EXECUTION COPY
ASSET PURCHASE AGREEMENT, dated as of November 21, 2000 (together with
all Schedules hereto, this "Agreement"), among HCI Acquisition Corp., a New York
corporation, with offices at 0000 Xxxxxx Xxxxxxxxx, Xxxxxxxxx, Xxx Xxxx 00000
("Buyer"), and American Medical Alert Corp., a New York corporation, with
offices at 0000 Xxxxxx Xxxxxxxxx, Xxxxxxxxx, Xxx Xxxx 00000 ("Parent"), on the
one hand, and Xxxxxxx Xxxxxxxx, Incorporated, a New York corporation, with
offices at 000 Xxxx 00xx Xxxxxx, Xxx Xxxx, XX 00000-0000 ("Seller") and Xxxxx
Xxxxxxxx, an individual and sole shareholder of Seller, residing at 00 Xxxx Xxx
Xxxxxx, Xxx. X00X, Xxx Xxxx, Xxx Xxxx 00000 ("Shareholder"), on the other hand.
RECITALS
A. Seller is in the business of providing telephone after-hour
answering services, stand-alone voice-mail services, auto-paging and
auto-attendant application services for the healthcare community (collectively,
the "Business").
B. Buyer desires to purchase from Seller, and Seller desires to sell to
Buyer, all of Seller's assets and properties relating to the Business in
consideration for the payment of cash and warrants and the assumption of certain
specified liabilities as set forth below, on the terms and subject to the
conditions set forth herein.
AGREEMENT
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It is agreed as follows:
Section 1. Sale and Purchase of Assets.
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1.1. Sale and Purchase. Upon the terms and subject to the
conditions contained in this Agreement, at the Closing (as defined herein),
Seller shall sell, assign, transfer and deliver to Buyer, and Buyer shall
purchase and accept from Seller (directly or through a wholly-owned subsidiary),
all of the assets and rights of every nature, kind and description, tangible and
intangible, wherever located, that are owned, used or held for use by Seller in
or for the Business, as the same shall exist on the Closing Date (as defined
herein) (collectively, the "Purchased Assets"), free and clear of any and all
liens, charges, claims, pledges, security interests or other encumbrances of any
kind whatsoever ("Liens"), other than any assets or rights relating to any
Employee Benefit Plan (as defined in Section 2.26 of this Agreement), but
including, without limitation, the following:
(a) [Intentionally Omitted];
(b) accounts receivable, notes receivable, drafts or
other similar instruments;
(c) inventory, including but not limited to finished
goods, work in process, raw materials and supplies;
(d) prepaid expenses and deposits;
(e) machinery, equipment, tools and dies, hand tools,
vehicles, computers and other data processing hardware (and all software related
thereto or used therewith) and other tangible personal property of similar
nature, including but not limited to all items set forth on Seller's fixed asset
ledger attached to this Agreement on Section 2.5 of the Disclosure Schedule
(collectively, the "Machinery and Equipment");
(f) office furniture, office equipment, fixtures and
other tangible personal property of similar nature (collectively, the "Furniture
and Fixtures");
(g) interests to the extent owned by Seller in any
patent, copyright, trademark, trade name, brand name, service xxxx, service
name, assumed name, domain name, website, logo, symbol, trade dress, design or
representation or expression of any thereof, or registration or application for
registration thereof, or any other invention, trade secret, technical
information, know-how, proprietary right or intellectual property, technologies,
methods, designs, drawings, software (including documentation and source code
listings), processes and other proprietary properties or information
(collectively, the "Intellectual Property");
(h) real property interests described in Section 2.9 of
the Disclosure Schedule to this Agreement together with all buildings,
facilities and other improvements thereon and all licenses, leases, rights,
privileges and appurtenances thereto including, without limitation, all leases,
agreements and other rights to use, occupy or possess, or otherwise with respect
to, real property or machinery, equipment, vehicles, and other tangible personal
property of similar nature to which Seller is a party, and all rights arising
under or pursuant to such leases, agreements and rights;
(i) to the extent not included above, all contracts,
agreements, options, commitments, understandings, licenses, leases and
instruments relating to the Business including, without limitation, customer and
supplier contracts, sales representative and distributor contracts and
commission contracts with respect thereto in each case to the extent listed on
Section 1.1(i) of the Disclosure Schedule, and each of the Material Contracts as
listed in Section 2.11 of the Disclosure Schedule (collectively, the "Assigned
Contracts");
(j) customer and supplier lists, mailing lists,
catalogs, brochures and handbooks relating to the Business;
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(k) other books, records, files, contracts, plans,
notebooks, production and sales data and other data of Seller relating to the
Business, whether or not in tangible form or in the form of intangible computer
storage media such as optical disks, magnetic disks, tapes and all similar
storage media;
(l) the name "Xxxxxxx Xxxxxxxx, Incorporated" and all
variations thereof (including HCI) and all similar names and the goodwill
associated therewith, together with all trademarks, service marks and trade
names of Seller related to the Business, if any;
(m) rights related to any portion of the Business or the
Purchased Assets, including third party warranties and guarantees and other
similar contractual rights, as to third parties held by or in favor of Seller,
and arising out of, resulting from or relating to the Business or the Purchased
Assets; and
(n) rights to insurance and condemnation proceeds
relating to any damage, destruction, taking or other similar impairment of any
of the Purchased Assets.
