or public,
regardless of form, whether in money, property, or services that is in violation
of any Legal Requirement (i) to obtain favorable treatment in securing business,
(ii) to pay for favorable treatment for business secured for the
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Acquired Companies, or (iii) to obtain special concessions or for special
concessions already obtained, for or in respect of any Acquired Company, or, (b)
established or maintained any fund or asset that has not been recorded in the
books and records of the Acquired Companies.
3.24 RELATIONSHIPS WITH RELATED PERSONS
With respect to the XxXxxx Trust, CLIP and the Management Option Holders,
neither such Seller nor any Related Person of such Seller has any interest in
any property (whether real, personal, or mixed and whether tangible or
intangible), used in the Acquired Companies' businesses. With respect to the
XxXxxx Trust, CLIP and the Management Option Holders, no such Seller nor any
Related Person of such Seller owns (of record or as a beneficial owner) a
material equity interest or any other material financial or profit interest in,
a Person that has (i) business dealings or a material financial interest in any
transaction with any Acquired Company other than business dealings or
transactions conducted in the Ordinary Course of Business with the Acquired
Companies at substantially prevailing market prices and on substantially
prevailing market terms, or (ii) engaged in competition with any Acquired
Company with respect to any line of physical therapy or chiropractic products or
services of such Acquired Company (a "Competing Business") in any market for
physical therapy or chiropractic equipment presently served by such Acquired
Company except for less than one percent of the outstanding capital stock of any
Competing Business that is publicly traded on any recognized exchange or in the
over-the-counter market. Except as set forth in Part 3.24 of the Disclosure
Letter, with respect to the XxXxxx Trust, CLIP and the Management Option
Holders, no such Seller nor any Related Person of such Seller is a party to any
Contract with any Acquired Company.
3.25 BROKERS OR FINDERS
Such Seller and its agents have incurred no obligation or liability, contingent
or otherwise, for brokerage or finders' fees or agents' commissions or other
similar payment in connection with this Agreement.
4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers as follows:
4.1 ORGANIZATION AND GOOD STANDING
Buyer is a corporation duly organized, validly existing, and in good standing
under the laws of the State of Delaware.
4.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms.
Upon the execution and
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delivery by Buyer of the Escrow Agreement, the Escrow Agreement will constitute
the legal, valid, and binding obligations of Buyer, enforceable against Buyer in
accordance with their respective terms. Buyer has the absolute and unrestricted
right, power, and authority to execute and deliver this Agreement and the Escrow
Agreement and to perform its obligations under this Agreement and the Escrow
Agreement.
(b) Except as set forth in Schedule 4.2, neither the execution and delivery
of this Agreement by Buyer nor the consummation or performance of any of the
Contemplated Transactions by Buyer will give any Person the right to prevent,
delay, or otherwise interfere with any of the Contemplated Transactions pursuant
to:
(i) any provision of Buyer's organizational documents;
(ii) any resolution adopted by the board of directors or the
stockholders of Buyer;
(iii) any Legal Requirement or Order to which Buyer may be subject; or
(iv) any Contract to which Buyer is a party or by which Buyer may be
bound.
Except as set forth in Schedule 4.2, Buyer is not and will not be required to
obtain any Consent from any third-party Person in connection with the execution
and delivery of this Agreement or the consummation or performance of any of the
Contemplated Transactions.
4.3 INVESTMENT INTENT
Buyer is acquiring the Shares for its own account and not with a view to their
distribution within the meaning of Section 2(11) of the Securities Act. Buyer
understands that Shares are characterized as "restricted securities" under the
federal securities laws inasmuch as they are being acquired in a transaction not
involving a public offering and that under such laws and applicable regulations
such securities may be resold without registration under the Securities Act only
in certain limited circumstances. Buyer is an "accredited investor" as defined
in Rule 501 of Regulation D promulgated under the Securities Act. Buyer is
sophisticated and able to fend for itself, and has such knowledge and experience
in financial or business matters such that it is capable of evaluating the
transactions contemplated by this Agreement. Buyer believes it has received all
the information it considers necessary or appropriate for deciding whether to
consummate the transactions contemplated by this Agreement and has had an
opportunity to ask questions and received answers to all such questions from the
Acquired Companies regarding the business, operations, assets, liabilities and
financial condition of the Acquired Companies.
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4.4 CERTAIN PROCEEDINGS
There is no pending Proceeding that has been commenced against Buyer and that
challenges, or may have the effect of preventing, delaying, making illegal, or
otherwise interfering with, any of the Contemplated Transactions. To Buyer's
Knowledge, no such Proceeding has been Threatened.
4.5 BROKERS OR FINDERS
Except for Xxxxxx, Oxford and Associates and with respect to any financing
incurred by Buyer in connection with this Agreement or the transactions
contemplated hereby, Buyer and its officers and agents have incurred no
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with this
Agreement and the transactions contemplated hereby and will indemnify and hold
Sellers harmless from any such payment alleged to be due by or through Buyer as
a result of the action of Buyer or its officers or agents. Buyer is solely
responsible for any fee due Xxxxxx, Oxford and Associates and with respect to
any financing incurred by Buyer in connection with this Agreement or the
transactions contemplated hereby.
4.6 FINANCING
Buyer has entered into a commitment letter with Bank of America, N.A. and with
Whitney & Co. providing for, on the terms and subject to the conditions provided
for therein, all of the financing necessary for Buyer to consummate the
Contemplated Transactions. Buyer has no knowledge of any material fact or issue
that would reasonably be expected to prevent consummation of the financing
contemplated by such commitment letters. Copies of such commitment letters are
attached hereto as Exhibits 4.6(a) and 4.6(b) (the "Commitment Letters").
-------------------------- ------------------
5. COVENANTS OF SELLERS PRIOR TO CLOSING DATE
5.1 ACCESS AND INVESTIGATION
Between the date of this Agreement and the Closing Date, Sellers will, and will
cause each Acquired Company and its Representatives to, (a) afford Buyer and its
Representatives and prospective lenders and their Representatives (collectively,
"Buyer's Advisors") full and free access to each Acquired Company's personnel,
properties (excluding subsurface testing), contracts, books and records, and
other documents and data, (b) furnish Buyer and Buyer's Advisors with copies of
all such contracts, books and records, and other existing documents and data as
Buyer may reasonably request, and (c) furnish Buyer and Buyer's Advisors with
such additional financial, operating, and other data and information as Buyer
may reasonably request, provided, however, that Buyer shall not be entitled to
-------- -------
receive any materials or information relating to the Department of Commerce
Investigation protected by attorney-client, attorney work product or other
similar privilege. Buyer will treat as confidential all information it receives
pursuant to
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this section, and will return or destroy all such information should this
Agreement terminate under Section 9.
5.2 OPERATION OF THE BUSINESSES OF THE ACQUIRED COMPANIES
Between the date of this Agreement and the Closing Date, Sellers will, and will
cause each Acquired Company to:
(a) conduct the business of such Acquired Company only in the Ordinary
Course of Business;
(b) use their Best Efforts to preserve intact the current business
organization of such Acquired Company, keep available the services of the
current officers, and employees of such Acquired Company, and maintain the
relations and good will with suppliers, customers, landlords, creditors,
employees, agents, and others having business relationships with such Acquired
Company; and
(c) otherwise report periodically to Buyer upon Buyer's reasonable
request concerning the status of the business, operations, and finances of such
Acquired Company.
5.3 NEGATIVE COVENANT
Except as otherwise expressly permitted by this Agreement, between the date of
this Agreement and the Closing Date, each Seller agrees that it will not, and
will use its Best Efforts to cause each Acquired Company not to, without the
prior consent of Buyer (not to be unreasonably withheld, conditioned or
delayed), take any affirmative action, or fail to take any reasonable action
within their or its control, as a result of which any of the changes or events
listed in Section 3.16 is likely to occur.
5.4 REQUIRED APPROVALS
As promptly as practicable after the date of this Agreement, Sellers will, and
will cause each Acquired Company to, make all filings required by Legal
Requirements to be made by them in order to consummate the Contemplated
Transactions. Between the date of this Agreement and the Closing Date, Sellers
will, and will cause each Acquired Company to, (a) reasonably cooperate with
Buyer with respect to all filings that Buyer elects to make or is required by
Legal Requirements to make in connection with the Contemplated Transactions, and
(b) reasonably cooperate with Buyer in obtaining all consents identified in
Schedule 4.2.
