Exhibit 2.1
EXECUTION COPY
STOCK PURCHASE AGREEMENT
BY AND AMONG
XXXXXXXXXXXX.XXX, INC.,
CHOLESTECH CORPORATION
AND
WELLCHECK INC.
DECEMBER 23, 2002
TABLE OF CONTENTS
PAGE
----
ARTICLE I DEFINITIONS........................................................................................... 1
ARTICLE II PURCHASE AND SALE OF COMPANY SHARES.................................................................. 5
2.1 Basic Transaction.................................................................................. 5
2.2 Purchase Price..................................................................................... 6
2.3 Additional Consideration........................................................................... 6
2.4 Earnout Payment.................................................................................... 6
2.5 The Closing........................................................................................ 7
2.6 Deliveries at the Closing.......................................................................... 7
2.7 Excluded Assets and Liabilities.................................................................... 8
ARTICLE III REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION........................................... 9
3.1 Representations and Warranties of the Seller....................................................... 9
3.2 Representations and Warranties of the Buyer........................................................ 10
ARTICLE IV REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY................................................ 11
4.1 Organization, Qualification, and Corporate Power................................................... 11
4.2 Capitalization..................................................................................... 11
4.3 Noncontravention................................................................................... 11
4.4 Brokers' Fees...................................................................................... 12
4.5 Title to Assets.................................................................................... 12
4.6 Financial Statements............................................................................... 12
4.7 Events Subsequent to Most Recent Fiscal Year End................................................... 12
4.8 Undisclosed Liabilities............................................................................ 13
4.9 Legal Compliance................................................................................... 13
4.10 Tax Matters....................................................................................... 13
4.11 Real Property..................................................................................... 14
4.12 Intellectual Property............................................................................. 15
4.13 Contracts......................................................................................... 17
4.14 [RESERVED]........................................................................................ 16
4.15 Powers of Attorney................................................................................ 17
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4.16 Insurance......................................................................................... 17
4.17 Litigation........................................................................................ 17
4.18 Product Liability................................................................................. 18
4.19 Employees......................................................................................... 18
4.20 Employee Benefits................................................................................. 18
4.21 Guaranties........................................................................................ 20
4.22 Environmental, Health, and Safety Matters......................................................... 20
4.23 Tangible Assets................................................................................... 20
4.24 Certain Business Relationships with the Company................................................... 20
4.25 Disclosure........................................................................................ 20
ARTICLE V [RESERVED]............................................................................................ 20
ARTICLE VI POST-CLOSING COVENANTS............................................................................... 21
6.1 General............................................................................................ 21
6.2 Litigation Support................................................................................. 21
6.3 Transition......................................................................................... 21
6.4 Confidentiality.................................................................................... 21
6.5 Press Releases and Public Announcements............................................................ 21
6.6 Covenant Not to Compete............................................................................ 22
6.7 Buyer Note......................................................................................... 22
6.8 Agreements Relating to Employees and Employee Plans................................................ 22
6.9 Buyer as Seller's Preferred Provider............................................................... 22
6.10 Trademarks......................................................................................... 22
6.11 Release............................................................................................ 23
ARTICLE VII DELIVERIES AT CLOSING............................................................................... 24
7.1 Deliveries of the Seller........................................................................... 24
7.2 Deliveries of the Buyer............................................................................ 25
ARTICLE VIII REMEDIES FOR BREACHES OF THIS AGREEMENT............................................................ 25
8.1 Survival of Representations and Warranties......................................................... 25
8.2 Indemnification Provisions for Benefit of the Buyer................................................ 26
8.3 Indemnification Provisions for Benefit of the Seller............................................... 26
8.4 Indemnification Procedures......................................................................... 26
8.5 Matters Involving Third Parties.................................................................... 27
8.6 Indemnity Offset Against Buyer Note................................................................ 28
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8.7 Resolution of Conflicts: Arbitration............................................................... 29
ARTICLE IX TAX MATTERS.......................................................................................... 29
9.1 Tax Periods Ending on or Before the Closing Date................................................... 29
9.2 Tax Periods Beginning Before and Ending After the Closing Date..................................... 30
9.3 Cooperation on Tax Matters......................................................................... 30
9.4 Tax Sharing Agreements............................................................................. 31
9.5 Certain Taxes...................................................................................... 31
9.6 Section 338(h)(10) Election........................................................................ 31
ARTICLE X MISCELLANEOUS......................................................................................... 31
10.1 No Third-Party Beneficiaries...................................................................... 31
10.2 Entire Agreement.................................................................................. 32
10.3 Succession and Assignment......................................................................... 32
10.4 Counterparts...................................................................................... 32
10.5 Headings.......................................................................................... 32
10.6 Notices........................................................................................... 32
10.7 Governing Law..................................................................................... 33
10.8 Amendments and Waivers............................................................................ 33
10.9 Severability...................................................................................... 33
10.10 Expenses......................................................................................... 33
10.11 Construction..................................................................................... 34
10.12 Incorporation of Exhibits, Annexes, and Schedules................................................ 34
10.13 Specific Performance............................................................................. 34
10.14 Submission to Jurisdiction....................................................................... 34
Exhibits
--------
Exhibit 2.2 -- Form of Buyer Note
Exhibit 6.8 -- Business Employees
Exhibit 7.1(c) -- Form of Releases
Exhibit 7.1(d) -- Form of Supply Agreement
Exhibit 7.1(e) -- Form of Opinion of Counsel to the Seller
Disclosure Schedule -- Exceptions to Representations and Warranties Concerning the Company
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is entered into on
December 23, 2002 by and among XxxxxxXxxxxx.xxx, Inc., a Pennsylvania
corporation (the "Buyer"), Cholestech Corporation, a California corporation (the
"Seller"), and WellCheck Inc., a California corporation (the "Company") and a
wholly owned subsidiary of the Seller. The Buyer, the Seller and the Company are
referred to collectively herein as the "Parties."
RECITALS
A. The Seller owns all of the outstanding capital stock of the
Company.
B. This Agreement contemplates a transaction in which the Buyer
will purchase from the Seller, and the Seller will sell to the Buyer, all of the
outstanding capital stock of the Company in return for the Buyer Note and
additional consideration from the Buyer.
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 "Adverse Consequences" means all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including court costs and reasonable attorneys' fees and
expenses.
1.2 "Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act.
1.3 "Affiliated Group" means any affiliated group within the
meaning of Code Section 1504(a) or any similar group defined under a similar
provision of state, local or foreign law.
1.4 "Assumed Contracts" has the meaning set forth in Section
2.6 below.
1.5 "Basis" means any past or present fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction that forms or could form the
basis for any specified consequence.
1.6 "Business Employees" has the meaning set forth in Section
6.8(a) below.
1.7 "Buyer" has the meaning set forth in the preface above.
1.8 "Buyer Note" has the meaning set forth in Section 2.2 below.
1.9 "Closing" has the meaning set forth in Section 2.4 below.
1.10 "Closing Date" has the meaning set forth in Section 2.4 below.
1.11 "Code" means the Internal Revenue Code of 1986, as amended.
1.12 "COBRA" means the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended.
1.13 "Company" has the meaning set forth in the preface above.
1.14 "Company Share" means any share of the Common Stock, no par
value per share, of the Company.
1.15 "Disclosure Schedule" has the meaning set forth in Article IV
below.
1.16 "Earnout Certificate" has the meaning set forth in Section
2.4(a) below.
1.17 "Earnout Dispute Notice" has the meaning set forth in Section
2.4(b) below.
1.18 "Earnout Payment" has the meaning set forth in Section 2.4(c)
below.
1.19 "Earnout Performance" has the meaning set forth in Section
2.4(a) below.
1.20 "Earnout Period" has the meaning set forth in Section 2.4(a)
below.
1.21 "Earnout Purchase Price" has the meaning set forth in Section
2.2 below.
1.22 "Election" has the meaning set forth in Section 9.6 below.
1.23 "Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement, (b) qualified defined
contribution retirement plan or arrangement which is an Employee Pension Benefit
Plan, (c) qualified defined benefit retirement plan or arrangement which is an
Employee Pension Benefit Plan (including any Multiemployer Plan), or (d)
Employee Welfare Benefit Plan or material fringe benefit or other retirement,
bonus, or incentive plan or program.
1.24 "Employee Pension Benefit Plan" has the meaning set forth in
ERISA Section 3(2).
1.25 "Employee Welfare Benefit Plan" has the meaning set forth in
ERISA Section 3(1).
1.26 "Environmental, Health, and Safety Requirements" shall mean
all federal, state, local and foreign statutes, regulations, ordinances and
other provisions having the force or effect of law, all judicial and
administrative orders and determinations, all contractual obligations and all
common law concerning public health and safety, worker health and safety, and
pollution or protection of the environment, including without limitation all
those relating to the presence, use, production, generation, handling,
transportation, treatment, storage, disposal, distribution, labeling, testing,
processing, discharge, release, threatened release, control, or cleanup of any
hazardous materials, substances or wastes, chemical substances or mixtures,
pesticides,
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pollutants, contaminants, toxic chemicals, petroleum products or byproducts,
asbestos, polychlorinated biphenyls, noise or radiation, each as amended and as
now or hereafter in effect.
1.27 "Employment Offer" has the meaning set forth in Section 6.8(a)
below.
1.28 "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
1.29 "ERISA Affiliate" means each entity which is treated as a
single employer with the Company for purposes of Code Section 414(b), (c), (m)
or (o).
1.30 "Excess Loss Account" has the meaning set forth in Reg.
Section 1.1502-19.
1.31 "Excluded Assets and Liabilities" has the meaning set forth
in Section 2.6 below.
1.32 "Fiduciary" has the meaning set forth in ERISA Section 3(21).
1.33 "Final Earnout Performance" has the meaning set forth
in Section 2.4(b) below.
1.34 "Financial Statements" has the meaning set forth in Section
4.6 below.
1.35 "GAAP" means United States generally accepted accounting
principles as in effect from time to time.
1.36 "Indemnified Party" has the meaning set forth in Section 8.4
below.
1.37 "Indemnifying Party" has the meaning set forth in Section 8.4
below.
1.38 "Intellectual Property" means (a) all inventions (whether
patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications, and patent
disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions, and reexaminations thereof, (b)
all trademarks, service marks, trade dress, logos, trade names, and corporate
names, together with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith, (c) all
copyrightable works, all copyrights, and all applications, registrations, and
renewals in connection therewith, (d) all mask works and all applications,
registrations, and renewals in connection therewith, (e) all trade secrets and
confidential business information (including ideas, research and development,
know-how, formulas, compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information, and business and marketing plans
and proposals), (f) all computer software (including data and related
documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
1.39 "Knowledge" means actual knowledge after reasonable
investigation.