1.2. Assumption of Specified Liabilities. At the Closing (as
defined herein), Buyer will assume and agree to pay, perform and discharge the
liabilities of Seller set forth on Exhibit A (referred to herein as the "Assumed
Liabilities"). Buyer is only assuming the liabilities and obligations of Seller
expressly set forth on Exhibit A and is not assuming any no other liabilities or
obligations of any kind.
1.3. Purchase Price. The aggregate purchase price for the
Purchased Assets (the "Purchase Price") shall be payable as follows:
(a) Nine Hundred and Fifteen Thousand and Four Hundred
and Thirty-Three and 10/00 ($915,433.10) less the aggregate amount necessary to
satisfy in full each of the liabilities of Seller and Shareholder set forth on
Exhibit B hereto (which liabilities shall be satisfied by Buyer at the Closing),
payable to Seller by certified check or wire transfer of immediately available
funds to an account designated in writing by Seller at least three (3) days
prior to the Closing (the "Cash Purchase Price");
(b) The issuance of warrants to Seller substantially in
the forms attached to Exhibit C-1 hereto (the ""Y" Warrants") and Exhibit C-2
hereto (the ""Z" Warrants" and, together with the "Y" Warrants, collectively,
the "Warrants");
(c) (i) Subject to clause (iii) of this Section 1.3(c),
during the six-year period following the Closing Date (the "Earn-Out Period"),
Seller shall also be entitled to receive from Buyer an amount (the "Earn-Out
Amount") equal to 30% of (A) the Net Income (as defined below) for such period
of the operating division of Parent in which the Business of Seller is operated
after the Closing Date (the "Operating Division") and which shall include any
Business that is acquired by Parent and/or any Subsidiary (as defined below) or
Affiliate (as defined below) of Parent in such division after the Closing Date
(excluding the Net Income of businesses
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related to disease management and personal emergency response) for such period
before taxes for such period minus (B) any costs and expenses (including
interest) on Mortgage Indebtedness (as defined below) to the extent not
otherwise reflected in the computation of such Net Income plus (C) to the extent
deducted from the calculation of such Net Income, any interest expenses on
Acquisition Indebtedness (as defined below).
(ii) Commencing with the quarter ending December 31, 2000, the Earn-Out
Amount shall be payable by Buyer to Seller (within ten (10) days from the filing
of Parent's Form 10-Q or 10-K, as the case may be, after the end of each
calendar quarter during the Earn-Out Period) with respect to income occurring
during the then most recently ended calendar quarter (or any shorter period with
respect to the initial calendar quarter or following the last complete calendar
quarter during the Earn-Out Period) (the "Earn-Out Payments"), and be
accompanied by a statement setting forth Buyer's calculation of the amount of
the Earn-Out Payment for such period (the "Calculation Statement"). In the event
that Seller does not notify Buyer within thirty (30) days of its receipt of such
statement that it objects to the computation of the amount of the Earn-Out
Payment set forth therein (as provided in this Section 1.3(c) (ii)), the amounts
set forth in the Calculation Statement shall be binding and conclusive for the
purposes of this Agreement. In connection with the delivery of an Objection
Notice (as defined below), Seller shall have the right upon reasonable notice
and at reasonable times to examine the books and records of the Operating
Division to the extent directly relating to the Business and the calculation of
the Earn-Out Amount.
In the event that Seller objects to the computation of the Earn-Out
Amount set forth therein, Seller shall give written notice (the "Objection
Notice") of its disagreement to Buyer within thirty (30) days after Seller's
receipt of the Calculation Statement, specifying in reasonable detail Seller's
disagreement with the Calculation Statement. If an Objection Notice is received
by Buyer within such thirty (30) days, then the Calculation Statement shall
become final and binding upon the parties on the earlier of (A) the date the
parties hereto resolve in writing any differences they may have with respect to
any matter specified in the Objection Notice and (B) the date the Earn-Out
Matters (as defined below) are finally resolved in writing by the Earn-Out
Arbitrator (as defined below). Any such Objection Notice shall state in
reasonable detail the nature of any disagreement so asserted. During a period of
ten (10) days (or such longer period as Buyer and Seller may mutually agree)
after receipt by Buyer of the Objection Notice, Buyer and Seller shall attempt
to resolve in writing any differences that they may have with respect to any
matter specified in the Objection Notice. If at the end of such ten (10) day
period (or such longer period as Buyer and Seller may have mutually agreed),
Buyer and Seller have failed to reach a written agreement with respect to all
such matters, then all such matters as specified in the Objection Notice as to
which such written agreement has not been reached (the "Earn-Out Matters") shall
be submitted to and reviewed by an arbitrator (the "Earn-Out Arbitrator"). If
Buyer and Seller are unable to agree upon the identity of the Earn-Out
Arbitrator within five (5) days of the conclusion of the ten (10)-day
negotiation period, Seller and Buyer shall each select within five (5) days
thereafter one of the "Big-Five" accounting firms having no other relationship
with any party hereto during the past two (2) years to select the
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Earn-Out Arbitrator. If such accounting firms cannot agree as to the identity of
the Earn-Out Arbitrator within ten (10) days, then each of such accounting firms
shall select one nominee and the Earn-Out Arbitrator shall be chosen by lot. The
Earn-Out Arbitrator shall consider only the Earn-Out Matters and shall be
instructed to act promptly to resolve all Earn-Out Matters, and its decision
with respect to all Earn-Out Matters shall be final and binding upon Buyer and
Seller. The Earn-Out Arbitrator shall decide all of the Earn-Out Matters within
fifteen (15) days of his appointment and provide Seller and Buyer with a written
decision regarding his determination of the Earn-Out Matters. The fees and
expenses of the Earn-Out Arbitrator with respect to the settlement of all
Earn-Out Matters, and the "Big-Five" accounting firms with respect to the
selection of the Earn-Out Arbitrator, shall be borne by Buyer, on the one hand,
and Seller, on the other hand, in such proportion as shall be determined by the
Earn-Out Arbitrator giving consideration to Buyer's and Seller's initial
positions with respect to the matter and how far such positions were from the
Earn-Out Arbitrator decision. Any payments to be made by Buyer to Seller
pursuant to the determination of the Earn-Out Arbitrator shall be made, within
ten (10) days after receipt by the parties of the Earn-Out Arbitrator's decision
by wire transfer to an account designated by Seller.