5.5 NOTIFICATION
Between the date of this Agreement and the Closing Date, the Sellers'
Representative will have the right and obligation to promptly notify Buyer in
writing (each such notification, an "Update") if the Sellers' Representative
becomes aware of any fact or
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condition that constitutes a Breach of any of Sellers' representations and
warranties as of the date of this Agreement, or if the Sellers' Representative
becomes aware of the occurrence after the date of this Agreement of any fact or
condition that would (except as expressly contemplated by this Agreement)
constitute a Breach of any such representation or warranty had such
representation or warranty been made as of the time of occurrence or discovery
of such fact or condition or if the Disclosure Letter otherwise needs to be
updated. Should any such fact or condition require an Update, then the Sellers'
Representative shall be permitted to provide an Update as the Sellers'
Representative deems necessary; provided, however, the Sellers' Representative
-------- -------
shall not be entitled to provide an Update for any fact or condition in
existence prior to the date hereof that any Seller intentionally failed to
include on the Disclosure Schedule as of the date hereof; and provided, further,
-------- -------
Buyer shall have the termination rights provided in Section 9.1(e). Each Update
shall be deemed to be an exception to Sellers' representations and warranties,
and an amendment to the Disclosure Letter, for all purposes of this Agreement.
During the same period, each Seller will promptly notify Buyer of the occurrence
of any Breach of any covenant of such Seller in this Section 5 or of the
occurrence of any event known to such Seller that may make the satisfaction of
the conditions in Section 7 impossible or unlikely.
5.6 PAYMENT OF INDEBTEDNESS BY RELATED PERSONS
Except as expressly provided in this Agreement, each Seller agrees to cause all
indebtedness owed to an Acquired Company by such Seller or any Related Person of
such Seller to be paid in full prior to Closing (other than indebtedness for
travel advances and other expenses incurred by employees in the Ordinary Course
of Business).
5.7 NO NEGOTIATION
Until such time, if any, as this Agreement is terminated pursuant to Section 9,
each Seller agrees that it will not, and will use its Best Efforts to cause each
Acquired Company and each of its Representatives not to, directly or indirectly
solicit, initiate, or encourage any inquiries or proposals from, discuss or
negotiate with, provide any non-public information to, or consider the merits of
any unsolicited inquiries or proposals from, any Person (other than Buyer)
relating to any transaction involving the sale of the business or assets (other
than in the Ordinary Course of Business) of any Acquired Company, or any of the
capital stock of any Acquired Company, or any merger, consolidation, business
combination, or similar transaction involving any Acquired Company. Furthermore,
should any Seller or any Acquired Company receive any unsolicited inquiries,
offers or proposals from another party, then such Seller or Acquired Company
shall immediately inform Buyer of such receipt thereof.
5.8 BEST EFFORTS
Between the date of this Agreement and the Closing Date, each Seller agrees that
it will use its Best Efforts to cause the conditions in Sections 7 and 8 to be
satisfied.
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5.9 NOTICE TO OPTION HOLDERS AND THE WARRANT HOLDER
As soon as practicable following the execution of this Agreement, the Company
shall (i) send to each Option Holder and the Warrant Holder such notice as is
required by each Option agreement and Warrant Agreement of Buyer's proposed
purchase of the Shares from the Sellers pursuant to this Agreement and (ii) take
such other actions as are required to cause the exercise of such Options and
Warrant or the cancellation thereof at or prior to the closing of the
Contemplated Transactions. Option Holders and current stockholders other than
the XxXxxx Trust and CLIP who do not become a party to this Agreement at the
time that this Agreement is originally executed by the parties hereto may
subsequently become a party to this Agreement by executing a Joinder Agreement
substantially in the form as attached hereto as Exhibit 5.9 (the "Joinder
-----------
Agreement"). The parties hereto acknowledge and agree that prior to Closing each
Option Holder may exercise his options, which exercise may or may not be
contingent upon the consummation of the transactions contemplated hereby, and as
a result of such exercise become an owner of Shares. The parties hereto further
agree that (i) each Option Holder exercising Options (whether such exercise is
absolute or contingent upon consummation of the transactions contemplated
hereby) and any other shareholder may sell the Shares issued or to be issued
pursuant to such Options to Buyer pursuant to this Agreement by executing a
Joinder Agreement and, by doing so, such Option Holder shall be deemed a Seller,
and all Shares such Option Holder elects to sell shall be deemed Tendered
Shares, for all purposes of this Agreement and the Seller's Closing Documents
and (ii) each current stockholder other than the XxXxxx Trust and CLIP may sell
the Shares held by them to Buyer pursuant to this Agreement by executing a
Joinder Agreement and, by doing so, such person or entity shall be deemed a
Seller, and all Shares such stockholder elects to sell shall be deemed Tendered
Shares, for all purposes of this Agreement and the Seller's Closing Documents.
No consent of any other party to this Agreement shall be necessary so as to
permit an Option Holder or any other owner of Shares to become a party to this
Agreement as a Seller hereunder by executing a Joinder Agreement. For all
purposes of this Agreement, Option Holders hereafter exercising options
(including any exercise contingent upon the consummation of the transactions
contemplated hereby) shall be deemed to have exercised their Options and become
owners of the underlying Shares immediately prior to the Closing.
Notwithstanding anything herein to the contrary, the parties agree that any
exercise of Options by an Option Holder or exercise of Warrants by the Warrant
Holder, any acts taken in connection with any such exercise, or the existence of
any facts as a result of such exercise or related acts shall not be a breach of
any representation, warranty or covenant contained in this Agreement or in any
other Seller's Closing Document.
Buyer acknowledges and agrees that (i) Option Holders may exercise Options in
any manner permitted under the applicable Option and the Chattanooga Group Stock
Option Plan, including without limitation the delivery of promissory notes in
payment of the exercise price therefor plus any additional tax amounts required
to be paid in connection with such exercise and (ii) the Warrant Holder may
exercise the Warrant and may deliver a promissory note in payment of the
exercise price therefor (provided that all such
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promissory notes made by any Option Holder or the Warrant Holder becoming a
Seller hereunder shall be paid out of such Seller's sales proceeds at Closing).
6. COVENANTS OF BUYER PRIOR TO CLOSING DATE
6.1 APPROVALS OF GOVERNMENTAL BODIES
As promptly as practicable after the date of this Agreement, Buyer will, and
will cause each of its Related Persons to, make all filings required by Legal
Requirements to be made by them to consummate the Contemplated Transactions.
Between the date of this Agreement and the Closing Date, Buyer will, and will
cause each Related Person to, reasonably cooperate with Sellers with respect to
all filings that Sellers are required by Legal Requirements to make in
connection with the Contemplated Transactions, and (ii) reasonably cooperate
with Sellers in obtaining all consents identified in Part 3.2 of the Disclosure
Letter; provided that this Agreement will not require Buyer to dispose of or
make any change in any portion of its business or to incur any other material
burden to obtain a Governmental Authorization.
6.2 BEST EFFORTS
Except as set forth in the proviso to Section 6.1, between the date of this
Agreement and the Closing Date, Buyer will use its Best Efforts to cause the
conditions in Sections 7 and 8 to be satisfied.
6.3 FINANCING
Between the date of this Agreement and the Closing Date, Buyer will use its Best
Efforts to obtain the funding of the financing contemplated by Section 4.6 or
other financing upon terms no less favorable than those currently proposed with
respect to the financing contemplated by Section 4.6. Between the date of this
Agreement and the Closing Date, Buyer will, upon Sellers' request, report to
Sellers regarding the status of such financing. Between the date of this
Agreement and the Closing Date, Buyer will give Sellers' Representative and CLIP
prompt written notice of any material facts or issues that could reasonably be
expected to make the consummation of such financing unlikely to occur.