1.40 "Liability" means any liability or obligation (whether known
or unknown, whether asserted or unasserted, whether absolute or contingent,
whether accrued or unaccrued,
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whether liquidated or unliquidated, and whether due or to become due), including
any liability for Taxes.
1.41 "Maximum Liability" has the meaning set forth in Section 8.6
below.
1.42 "Minimum Claim Amount" has the meaning set forth in Section
8.6 below.
1.43 "Modifications" means modifications, translations, derivative
works, improvements, upgrades, enhancements, fixes, patches, extensions,
customizations, abridgements or new versions with significant additional
features or capability.
1.44 "Most Recent Balance Sheet" means the balance sheet contained
within the Most Recent Financial Statements.
1.45 "Most Recent Financial Statements" has the meaning set forth
in Section 4.6 below.
1.46 "Most Recent Fiscal Month End" has the meaning set forth
in Section 4.6 below.
1.47 "Most Recent Fiscal Year End" has the meaning set forth
in Section 4.6 below.
1.48 "Multiemployer Plan" has the meaning set forth in ERISA
Section 3(37).
1.49 "New Business" has the meaning set forth in Section 2.4(d)
below.
1.50 "Ordinary Course of Business" means the ordinary course of
business consistent with past custom and practice (including with respect to
quantity and frequency).
1.51 "Party" has the meaning set forth in the preface above.
1.52 "PBGC" means the Pension Benefit Guaranty Corporation.
1.53 "Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization, or a governmental entity (or any
department, agency, or political subdivision thereof).
1.54 "Prohibited Transaction" has the meaning set forth in ERISA
Section 406 and Code Section 4975.
1.55 "Purchase Price" has the meaning set forth in Section 2.2
below.
1.56 "Releases" has the meaning set forth in Section 7.1(c) below.
1.57 "Reportable Event" has the meaning set forth in ERISA Section
4043.
1.58 "Securities Act" means the Securities Act of 1933, as amended.
1.59 "Securities Exchange Act" means the Securities Exchange Act of
1934, as amended.
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1.60 "Security Interest" means any mortgage, pledge, lien,
encumbrance, charge, or other security interest, other than (a) mechanic's,
materialmen's, and similar liens, (b) liens for Taxes not yet due and payable,
(c) purchase money liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of Business and
not incurred in connection with the borrowing of money.
1.61 "Seller" has the meaning set forth in the preface above.
1.62 "Supply Agreement" has the meaning set forth in Section 7.1(d)
below.
1.63 "Tax" means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under Code
Section 59A), customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
1.64 "Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
1.65 "TEAMS" means the Test Event Activity Management Software
computer program of the Company and any Modifications thereto.
1.66 "Terminated Employees" has the meaning set forth in Section
6.8(a) below.
1.67 "Third Party Claim" has the meaning set forth in Section 8.4
below.
1.68 "Third Party Transferred IP" has the meaning set forth
in Section 4.12(d) below.
1.69 "Trademarks" has the meaning set forth in Section 6.10 below.
1.70 "Transaction" has the meaning set forth in Section 2.1 below.
1.71 "Transferred Employees" has the meaning set forth in Section
6.8(a) below.
1.72 "Transferred IP" has the meaning set forth in Section 4.12(c)
below.
1.73 "WARN Act" has the meaning set forth in Section 6.8(d) below.
ARTICLE II
PURCHASE AND SALE OF COMPANY SHARES
2.1 Basic Transaction. Effective immediately and subject to the
terms and conditions of this Agreement, the Buyer hereby purchases from the
Seller, and the Seller hereby sells,
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conveys, transfers, assigns and delivers to the Buyer all of the Company Shares
for the consideration specified below in this Article II (the "Transaction").
2.2 Purchase Price. As consideration for the Seller's sale,
conveyance, transfer, assignment and delivery of the Company Shares to the
Buyer, the Buyer agrees to pay to the Seller at the Closing Two Hundred Fifty
Thousand Dollars ($250,000) (the "Purchase Price") by delivery of a secured
promissory note (the "Buyer Note") in the form of Exhibit 2.2 attached hereto in
the aggregate principal amount of $250,000. In addition, the Buyer shall, at the
Closing, grant the Seller the contingent right to receive an additional $200,000
(the "Earnout Purchase Price") as provided and subject to the conditions in
Section 2.4.
2.3 Additional Consideration. From and after the Closing Date
until the third anniversary thereof, for each test on a participant conducted
with TEAMS, the Purchase Price shall be increased by $1.00 for each such test in
year one, $0.75 for each such test in year two and $0.50 for each such test in
year three; provided, however that if multiple tests shall be conducted on a
single participant during a single testing event, the Purchase Price shall be
increased only once for such multiple tests. From and after the Closing Date
until the third anniversary thereof, the Buyer shall afford the Seller and its
representatives on an annual basis, during normal business hours, reasonable
access to the books, records and other data relating to the Buyer's or the
Company's testing with TEAMS to allow the Seller to conduct one audit or review
of the number of tests conducted by the Buyer or the Company during each annual
period. The Buyer or the Company shall pay any such additional consideration to
the Seller thirty (30) days after the end of each calendar quarter during such
three year period (with respect to tests conducted during the quarter then
ending).
2.4 Earnout Payment.
(a) Earnout Performance and Earnout Certificate. On or
before January 31, 2005, the Buyer shall prepare and deliver to the Seller a
certificate (the "Earnout Certificate") stating the aggregate revenues (in
accordance with GAAP) during the period beginning on the first day following the
Closing Date and ending on December 31, 2004 (the "Earnout Period") of the
Buyer, the Company and any Affiliate thereof under (i) the contracts listed in
Section 4.13 of the Disclosure Schedule (as defined in Article IV below) and
(ii) any agreements resulting from the Company's current negotiations with each
of Keystone Marketing and Rite Aid (the "Earnout Performance").
(b) Review and Audit. The Seller shall have sixty (60)
calendar days following the delivery of the Earnout Certificate to conduct an
audit of the records of the Company and Buyer that are relevant to the Earnout
Performance to verify the calculation of the Earnout Performance as set forth in
the Earnout Certificate, and to deliver written notice to Buyer of any dispute
regarding the calculation of the Earnout Performance (an "Earnout Dispute
Notice"), with such audit to be conducted during reasonable hours and without
material interference with the Buyer's or the Company's normal conduct of
business. The Earnout Dispute Notice shall state with specificity the
deficiencies asserted by the Seller with respect to the Buyer's asserted Earnout
Performance (including the amount asserted by the Seller to be correct). Unless
the Seller delivers to the Buyer an Earnout Dispute Notice during such sixty
(60) calendar day period, the Earnout Performance shall become binding on the
Buyer and Seller
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at the end of such sixty (60) calendar day period. If the Seller delivers an
Earnout Dispute Notice during such sixty (60) calendar day period, Seller and
Buyer shall then use their reasonable efforts for fifteen (15) calendar days
after the receipt by Buyer of such Earnout Dispute Notice to resolve, settle and
agree upon the amount of the Earnout Performance. Upon such settlement and
agreement, if any, the Earnout Performance as agreed upon shall become binding
on Buyer and Seller. If the Seller and Buyer cannot agree upon all the proposed
adjustments to the Earnout Performance during such fifteen (15) calendar period,
each unresolved proposed adjustment shall thereafter be promptly be submitted
for resolution to a mutually agreeable independent accounting firm (excluding
all accounting firms engaged by the Seller, Buyer or any of their affiliates
during the three preceding years). The Seller and Buyer will each furnish to
such accounting firm such work papers, schedules and other documentation
relating to the unresolved adjustments as the accounting firm may reasonably
request. The decision of the accounting firm shall be based solely upon
presentations by the Seller and Buyer, and not on any independent investigation
or research, and shall be binding upon the Seller and the Buyer. The parties
will instruct the accounting firm to deliver its written determination of the
disputed issues with respect to the Earnout Performance within thirty (30)
calendar days from the date of such presentations. The fees and expenses of the
accounting firm shall be borne by the party whose asserted Earnout Performance
most deviates from that determined by the dispute resolution process. The
binding Earnout Performance is referred to herein as the "Final Earnout
Performance."
(c) Earnout Payment. In the event that the Final Earnout
Performance is equal to or greater than $2,000,000, the Seller shall be entitled
to receive from the Buyer a payment in an amount equal to $200,000 (the "Earnout
Payment"), with the Earnout Payment to be paid within 30 calendar days of the
date the Earnout Payment becomes binding on the Buyer and Seller.
(d) Buyer Obligations. It is the present intent of the
Parties to develop and actively promote the business of the Company to be
operated by the Buyer (the "New Business") to the mutual advantage of the Buyer
and the Seller. The Buyer agrees to operate the New Business in the ordinary
course of the Buyer's other businesses and to provide reasonable support to the
development, sale and customer support of the services provided by the Buyer in
such areas as development, sales, marketing, quality assurance, contract
administration, public relations, staffing and other direct business activities,
all in accordance with the Buyer's standard practices and procedures for the
allocation of such resources; provided, however, that except as provided in this
Section 2.4(d), the operations of the New Business shall at all times be subject
to the management and control of the Buyer, in its sole discretion.
2.5 The Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place contemporaneously with the
execution and delivery of this Agreement at the offices of Xxxxxx Xxxxxxx
Xxxxxxxx & Xxxxxx, Professional Corporation, 000 Xxxx Xxxx Xxxx, Xxxx Xxxx,
Xxxxxxxxxx on December 23, 2002 (the "Closing Date").
2.6 Deliveries at the Closing. At the Closing, (i) the Seller
shall deliver to the Buyer the various certificates, instruments, and documents
referred to in Section 7.1 below, (ii) the Buyer shall deliver to the Seller the
various certificates, instruments, and documents referred to in Section 7.2
below, (iii) the Seller shall deliver to the Buyer stock certificates
representing all of its Company
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Shares, endorsed in blank or accompanied by duly executed assignment documents,
and (iv) the Buyer shall deliver to the Seller the Buyer Note.