(iii) Seller shall not be entitled to receive Earn-Out Payments
aggregating an amount in excess of $550,000. If, at any time prior to the
expiration of the Earn-Out Period, the Earn-Out Payments paid to Buyer hereunder
aggregate $550,000, Buyer shall have no further obligation to make any payments
to Seller pursuant to this Section.
(iv) For purposes of this Section, the following definitions shall
apply:
"Acquisition Indebtedness" means all indebtedness incurred in connection with
the acquisition of Purchased Assets, excluding the Mortgage Debt.
"Affiliate" shall mean, with respect to any Person (as defined below), any
Person directly or indirectly controlling, controlled by or under direct or
indirect common control with such other Person.
"Mortgage Indebtedness" means all indebtedness (in a principal amount not exceed
$350,000) incurred by Buyer in connection with the acquisition of the Owned Real
Property.
"Net Income" means, for any period, net income calculated in accordance with
generally accepted accounting principles in the United States ("GAAP") provided,
however, that the following amounts shall not be deducted in the calculation of
Net Income: (i) salaries and benefits of executive officers of Parent and any
Subsidiary (other than Buyer) and (ii) general corporate overhead not related to
the Operating Division.
"Subsidiary" shall mean, with respect to any Person (i) any corporation as to
which more than 50% of the outstanding stock having ordinary voting rights or
power (and excluding stock having voting rights only upon the occurrence of a
contingency unless and until such contingency occurs and such rights may be
exercised) is owned or controlled, directly or indirectly by such Person and/or
by one or more of such Person's Subsidiaries, and (ii) any partnership, joint
venture or other similar relationship between such Person
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(or any Subsidiary thereof) and any other Person (whether pursuant to written
agreement or otherwise), if such Person has more than a 50% equity interest
therein.
1.4. Closing. The consummation of the transactions
contemplated hereby (the "Closing") will take place at 10:00 a.m., on November
21, 2000 at the offices of Xxxxxx Xxxxxx LLP, The Chrysler Building, 000
Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 or at such other time or place or on
such other date that is mutually agreeable to Buyer and Seller. The date on
which the Closing occurs is referred to herein as the "Closing Date."
1.5. Closing Obligations.
(a) Deliveries of Seller. At the Closing or prior
thereto, Seller will deliver to Buyer each of the following documents
(collectively, the "Seller's Closing Documents"):
(i) Certificate of Secretary. A certificate of the
Secretary of Seller setting forth a copy of the resolutions adopted by its Board
of Directors and shareholder approving the execution and delivery of this
Agreement and the other documents and instruments contemplated hereby to which
it is a party (this Agreement and all other documents and instruments to which
Buyer, Seller or the Shareholder is a party in connection herewith being
sometimes collectively referred to herein as the "Purchase Documents") and the
consummation of the transactions contemplated hereby and thereby.
(ii) Instruments of Transfer. A Xxxx of Sale, Assignment
and Assumption Agreement, in the form of Exhibit D attached hereto (the "Xxxx of
Sale"), duly executed by Seller and Shareholder, that, among other things,
conveys, transfers and sells to Buyer all right, title and interest of Seller in
and to the Purchased Assets.
(iii) Legal Opinion of Counsel to Seller and
Shareholder. An opinion, substantially in the form of Exhibit E attached hereto,
from Xxxxxxx & Xxxxxxx, counsel to Seller and Shareholder.
(iv) Consents. The consents referred to in Section 2.4
of the Disclosure Schedule attached hereto.
(v) Real Property.