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to purchase the Shares, Options and Warrants and to take the
other actions required to be taken by Buyer at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by Buyer, in whole or in part):
7.1 ACCURACY OF REPRESENTATIONS
(a) Each of Sellers' representations and warranties in this Agreement
other than those made in Sections 3.3, 3.4 and 3.12 must have been accurate in
all material
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respects as of the date of this Agreement, and must be accurate in all material
respects as of the Closing Date as if made on the Closing Date, without giving
effect to any Update (other than Updates relating to Accounts Receivable,
Applicable Contracts, Section 3.18(b) (with respect to changes in additional
insureds under any Acquired Company insurance policy), Section 3.18(c) (with
respect to any changes to the loss history or additional claims after the date
hereof) and Section 3.20(c) (with respect to employees retiring after the date
hereof) provided all such changes occurred in the Ordinary Course of Business
and the first sentence of Section 3.1(a) (with respect to the number of shares,
options and warrants held by each stockholder, option holder and the warrant
holder)).
(b) Each of Sellers' representations and warranties in Sections 3.3,
3.4 and 3.12 must have been accurate in all respects as of the date of this
Agreement, and must be accurate in all respects as of the Closing Date as if
made on the Closing Date, without giving effect to any Updates (other than any
Update to give effect to the exercise or cancellation of the Options or the
Warrant).
7.2 SELLERS' PERFORMANCE
(a) All of the covenants and obligations that Sellers are required to
perform or to comply with pursuant to this Agreement at or prior to the Closing
must have been duly performed and complied with in all material respects.
(b) Each document required to be delivered by Sellers pursuant to
Section 2.4 must have been delivered.
7.3 CONSENTS
Each of the Consents identified in Part 3.2 of the Disclosure Letter, and each
Consent identified in Schedule 4.2, must have been obtained and must be in full
force and effect.
7.4 ADDITIONAL DOCUMENTS
Each of the following documents must have been delivered to Buyer:
(a) an opinion of Xxxxxxxx & Xxxxxxxx with respect to the XxXxxx
Trust and the Acquired Companies, dated the Closing Date, in the form of
Exhibit 7.4(a);
(b) such other documents as Buyer may reasonably request for the
purpose of (i) evidencing the accuracy of any of Sellers' representations and
warranties, (ii) evidencing the performance by any Seller of, or the compliance
by any Seller with, any covenant or obligation required to be performed or
complied with by such Seller on or before the Closing Date, (iii) evidencing the
satisfaction of any condition referred to in this Section 7, or (v) otherwise
facilitating the consummation or performance of any of the Contemplated
Transactions.
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7.5 NO PROCEEDINGS
Since the date of this Agreement, there must not have been commenced or
Threatened against Buyer, or against any Person affiliated with Buyer, any
Proceeding (a) involving any challenge to, or seeking damages or other relief in
connection with, any of the Contemplated Transactions, or (b) that may have the
effect of preventing, delaying, making illegal, or otherwise interfering with
any of the Contemplated Transactions.
7.6 NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS
There must not have been made or Threatened by any Person any claim asserting
that such Person, other than the Sellers(a) is the holder or the beneficial
owner of, or has the right to acquire or to obtain beneficial ownership of, any
of the Tendered Shares, or (b) is entitled to all or any portion of the Purchase
Price payable for the Tendered Shares.
7.7 EMPLOYMENT AGREEMENTS
The Company will have in full force and effect on the Closing Date employment
agreements in form and substance reasonably satisfactory to Buyer and Sellers'
Representative (the "Employment Agreements") with the Management Option Holders,
each on terms and conditions reasonably acceptable to the Buyer, and all
preexisting employment agreements with such persons shall be of no further force
and effect.
7.8 MINIMUM SHARES TENDERED; CANCELLATION OF OPTIONS AND WARRANT
There will have been tendered to Buyer (i) one hundred percent (100%) of the
Class A Shares and (ii) an aggregate number of the Class B Shares that equal or
exceed ninety percent (90%) of the total outstanding Class B Shares, all of
which shall have been duly endorsed or accompanied by duly executed stock powers
(collectively, the "Tendered Shares"). The Warrant shall have been exercised by
the Warrant Holder and the Class B shares received by the Warrant Holder in
connection with the exercise thereof shall be part of the Tendered Shares. All
of the Options held by the Management Option Holders shall have been exercised
(which exercise may be contingent upon the consummation of the Contemplated
Transactions). All of the other Options shall have either been exercised (which
exercise may be contingent upon the consummation of the Contemplated
Transactions) or extinguished at Closing. All Class B Shares received by the
Management Option Holders, and any other Option Holders who executes this
Agreement as provided for in Section 12.15, shall be part of the Tendered
Shares.
7.9 FINANCING
On or prior to the Closing Date, Buyer shall have obtained or shall have been
able to obtain the funding of the financing contemplated by Section 4.6 or other
financing upon terms and conditions at least as favorable as those proposed in
the Commitment Letters.
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7.10 DELIVERY OF W-8 OR W-9
On or prior to the Closing Date, each Seller shall have delivered a
fully-executed W-8 or W-9 IRS form, as applicable.
8. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE
Sellers' obligation to sell the Shares and to take the other actions required to
be taken by Sellers at the Closing is subject to the satisfaction, at or prior
to the Closing, of each of the following conditions (any of which may be waived
by Sellers, in whole or in part):
8.1 ACCURACY OF REPRESENTATIONS
Each of Buyer's representations and warranties in this Agreement must have been
accurate in all material respects as of the date of this Agreement and must be
accurate in all material respects as of the Closing Date as if made on the
Closing Date.
8.2 BUYER'S PERFORMANCE
(a) All of the covenants and obligations that Buyer is required to perform
or to comply with pursuant to this Agreement at or prior to the Closing must
have been performed and complied with in all material respects.
(b) Buyer must have delivered each of the documents required to be
delivered by Buyer pursuant to Section 2.4 and must have made the cash payments
required to be made by Buyer pursuant to Sections 2.4(b)(i) and 2.4(b)(ii).
8.3 CONSENTS
Each of the Consents identified in Part 3.2 of the Disclosure Letter must have
been obtained and must be in full force and effect.
8.4 ADDITIONAL DOCUMENTS
Buyer must have caused the following documents to be delivered to Sellers:
(a) an opinion of Xxxxxxx Xxxxxx LLP, dated the Closing Date, in the form
of Exhibit 8.4(a); and
(b) such other documents as Sellers may reasonably request for the purpose
of (i) evidencing the accuracy of any representation or warranty of Buyer, (ii)
evidencing the performance by Buyer of, or the compliance by Buyer with, any
covenant or obligation required to be performed or complied with by Buyer, (iii)
evidencing the satisfaction of any condition referred to in this Section 8, or
(v) otherwise facilitating the consummation of any of the Contemplated
Transactions.
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8.5 NO INJUNCTION
There must not be in effect any Legal Requirement or any injunction or other
Order that (a) prohibits the sale of the Tendered Shares by Sellers to Buyer,
and (b) has been adopted or issued, or has otherwise become effective, since the
date of this Agreement.
8.6 NO PROCEEDINGS
Since the date of this Agreement, there must not have been commenced or
Threatened against Sellers, or against any Person affiliated with Sellers, any
Proceeding (a) involving any challenge to, or seeking damages or other relief in
connection with, any of the Contemplated Transactions, or (b) that may have the
effect of preventing, delaying, making illegal, or otherwise interfering with
any of the Contemplated Transactions.
8.7 EMPLOYMENT AGREEMENTS
The Company will have in full force and effect on such closing date the
Employment Agreements with the Management Option Holders.