2.7 Excluded Assets and Liabilities. Prior to the Closing, the
Seller shall cause the Company to distribute and assign to the Seller, and the
Seller shall retain the following assets, liabilities and obligations
(collectively referred to as the "Excluded Assets and Liabilities"):
(a) the Company's cash, cash equivalents and security
deposits existing on the Closing Date, except for amounts relating to any
testing services to be performed by the Company after the Closing Date;
(b) all of the Company's accounts receivable existing on
the Closing Date, except for amounts relating to any testing services to be
performed by the Company after the Closing Date;
(c) all of the Company's testing cassette inventory
existing on the Closing Date;
(d) the Real Property Leases (as defined in Section 4.11)
and leasehold improvements made to the premises related thereto;
(e) all of the Company's claims, causes of action and
rights of refunds relating to or arising out of the Excluded Assets and
Liabilities;
(f) all of the Company's Liabilities arising under or
relating to all accounts payable and accrued expenses with respect to the period
ending on or before the Closing, including all intercompany payables;
(g) all of the Company's Liabilities and the Seller's
Liabilities in connection with that certain Right of First Refusal Agreement,
dated as of November 23, 1999, by and between Xxxxxxx & Xxxxxxx Merck Consumer
Pharmaceutical Co. ("Xxxxxxx & Xxxxxxx") and the Seller (the "Right of First
Refusal Agreement");
(h) the URL address "XxxxXxxxx.xxx"; and
(i) any and all other Liabilities of the Company,
including without limitation in connection with any Employee Benefit Plan and
the Terminated Employees (as defined in Section 6.7(a)).
The Seller shall be solely responsible for satisfying, discharging or
performing the foregoing liabilities and obligations on a timely basis in
accordance with their respective terms. The Seller shall deliver to Buyer within
45 days of the Closing Date a balance sheet of the Company as of the Closing and
reflecting the assignment and transfer of the Excluded Assets and Liabilities to
the Seller.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION
3.1 Representations and Warranties of the Seller. The Seller
represents and warrants to the Buyer that the statements contained in this
Section 3.1 are correct and complete as of the date of this Agreement:
(a) Organization of the Seller. The Seller is duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
(b) Authorization of Transaction. The Seller has full
corporate power and authority to execute and deliver this Agreement and the Xxxx
of Sale and Assignment and Assumption Agreement being executed by Seller
concurrently herewith in connection with the distribution and assignment of the
Excluded Assets and Liabilities as contemplated by Section 2.7 (the "Related
Agreements") and to perform its obligations hereunder and thereunder. Each of
this Agreement and the Related Agreements constitute the valid and legally
binding obligation of the Seller, enforceable in accordance with its terms and
conditions. The Seller need not give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or governmental
agency in order to consummate the transactions contemplated by this Agreement
and the Related Agreements.
(c) Noncontravention. Neither the execution and the
delivery of this Agreement or the Related Agreements, nor the consummation of
the transactions contemplated hereby or thereby, will (i) violate any
constitution, statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental agency, or
court to which the Seller is subject or, any provision of its certificate of
incorporation or bylaws or (ii) conflict with, result in a breach of, constitute
a default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
the Seller is a party or by which it is bound or to which any of its assets is
subject; provided, however, that the Right of First Refusal Agreement referred
to Section 3.1(f) shall not be governed by this Section 3.1(c), but shall
instead be governed by Section 3.1(f) below.
(d) Brokers' Fees. The Seller has no Liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement for which the Buyer
could become liable or obligated.
(e) Company Shares. The Seller holds of record and owns
beneficially 100 Company Shares, which shares constitute all of the authorized
and outstanding shares of the Company's capital stock, free and clear of any
restrictions on transfer (other than any restrictions under the Securities Act
and state securities laws), Taxes, Security Interests, options, warrants,
purchase rights, contracts, commitments, equities, claims, and demands. The
Seller is not a party to any option, warrant, purchase right, or other contract
or commitment that could require the Seller to sell, transfer, or otherwise
dispose of any capital stock of the Company (other than this Agreement). The
Seller is not a party to any voting trust, proxy, or other agreement or
understanding with respect to the voting of any capital stock of the Company.
9
(f) Right of First Refusal Agreement. The Right of First
Refusal Agreement does not apply to the Transaction, and neither the Buyer, the
Company nor any Affiliate thereof will be subject to or bound by any of the
terms and conditions of the Right of First Refusal Agreement after the Closing
of the Transaction.
3.2 Representations and Warranties of the Buyer . The Buyer
represents and warrants to the Seller that the statements contained in this
Section 3.2 are correct and complete as of the date of this Agreement:
(a) Organization of the Buyer. The Buyer is a corporation
duly organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
(b) Authorization of Transaction. The Buyer has full
corporate power and authority to execute and deliver this Agreement and to
perform their obligations hereunder. This Agreement constitutes the valid and
legally binding obligation of the Buyer, enforceable in accordance with its
terms and conditions. The Buyer needs not give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any government or
governmental agency in order to consummate the transactions contemplated by this
Agreement.
(c) Noncontravention. Neither the execution and the
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will (i) violate any constitution, statute, regulation,
rule, injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which the Buyer is subject
or any provision of their articles of incorporation or bylaws or (ii) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which the Buyer is a party or by which it is
bound or to which any of its assets is subject.
(d) Brokers' Fees. The Buyer has no Liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement for which the Seller
could become liable or obligated.
(e) Investment. The Buyer is not acquiring the Company
Shares with a view to or for sale in connection with any distribution thereof
within the meaning of the Securities Act.
(f) Buyer Financial Statements. The Buyer has furnished
or made available to the Seller audited financial statements of the Buyer for
the fiscal year ended December 31, 2001 and unaudited financial statements as of
September 30, 2002 (collectively, the "Buyer Financial Statements") and the
Buyer Financial Statements, including the notes to the audited Buyer Financial
Statements, comply as to form in all material respects with applicable
accounting requirements, have been prepared in accordance with generally
accepted accounting principles consistently applied (except as may be indicated
in the notes thereto) and present fairly the consolidated financial position of
the Buyer at the dates thereof and of its operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
audit
10
adjustments). There has been no change in the Buyer's accounting policies except
as described in the notes to the Buyer Financial Statements.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY
The Seller represents and warrants to the Buyer that the statements
contained in this Article IV are correct and complete as of the date of this
Agreement, except as set forth in the disclosure schedule delivered by the
Seller to the Buyer on the date hereof (the "Disclosure Schedule"). The
Disclosure Schedule is arranged in paragraphs corresponding to the lettered and
numbered paragraphs contained in this Article IV (and other provisions of this
Agreement to which it relates), and matters disclosed therein shall be deemed
disclosed in respect of (a) the representation and warranty specifically
corresponding to such lettered and numbered paragraph and (b) such other
representation and warranty where such deemed disclosure would be reasonably
apparent from the face of the disclosed exception.
4.1 Organization, Qualification, and Corporate Power. The Company
is a corporation duly organized, validly existing, and in good standing under
the laws of the jurisdiction of its incorporation. The Company is duly
authorized to conduct business and is in good standing under the laws of each
jurisdiction where such qualification is required. The Company has full
corporate power and authority and all licenses, permits, and authorizations
necessary to carry on the businesses in which it is engaged and in which it
presently proposes to engage and to own and use the properties owned and used by
it. Section 4.1 of the Disclosure Schedule lists the directors and officers of
the Company. The Seller has delivered to the Buyer correct and complete copies
of the charter and bylaws of the Company (as amended to date). The minute books
(containing the records of meetings of the shareholders, the board of directors,
and any committees of the board of directors), the stock certificate books, and
the stock record books of the Company are correct and complete in all material
respects. The Company is not in default under or in violation of any provision
of its charter or bylaws. The Company has no direct or indirect subsidiaries.
4.2 Capitalization. The entire authorized capital stock of the
Company consists of 100 Company Shares, all of which are issued and outstanding.
All of the issued and outstanding Company Shares have been duly authorized, are
validly issued, fully paid, and nonassessable, and are held of record by the
Seller. There are no outstanding or authorized options, warrants, purchase
rights, subscription rights, conversion rights, exchange rights, or other
contracts or commitments that could require the Company to issue, sell, or
otherwise cause to become outstanding any of its capital stock. There are no
voting trusts, proxies, or other agreements or understandings with respect to
the voting of the capital stock of the Company.
4.3 Noncontravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated hereby,
will (a) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Company is subject or any provision
of the charter or bylaws of the Company or (b) conflict with, result in a breach
of, constitute a default under, result in the acceleration of, create in any
party the right to accelerate,
11
terminate, modify, or cancel, or require any notice under any agreement,
contract, lease, license, instrument, or other arrangement to which the Company
is a party or by which it is bound or to which any of its assets is subject (or
result in the imposition of any Security Interest upon any of its assets). The
Company does not need to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency in
order for the Parties to consummate the transactions contemplated by this
Agreement.
4.4 Brokers' Fees. The Company has no Liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement.
4.5 Title to Assets. The Company has good and marketable title to,
or a valid leasehold interest in, the properties and assets used by it, located
on its premises, or shown on the Most Recent Balance Sheet or acquired after the
date thereof, free and clear of all Security Interests, except for properties
and assets disposed of in the Ordinary Course of Business since the date of the
Most Recent Balance Sheet.
4.6 Financial Statements. The Company has delivered to the Buyer
the following financial statements (collectively, the "Financial Statements"):
(a) the unaudited balance sheet and statement of operations as of and for the
fiscal year ended March 29, 2002 for the Company which were included in the
audited consolidated financial statements of the Seller for those periods; and
(b) the unaudited balance sheet and statement of operations (the "Most Recent
Financial Statements") as of and for the twenty-six weeks ended September 27,
2002 (the "Most Recent Fiscal Month End") for the Company which were included in
the unaudited consolidated financial statements of the Seller for such periods.
The Financial Statements have been prepared in accordance with GAAP applied on a
consistent basis throughout the periods covered thereby, are correct and
complete and are consistent with the books and records of the Company (which
books and records are complete and correct); provided, however, the Most Recent
Financial Statements are subject to normal year-end adjustments (which will not
be material individually or in the aggregate) and lack footnotes and other
presentation items.
4.7 Events Subsequent to Most Recent Fiscal Year End. Since the
Most Recent Fiscal Year End, other than with respect to the negotiations with
the Buyer and its representatives regarding the transactions contemplated by
this Agreement:
(a) the Company has not entered into any transaction
except in the Ordinary Course of Business conducted on that date and consistent
with past practices;
(b) the Company has not sold, leased, transferred or
assigned any of its assets, tangible or intangible, other than for a fair
consideration in the Ordinary Course of Business;
(c) the Company has not amended or terminated any Assumed
Contract, or any material contract, agreement or license to which the Company is
a party or by which it is bound;
(d) the Company has not experienced any damage to or
destruction or loss of (whether or not covered by insurance) any Purchased Asset
or any material assets, business or customer of the Company;
12
(e) the Company has not granted any license or sublicense
of any rights under or with respect to any Intellectual Property;
(f) there has been no change made or authorized in the
charter or bylaws of the Company;
(g) the Company has not entered into or granted, or
amended or modified the terms of, any employment agreement or arrangement with
any of the Business Employees, including any grant of or change in the
compensation of or benefits available to any such employee (other than ordinary
increases consistent with past practice);
(h) there has not been any other material occurrence,
event, incident, action, failure to act or transaction outside the Ordinary
Course of Business involving the Company; and
(i) the Company has not committed to any of the things
described in the preceding clauses (a) through (h).