(A) Bargain and sale deed with covenant against
grantor's acts ("Deed"), complying with RPLss.339-0 and containing the covenant
required by LL ss. 13(5), conveying to Buyer title to the unit (the "Unit")
known as Unit Professional East in the premises known as 216-218 East 75th
Street Condominium (the "Condominium"), together with its undivided
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18.5% interest in the Common Elements (as such term is defined in the
declaration (the "Declaration") establishing a plan for condominium ownership of
the premises located at 000-000 Xxxx 00xx Xxxxxx in the City, State and County
of New York and which term shall be deemed to include Seller's right, title and
interest in any limited common elements attributable to or used in connection
with the Unit) appurtenant thereto, free and clear of all Liens other than
Permitted Exceptions (as hereinafter defined). The Deed shall be executed and
acknowledged by Seller and, if requested by the Condominium, executed and
acknowledged by Buyer, in proper statutory form for recording;
(B) A waiver of the right of first refusal to
purchase the Unit executed by the board of managers of the Condominium ("Board")
waiving the Condominium's rights, if any, to purchase the Unit under the
Declaration or the By-Laws of the Condominium;
(C) A statement by the Condominium or its managing
agent that the common charges and any assessments then due and payable to the
Condominium have been paid to the date of the Closing;
(D) All keys to the doors of, and mailbox for, the
Unit;
(E) Such affidavits and/or other evidence as the
title company (the "Title Company") from which Buyer has ordered a title
insurance report and which is authorized to do business in New York State shall
reasonably require in order to omit from its title insurance policy all
exceptions for judgments, bankruptcies or other returns against Seller,
Shareholder, and persons or entities whose names are the same as or are similar
to Seller's or Shareholder's names;
(F) An owner's title insurance policy in an amount
equal to the Condominium Allocated Amount subject only to Liens expressly
permitted hereunder and otherwise in form acceptable to Buyer and containing
such endorsements as may be reasonably requested by Buyer;
(G) New York City Real Property Transfer Tax Return,
if applicable, and New York State Department of Taxation and Finance Combined
Real Estate Transfer Tax Return and Credit Line Mortgage Certificate, prepared,
executed and acknowledged by Seller in proper form for submission;
(H) Checks in payment of all applicable real property
transfer taxes except a transfer tax which by law is primarily imposed on the
Buyer ("Buyer Transfer Tax"), if any, due in connection with the sale. Seller
shall pay the additional transfer taxes, if any, payable after the Closing by
reason of the conveyance of the Unit, which obligation shall survive the
Closing;
(I) Certification that Seller is not a foreign person
pursuant to FIRPTA (as hereinafter defined);
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(J) Affidavit that a single station smoke detecting
alarm device is installed pursuant to New York Executive Lawss.378(5); and
(K) Any other documents required by the Board and
necessary to convey title to the Unit in the Condominium to the Buyer,
including, without limitation, any powers of attorney.
(vi) Employment Agreement. An Employment Agreement
between Shareholder and Buyer in substantially the form of Exhibit F attached
hereto (the "Employment Agreement"), duly executed by Shareholder.
(vii) All books and records relating to the Business.
(b) Deliveries of Buyer. At the Closing or prior
thereto, Buyer will deliver to Seller each of the following documents
(collectively "Buyer's Closing Documents"):
(i) Certificate of Secretary. A certificate of the
Secretary of Buyer setting forth a copy of the resolutions adopted by its Board
of Directors approving the execution and delivery of this Agreement and the
other Purchase Documents and the consummation of transactions contemplated
hereby and thereby.
(ii) Instruments of Transfer. The Xxxx of Sale, duly
executed by Buyer.
(iii) Legal Opinion of Counsel to Buyer. An opinion,
substantially in the form of Exhibit G attached hereto, from Xxxxxx Xxxxxx LLP,
counsel to Buyer.
(iv) Employment Agreement. The Employment Agreement,
duly executed by Buyer.
(v) Cash Purchase Price. At the Closing, Buyer shall
deliver or cause to be delivered to Seller the Cash Purchase Price in
immediately available funds.
(vi) Warrants. At the Closing, Buyer shall deliver or
cause to be delivered to Seller the Warrants.
(vii) Transfer Taxes. New York City Real Property
Transfer Tax Return and New York State Department of Taxation and Finance
Combined Real Estate Transfer Tax Return and Credit Line Mortgage Certificate
executed and acknowledged by Buyer and an Affidavit in Lieu of Registration
pursuant to New York Multiple Dwelling Law, each in proper form for submission,
if applicable.
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Section 2. Representations and Warranties of Seller and the
Shareholders. Each of Seller and the Shareholder, jointly and severally,
represents and warrants to Buyer as follows:
2.1. Organization. Seller is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation, with full corporate power and authority to conduct its business
and to own and operate its assets and properties as presently conducted and
operated. Seller is duly qualified or licensed to do business as a foreign
corporation and is in good standing in each jurisdiction in which the nature of
the business conducted by it makes such qualification or licensing necessary.
Seller has delivered to Buyer true, correct and complete copies of Seller's
certificate of incorporation and bylaws, as currently in effect.
2.2. Title to Purchased Assets; Ownership of Capital Stock
(a) Seller has good and marketable title to the
Purchased Assets including, without limitation, all assets set forth on Seller's
fixed asset ledger attached to this Agreement on Section 2.5 of the Disclosure
Schedule, free and clear of all Liens, other than (i) Liens, if any, for
personal property taxes and assessments not yet due and payable and (ii) Liens
disclosed on Section 2.2 of the Disclosure Schedule. Upon consummation of the
transactions contemplated by this Agreement, Buyer will acquire all of Seller's
right, title and interest in and to the Purchased Assets, free and clear of all
Liens.