9. TERMINATION
9.1 TERMINATION EVENTS
This Agreement may, by notice given prior to or at the Closing, be terminated:
(a) by either (i) Buyer or (ii) Sellers' Representative, if a material
Breach of any provision of this Agreement has been committed by the other party,
and which Breach, unless waived by the terminating party, is incapable of being
cured or has not been cured prior to ten (10) days following such Breach;
(b) (i) by Buyer if any of the conditions in Section 7 has not been
satisfied as of the Closing Date or if satisfaction of such a condition is or
becomes impossible (other than through the failure of Buyer to comply with its
obligations under this Agreement) and Buyer has not waived such condition on or
before the Closing Date; or (ii) by Sellers' Representative, if any of the
conditions in Section 8 has not been satisfied as of the Closing Date or if
satisfaction of such a condition is or becomes impossible (other than through
the failure of Sellers to comply with their obligations under this Agreement)
and Sellers' Representative has not waived such condition on or before the
Closing Date;
(c) by mutual consent of (i) Buyer, and (ii) Sellers' Representative;
(d) by either (i) Buyer or (ii) Sellers' Representative if the Closing has
not occurred (other than through the failure of any party seeking to terminate
this Agreement to comply fully with its obligations under this Agreement) on or
before December 18, 2001, or such later date as the parties may agree upon;
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(e) by Buyer prior to Closing, if within five (5) business days of
receipt of any Update, which Update discloses facts of conditions that would
make Section 7.1 impossible to satisfy, Buyer notifies Sellers of its decision
to terminate this Agreement; or
(f) by the Sellers' Representative prior to Closing, if any material
fact or issue has arisen that could reasonably be expected to make the
consummation of the financing contemplated by Section 4.6 unlikely.
9.2 EFFECT OF TERMINATION
If this Agreement is terminated pursuant to Section 9.1, all further liabilities
and obligations of the parties under this Agreement will terminate, except that
the obligations in Sections 12.1 and 12.3 will survive; provided, however, that
-------- -------
if this Agreement is terminated pursuant to Section 9.1(a) or (b) under
circumstances where a non-terminating party has knowingly and intentionally
caused the condition giving rise to the right of termination of this Agreement
pursuant to Section 9.1(a) or (b) then the terminating party's right to pursue
all legal remedies under this Agreement or otherwise will survive such
termination unimpaired solely with respect to the particular party that
knowingly and intentionally caused such condition and the exercise of the right
of termination will not be an election of remedies as against the particular
party that caused such condition; provided, further, that if this Agreement is
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terminated by Buyer pursuant to Section 9.1(a) or (b) under circumstances where
one or more (but not all) Sellers has knowingly and intentionally caused the
condition giving rise to the right of termination of this Agreement pursuant to
Section 9.1(a) or (b), then Buyer shall have no right to pursue any remedies or
claims against any Sellers other than those Sellers that knowingly and
intentionally caused such condition.
10. INDEMNIFICATION; REMEDIES
10.1 SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY KNOWLEDGE
All representations, warranties, covenants (other than the covenants contained
in Articles 5 and 6, which shall expire at Closing), and obligations in this
Agreement, the certificates delivered pursuant to Section 2.4(a)(iii) and
Section 2.4(b)(iii), and any other certificate or document delivered pursuant to
this Agreement will survive the Closing.
10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS
After the Closing, subject to the limitations set forth in Article 10, each
Seller will indemnify and hold harmless Buyer, the Acquired Companies, and their
respective Representatives, stockholders, controlling persons, and affiliates
(collectively, the "Indemnified Persons") from and against any loss, liability,
claim, damage, expense (including reasonable costs of investigation and defense
and reasonable attorneys' fees), whether or not involving a third-party claim
(collectively, "Damages"), actually incurred
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or suffered by the Indemnified Persons arising, from or in connection with:
(a) any Breach of any representation or warranty made by such
Seller in this Agreement (after giving effect to all Updates);
(b) any Breach by such Seller of any covenant or obligation of such
Seller in this Agreement intended to survive Closing, provided that each Seller
shall be solely responsible for providing indemnification for its own Breach;
(c) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with such Seller or any Acquired
Company (or any Person acting on their behalf) in connection with any of the
Contemplated Transactions, provided that each Seller shall be solely responsible
for providing indemnification for its own breach.
After Closing, the remedies provided in this Section 10.2 will be the sole and
exclusive remedies that may be available to Buyer or the other Indemnified
Persons of Buyer for any Breach of this Agreement and all other claims arising
out of or relating to the subject matter of this Agreement and transactions
contemplated hereby and shall preclude the assertion of all other claims and
suits whatsoever, whether based in tort, in contract or otherwise. Further, in
the event of a breach by a Seller of a representation or warranty of such Seller
set forth in Sections 3.2(a), 3.2(c), 3.3(b), 3.17(b), 3.24 and/or 3.25 or of a
covenant to be performed by such Seller (a "Seller Breach"), only the Seller
responsible for such Seller Breach shall be liable for any Damages sustained or
incurred as a result of such Seller Breach and the Buyer, on behalf of itself,
its affiliates, Related Persons and all Indemnified Persons, covenants and
agrees not to seek any Damages or personal money judgment against any Seller
other than the Seller responsible for such Seller Breach for Damages sustained
or incurred by any Indemnified Party arising out of or in connection with such
Seller Breach. Further, in the event of a breach of a representation or warranty
set forth in Sections 3.1, 3.2(b), 3.3(a), 3.3(c) and 3.4 through 3.23 (other
than Section 3.17(b)) or of a covenant to be performed by an Acquired Company (a
"Company Breach"), each Seller shall only be responsible for such Seller's Pro
Rata Share of any Damages sustained or incurred as a result of such Company
Breach and the Buyer, on behalf of itself, its affiliates, Related Persons and
all Indemnified Persons of Buyer, covenants and agrees not to seek any Damages
or personal money judgment against any Seller in excess of such Seller's Pro
Rata Share of any Damages sustained or incurred by any Indemnified Party arising
out of or in connection with such Company Breach.
10.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER
After the Closing, Buyer will indemnify and hold harmless Sellers, and will pay
to Sellers the amount of any Damages arising from or in connection with (a) any
Breach of any representation or warranty made by Buyer in this Agreement or in
any certificate delivered by Buyer pursuant to this Agreement, (b) any Breach by
Buyer of any covenant or obligation of Buyer in this Agreement, or (c) any claim
by any Person for brokerage or finder's fees or commissions or similar payments
based upon any agreement or
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understanding alleged to have been made by such Person with Buyer (or any Person
acting on its behalf) in connection with any of the Contemplated Transactions.
10.4 TIME LIMITATIONS
If the Closing occurs, Sellers will have no liability (for indemnification or
otherwise) with respect to any representation or warranty other than those in
Sections 3.3, 3.11, 3.13, and 3.19, unless on or before sixteen (16) months
after the Closing Date Buyer notifies Sellers of a claim specifying the factual
basis of that claim in reasonable detail to the extent then known by Buyer; a
claim with respect to Section 3.19 must be so made on or before the third
anniversary of the Closing Date; a claim with respect to section 3.11 and 3.13
must be so made on or before the 90th day after the expiration of the applicable
statute of limitations; and a claim with respect to Section 3.3, or a claim for
indemnification based upon any covenant or obligation to be performed and
complied with after the Closing Date, may be so made at any time (subject to any
applicable statute of limitations). If the Closing occurs, Buyer will have no
liability (for indemnification or otherwise) with respect to any representation
or warranty, or covenant or obligation to be performed and complied with prior
to the Closing Date, unless on or before sixteen (16) months after Closing
Sellers notify Buyer of a claim specifying the factual basis of that claim in
reasonable detail to the extent then known by Sellers.