4.8 Undisclosed Liabilities. The Company has no Liability (and to
the Seller's Knowledge, there is no Basis for any present or future action,
suit, proceeding, hearing, investigation, charge, complaint, claim, or demand
against the Company giving rise to any Liability), except for (a) Liabilities
set forth on the face of the Most Recent Balance Sheet and (b) Liabilities which
have arisen after the Most Recent Fiscal Month End in the Ordinary Course of
Business (none of which results from, arises out of, relates to, is in the
nature of, or was caused by any breach of contract, breach of warranty, tort,
infringement or violation of law).
4.9 Legal Compliance. The Company has complied with all applicable
laws (including rules, regulations, codes, plans, injunctions, judgments,
orders, decrees, rulings, and charges thereunder) of federal, state, local, and
foreign governments (and all agencies thereof), and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand, or notice has been
filed or commenced against any of them alleging any failure so to comply.
4.10 Tax Matters.
(a) The Company has timely filed all Tax Returns that it
was required to file. All such Tax Returns were true, correct and complete in
all material respects. All Taxes owed by the Company (whether or not shown on
any Tax Return) have been paid. The Company currently is not the beneficiary of
any extension of time within which to file any Tax Return. No claim has ever
been made by an authority in a jurisdiction where the Company does not file Tax
Returns that it is or may be subject to taxation by that jurisdiction. There are
no Security Interests on any of the assets of the Company that arose in
connection with any failure (or alleged failure) to pay any Tax. The Company
does not own an interest in any entity that is treated as a partnership for
federal tax purposes.
(b) The Company has withheld and paid all Taxes required
to have been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, shareholder, or other third party.
13
(c) Neither the Seller nor any officer or director of the
Company expects any authority to assess any additional Taxes for any period for
which Tax Returns have been filed, and the Company is not presently the subject
of any audit, investigation or examination by any taxing authority and no such
audit, investigation or examination has been proposed or threatened. There is no
dispute or claim concerning any Tax Liability of the Company either (i) claimed
or raised by any authority in writing or (ii) as to which the Seller and the
directors and officers (and employees responsible for Tax matters) of the
Company has Knowledge based upon personal contact with any agent of such
authority. Section 4.10 of the Disclosure Schedule lists all federal, state,
local, and foreign income Tax Returns filed with respect to the Company and
XxxxXxxxx.xxx, Inc. for taxable periods ended on or after March 31, 2000,
indicates those Tax Returns that have been audited, and indicates those Tax
Returns that currently are the subject of audit. The Seller has made available
to the Buyer correct and complete copies of all federal income Tax Returns filed
by (or with respect to), examination reports issued to (or with respect to), and
statements of deficiencies assessed against (or with respect to) or agreed to by
(or with respect to) the Company since its incorporation.
(d) The Company has not waived any statute of limitations
in respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(e) The Company has not filed a consent under Code
Section 341(f) concerning collapsible corporations. The Company has not made any
payments, is not obligated to make any payments, nor is it a party to any
agreement that under certain circumstances could obligate it to make any
payments that will not be deductible under Code Section 280G. The Company has
not been a United States real property holding corporation within the meaning of
Code Section 897(c)(2) during the applicable period specified in Code Section
897(c)(1)(A)(ii). The Company is not a party to any Tax allocation or sharing
agreement. The Company (i) has not been a member of an Affiliated Group filing a
consolidated federal income Tax Return (other than a group the common parent of
which was the Seller) and (ii) has no Liability for the Taxes of any Person
under Reg. Section 1.1502-6 (or any similar provision of state, local, or
foreign law), as a transferee or successor, by contract, or otherwise.
(f) The unpaid Taxes of the Company (i) did not, as of
the Most Recent Fiscal Month End, exceed the reserve for Tax Liability (rather
than any reserve for deferred Taxes established to reflect timing differences
between book and Tax income) set forth on the face of the Most Recent Balance
Sheet (rather than in any notes thereto) and (ii) do not exceed that reserve as
adjusted for the passage of time through the Closing Date in accordance with the
past custom and practice of the Company in preparing its financial statements
and filing its Tax Returns.
4.11 Real Property. The Company owns no real property. All real
property leased by the Company is leased pursuant to one or more lease
agreements listed on Section 4.11 of the Disclosure Schedule (the "Real Property
Leases"), and, to the Seller's Knowledge, there is no material breach or default
of any of the Real Property Leases, or any material term or provision thereof.
The assignment and transfer of each Real Property Lease as contemplated by
Section 2.6 above will not constitute a breach or default under any such Real
Property Lease, or the Company or the Seller will obtain the written consent of
the other party thereto in connection with such assignment prior to the Closing.
14
4.12 Intellectual Property.
(a) The Company owns or has the right to use pursuant to
license, sublicense, agreement, or permission all Intellectual Property, and the
Transferred IP and the Third Party Transferred IP collectively is all
Intellectual Property necessary for the operation of the business of the Company
in all material respects as presently conducted. Except as provided otherwise in
the Disclosure Schedule, each item of Intellectual Property owned or used by the
Company immediately prior to the Closing hereunder will be owned or available
for use by the Company on identical terms and conditions immediately subsequent
to the Closing hereunder. The Company has taken all necessary action to maintain
and protect each item of Intellectual Property that it owns or uses.
(b) To the Knowledge of any of the Seller and the
directors and officers (and employees with responsibility for Intellectual
Property matters) of the Company, the Company has not interfered with, infringed
upon, misappropriated, or otherwise come into conflict with any Intellectual
Property rights of third parties, and none of the Seller and the directors and
officers (and employees with responsibility for Intellectual Property matters)
of the Company has ever received any charge, complaint, claim, demand, or notice
alleging any such interference, infringement, misappropriation, or violation
(including any claim that the Company must license or refrain from using any
Intellectual Property rights of any third party). To the Knowledge of any of the
Seller and the directors and officers (and employees with responsibility for
Intellectual Property matters) of the Company, no third party has interfered
with, infringed upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of the Company.
(c) Section 4.12(c) of the Disclosure Schedule
identifies each patent or registration which has been issued to the Company with
respect to any of its Intellectual Property, identifies each pending patent
application or application for registration which the Company has made with
respect to any of its Intellectual Property, and identifies each license,
agreement, or other permission which the Company has granted to any third party
with respect to any of its Intellectual Property (together with any exceptions).
The Seller has delivered to the Buyer correct and complete copies of all such
licenses, agreements, and permissions (as amended to date). Section 4.12(c) of
the Disclosure Schedule also identifies each trade name or unregistered
trademark used by the Company in connection with the operation of its business
in all material respects as presently conducted, and identifies any such trade
names or trademarks to be transferred to the Buyer pursuant to this Agreement.
With respect to each item of Intellectual Property required to be identified in
Section 4.12(c) of the Disclosure Schedule as Intellectual Property to be
transferred to the Buyer pursuant to this Agreement (the "Transferred IP"):
(i) the Company possesses all right, title, and
interest in and to the Transferred IP, free and clear of any
Security Interest, license, or other restriction;
(ii) the Transferred IP is not subject to any
outstanding injunction, judgment, order, decree, ruling or
charge;
(iii) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending
or, to the Knowledge of any of the Seller
15
and the directors and officers (and employees with
responsibility for Intellectual Property matters) of the
Company, is threatened which challenges the legality,
validity, enforceability, use, or ownership of the Transferred
IP; and
(iv) the Company has never agreed to indemnify
any Person for or against any interference, infringement,
misappropriation, or other conflict with respect to the
Transferred IP.
(d) Section 4.12(d) of the Disclosure Schedule
identifies each item of Intellectual Property that any third party owns and that
the Company uses pursuant to license, sublicense, agreement, or permission. The
Seller has delivered to the Buyer correct and complete copies of all such
licenses, sublicenses, agreements, and permissions (as amended to date). With
respect to each item of Intellectual Property required to be identified in
Section 4.12(d) of the Disclosure Schedule (the "Third Party Transferred IP"):
(i) the license, sublicense, agreement, or
permission covering the Third Party Transferred IP is legal,
valid, binding, enforceable, and in full force and effect;
(ii) the license, sublicense, agreement, or
permission will continue to be legal, valid, binding,
enforceable, and in full force and effect on identical terms
following the consummation of the transactions contemplated
hereby (including the assignments and assumptions referred to
in Article II above);
(iii) no party to the license, sublicense,
agreement, or permission is in breach or default, and no event
has occurred which with notice or lapse of time would
constitute a breach or default or permit termination,
modification, or acceleration thereunder;
(iv) with respect to each sublicense, the
representations and warranties set forth in subsections (i)
through (iii) above are true and correct with respect to the
underlying license;
(v) the Third Party Transferred IP is not
subject to any outstanding injunction, judgment, order,
decree, ruling, or charge;
(vi) to the Knowledge of the Seller and the
directors and officers (and employees with responsibility for
Intellectual Property matters) of the Company, no action,
suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand is pending or threatened which challenges the
legality, validity, or enforceability, of the underlying Third
Party Transferred IP;
(vii) no party to the license, sublicense,
agreement, or permission has repudiated any provision thereof;
and
(viii) the Company has not granted any sublicense
or similar right with respect to the license, sublicense,
agreement, or permission.
16
4.13 Contracts. Section 4.13 of the Disclosure Schedule contains a
list of all outstanding contracts (a) material to the Company, (b) pursuant to
which the Company received (or was entitled to receive) or paid (or was
purportedly reported to pay) Twenty-Five Thousand Dollars ($25,000) or more in
the twelve (12) month period ended November 30, 2002, (c) involving an agreement
with the Seller or its Affiliates, (d) pursuant to which the Company employs any
Business Employees or offers or extends benefits thereto or (e) if not listed or
disclosed pursuant to Section 4.12, involves any Intellectual Property
(collectively the "Material Contracts"). Each such Material Contract and each
Assumed Contract is valid, binding and enforceable against the Company subject
to the effect of any applicable, bankruptcy, reorganization, insolvency,
moratorium, or similar laws affecting creditors' rights and remedies generally
and, to the Seller's Knowledge, against the other parties thereto, in accordance
with its terms. The Company has not received any notice that it is in default or
breach of or is otherwise delinquent in performance under any such Material
Contract or Assumed Contract, which default, breach or delinquency would
reasonably be expected to have an Adverse Consequence. To the Seller's
Knowledge, each of the other parties to the Material Contracts and the Assumed
Contracts has performed in all material respects all obligations required to be
performed by them, and is not in default in any material respect, under its
respective Material Contract or Assumed Contract. The assignment and transfer of
each contract or agreement of the Company as contemplated by Section 2.6 above
will not constitute a breach or default under any such contract or agreement, or
the Company or the Seller will obtain the written consent of the other party
thereto in connection with such assignment prior to the Closing.