(b) The Shareholder is the record and beneficial owner
of all of the outstanding shares of capital stock of Seller.
2.3. Authorization; Validity of Agreement, Etc. Shareholder
has the requisite capacity, and Seller has the full right, power and authority,
to execute and deliver this Agreement and the other Purchase Documents to which,
as applicable, he or it is a party and to consummate the transactions
contemplated hereby and thereby, and to make the representations set forth
herein and therein. The execution and delivery of this Agreement and the other
Purchase Documents to which it is a party and the consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized by Seller and no other proceedings on the part of Seller are
necessary to authorize the execution and delivery of this Agreement and the
other Purchase Documents to which Seller is a party or the consummation of the
transactions contemplated hereby and thereby by Seller and Shareholder. Each of
this Agreement and the other Purchase Documents to which Seller is a party when
delivered to Buyer will be duly and validly executed by Seller and constitute
the valid and binding agreement of Seller, enforceable against Seller in
accordance with its respective terms, except as such enforceability may be
subject to or limited by applicable bankruptcy, insolvency, reorganization or
other similar laws affecting the enforcement of creditors' rights generally.
Each of this Agreements and the other Purchase Documents to which Shareholder is
a party when delivered to Buyer will be duly and validly executed by Shareholder
and when so delivered will constitute the valid and binding obligation of
Shareholder, enforceable against Shareholder in accordance with its respective
terms, except as such enforceability may be subject to or limited by applicable
bankruptcy,
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insolvency, reorganization or other similar laws affecting the enforcement of
creditors' rights generally.
2.4. Consents and Approvals; No Violation. Except as set forth
in Section 2.4 of the Disclosure Schedule, the execution, performance and
delivery by Seller and Shareholder of this Agreement and each of the other
Purchase Documents to which it or he is a party, as applicable, and the
consummation by Seller and Shareholder of the transactions contemplated hereby
and thereby, respectively, and the compliance by Seller and Shareholder with the
provisions hereof and thereof will not: (a) conflict with or breach any
provision of the Articles of Incorporation or By-Laws of Seller; (b) violate or
breach in any respect any provision of, or constitute a default (or an event
which, with notice or lapse of time or both would constitute a default) under,
any of the terms, covenants, conditions or provisions of, or give rise to a
right to terminate or accelerate or increase the amount of payment due under,
any note, bond, mortgage, indenture, deed of trust, license, franchise, permit,
lease, contract, agreement or other instrument, commitment or obligation to
which Seller or Shareholder is a party (collectively, "Contracts"), or by which
Seller or Shareholder or any of its or his properties or assets, as applicable,
may be bound or affected; (c) require Seller or Shareholder to make any filing
or registration with, or obtain any other permit, authorization, consent or
approval of, any Person (as hereinafter defined) or Governmental Entity (as
hereinafter defined); (d) result in the creation of any Lien on or affecting the
Purchased Assets; (e) violate any order, writ, injunction, decree, judgment, or
ruling of any court or governmental authority, applicable to Seller or
Shareholder or any of their respective properties or assets; or (f) violate any
statute, law, rule or regulation applicable to Seller or any of its properties
or assets. "Person" shall mean any individual, partnership, joint venture,
limited liability company, trust, organization or any other entity.
"Governmental Entity" shall mean any foreign, provincial, United States federal,
state, county, municipal or other local jurisdiction, political entity, body,
organization, subdivision or branch, legislative or executive agency or
department or other regulatory service, authority or agency.
2.5. Condition of Purchased Assets. All items of machinery,
equipment, tooling and other tangible personal property owned or leased by
Seller and used in the conduct of the Business (other than items of inventory)
are listed in the detailed fixed assets ledger of Seller attached to Section 2.5
of the Disclosure Schedule (collectively, the "Personal Property"). The Personal
Property conforms in all respects to all requirements of applicable laws. All of
the items of machinery, equipment and tooling included within the Personal
Property are in good operating condition and in good state of maintenance and
repair and are adequate for use in the conduct of Seller's business as
previously conducted.
2.6. Receivables. All accounts receivable of Seller are
reflected on Section 2.6 of the Disclosure Schedule and represent valid
obligations arising from bona fide transactions in the ordinary course of
Seller's business consistent with past practice and established in the ordinary
course of Seller's business. Unless paid prior to the Closing Date, the accounts
receivable of Seller are or will be as of the Closing Date current and
collectible. Each of the accounts receivable either have been or will be
collected in full, without any set off, within 90 days after the day on which it
first becomes due and payable. There is no contest, claim, or right
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of set off, other than returns in the ordinary course of Seller's business
consistent with past practice, under any contract with any obligor of an
accounts receivable relating to the amount or validity of such accounts
receivable.
2.7. Inventories. Except as reflected on Section 2.7 of the
Disclosure Schedule, the inventories of Seller have been valued at the lower of
cost (on the first-in, first-out method) or market in accordance with GAAP,
consistently applied, and the value of obsolete materials and materials of below
standard quality has been written down in accordance with GAAP, consistently
applied. Except as reflected on Section 2.7 of the Disclosure Schedule, the
inventories of Seller contain no amount of items not saleable or usable within
12 months from the date thereof at normal profit margins consistent with
historical sales practices. Except as set forth in Section 2.7 of the Disclosure
Schedule, Seller is not under any liability or obligation with respect to the
return of inventory or merchandise in the possession of wholesalers,
distributors, retailers or other customers.