10.5 LIMITATIONS ON AMOUNT -- SELLERS
Sellers will have no liability (for indemnification or otherwise) with respect
to the matters described in clause (a) and clause (b) of Section 10.2 until the
total of all Damages with respect to such matters exceeds $175,000, and then
only for the amount by which such Damages exceed $175,000 (the "Deductible");
provided, however, that Sellers shall be responsible, without deduction, for all
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cash out-of-pocket Damages relating to the Department of Commerce Investigation
in excess of amounts accrued therefor on the Closing Balance Sheet in accordance
with Section 10.9(c). In no event will any Seller be liable for any Damages with
respect to claims arising out of or related to this Agreement (including,
without limitation, the Contemplated Transactions) and the documents entered
into in connection herewith in an aggregate amount in excess of such Seller's
Pro Rata Share of $5,000,000 (the "General Cap") other than for Damages relating
to claims arising out of or related to such Seller's representations regarding
capitalization of the Company as set forth in Section 3.3(a) and ownership by
such Seller of Tendered Shares sold by such Seller hereunder as set forth in
Section 3.3(b). In no event will any Seller be liable for any Damages with
respect to claims arising out of or related to this Agreement (including,
without limitation, the Contemplated Transactions) and the documents entered
into in connection herewith (including, without limitation, any Damages with
respect to claims arising out of or related to such Seller's representations
regarding capitalization of the Company as set forth in Section 3.3(a) and
ownership by such Seller of Tendered Shares sold by such Seller hereunder as set
forth in Section 3.3(b)) in an aggregate amount in excess of one hundred percent
(100%) of such Seller's Pro Rata Share of the Purchase Price (the "Overall
Cap"). Buyer, on behalf of itself and all of its Indemnified Persons, covenants
and agrees not to seek any Damages against any Seller in
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excess of such Seller's Pro Rata Share of the General Cap and the Overall Cap,
as applicable. Notwithstanding the foregoing, the Deductible and the General Cap
will not apply to (i) any Seller's knowing and intentional Breach of any of such
Seller's representations and warranties, or (ii) any Seller's knowing and
intentional Breach of any of such Seller's covenants or obligations to be
performed after Closing.
10.6 LIMITATIONS ON AMOUNT -- BUYER
Buyer will have no liability (for indemnification or otherwise) with respect to
the matters described in clause (a) or (b) of Section 10.3 until the total of
all Damages with respect to such matters exceeds $175,000, and then only for the
amount by which such Damages exceed $175,000. However, this Section 10.6 will
not apply to any knowing and intentional Breach of any of Buyer's
representations and warranties or any knowing and intentional Breach by Buyer of
any covenant or obligation to be performed after Closing.
10.7 MITIGATION
(a) The parties shall use reasonable efforts to collect the proceeds
of any insurance which would have the effect of reducing Damages (in which case
such proceeds shall reduce such Damages) and, if indemnification payments shall
have been received prior to the collection of such proceeds, shall remit to the
indemnifying party the amount of such proceeds (net of the cost of collection
thereof) to the extent of indemnification payments received in respect of such
Damages. To the extent any Damage of an indemnified party is reduced by receipt
of payment (i) under insurance policies, or (ii) from third parties not
affiliated with the indemnified party, such payments (net of the expenses of the
recovery thereof) shall be credited against such Damages.
(b) The amount of any Damages payable hereunder shall be net of any
tax benefit actually derived (or reasonably expected to be derived) by the
Indemnified Persons on account of such Damages.
(c) The indemnifying party shall be subrogated to the indemnified
party's rights of recovery to the extent of any Damage satisfied by the
indemnifying party. The indemnified party shall execute and deliver such
instruments and papers as are necessary to assign such rights and assist in the
exercise thereof.
(d) Notwithstanding anything in this Agreement to the contrary, no
claim for indemnification may be made by Buyer or any Indemnified Persons and no
indemnification shall be required by Sellers to the extent that the Damages
sustained or incurred by Buyer or any Indemnified Persons for which
indemnification is sought were accrued on the Closing Balance Sheet.
(e) The amount of any Damages hereunder with respect to claims
relating to Taxes shall be reduced by (i) the $100,000 unallocated general tax
reserve on the Closing Balance Sheet, and (ii) an aggregate amount equal to the
remaining balance of the June 30, 2002 Deferred Tax Asset that was not accrued
as an asset on the Closing
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Balance Sheet. This clause (e) shall be applied to reduce any Damages hereunder
with respect to claims relating to Taxes prior to any application of the
Deductible.
10.8 ESCROW
Upon notice to Sellers of a claim for indemnification pursuant to Sections 10.9
or 10.10, specifying in reasonable detail the basis for such claim, Buyer may
give notice of a claim for such amount under the Escrow Agreement. The Escrowed
Proceeds are available to satisfy claims for Damages relating to a Company
Breach only. For claims relating to a Seller Breach, only the applicable Seller
is responsible for the related Damages, without recourse to the escrow.
10.9 PROCEDURE FOR INDEMNIFICATION--THIRD PARTY CLAIMS
(a) Promptly after receipt by an indemnified party of notice of the
commencement of any Proceeding against it, such indemnified party will, if a
claim is to be made against an indemnifying party under Section 10.2 or Section
10.3, give notice, setting forth the factual basis for such claim in reasonable
detail to the extent known, to the indemnifying party of the commencement of
such claim, but the failure to notify the indemnifying party will not relieve
the indemnifying party of any liability that it may have to any indemnified
party, except to the extent that the indemnifying party is prejudiced by the
indemnifying party's failure to give such notice.
(b) If any Proceeding referred to in Section 10.9(a) is brought
against an indemnified party and it gives notice to the indemnifying party of
the commencement of such Proceeding, the indemnifying party will be entitled to
participate in such Proceeding and, to the extent that it wishes, to assume the
defense of such Proceeding with counsel reasonably satisfactory to the
indemnified party and, after notice from the indemnifying party to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party will not, as long as it diligently conducts such defense, be
liable to the indemnified party under this Section 10 for any fees of other
counsel or any other expenses with respect to the defense of such Proceeding, in
each case subsequently incurred by the indemnified party in connection with the
defense of such Proceeding. If the indemnifying party assumes the defense of a
Proceeding, no compromise or settlement of such claims may be effected by the
indemnifying party without the indemnified party's consent (not to be
unreasonably withheld, delayed or conditioned) unless (A) there is no finding or
admission of any violation of Legal Requirements, and (B) there is no liability
or restriction on the indemnified party; and (iii) the indemnified party will
have no liability with respect to any compromise or settlement of such claims
effected without its consent. If notice is given to an indemnifying party of the
commencement of any Proceeding and the indemnifying party does not, within
twenty days after the indemnified party's notice is given, give notice to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnified party shall diligently conduct the defense and shall not compromise
or settle such claims without the written consent of the indemnifying party, not
to be unreasonably withheld, conditioned or delayed. In the event that Sellers
are the indemnifying parties, Sellers' Representative
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shall have the right to act on behalf of Sellers, and control the defense of
such claims, for all purposes of this Section 10.9(b) except with respect to a
Seller Breach.
(c) Sellers' Representative, on behalf of all Sellers, shall have the
right to represent the Acquired Companies in, and control the defense of, the
Department of Commerce Investigation. Buyer or the Acquired Companies shall pay
all reasonable costs, expenses, settlements and fines incurred by the Acquired
Companies or Sellers' Representative in defending the Department of Commerce
Investigation (as such costs, expenses, settlements and fines are incurred) up
to the amount accrued therefor on the Closing Balance Sheet and Sellers shall
pay out of the Escrowed Proceeds all amounts in excess thereof, based upon their
Pro Rata Share, within 10 business days of receipt of notice thereof. Sellers'
Representative shall, however, (i) reasonably and in good faith consult with
Buyer with respect to the defense of the Department of Commerce Investigation,
(ii) afford Buyer the right to have representatives attend all conferences,
hearings or proceedings in respect of the Department of Commerce Investigation
(with timely notice provided thereof), and (iii) provide Buyer the opportunity
to review and discuss any settlement proposals related thereto; provided,
--------
however, Sellers' Representative shall not settle the Department of Commerce
-------
Investigation without Buyer's prior written consent, not to be unreasonably
withheld, delayed or conditioned, if there is any future material restriction
(and for purposes of this Agreement, requirements with respect to training or
compliance shall not be considered a material restriction) imposed on the
Acquired Companies or Buyer or if such settlement would result in liability to
the Acquired Companies or Buyer in excess of the amount accrued therefor on the
Closing Balance Sheet (less the aggregate amount of costs, expenses, settlements
and fines previously paid by Buyer or the Acquired Companies to Sellers'
Representative pursuant to this Section 10.9(c)) for which Buyer is not
indemnified by Sellers. The fees and expenses of any legal counsel retained with
respect to the Department of Commerce Investigation other than legal counsel
designated by the Sellers' Representative (i) shall be at the expense of Buyer
and/or the Acquired Companies, (ii) shall not be applied against the amount
accrued for the Department of Commerce Investigation on the Closing Balance
Sheet, and (iii) shall not be subject to indemnification hereunder. Upon a final
non-appealable determination or settlement of the Department of Commerce
Investigation, Buyer shall pay to each Seller such Seller's Pro Rata Share of
the excess, if any, of the amount accrued therefor on the Closing Balance Sheet
over the aggregate amount of costs, expenses, settlements and fines previously
paid by Buyer or the Acquired Companies pursuant to this Section 10.9(c)). Any
such payment by Buyer shall be made within three business days of such final
determination or settlement in accordance with the method for payment of the
Adjustment Amount in Section 2.6(b).