4.14 [RESERVED]
4.15 Powers of Attorney. There are no outstanding powers of
attorney executed on behalf of the Company.
4.16 Insurance. Section 4.16 of the Disclosure Schedule lists each
insurance policy to which the Company has been a party, a named insured, or
otherwise the beneficiary of coverage at any time within the last two years, and
sets forth the type of policy, the name of the insurer, the amount of coverage
and the deductible and any ceiling with respect thereto. With respect to the
insurance policies and fidelity bonds covering the assets, business, equipment,
properties, operations, employees, officers and directors of the Company, there
is no claim by the Company pending under any of such policies or bonds as to
which coverage has been questioned, denied or disputed by the underwriters of
such policies or bonds. All premiums due and payable under all such policies and
bonds have been paid and the Company is otherwise in compliance with the terms
of such policies and bonds (or other policies and bonds providing substantially
similar insurance coverage). The Seller has no Knowledge of any threatened
termination of, or premium increase with respect to, any of such policies.
4.17 Litigation. The Company (a) is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge or (b) is not a party or,
to the Knowledge of the Seller and the directors and officers of the Company, is
threatened to be made a party to any action, suit, proceeding, hearing, or
investigation of, in, or before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or before any
arbitrator. The Company and its assets are not subject to any order, writ,
judgment, injunction, decree, determination or award.
17
4.18 Product Liability. The Company has no Liability (and to the
Seller's Knowledge, there is no Basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand against
any of them giving rise to any Liability) arising out of any injury to
individuals or property as a result of the ownership, possession, or use of any
product manufactured, sold, leased, or delivered by any of the Company.
4.19 Employees. The Company is not a party to or bound by any
collective bargaining agreement, nor has it experienced any strikes, grievances,
claims of unfair labor practices, or other collective bargaining disputes. The
Company has not committed any unfair labor practice. None of the Seller and the
directors and officers of the Company has any Knowledge of any organizational
effort presently being made or threatened by or on behalf of any labor union
with respect to employees of the Company.
4.20 Employee Benefits.
(a) Section 4.20 of the Disclosure Schedule lists each
current Employee Benefit Plan covering current or former employees, directors
or officers of the Company.
(i) Each such Employee Benefit Plan (and each
related trust, insurance contract or fund) is in material
compliance with the applicable requirements of ERISA, the
Code, and other applicable laws.
(ii) All required reports and descriptions
(including Form 5500 Annual Reports, summary annual reports,
PBGC-1's, and summary plan descriptions) have been timely
filed and distributed appropriately with respect to each such
Employee Benefit Plan. The requirements of COBRA have been met
with respect to each such Employee Benefit Plan which is an
Employee Welfare Benefit Plan, or to which COBRA applies.
(iii) All contributions (including all employer
contributions and employee salary reduction contributions)
which are due have been paid to each such Employee Benefit
Plan which is an Employee Pension Benefit Plan within the time
limits imposed by law and all contributions for any period
ending on or before the Closing Date which are not yet due
have been paid to each such Employee Pension Benefit Plan
covering current or former employees, directors or officers of
the Company or accrued in accordance with the past custom and
practice of the Company. All premiums or other payments for
all periods ending on or before the Closing Date have been
paid on time with respect to each such Employee Benefit Plan
covering current or former employees, directors or officers of
the Company which is an Employee Welfare Benefit Plan.
(iv) Each such Employee Benefit Plan which is an
Employee Pension Benefit Plan is intended to meet the
requirements of a "qualified plan" under Code Section 401(a),
has received, or still has remaining a period in which to
apply for without penalty, a favorable determination letter
from the Internal Revenue Service that it is a "qualified
plan," and the Seller is not aware of any facts or
18
circumstances that could result in the revocation of such
determination letter, or the IRS's refusal to issue such a
letter.
(v) No Employee Pension Benefit Plan is subject
to Title IV of ERISA or Section 412 of the Code.
(vi) The Seller has made available to the Buyer
correct and complete copies of the plan documents and summary
plan descriptions, the most recent determination letter
received from the Internal Revenue Service, the most recent
Form 5500 Annual Report, and material trust agreements,
insurance contracts, and other funding agreements which relate
to each such Employee Benefit Plan.
(b) With respect to each Employee Benefit Plan that the
Company and any ERISA Affiliate maintains or ever has maintained or to which any
of them contributes, ever has contributed, or ever has been required to
contribute:
(i) No such Employee Benefit Plan which is an
Employee Pension Benefit Plan (other than any Multiemployer
Plan) has been completely or partially terminated or been the
subject of a Reportable Event as to which notices would be
required to be filed with the PBGC. No proceeding by the PBGC
to terminate any such Employee Pension Benefit Plan (other
than any Multiemployer Plan) has been instituted or, to the
Knowledge of the Seller and the Company, threatened.
(ii) There have been no Prohibited Transactions
with respect to any such Employee Benefit Plan. To the
Knowledge of the Seller and the Company, no Fiduciary has any
Liability for breach of fiduciary duty or any other failure to
act or comply in connection with the administration or
investment of the assets of any such Employee Benefit Plan. No
action, suit, proceeding, hearing, or investigation with
respect to the administration or the investment of the assets
of any such Employee Benefit Plan (other than routine claims
for benefits) is pending or, to the Knowledge of the Seller
and the Company, threatened. None of the Seller and the
Company has any Knowledge of any Basis for any such action,
suit, proceeding, hearing, or investigation.
(iii) Neither the Company nor any ERISA Affiliate
has incurred, and none of the Seller and the Company has any
reason to expect that the Company or any ERISA Affiliate will
incur, any Liability to the PBGC (other than PBGC premium
payments) or otherwise under Title IV of ERISA (including any
withdrawal liability as defined in ERISA Section 4201) or
under the Code with respect to any Employee Pension Benefit
Plan.
(iv) No Employee Benefit Plan is subject to Title
IV of ERISA or Section 412 of the Code.
(v) Neither the Company nor any ERISA Affiliate
contributes to, ever has contributed to, or ever has been
required to contribute to any Multiemployer Plan or has any
Liability (including withdrawal liability as defined in ERISA
Section 4201) under any Multiemployer Plan.
19
(vi) The Company has not promised to be provide,
and does not maintain or contribute and has never maintained
or contributed or ever has been required to contribute to any
Employee Welfare Benefit Plan providing retiree medical,
health, or life insurance or other welfare-type benefits for
current or future retired employees, officers or directors of
the Company, their spouses, or their dependents (other than in
accordance with COBRA or similar state law).
4.21 Guaranties. The Company is not a guarantor or otherwise liable
for any Liability or obligation (including indebtedness) of any other Person.
4.22 Environmental, Health, and Safety Matters. To the Seller's
Knowledge:
(a) the Company, and its predecessors and Affiliates has
complied and is in compliance with all Environmental, Health, and Safety
Requirements in all material respects;
(b) without limiting the generality of the foregoing, the
Company and its Affiliates has obtained and complied with, and is in compliance
with, in all material respects all permits, licenses and other authorizations
that are required pursuant to Environmental, Health, and Safety Requirements for
the occupation of its facilities and the operation of its business; and
(c) none of the Company, its predecessors or its
Affiliates has received any written or oral notice, report or other information
regarding any actual or alleged violation of Environmental, Health, and Safety
Requirements, or any Liabilities or potential Liabilities, including any
investigatory, remedial or corrective obligations, relating to any of them or
its facilities arising under Environmental, Health, and Safety Requirements.
4.23 Tangible Assets. The Company owns or leases all buildings,
machinery, equipment, and other tangible assets necessary for the conduct of its
business as presently conducted.
4.24 Certain Business Relationships with the Company. Except as
otherwise contemplated herein, none of the Seller or its Affiliates has been
involved in any business arrangement or relationship with the Company within the
past 12 months, and none of the Seller or its Affiliates owns any asset,
tangible or intangible, which is used in the business of any of the Company.
4.25 Disclosure. The representations and warranties contained in
this Article IV do not contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements and
information contained in this Article IV not misleading.
ARTICLE V
[RESERVED]
20
ARTICLE VI
POST-CLOSING COVENANTS
The Parties agree as follows with respect to the period following the
Closing:
6.1 General. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this Agreement,
each of the Parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other Party
reasonably may request, all at the sole cost and expense of the requesting Party
(unless the requesting Party is entitled to indemnification therefor under
Article VIII below). The Seller acknowledges and agrees that from and after the
Closing the Buyer will be entitled to possession of all documents, books,
records (including Tax records), agreements, and financial data of any sort
relating to the Company.
6.2 Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(a) any transaction contemplated under this Agreement or (b) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving the Company, each of the other Parties will
cooperate with it and its counsel in the contest or defense, make available
their personnel, and provide such testimony and access to their books and
records as shall be necessary in connection with the contest or defense, all at
the sole cost and expense of the contesting or defending Party (unless the
contesting or defending Party is entitled to indemnification therefor under
Article VIII below).
6.3 Transition. Except as otherwise provided herein, the Seller
will not take any action that is designed or intended to have the effect of
discouraging any lessor, licensor, customer, supplier, or other business
associate of the Company from maintaining the same business relationships with
the Company after the Closing as it maintained with the Company prior to the
Closing. The Seller will refer all customer inquiries relating to the businesses
of the Company to the Buyer from and after the Closing.
6.4 Confidentiality. The Parties agree that the information that
the Seller and the Buyer have obtained in any investigation pursuant to the
negotiation and execution of this Agreement or the effectuation of the
transactions contemplated by this Agreement, shall be governed by the terms of
the Nondisclosure Agreement between the Buyer and the Seller dated May 28, 2002.
6.5 Press Releases and Public Announcements. No Party shall issue
any press release or make any public announcement relating to the subject matter
of this Agreement without the prior written approval of the Buyer and the
Seller; provided, however, that any Party may make any public disclosure it
believes in good faith is required by applicable law or any listing or trading
agreement concerning its publicly-traded securities (in which case the
disclosing Party will use its best efforts to advise the other Party prior to
making the disclosure).