2.8. Taxes.
(a) Seller has elected to be treated as an "S"
corporation for federal Income Tax purposes effective as of January 1, 1987 and
such election is effective for each year thereafter up to and including the
Closing Date. Section 2.8(a) of the Disclosure Schedule hereto sets forth each
other jurisdiction for which Seller has made an "S" election (or similar
election), or for which an "S" election (or similar election) is effective,
including the date of the election, its effective date, the date of any
termination of such election, if any, and the cause of such termination. Except
as set forth on Section 2.8(a) of the Disclosure Schedule, such election is
effective for each year from its effective date up to and including the Closing
Date.
(b) Except as set forth in Section 2.8(b) of the
Disclosure Schedule:
(i) Seller has (A) duly and timely filed or caused to
be filed with the Internal Revenue Service or other applicable Governmental
Entity (collectively, "Taxing Authorities") all Tax Returns (as defined below)
that are required to be filed by or on behalf of Seller and that include or
relate to the Purchased Assets or the Business, which Tax Returns are true,
correct and complete, and (B) duly and timely paid in full or caused to be paid
in full, or recorded a provision for such payment on the books and records of
Seller in accordance with GAAP for the payment of, all Taxes that are due and
payable that could result in a Lien on any Purchased Asset or the Business and
has recorded a provision for such payment on the books and records of Seller in
accordance with GAAP for the payment of all Taxes that are not due and payable;
(ii) Seller has duly and timely complied with all
applicable Laws relating to the collection or withholding of Taxes, and the
reporting and remittance thereof to the applicable Taxing Authorities;
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(iii) no audit, examination, investigation,
reassessment or other administrative or court proceeding (collectively, a "Tax
Proceeding") is pending or proposed, or to the best knowledge of each of Seller
and Shareholder threatened, with regard to any Tax or Tax Return referred to in
clause (i) above;
(iv) there is no Lien for any Tax upon any of the
Purchased Assets or the Business;
(v) [Intentionally omitted];
(vi) there is no outstanding request for a ruling
from any Taxing Authority, closing agreement (within the meaning of Section 7121
of the Code or any analogous provision of applicable Law) relating to any Tax
for which Seller is or may be liable or with respect to Seller's income, assets
or business, power of attorney relating to, or in connection with, any Tax that
could result in a Lien on any Purchased Asset or the Business;
(vii) none of the Purchased Assets is "tax-exempt
bond financed property" or "tax-exempt use property" within the meaning of
Section 168(g) or (h), respectively, of the Code or any similar provision of
applicable Law;
(viii) none of the Purchased Assets is required to be
treated as being owned by any other person pursuant to the "safe harbor" leasing
provisions of Section 168(f)(8) of the Internal Revenue Code of 1954 as in
effect prior to the repeal of those "safe harbor" leasing provisions or any
similar provision of applicable Law;
(ix) no claim has ever been made by a Taxing
Authority in a jurisdiction where Seller has not paid any Tax or filed Tax
Returns relating to the Business or any Purchased Asset asserting that Seller is
or may be subject to Tax in such jurisdiction.
(c) Seller has provided to Buyer true, complete and
correct copies of (i) all Tax Returns relating to, and (ii) all audit reports
relating to, each proposed adjustment, if any, made by any Taxing Authority with
respect to any taxable period ending after December 31, 1994 and any and all
Taxes with respect to which a Lien may be imposed on any Purchased Asset or the
Business.
(d) As used herein, (i) "Tax Return" means any return,
declaration, report, information return or statement, and any amendment thereto,
including without limitation any consolidated, combined or unitary return or
other document (including any related or supporting information), filed or
required to be filed with any Taxing Authority in connection with the
determination, assessment, collection, payment, refund or credit of any federal,
state, local or foreign Tax or the administration of any Laws relating to any
Tax or ERISA, and (ii) "Tax" or "Taxes" means any and all taxes, charges, fees,
levies, deficiencies or other assessments of whatever kind or nature including,
without limitation, all net income, gross income, profits, gross receipts,
excise, real or personal property, sales, ad valorem, withholding, social
security,
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retirement, excise, employment, unemployment, minimum, estimated, severance,
stamp, property, occupation, environmental, windfall profits, use, service, net
worth, payroll, franchise, license, gains, customs, transfer, recording and
other taxes, customs duty, fees assessments or charges of any kind whatsoever,
imposed by any Taxing Authority, including any liability therefor as a
transferee (including without limitation under Section 6901 of the Code or any
similar provision of applicable Law), as a result of Treasury Regulation
ss.1.1502-6 or any similar provision of applicable Law, or as a result of any
Tax sharing or similar agreement, together with any interest, penalties or
additions to tax relating thereto.
2.9. Real Property.
(a) The Unit is the only real property owned by Seller.