(d) Sellers' Representative, on behalf of all Sellers, shall have the
right to represent the Acquired Companies with respect to, and control all,
remediation activities arising out of the matters described in Section 3.19 if
the total projected cost of such activities is less than the amount of the
Overall Cap, as reduced for any prior claims.
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10.10 PROCEDURE FOR INDEMNIFICATION--OTHER CLAIMS
A claim for indemnification for any matter not involving a third-party claim
shall be promptly asserted by notice to the party from whom indemnification is
sought. In the event that Sellers are the indemnifying parties, Sellers'
Representative shall have the right to act on behalf of Sellers, and control the
defense of such claim, for all purposes of this Section 10.10, except with
respect to a Seller Breach.
11. TAX MATTERS
The following provisions shall govern the allocation of responsibility as
between Buyer and Sellers for certain Tax matters following the Closing Date:
(a) Tax Periods Ending on or Before the Closing Date. Buyer shall
------------------------------------------------
prepare or cause to be prepared and file or cause to be filed all Tax Returns
for the Acquired Companies for all taxable years or taxable periods ending on or
prior to the Closing Date ("Pre-Closing Periods") which are to be filed after
the Closing Date. Buyer shall permit the Sellers' Representative to review and
comment on each such Tax Return described in the preceding sentence prior to
filing, by providing a draft of each such Tax Return to the Sellers'
Representative not less than fifteen days before the date on which such Tax
Return is required to be filed, and shall make such revisions to such Tax
Returns as are reasonably requested by the Sellers' Representative. Buyer and
Sellers' Representative shall attempt in good faith to resolve any issues
arising out of the review of such Tax Returns. In no event, however, shall
Sellers be required to pay any Taxes with respect to items of income or gain
arising with respect to the Acquired Companies after the Closing, including,
without limitation, with respect to any election under IRC Section 338 made by
Buyer with respect to the Contemplated Transactions. Any income tax expense
recognized by an Acquired Company by reason of the exercise, redemption or
cancellation of the Options or the Warrants shall be treated as an item of
expense arising prior to the Closing.
(b) Tax Periods Beginning Before and Ending After the Closing Date.
--------------------------------------------------------------
Buyer shall prepare or cause to be prepared and file or cause to be filed any
Tax Returns of the Acquired Companies for taxable periods which begin before the
Closing Date and end after the Closing Date ("Straddle Periods"). No election
shall be made under Treasury Regulation Section 1.1502-76(b)(2)(ii) (relating to
ratable allocation of a year's items). Except as provided in the following
sentence, Tax Returns for Pre-Closing Periods that are prepared by Buyer shall
be prepared in a manner consistent with past practices of the Acquired
Companies. Such Tax Returns may be prepared in accordance with any reasonable
Tax accounting practices selected by Buyer to the extent (i) any items are not
covered by past practices, (ii) past practices applicable to an item are no
longer permissible under the IRC or other applicable Tax Law, or (iii) there is
no reasonable basis for past practices applicable to an item.
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(c) Cooperation on Tax Matters.
--------------------------
(i) Buyer and the Sellers' Representative shall cooperate
fully, as and to the extent reasonably requested by the other party, in
connection with the filing of Tax Returns pursuant to this Section and any
audit, litigation or other proceeding with respect to Taxes, in each case with
respect to Pre-Closing Periods and Straddle Periods. Such cooperation shall
include the retention and (upon the other party's reasonable request) the
provision of records and information which are reasonably relevant to any such
audit, litigation or other proceeding and making employees available on a
mutually convenient basis to provide additional information and explanation of
any material provided hereunder. The Acquired Companies and Sellers agree to
retain all books and records with respect to Tax matters pertinent to the
Acquired Companies relating to any taxable period beginning before the Closing
Date until the expiration of the statute of limitations (and, to the extent
notified by Buyer or Sellers, any extensions thereof) of the respective taxable
periods, and to abide by all record retention agreements entered into with any
Tax authority.
(ii) Buyer and the Sellers' Representative further agree, upon
request, to use their best efforts to obtain any certificate or other document
from any governmental authority or any other Person as may be necessary to
mitigate, reduce or eliminate any Tax that could be imposed (including, but not
limited to, with respect to the transactions contemplated hereby).
(iii) Any information or documents described in this Section
11(c) shall be kept confidential by the Person receiving the information or
documents, except as may otherwise be necessary in connection with the filing of
Tax Returns or in connection with any administrative or judicial proceedings
relating to Taxes or as otherwise required by law.
(iv) Nothing in this Section 11(c) shall require Sellers or
Buyer to provide access to or disclosure of any information or documents (i)
relating to Sellers' or Buyer's assets or activities other than the assets and
activities of the Acquired Companies, or (ii) to the extent such access and
disclosure would (A) violate any applicable law or regulation; or (B) violate
the terms of any agreement to which the disclosing party or any Related Person
is bound, or (C) impair any attorney-client, work-product, or similar privilege
of the disclosing party.
(d) Expenses. Each party and its Related Persons shall bear their own
--------
expenses incurred in connection with preparation of Tax Returns and other
matters related to Taxes under the provisions of this Agreement; provided that
Sellers' portion of such fees shall be paid first by deducting such amount from
the Adjustment Amount and, if Sellers' portion has not been fully satisfied,
second from the Escrow Proceeds.
(e) Interpretation. In the event of any conflict between the
--------------
provisions of this Section 11 and any other provisions of the Agreement as
applied to any liability for any Tax or any other matter relating to Taxes, the
provisions of this Section 11 shall control.
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12. GENERAL PROVISIONS
12.1 EXPENSES
Except as otherwise expressly provided in this Agreement, each party to this
Agreement will bear its respective expenses incurred in connection with the
preparation, execution, and performance of this Agreement and the Contemplated
Transactions, including all fees and expenses of agents, representatives,
counsel, and accountants, provided, however, the Company shall pay all such
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expenses incurred for its own account or as incurred by the XxXxxx Trust
(provided such amounts are paid prior to or at Closing or are or will be accrued
on the Closing Balance Sheet); and provided, further, that Buyer agrees to cause
the Company to pay all such amounts accrued on the Closing Balance Sheet
promptly at the direction of Sellers' Representative. Buyer will pay all amounts
payable to Xxxxxx, Oxford & Associates, and with respect to any financing
incurred by Buyer, in connection with this Agreement and the Contemplated
Transactions.
12.2 PUBLIC ANNOUNCEMENTS
Any public announcement or similar publicity with respect to this Agreement or
the Contemplated Transactions will be issued, if at all, at such time and in
such manner as Buyer and Sellers' Representative mutually agree. Unless required
by Legal Requirements, prior to the Closing Sellers shall, and shall cause the
Acquired Companies to, and Buyer shall keep this Agreement strictly confidential
and may not make any disclosure of this Agreement to any Person, except that
Buyer shall have the right to unilaterally disclose this Agreement and/or the
terms thereunder if, in the opinion of outside counsel, such disclosure is
required under applicable securities laws. Sellers' Representative and Buyer
will consult with each other concerning the means by which the Acquired
Companies' employees, customers, and suppliers and others having dealings with
the Acquired Companies will be informed of the Contemplated Transactions, and
Buyer will have the right to be present for any such communication.
12.3 CONFIDENTIALITY
Between the date of this Agreement and the Closing Date, Buyer and Sellers will
maintain in confidence, and will cause the directors, officers, employees,
agents, and advisors of Buyer and the Acquired Companies to maintain in
confidence, and not use to the detriment of another party or an Acquired Company
any written, oral, or other information obtained in confidence from another
party or an Acquired Company in connection with this Agreement or the
Contemplated Transactions, unless (a) such information is already known to such
party or to others not bound by a duty of confidentiality or such information
becomes publicly available through no fault of such party, (b) the use of such
information is necessary or appropriate in making any filing or obtaining any
consent or approval required for the consummation of the Contemplated
Transactions, or (c) the furnishing or use of such information is required by
legal proceedings.