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6.6 Covenant Not to Compete. For a period of three (3) years from
and after the Closing Date, (a) the Seller will not engage directly or
indirectly in the business of providing testing services for human beings for
the presence of the amount of blood cholesterol, liver damage or blood glucose
that the Company conducts as of the Closing Date or for diabetes, blood
pressure, asthma, allergy or bone mineral density screening (BMO) (collectively
the "Restricted Business") and (b) the Buyer will not engage directly or
indirectly in the business of developing, manufacturing and marketing diagnostic
testing products that the Seller conducts as of the Closing Date; provided,
however, that, nothing in this Section 6.6 shall (i) prevent the Seller from
manufacturing, marketing and selling diagnostic products and cassettes for the
testing of human beings or (ii) be binding upon any Person that acquires the
Seller by merger or consolidation at any time immediately after the Closing,
provided that such Person engages in the Restricted Business prior to the time
of such acquisition. If the final judgment of a court of competent jurisdiction
declares that any term or provision of this Section 6.6 is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
6.7 Buyer Note. The Buyer Note will be imprinted with a legend
substantially in the following form:
The payment of principal and interest on this Note is
subject to certain offset provisions set forth in a Stock
Purchase Agreement dated as of December __, 2002 (the
"Purchase Agreement") between the Maker of this Note, the
original Payee of this Note and the original Payee's
Subsidiary. This Note was originally issued on
December __, 2002, and has not been registered under the
Securities Act of 1933, as amended. This Note is subject
to certain restrictions set forth in the Purchase Agreement
and is not transferable, except as provided herein. The
Maker of this Note will furnish a copy of these provisions
to the holder hereof without charge upon written request.
6.8 Agreements Relating to Employees and Employee Plans.
(a) Termination of Employees/Employee Offers. All
employees of the Company are set forth in Schedule 6.8, and the Company shall
terminate the employment of all such employees on or prior to the Closing Date.
The Buyer or the Company shall offer employment (the "Employment Offer") to any
employees of the Company on or after the Closing Date in the sole discretion of
the Buyer or the Company. Such Employment Offers shall provide similar benefits
in the aggregate (including, without limitation, health, dental, pension,
incentive and equity-based benefits) as are offered to similarly situated
employees of the Buyer or the Company. Former employees of the Company who
accept such Employment Offers shall become employees of the Buyer or the Company
effective on the effective date of such Employment Offers (the "Transferred
Employees"). All employees of the Company other than
22
the Transferred Employees shall be referred to in this Agreement as the
"Terminated Employees."
(b) Benefits. The Seller shall cause such action to be
taken so that effective as of the Closing Date, the Transferred Employees shall
cease all participation in the Seller Employee Benefit Plans, and the Company
shall cease to be a participating employer with respect to such Seller Employee
Benefit Plans. The Seller will cause all required notifications concerning the
termination of participation in such plans to be given to the Transferred
Employees and, if applicable, the Terminated Employees. The Seller is, and shall
remain, solely responsible for any and all liabilities and obligations, whether
contractual or statutory, with respect to the Terminated Employees, including,
without limitation, any liabilities or obligations with respect to severance pay
or Seller Employee Benefit Plans. The Buyer agrees that the service of each
Employee with the Company who becomes a Transferred Employee shall be counted
for purposes of determining such employee's eligibility to participate in and
vesting under the Buyer's Employee Pension Benefit Plan if allowable under the
terms of such plans. The Buyer shall have no liability under the Seller Employee
Benefit Plans for any claims incurred before or after the Closing (whether or
not paid or presented before Closing), or for any liabilities arising from any
failure of such plans before or after the Closing to comply with the
requirements of ERISA, the Code or regulations thereunder.
(c) COBRA. The Seller shall provide the Terminated
Employees and the Transferred Employees with any notices and continuation of
health benefits coverage which are required to be provided by the Company or the
Seller under Part 6 of Subtitle B of Title I of ERISA or, if applicable,
Section 4980B of the Code as a result of their termination of employment by the
Company on or before the Closing Date.
(d) Liability for Certain Matters. The Seller shall
indemnify the Buyer and the Company and hold the Buyer and the Company harmless
against any Liability, cost and expense resulting from the failure of the Seller
or the Company to comply with the Worker Adjustment and Retraining Notification
Act (the "WARN Act") or any similar statute of any state, and any termination or
severance pay to Terminated Employees in each of the jurisdictions in which such
Terminated Employees are located.
6.9 Buyer as Seller's Preferred Provider. From and after the
Closing Date and until the third anniversary thereof and provided that the Buyer
has not failed to cure a default within the time period provided in Section 13.2
of the Supply Agreement, the Seller shall cause the Buyer to be the "preferred
provider" to the Seller for testing services. The Seller shall use its
commercially reasonable efforts to cause its employees, agents and sales
representatives to refer to the Buyer as the Seller's preferred provider for
testing services in communications, written or oral, with the Seller's
customers. Such employees, agents and sales representatives shall notify the
Buyer regarding opportunities to provide testing services.
6.10 Trademarks. If within six (6) months after the Closing the
Buyer desires to enter into an agreement with Xxxxxxx & Xxxxxxx that, among
other things, secures the Buyer's right to hold and use the trademarks set forth
in Section 4.12(c) of the Disclosure Schedule (the "Trademarks"), the Seller
shall take such further action (including the execution and delivery of such
further instruments and documents) as the Buyer may reasonably request, all at
the sole cost
23
and expense of the Buyer (unless the Buyer is entitled to indemnification
therefor under Article VIII below). The Buyer, during the six (6) month period
described in the preceding sentence or until the execution of the agreement with
Xxxxxxx & Xxxxxxx described above, if earlier, shall reimburse Seller for the
reasonable costs and expenses incurred by Seller in validly maintaining the
Trademarks unless Buyer or the Company requests Seller to permit such Trademarks
to lapse.
6.11 Release. For and in consideration of the Closing, the Seller
hereby releases and forever discharges, for itself, its successors and assigns
(collectively the "Releasing Parties") the Company and its officers, directors,
shareholders and assignees (collectively the "Released Parties") of and from any
and all manner of actions, proceedings, causes of action, suits, debts, sums of
money, accounts, reckonings, bonds, bills, specialties, covenants,
controversies, contracts, leases, agreements, promises, damages, judgments,
executions, claims and demands, of any nature whatsoever, and of every kind and
description, xxxxxx and inchoate, at law or in equity (collectively the
"Claims"), which the Releasing Parties or any of them now have or ever had, or
hereafter can, shall or may have, for, upon or by reason of any matter, cause or
thing whatsoever, against the Company, arising or existing during the period of
time from the Company's inception to the date of this Agreement, provided,
however, that nothing herein shall be construed as a release of any of the
Releasing Parties' rights under the Agreement or the Released Parties'
obligations under the Agreement. The Seller, acting in its capacity as a
Releasing Party, agrees that if the Releasing Parties, or one of them,
commences, joins in, or in any manner seeks relief through any suit arising out
of, based upon, or relating to any of the Claims released hereunder, then the
Seller shall pay to the Released Party, in addition to any other damages, direct
or indirect, all attorney' fees incurred in defending or otherwise responding to
such suit or Claims.
ARTICLE VII
DELIVERIES AT CLOSING
7.1 Deliveries of the Seller. At the Closing, the Seller and the
Company shall deliver to the Buyer the following:
(a) Consents from each party listed in Schedule 7.1
attached hereto;
(b) Evidence reasonably satisfactory to the Buyer that
the Excluded Assets and Liabilities have been properly assigned to the Seller
prior to the Closing Date;
(c) General releases in form and substance as set forth
in Exhibit 7.1(c) attached hereto (the "Releases"), duly executed by Seller,
Xxxxxx and Xxxxx Xxxxxx and Xxxxxx and Xxxxx Xxxxxxx, and the Releases shall be
in full force and effect;
(d) A purchase and supply agreement in form and substance
as set forth in Exhibit 7.1(d) attached hereto (the "Supply Agreement"), duly
executed by Seller;
(e) The Buyer shall have received from counsel to the
Seller an opinion in form and substance as set forth in Exhibit 7.1(e) attached
hereto, addressed to the Buyer, and dated as of the Closing Date;
24
(f) The Buyer shall have received the resignations,
effective as of the Closing, of each director and officer of the Company; and
(g) Such other consents, agreements, documents or
instruments that the Buyer may reasonably request.
7.2 Deliveries of the Buyer. At the Closing, in addition to those
deliveries set forth in Section 2.5 above, the Buyer shall deliver to the Seller
the following:
(a) The Supply Agreement, duly executed by the Buyer;
(b) The Buyer Note, duly executed by the Buyer; and
(c) Such other consents, agreements, documents or
instruments that the Seller may reasonably request.
ARTICLE VIII
REMEDIES FOR BREACHES OF THIS AGREEMENT
8.1 Survival of Representations and Warranties. All of the
representations and warranties of the Seller contained in Article III and
Article IV above (other than Section 3.1(f), Section 4.1, Section 4.2, Section
4.10 and Section 4.12) shall survive the Closing hereunder (even if the Buyer
knew or had reason to know of any misrepresentation or breach of warranty at the
time of Closing) and continue in full force and effect for a period of two years
thereafter. The representations and warranties of the Seller contained in
Section 3.1(f) shall survive the Closing hereunder and continue in full force
and effect until the earlier to occur of (i) such time as the Buyer and/or the
Company and Xxxxxxx & Xxxxxxx shall have entered into an agreement regarding the
Trademarks in accordance with Section 6.10 of this Agreement and (ii) one (1)
year after the Closing. The representations and warranties of the Seller
contained in Section 4.12 shall survive the Closing hereunder and continue in
full force and effect for a period of three years thereafter. All other
representations, warranties, covenants and agreements of each of the Parties
under this Agreement (other than those of the Seller in Section 3.1(f) and
Section 4.12 but including those of the Seller in Section 4.1, Section 4.2, and
Section 4.10) shall survive the Closing for the period of the applicable statute
of limitations (which with respect to Section 4.10 means the statute of
limitations for the underlying claims that constitute a breach of, or are the
subject of, such representations or warranties) plus any extensions or waivers
granted or imposed with respect thereto.
25
8.2 Indemnification Provisions for Benefit of the Buyer.
(a) In the event that the Seller breaches any of its
representations and warranties set forth in Articles III or IV, and, if there is
an applicable survival period pursuant to Section 8.1 above, provided that the
Buyer makes a written claim for indemnification against the Seller pursuant to
Section 8.4 below within such survival period, then the Seller agrees to
indemnify the Buyer and the Company from and against any Adverse Consequences
(subject to Section 8.6 below) the Buyer or the Company may suffer through and
after the date of the claim for indemnification resulting from, arising out of,
relating to, in the nature of, or caused by the breach.