Section 2.9(a) of the Disclosure Schedule sets forth the legal description of
the Unit. The Unit is a Professional Unit (as such term is defined in the
Declaration). Seller has good and marketable title to and owns the Unit in fee
simple subject to no Liens except such immaterial easements and rights-of-way,
none of which interfere with the operation of the Business or as otherwise set
forth on Section 2.9(a) of the Disclosure Schedule (collectively, the "Permitted
Exceptions"). Seller has not received notice of any default or breach by it
under any of the covenants, conditions, restrictions, easements, or
rights-of-way affecting the Unit or any portion thereof, and to the best
knowledge of Seller and Shareholder, no such default or breach now exists, and
no event has occurred or is continuing which with notice or the passage of time
or both, would constitute a default thereunder.
(b) The Seller is neither a landlord, sublandlord or
licensor nor a tenant, subtenant or licensee under any lease, sublease, license
or occupancy agreement with respect to real property.
(c) Attached to Section 2.9(c) of the Disclosure
Schedule is a true, correct and complete copy of the most recent title insurance
policy with respect to the Unit. Seller has not entered into any leases,
subleases, licenses or occupancy agreements relating to the Unit and no Person
has any rights to acquire, lease, sublease or otherwise occupy the Unit or any
part thereof or to otherwise obtain any interest therein, and there are no
outstanding options, rights of first refusal or rights of reverter relating to
the Unit or any interests therein. Except as set forth in Section 2.9(c) of the
Disclosure Schedule, there are no service or maintenance contracts, management
agreements or similar agreements relating to the Unit. There has been no
service, material or other work provided or supplied to the Unit that has not
been paid in full.
(d) Except as set forth in Section 2.9(d) of the
Disclosure Schedule, all licenses, permits, approvals and certificates of
occupancy (the "Approvals"), in connection with the construction, use, occupancy
and maintenance of the Unit are in full force and effect in accordance with the
respective terms thereof, and none of the Approvals has been amended, assigned,
pledged or otherwise transferred. There is no alteration, improvement or change
in use of the Unit that would require any new Approvals or amendment of an
existing Approval. The condition and use of the Unit conforms to each Approval.
Seller is in compliance with all Laws
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that are applicable to the Unit or any part thereof. Seller is in compliance
with the Declaration, and the By-Laws and the rules and regulations of the
Condominium.
(e) The Unit including, without limitation, all
plumbing, electrical, mechanical, heating, ventilating, air conditioning and
sprinkler systems are fully installed and as applicable, operating, in good
condition and repair and as applicable, free of leaks. The electricity service
and all other public or private utilities ("Utilities") serving the Unit are
fully installed and operating.
(f) To the best knowledge of Seller and Shareholder,
there are no pending or proposed or contemplated or anticipated (i) special
assessments affecting the Unit or any portion thereof that are or would be
payable by Seller and could result in a Lien against the Unit or (ii) changes in
any applicable Laws relating to the use, occupation or operation of the Unit.
(g) Seller has not received notice from any insurance
company or Board of Fire Underwriters (or organization exercising functions
similar thereto) or from any mortgagee requesting the performance of any work or
alteration in respect of the Unit, and to the best of each of Seller's and the
Shareholder's knowledge, there are no outstanding requirements or
recommendations from any of the foregoing.
(h) There has been no damage to any portion of the Unit
or the building within which the Unit is located within the last 24 months
caused by fire or other casualty that has not been repaired.
(i) Copies of the current real estate tax bills for the
Unit have been delivered to Buyer by the Shareholder. Said bills, with respect
to the Unit, cover the whole of the Unit and do not cover or apply to any other
property. No application or proceeding is pending with respect to a reduction of
the taxes on the Unit.
(j) Seller does not owe any monies to any contractor,
subcontractor or materialman for labor or materials performed, rendered or
supplied in connection with the Unit for which such person could claim a Lien
against the Unit.
(k) Seller is not a "sponsor" or a nominee of a
"sponsor" under any plan of condominium organization in the Declaration
affecting the Unit in the Condominium.
(l) The common charges (excluding separately billed
utility charges) for the Unit on the date hereof are $543.73 per month, and
Seller has not received any written notice of any intended assessment or
increase in such common charges.
(m) The real estate taxes for the Unit for the six month
period commencing July 1, 2000, and ending January 1, 2001, are $7,403.34.
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(n) Seller is not a "foreign person" as defined in
IRCss. 1445 ("FIRPTA"), as amended, and the regulations issued thereunder ("Code
Withholding Section"). At the Closing, Seller shall deliver to Buyer a
certificate stating that Seller is not a foreign person in the form then
required by the Code Withholding Section. In the event Seller fails to deliver
the aforesaid certification or in the event that Buyer is not entitled under the
Code Withholding Section to rely on such certification, Buyer shall deduct and
withhold from the Purchase Price a sum equal to 10% of the portion thereof
allocable to the Unit, which allocable amount equals $400,000 ("Condominium
Allocated Amount"), and shall at Closing remit the withheld amount with the
required forms to the Internal Revenue Service.
2.10. Intellectual Property. Section 2.10 of the Disclosure
Schedule lists all Intellectual Property that is owned by Seller or any other
Person and used by Seller in the operations of the Business, and there are no
pending or threatened claims by any Person relating to Seller's use of any
Intellectual Property. Seller has such rights of ownership (free and clear of
all Liens) of, or such rights by license, lease or other agreement to use (free
and clear of all Liens) the Intellectual Property as are necessary to permit
Seller to conduct its business and, except as set forth on Section 2.10 of the
Disclosure Schedule, Seller is not obligated to pay any royalty or similar fee
to any Person in connection with Seller's use or license of any of the
Intellectual Property.