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If the Contemplated Transactions are not consummated, each party will return or
destroy as much of such written information (including all notes and analyses
thereof) as the other party may reasonably request.
12.4 NOTICES
All notices, consents, waivers, and other communications under this Agreement
must be in writing and will be deemed to have been duly given when (a) delivered
by hand (with written confirmation of receipt), (b) sent by telecopier (with
written confirmation of receipt), provided that a copy is mailed by registered
mail, return receipt requested, or (c) when received by the addressee, if sent
by a nationally recognized overnight delivery service (receipt requested), in
each case to the appropriate addresses and telecopier numbers set forth below
(or to such other addresses and telecopier numbers as a party may designate by
notice to the other parties):
Sellers: Xxxxxx X. XxXxxx, Xx. 1983 Trust
0000 Xxxxxxxxxx Xxxx., Xxx 0, 0/xx/ Xxxxx
Xxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx
Facsimile No.: (000) 000-0000
with a copy to: Xxxxxxxx & Xxxxxxxx
Four Stamford Plaza
Stamford, CT 06901
Attention: Xxxx Xxxxxxxx
Facsimile No.: (000) 000-0000
Buyer: Encore Medical Corporation
0000 Xxxxxx Xxxx.
Xxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxxx
Facsimile No.: (000) 000-0000
with a copy to: Xxxxxxx Xxxxxx LLP
000 Xxxxxxxx Xxxx.
Xxxxxx, XX 00000
Attention: Xxxxx Xxxx
Facsimile No.: (000) 000-0000
CLIP: Chatt Investment L.P. c/o Xxxxxx Xxxxxxxxx & Co., Inc.
Xxx Xxxxxxxxx Xxxxx, 0/xx/ Xxxxx
Xxxxxxxxx, XX 00000
Attention: Xxxx Xxxxxxxxxx
Facsimile No.: (000) 000-0000
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12.5 JURISDICTION; SERVICE OF PROCESS
Any action or proceeding seeking to enforce any provision of, or based on any
right arising out of, this Agreement shall be brought against any of the parties
only in the courts of the State of Tennessee, County of Xxxxxxxx, or, if it has
or can acquire jurisdiction, in the United States District Court for the Eastern
District of Tennessee, and each of the parties consents to the jurisdiction of
such courts (and of the appropriate appellate courts) in any such action or
proceeding and waives any objection to venue laid therein. Process in any action
or proceeding referred to in the preceding sentence may be served on any party
anywhere in the world.
12.6 FURTHER ASSURANCES
The parties agree (a) to furnish upon request to each other such further
information, (b) to execute and deliver to each other such other documents, and
(c) to do such other acts and things, all as the other party may reasonably
request for the purpose of carrying out the intent of this Agreement and the
documents referred to in this Agreement.
12.7 WAIVER
Neither the failure nor any delay by any party in exercising any right, power,
or privilege under this Agreement or the documents referred to in this Agreement
will operate as a waiver of such right, power, or privilege, and no single or
partial exercise of any such right, power, or privilege will preclude any other
or further exercise of such right, power, or privilege or the exercise of any
other right, power, or privilege. To the maximum extent permitted by applicable
Law, (a) no claim or right arising out of this Agreement or the documents
referred to in this Agreement can be discharged by one party, in whole or in
part, by a waiver or renunciation of the claim or right unless in writing signed
by Buyer with respect to a waiver on behalf of Buyer and by XxXxxx Trust with
respect to a waiver to on behalf of Sellers; (b) no waiver that may be given by
a party will be applicable except in the specific instance for which it is
given; and (c) no notice to or demand on one party will be deemed to be a waiver
of any obligation of such party or of the right of the party giving such notice
or demand to take further action without notice or demand as provided in this
Agreement or the documents referred to in this Agreement.
12.8 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements between the parties with respect
to its subject matter (including the Offer Letter between Buyer, the Company and
the XxXxxx Trust, dated October 3, 2001) and constitutes (along with the
documents referred to in this Agreement) a complete and exclusive statement of
the terms of the agreement between the parties with respect to its subject
matter. Subject to Section 12.16, this Agreement may not be amended except (i)
by a written agreement executed by the party to be charged with the amendment
and (ii) by an Update in accordance with Section 5.5.
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12.9 DISCLOSURE LETTER
Any item disclosed hereunder, including in the Disclosure Letter, shall be
deemed disclosed for all purposes of the Agreement, irrespective of the specific
representation or warranty to which it is explicitly referenced.
12.10 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS
Neither party may assign any of its rights under this Agreement without the
prior consent of the other parties except that Buyer may assign any of its
rights, but not its obligations, under this Agreement to any Subsidiary of
Buyer; provided that the Person purchasing Shares pursuant to the Agreement
shall be an "includible corporation" of the "affiliated group" (each as defined
in IRC ss.1504), of which Buyer is the common parent that files federal income
tax returns on a consolidated basis for the taxable period of buyer that
includes the Closing Date. Subject to the preceding sentence, this Agreement
will apply to, be binding in all respects upon, and inure to the benefit of the
successors and permitted assigns of the parties. Nothing expressed or referred
to in this Agreement will be construed to give any Person other than the parties
to this Agreement any legal or equitable right, remedy, or claim under or with
respect to this Agreement or any provision of this Agreement. This Agreement and
all of its provisions and conditions are for the sole and exclusive benefit of
the parties to this Agreement and their successors and assigns.
Buyer and Sellers acknowledge and agree that Xxxxxxxx & Xxxxxxxx has represented
only the Acquired Companies and the XxXxxx Trust (and none of the other Sellers)
in connection with the preparation, execution and performance of this Agreement
and the Contemplated Transactions. Buyer hereby waives, on its own behalf and on
the behalf of the Acquired Companies following the Closing, any conflict which
has or may arise out of Xxxxxxxx & Lockwood's representation of both the
Acquired Companies and the XxXxxx Trust in connection with the preparation,
execution and performance of this Agreement and the Contemplated Transactions.
Buyer further consents, on its own behalf and on behalf of the Acquired
Companies following Closing, to Xxxxxxxx & Xxxxxxxx continuing to represent the
XxXxxx Trust following the Closing in matters related and unrelated to this
Agreement and the Contemplated Transactions, including in connection with any
litigation, arbitration or other controversy that may arise between the XxXxxx
Trust, on the one hand, and any of the Buyer, any Indemnified Persons or the
Acquired Companies, on the other hand, out of this Agreement or the Contemplated
Transactions.
12.11 SEVERABILITY
If any provision of this Agreement is held invalid or unenforceable by any court
of competent jurisdiction, the other provisions of this Agreement will remain in
full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
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12.12 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are provided for convenience only and
will not affect its construction or interpretation. All references to "Section"
or "Sections" refer to the corresponding Section or Sections of this Agreement.
All words used in this Agreement will be construed to be of such gender or
number as the circumstances require. Unless otherwise expressly provided, the
word "including" does not limit the preceding words or terms.
12.13 TIME OF ESSENCE
With regard to all dates and time periods set forth or referred to in this
Agreement, time is of the essence.
12.14 GOVERNING LAW
THIS AGREEMENT WILL BE GOVERNED BY THE LAWS OF THE STATE OF DELAWARE WITHOUT
REGARD TO CONFLICTS OF LAWS PRINCIPLES.
12.15 COUNTERPARTS; JOINDER
This Agreement may be executed in one or more counterparts, each of which will
be deemed to be an original copy of this Agreement and all of which, when taken
together, will be deemed to constitute one and the same agreement. Any Option
Holder who exercises his Options after the date hereof (whether such exercise is
absolute or contingent upon the consummation of the Contemplated Transactions)
and any other shareholder of the Company that, prior to the Closing Date, offers
to sell the capital stock of the Company received or to be received in
connection with such exercise by such Option Holder or that is otherwise owned
by such other shareholder to Buyer on the terms and conditions contained in this
Agreement, will, upon execution and delivery of a Joinder Agreement, be deemed
to be a Seller for all purposes hereof.