(b) Provided that the Buyer makes a written claim for
indemnification against the Seller pursuant to Section 8.4 below within the
applicable survival period, the Seller agrees to indemnify the Buyer and the
Company from and against any Adverse Consequences (subject to Section 8.6 below)
the Buyer or the Company may suffer resulting from, arising out of, relating to,
in the nature of, or caused by any Liability of the Company (i) for any Taxes of
the Company with respect to any Tax year or portion thereof ending on or before
the Closing Date (or for any Tax year beginning before and ending after the
Closing Date to the extent allocable (determined in a manner consistent with
Section 9.2) to the portion of such period beginning before and ending on the
Closing Date), other than Taxes attributable to actions taken by the Buyer on
the Closing Date and (ii) for the unpaid Taxes of any Person under Reg. Section
1.1502-6 (or any similar provision of state, local, or foreign law), as a
transferee or successor, by contract, or otherwise.
(c) Provided that the Buyer makes a written claim for
indemnification against the Seller pursuant to Section 8.4 below within the
applicable survival period, the Seller agrees to indemnify the Buyer and the
Company from and against any Adverse Consequences (subject to Section 8.6 below)
the Buyer or the Company may suffer resulting from, arising out of, relating to,
in the nature of, or caused by any Liability of the Company arising out of or in
connection with (i) the ownership or operation of the Company on or prior to the
Closing Date, (ii) the Excluded Assets and Liabilities, or (iii) the breach by
Seller of any covenant or agreement of the Seller under this Agreement.
8.3 Indemnification Provisions for Benefit of the Seller. In the
event the Buyer breaches any of its representations, warranties, and covenants
contained herein, and, if there is an applicable survival period pursuant to
Section 8.1 above, provided that the Seller makes a written claim for
indemnification against the Buyer pursuant to Section 8.4 below within such
survival period, then the Buyer agrees to indemnify the Seller from and against
any Adverse Consequences (subject to 8.6) the Seller may suffer through and
after the date of the claim for indemnification resulting from, arising out of,
relating to, in the nature of, or caused by the breach.
8.4 Indemnification Procedures. If the Buyer, Company or Seller
seeks indemnification under this Article VIII, such party (the "Claimant") shall
promptly give notice thereof by delivering an Officer's Certificate to the party
the Claimant claims it is entitled to indemnification from under this Article
VIII (the "Payor"). The Payor may object to such claim by delivering written
notice to the Claimant specifying the basis for the Payor's objection (an
"Objection Notice"), within thirty (30) calendar days following receipt by the
Payor of notice from the Claimant regarding such claim. For the purposes of this
Agreement, "Officer's Certificate" shall mean a certificate signed by any
officer of the Payor: (a) stating that the
26
Claimant has paid, sustained, incurred or properly accrued, or reasonably
anticipates that it shall have to pay, sustain, incur or accrue Adverse
Consequences, and (b) specifying in reasonable detail the individual items of
Adverse Consequences included in the amount so stated, the date each such item
was paid, sustained, incurred or properly accrued, or the basis for such
anticipated liability, and the nature of the misrepresentation, breach of
warranty or Liability to which such item is related.
8.5 Matters Involving Third Parties.
(a) If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a "Third Party Claim") which
may give rise to a claim for indemnification against any other Party (the
"Indemnifying Party") under this Article VIII, then the Indemnified Party shall
notify each Indemnifying Party thereof in writing in accordance with Section
8.4; provided, however, that no delay on the part of the Indemnified Party in
notifying any Indemnifying Party shall relieve the Indemnifying Party from any
obligation hereunder unless (and then solely to the extent) the Indemnifying
Party thereby is prejudiced.
(b) Any Indemnifying Party will have the right to defend
the Indemnified Party against the Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party so long as (i) the Indemnifying
Party notifies the Indemnified Party in writing within 15 days after the
Indemnified Party has given notice of the Third Party Claim, that the
Indemnifying Party will indemnify the Indemnified Party from and against the
entirety of any Adverse Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to, in the nature of, or caused by the Third
Party Claim, (ii) the Indemnifying Party provides the Indemnified Party with
evidence reasonably acceptable to the Indemnified Party that the Indemnifying
Party will have the financial resources to defend against the Third Party Claim
and fulfill its indemnification obligations hereunder, (iii) the Third Party
Claim involves only money damages and does not seek an injunction or other
equitable relief, (iv) settlement of, or an adverse judgment with respect to,
the Third Party Claim is not, in the good faith judgment of the Indemnified
Party, likely to establish a precedential custom or practice materially adverse
to the continuing business interests of the Indemnified Party, and (v) the
Indemnifying Party conducts the defense of the Third Party Claim actively and
diligently.
(c) So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with Section 8.5(b) above, (i)
the Indemnified Party may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party Claim, (ii) the
Indemnified Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnifying Party (not to be withheld unreasonably), and (iii)
the Indemnifying Party will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim without the prior
written consent of the Indemnified Party.
(d) In the event any of the conditions in Section 8.5(b)
above is or becomes unsatisfied, however, (i) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into any settlement
with respect to, the Third Party Claim in any manner it may deem appropriate
(and the Indemnified Party need not consult with, or obtain any consent from,
any Indemnifying Party in connection therewith), (ii) the Indemnifying Party
will
27
reimburse the Indemnified Party promptly and periodically for the costs of
defending against the Third Party Claim (including reasonable attorneys' fees
and expenses), and (iii) the Indemnifying Party will remain responsible for any
Adverse Consequences the Indemnified Party may suffer resulting from, arising
out of, relating to, in the nature of, or caused by the Third Party Claim to the
fullest extent provided in this Article VIII.
8.6 Limitation of Liability. Notwithstanding anything to the
contrary in this Article VIII, the Seller shall have no liability under Section
8.2 for any Adverse Consequences incurred by Buyer or the Company unless and
until the aggregate amount of such Adverse Consequences exceeds $10,000 (the
"Minimum Claim Amount"), provided that upon incurring Adverse Consequences in an
amount that exceeds the Minimum Claim Amount, Buyer or the Company shall be
entitled to indemnification under this Article VIII for the full amount of such
Adverse Consequences, subject to the following sentence. Notwithstanding
anything to the contrary in this Article VIII, the aggregate liability of the
Seller under Section 8.2 shall not exceed $450,000 (the "Maximum Liability"),
except for (i) the indemnification obligations of Seller under this Article VIII
with respect to the representations and warranties of Seller in Section 3.1(f),
for which Seller shall indemnify the Buyer and the Company from and against any
and all reasonable attorneys' fees and/or litigation preparation expenses and
costs, including without limitation investigation, research and preparation
expenses and costs, the Buyer and the Company may suffer in connection with the
Right of First Refusal Agreement, with such indemnification obligation of Seller
not to exceed $100,000 and not to be counted or applied against the Maximum
Liability and for which the right of offset set forth in Section 8.7 shall not
be the sole and exclusive remedy of the Buyer and the Company and (ii) the
indemnification obligations of Seller under this Article VIII with respect to
the covenant of Seller in Section 6.6, for which Seller shall indemnify the
Buyer and the Company from and against any Adverse Consequences the Buyer and
the Company may suffer in an amount not to exceed $2,000,000, which amount shall
include, and not be in addition to, the Maximum Liability, and for which the
right of offset set forth in Section 8.7 shall not be the sole and exclusive
remedy of the Buyer and the Company. Third party expenses such as attorneys'
fees and costs shall be included in the amount that comprises Adverse
Consequences and shall count toward the Minimum Claim Amount and the Maximum
Liability, and Adverse Consequences incurred by the Buyer and the Company shall
be aggregated together for purposes of determining whether the Minimum Claim
Amount or the Maximum Liability has been attained.
8.7 Indemnity Offset Against Buyer Note and Earnout Payment. Upon
compliance with Section 8.4, Section 8.5 and Section 8.8, as applicable, the
Buyer shall have the right to offset, on a dollar for dollar basis, all or any
part of any Adverse Consequences it or the Company may suffer against any
amounts payable and not yet paid or any amounts paid to the Seller under the
Buyer Note or pursuant to Section 2.4 by notifying the Seller in writing that
the Buyer is reducing the principal amount outstanding under the Buyer Note or
the amount due under Section 2.4 or is requesting Seller to repay to Buyer
amounts paid by Buyer to Seller under the Buyer Note or Section 2.4; provided,
however, that such right of offset shall terminate upon the lapse of the
applicable survival period set forth in Section 8.1. The right of offset against
the Buyer Note shall affect the timing and amount of payments required under the
Buyer Note in the same manner as if the Buyer had made a permitted prepayment
(without premium or penalty) thereunder. Any amounts that the Buyer has
previously paid to the Seller under the Buyer Note or Section 2.4 hereunder are
subject to the right of
28
offset, which shall be effected by Seller repaying such amounts to Buyer within
thirty (30) business days of such amount becoming binding upon Seller hereunder.
The right of offset described in this Section 8.7 shall be the sole and
exclusive remedy of the Buyer for any Adverse Consequences arising under this
Agreement, except as provided Section 8.6.
8.8 Resolution of Conflicts: Arbitration.
(a) If the Seller shall object in writing to any claim or
claims made in any Officer's Certificate to recover the losses sustained as a
result of any Adverse Consequences within thirty (30) days after delivery of
such Officer's Certificate, the Seller and the Buyer shall attempt in good faith
to agree upon the rights of the respective parties with respect to each of such
claims. If the Seller and the Buyer so agree, a memorandum setting forth such
agreement shall be prepared and signed by both parties, and the Buyer Note shall
promptly be adjusted by the amount of the claim agreed upon as described in
Section 8.6.
(b) If no such resolution can be reached within sixty
(60) days after delivery of the Officer's Certificate, the dispute shall be
resolved by final and binding arbitration before a three arbitrator panel
conducted under the auspices of the American Arbitration Association. In order
to invoke arbitration of the dispute, a party to the dispute may demand
arbitration of the matter by delivering a letter to the other party stating such
demand ("Demand Letter"), unless the amount of the damage or loss is at issue in
pending litigation with a third party, in which event arbitration shall not be
commenced until such amount is ascertained (provided that the rights of any
person entitled to indemnification under this Article VIII shall not be
prejudiced by any delay in determining the amount of such claim) or all parties
to the dispute agree to arbitration. Within ten (10) days after Demand Letter is
delivered, the parties on each of the two sides to the dispute shall each select
one arbitrator, and thereafter the two arbitrators so selected shall select a
third arbitrator. The decision of the majority of the arbitrators as to the
validity and amount of any claim pursuant to this Agreement shall be binding and
conclusive upon the parties to this Agreement.
(c) Judgment upon any award rendered by the arbitrators
may be entered in any court having jurisdiction. Any such arbitration shall be
held in Wayne, Pennsylvania under the commercial rules then in effect of the
American Arbitration Association. The costs of arbitration shall be borne by the
party incurring such costs unless otherwise specified in certain other
provisions of this Agreement.
ARTICLE IX
TAX MATTERS
The following provisions shall govern the allocation of responsibility
as between the Buyer and the Seller for certain Tax matters following the
Closing Date:
9.1 Tax Periods Ending on or Before the Closing Date. The Buyer
shall prepare or cause to be prepared with any and all assistance required from
the Seller and file or cause to be filed all Tax Returns for the Company for Tax
periods ending on or before the Closing Date which are required to be filed
after the Closing Date other than income Tax Returns with respect
29
to periods for which a consolidated, unitary or combined income Tax Return of
the Seller will include the operations of the Company and other than separate
company income Tax Returns of the Company for periods on or before the Closing
Date. Section 9.1 of the Disclosure Schedule lists all Tax Returns required to
be filed by the Company during its fiscal year, along with the required due date
therefor. The Buyer shall permit the Seller to review and comment on each such
Tax Return described in the preceding sentence prior to filing. The Seller shall
advance to the Buyer the Buyer's reasonable estimate of the Taxes of the Company
with respect to the pre-Closing Tax period (based on such Tax Returns) within
fifteen (15) days after the Buyer's delivery of written notice thereof. To the
extent that the actual amount of such Taxes attributable to the Seller hereunder
is less than the amount advanced, the Buyer shall refund the difference to the
Seller. To the extent that the actual amount of such Taxes attributable to the
Seller hereunder is more than the amount advanced, the Seller shall reimburse
the Buyer for such difference within fifteen (15) days after payment thereof by
the Buyer.
9.2 Tax Periods Beginning Before and Ending After the Closing
Date. The Buyer shall prepare or cause to be prepared and file or cause to be
filed any Tax Returns of the Company for Tax periods which begin before the
Closing Date and end after the Closing Date. The Seller shall pay to the Buyer
within fifteen (15) days after the date on which Taxes are paid with respect to
such periods an amount equal to the portion of such Taxes which relates to the
portion of such Tax period ending on the Closing Date. For purposes of this
Section, in the case of any Taxes that are imposed on a periodic basis and are
payable for a Tax period that includes (but does not end on) the Closing Date,
such Tax shall be apportioned to each day in the relevant Tax period on a pro
rata basis, and in the case of any Tax based upon or related to income or
receipts, the portion of such Tax which relates to the portion of such Taxable
period ending on the Closing Date shall be deemed equal to the amount which
would be payable if the relevant Tax period ended on the Closing Date. The
portion of any Tax which relates to the portion of such Tax period ending on the
Closing Date shall (a) be payable by the Seller, and (b) shall not include any
Taxes attributable to actions taken by the Buyer on the Closing Date. Any
credits relating to a Tax period that begins before and ends after the Closing
Date shall be taken into account as though the relevant Tax period ended on the
Closing Date. All determinations necessary to give effect to the foregoing
allocations shall be made in a manner consistent with prior practice of the
Company.
9.3 Cooperation on Tax Matters.
(a) The Buyer, the Company and the Seller 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. Such cooperation
shall include the retention and (upon the other party's 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 Company and the Seller agree (i) to retain all
books and records with respect to Tax matters pertinent to the Company relating
to any taxable period beginning before the Closing Date until the expiration of
the statute of limitations (and, to the extent notified by the Buyer or the
Seller, any extensions thereof) of the respective taxable periods, and to abide
by all record retention agreements entered into with any taxing authority, and
(ii) to give the other party reasonable written notice prior to
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transferring, destroying or discarding any such books and records and, if the
other party so requests, the Company or the Seller, as the case may be, shall
allow the other party to take possession of such books and records.
(b) The Buyer and the Seller 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).
(c) The Buyer and the Seller further agree, upon request,
to provide the other party with all information that either party may be
required to report pursuant to Section 6043 of the Code and all Treasury
Department Regulations promulgated thereunder.
9.4 Tax Sharing Agreements. All tax sharing agreements or similar
agreements with respect to or involving the Company shall be terminated as of
the Closing Date and, after the Closing Date, the Company shall not be bound
thereby or have any Liability thereunder.
9.5 Certain Taxes. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement, shall be paid by the
Seller when due, and the Seller will, at its own expense, file all necessary Tax
Returns and other documentation with respect to all such transfer, documentary,
sales, use, stamp, registration and other Taxes and fees, and, if required by
applicable law, the Buyer will, and will cause its affiliates to, join in the
execution of any such Tax Returns and other documentation.
9.6 Section 338(h)(10) Election. The Buyer shall, at the request
of the Seller, join with the Seller in making a timely election under Section
338(h)(10) of the Code and any corresponding elections under state and local tax
laws (collectively, the "Election") with respect to the purchase of all of the
capital stock of the Company. The Buyer and the Seller shall, as promptly as
practicable following the Closing Date, cooperate with each other to take all
actions necessary and appropriate (including agreeing upon an allocation of the
purchase price (including any assumed liabilities) among the assets of the
Company in accordance with the provisions of Code Section 338 and the
regulations promulgated thereunder and filing such forms, returns, elections,
schedules and other documents as may be required) to effect and preserve a
timely Election in accordance with Section 338 of the Code or any successor
provisions (and all corresponding state and local tax laws). The Buyer and the
Seller shall report the purchase of the Company Shares pursuant to this
Agreement consistent with the Election (including the allocation of the purchase
price agreed upon by the parties in connection therewith).
ARTICLE X
MISCELLANEOUS
10.1 No Third-Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
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10.2 Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements, or representations by or among
the Parties, written or oral, to the extent they related in any way to the
subject matter hereof.
10.3 Succession and Assignment. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of the other Party; provided, however, that the Buyer may (a) assign
any or all of their rights and interests hereunder to one or more of their
wholly owned subsidiaries and (b) designate one or more of their wholly owned
subsidiaries to perform their obligations hereunder (in any or all of which
cases the Buyer nonetheless shall remain responsible for the performance of all
of their obligations hereunder).
10.4 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
10.5 Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
10.6 Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to the Seller:
Cholestech Corporation
0000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Chief Financial Officer
Facsimile: (000) 000-0000
With a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
Professional Corporation
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxx, Esq.
Facsimile: (000) 000-0000
32
If to the Buyer:
XxxxxxXxxxxx.xxx, Inc.
000 Xxxxxxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxx, Xxxxxxxxxxxx 00000
Attention: Xxx Xxxxxxxxx, Chief Financial Officer
Facsimile: (000) 000-0000
With a copy to:
Xxxx, Xxxxxx & Xxxxxxxxx
0 Xxxxx XxXxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxxx X. Xxxxxxxxx, Esq.
Facsimile: (000) 000-0000
Any Party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address set forth above
using any other means (including personal delivery, expedited courier, messenger
service, telecopy, telex, ordinary mail, or electronic mail), but no such
notice, request, demand, claim, or other communication shall be deemed to have
been duly given unless and until it actually is received by the intended
recipient. Any Party may change the address to which notices, requests, demands,
claims, and other communications hereunder are to be delivered by giving the
other Party notice in the manner herein set forth.
10.7 Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the Commonwealth of
Pennsylvania without giving effect to any choice or conflict of law provision or
rule (whether of the Commonwealth of Pennsylvania or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than the
Commonwealth of Pennsylvania.
10.8 Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer and the Seller. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
10.9 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
10.10 Expenses. Each of the Parties will bear its own costs and
expenses (including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby. The Seller agrees that the
Company has not borne or will not bear the Seller's costs and expenses
(including any of its legal fees and expenses) in connection with this Agreement
or any of the transactions contemplated hereby.
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10.11 Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The Parties intend
that each representation, warranty, and covenant contained herein shall have
independent significance. If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant.
10.12 Incorporation of Exhibits, Annexes, and Schedules. The
Exhibits, Annexes, and Schedules identified in this Agreement are incorporated
herein by reference and made a part hereof.
10.13 Specific Performance. Each of the Parties acknowledges and
agrees that the other Party would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the Parties agrees that
the other Party shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement including without limitation
Section 6.2 and to enforce specifically this Agreement and the terms and
provisions hereof in any action instituted in any court of the United States or
any state thereof having jurisdiction over the Parties and the matter (subject
to the provisions set forth in Section 10.14 below), in addition to any other
remedy to which they may be entitled, at law or in equity.
10.14 Submission to Jurisdiction. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in Philadelphia,
Pennsylvania, in any action or proceeding arising out of or relating to this
Agreement and agrees that all claims in respect of the action or proceeding may
be heard and determined in any such court. Each Party also agrees not to bring
any action or proceeding arising out of or relating to this Agreement in any
other court. Each of the Parties waives any defense of inconvenient forum to the
maintenance of any action or proceeding so brought and waives any bond, surety,
or other security that might be required of any other Party with respect
thereto. Each Party agrees that a final judgment in any action or proceeding so
brought shall be conclusive and may be enforced by suit on the judgment or in
any other manner provided by law or at equity.
*****
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
the date first above written.
BUYER:
XXXXXXXXXXXX.XXX, INC.
By: /s/ Xxxx Xxxxxxx XxXxxxxx
-------------------------------------
Name: Xxxx Xxxxxxx XxXxxxxx
Title: Chief Executive Officer
SELLER:
CHOLESTECH CORPORATION
By: /s/ Xxxxxx X. Xxxxxxxx XX
-------------------------------------
Xxxxxx X. Xxxxxxxx XX
President and Chief Executive Officer
COMPANY:
WELLCHECK INC.
By: /s/ Xxxxxx X. Xxxxxxxx XX
-------------------------------------
Xxxxxx X. Xxxxxxxx XX
President
35
EXHIBITS OMITTED FROM THE STOCK PURCHASE AGREEMENT BY AND
AMONG XXXXXXXXXXXX.XXX, INC., CHOLESTECH CORPORATION AND WELLCHECK INC.
Exhibit 2.2 - Form of Buyer Note
Exhibit 6.8 - Business Employees
Exhibit 7.1(c) - Form of Releases
Exhibit 7.1(d) - Form of Supply Agreement
Exhibit 7.1(e) - Form of Opinion of Counsel to the Seller
Disclosure Schedule - Exceptions to the Representations and Warranties
Concerning the Company
Cholestech Corporation agrees to furnish supplementally a copy of any
of the foregoing Exhibits to the Commission upon request.
36