12.16 APPOINTMENT OF SELLERS' REPRESENTATIVE
(a) By the execution and delivery of this Agreement, each Seller, other
than CLIP hereby irrevocably constitutes and appoints the XxXxxx Trust as the
true and lawful agent and attorney-in-fact (the "Sellers' Representative") of
such Seller with full authority and power of substitution to act in the name,
place and stead of such Seller with respect to the consummation of the
transactions contemplated hereunder, including without limitation the power and
authority to (a) execute any amendment to this Agreement (including, without
limitation, the Disclosure Letter and Schedules hereto), or a waiver of any
provision of this Agreement (including without limitation the waiver of any
breach by the Buyer under this Agreement or the waiver of any condition
precedent to Closing under Section VIII hereof), or prepare and deliver Updates,
in each case as the Sellers' Representative shall deem necessary or appropriate
in its sole discretion; (b) receive or deliver any and all notices required to
be delivered to or sent by such Sellers
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pursuant to this Agreement, (c) prepare the Closing Balance Sheet and deliver
the same to Buyer and otherwise represent Sellers in, and control the
disposition of, all matters related thereto, (d) receive, hold and deliver to
the Buyer the certificates for the Tendered Shares and any other documents
relating thereto, (e) execute, acknowledge, deliver, record and file all
ancillary agreements (including the Escrow Agreement), certificates and
documents which the Sellers' Representative deems necessary or appropriate in
its sole discretion in connection with the consummation of the transactions
contemplated by the terms and provisions of this Agreement and otherwise
represent Sellers in, and control the disposition of, all matters related
thereto, and (f) take any other action permitted or contemplated to be taken by
the Sellers' Representative hereunder. The parties hereto understand and agree
that the Sellers' Representative may, but shall be under no duty or obligation
to, take or refrain from taking any or all of the above actions or any other
action, and any taking or refraining from taking any or all of the above actions
or any other action shall not create any duty or obligation to take or to
refrain from taking any later or successive action. The Buyer and any other
person may conclusively and absolutely rely, without inquiry, upon any action of
the Sellers' Representative as the action of each Seller, other than CLIP, in
all matters referred to herein, and each such Seller confirms all that the
Sellers' Representative shall do or cause to be done by virtue of its
appointment of Sellers' Representative. All actions by the Sellers'
Representative are acknowledged by the parties hereto to be taken by it solely
as agent and attorney-in-fact for each Seller, other than CLIP.
(b) By the execution and delivery of this Agreement, CLIP hereby
irrevocably constitutes and appoints the XxXxxx Trust as its true and lawful
agent and attorney-in-fact (as its "Sellers' Representative") with full
authority and power of substitution to act in the name, place and stead of CLIP
with respect to the matters, and only with respect to the matters, addressed in
Sections 2.6, 5.5, 9, 10.9, 10.10 and 11 (the "Specified Matters"). The parties
hereto understand and agree that the XxXxxx Trust may, but shall be under no
duty or obligation to, take or refrain from taking any or all of the above
actions or any other action with respect to the Specified Matters, and any
taking or refraining from taking any or all of the above actions or any other
action with respect to the Specified Matters shall not create any duty or
obligation to take or to refrain from taking any later or successive action with
respect to the Specified Matters. The Buyer and any other person may
conclusively and absolutely rely, without inquiry, upon any action of the
Sellers' Representative as the action of CLIP with respect to the Specified
Matters, and CLIP confirms all that the Sellers' Representative shall do or
cause to be done by virtue of its appointment of Sellers' Representative with
respect to the Specified Matters. All actions by the Sellers' Representative
with respect to the Specified Matters are acknowledged by the parties hereto to
be taken by it solely as agent and attorney-in-fact for CLIP.
(c) By the execution of this Agreement, the XxXxxx Trust has accepted
its appointment as the initial Sellers' Representative and in consideration for
the XxXxxx Trust's (or any successor's) agreement to act as the Sellers'
Representative, each Seller hereby consents and agrees to all actions or in
actions taken or omitted to be taken in good faith by the Sellers'
Representative under this Agreement as contemplated by
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Sections 12.16(a) and 12.16(b) and hereby agrees to indemnify and hold the
XxXxxx Trust and each of the XxXxxx Trust's trustees, beneficiaries, agents and
representatives (collectively, the "Representatives") and any and all successor
Sellers' Representative and their respective Representatives harmless from and
against all damages, losses, liabilities, charges, penalties, costs and expenses
(including court costs and attorneys' fees and expenses, if any) incurred in any
claim, action, dispute or proceeding between any such person and the Sellers (or
any of them) or between any such person and any third party (including, without
limitation, the Buyer or any Acquired Company or any affiliate thereof) or
otherwise incurred or suffered as a result of or arising out of such actions or
inactions by the Sellers' Representative, in its capacity as such, (and with
respect to CLIP, as limited by Section 12.16(b)) or otherwise relating to the
XxXxxx Trust's (or any successor's ) appointment as the Sellers' Representative,
except to the extent arising out of the gross negligence or willful misconduct
of Sellers' Representative.
(d) Each Seller covenants and agrees that it will not voluntarily revoke
the power of attorney conferred in this Section 12.16.
(e) The Sellers' Representative may resign as the Sellers'
Representative for any reason and at any time by written notice to the Buyer and
each Seller. If at any time the XxXxxx Trust (or any successor Sellers'
Representative) resigns from its position as the Sellers' Representative, the
XxXxxx Trust (or any successor Sellers' Representative) shall designate another
Seller as its successor as soon as practicable and shall notify the Buyer in
writing of such designation.
12.17 COVENANT OF EXISTENCE; TRUSTEES
The XxXxxx Trust hereby covenants and agrees not to liquidate, dissolve or
otherwise cease its existence for a period of sixteen (16) months following the
Closing Date. The parties hereto acknowledge and agree that (i) Xxxxxxx X. Xxxxx
and Xxxxxx X. Xxxxxxxxxxx are entering into this Agreement in their fiduciary
capacity as Trustees of the Xxxxxx X. XxXxxx, Xx. 1983 Trust under Trust
Agreement dated November 30, 1983 and not in their individual capacities, and
(ii) any liability of Xxxxxxx X. Xxxxx and Xxxxxx X. Xxxxxxxxxxx hereunder shall
be limited to the assets of the Xxxxxx X. XxXxxx, Xx. 1983 Trust and such
persons shall have no personal liability hereunder or arising out of the
Contemplated Transactions.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first written above.
Buyer:
-----
ENCORE MEDICAL CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxxx
------------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
----------------------------------------
Title: Chief Executive Officer and President
---------------------------------------
Sellers:
-------
By: /s/ Xxxxxxx X. Xxxxx
------------------------------------------
Xxxxxxx X. Xxxxx, as Trustee of
The Xxxxxx X. XxXxxx, Xx. 1983
Trust under Trust Agreement
Dated November 30, 1983 and
not in his individual capacity
By: /s/ Xxxxxx X. Xxxxxxxxxxx
------------------------------------------
Xxxxxx X. Xxxxxxxxxxx, as
Trustee of The Xxxxxx X.
XxXxxx, Xx. 1983 Trust under
Trust Agreement Dated
November 30, 1983 and
not in his individual capacity
CHATT INVESTMENT L.P.
By: Chatt Investment Corporation, its
General Partner
By: /s/ Xxxx X. Xxxxxxxxxx
------------------------------------------
Name: Xxxx X. Xxxxxxxxxx
----------------------------------------
Title: Vice President
---------------------------------------
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Management Option Holders:
-------------------------
By: /s/ Xxxx X. Xxxxxxx
----------------------------------
Xxxx X. Xxxxxxx, individually
By: /s/ Xxxxx X. Xxxxxxxxxx
----------------------------------
Xxxxx X. Xxxxxxxxxx, individually
By: /s/ Xxxxxxx X. Xxxxxx
----------------------------------
Xxxxxxx X. Xxxxxx, individually
By: /s/ Xxxxx X. Xxxxxxxx
----------------------------------
Xxxxx X. Xxxxxxxx, individually
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