2.11. Material Contracts. Section 2.11 of the Disclosure
Schedule sets forth a true, complete and correct list of every Contract that:
(i) provides for aggregate future payments by Seller or to Seller of more than
$1,000 and has an unexpired term exceeding six months (6) and may not be
canceled upon 60 days notice without any liability, penalty or premium
(excluding purchase orders and invoices arising in the ordinary course of
business); (ii) was entered into by Seller with Shareholder, or an officer,
director or significant employee of Seller; (iii) is a collective bargaining or
similar agreement; (iv) guarantees or indemnifies or otherwise causes Seller to
be liable or otherwise responsible for the obligations or liabilities of another
or provides for a charitable contribution by Seller; (v) involves an agreement
with any bank, finance company or similar organization; (vi) restricts Seller or
the Business from engaging in any business or activity anywhere in the world;
(vii) is an employment agreement, consulting agreement or similar arrangement
with any employee of Seller; (viii) involves an agreement or any other Contract
providing for payments from Seller to any other Person, or by any Person to
Seller, based on sales, purchases or profits, other than direct payments for
goods; or (ix) any other Contract that is material to the rights, properties,
assets, business or operations of Seller or the Business (the foregoing,
collectively, "Material Contracts"). Seller has heretofore provided true,
complete and correct copies of all Material Contracts to Buyer.
There is not, and to the best knowledge of each of Seller and
Shareholder, there has not been claimed or alleged by any Person with respect to
any Material Contract, any existing default, or event that with notice or lapse
of time or both would constitute a default or event of default, on the part of
Seller or, to the best knowledge of Seller and Shareholder, on the part of any
other party thereto and (ii) no consent, approval, authorization or waiver from,
or notice to, any Governmental Entity or other Person is required in order to
maintain in full force
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and effect any of the Material Contracts, other than such consents and waivers
that have been obtained and are unconditional and in full force and effect and
such notices that have been duly given and copies of such consents, waivers and
notices have been delivered to Buyer.
2.12. Customers, Suppliers and Distributors. Section 2.12 of
the Disclosure Schedule sets forth (i) the sales of Seller for the fiscal year
ended December 31, 1999 and the sales of Seller for the six (6) months ended
June 30, 2000, (ii) all of the customers of Seller during each of those periods
indicating the approximate total sales to each of those customers; and (iii) the
suppliers and distributors of Seller during each of those periods. There has not
been any adverse change in the business relationship of Seller with any such
customer, supplier or distributor, and Seller is not aware of any threatened
loss of any such customer, supplier or distributor.
2.13. Litigation; Compliance with Laws; Licenses and Permits.
(a) There is no claim, suit, action or proceeding
("Proceeding") pending, nor, to the best knowledge of Seller, is there any
investigation or Proceeding threatened, that involves or affects Seller or the
Business, by or before any Governmental Entity, court, arbitration panel or any
other Person.
(b) Seller and the Business have, and on the Closing
Date will have, complied with all applicable federal, state, county, municipal
or other local criminal, civil or common laws, statutes, ordinances, orders,
codes, rules, regulations, permits, policies, guidance documents, judgments,
decrees, injunctions, or agreements of any Governmental Entity (collectively,
"Laws"), including but not limited to Laws relating to zoning, building codes,
antitrust, occupational safety and health, industrial hygiene, environmental
protection, water, ground or air pollution, consumer product safety, product
liability, hiring, wages, hours, employee benefit plans and programs, collective
bargaining and the payment of withholding and social security taxes. Since
January 1, 1996, Seller has not received any notice of any violation of any Law.
(c) Each of Seller and the Business has every license,
permit, certification, qualification or franchise issued by any Governmental
Entity (each, a "License") and every approval, authorization, waiver, variance,
exemption, consent or ratification by or on behalf of any Person that is not a
party to this Agreement (each, a "Permit") required for it to conduct its
business as presently conducted. All such Licenses and Permits are in full force
and effect and neither Seller nor Shareholder has received notice of any pending
cancellation or suspension of any thereof nor, to the best knowledge of Seller,
is any cancellation or suspension thereof threatened. The applicability and
validity of each such License and Consent will not be adversely affected by the
consummation of the transactions contemplated by this Agreement.
2.14. Product Claims. No product liability claim is pending,
or to the best knowledge of each of Seller and Shareholder threatened, against
Seller or against any other party with respect to the products of the Business.
Section 2.14 of the Disclosure Schedule lists all
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service and product liability claims asserted against Seller with respect to the
products of the Business or Seller during the last five (5) years.
2.15. Warranties and Returns. Section 2.15 of the Disclosure
Schedule sets forth a summary of the practices and policies followed by Seller
with respect to warranties and returns of any products manufactured or sold by
it, whether such practices are oral or in writing or are deemed to be legally
enforceable. Except as set forth in Section 2.15 of the Disclosure Schedule,
there is not presently, nor has there been since December 31, 1995, any failure
or defect in any product sold by Seller that has required, or that may require,
a general recall or replacement campaign or similar action with respect to such
product or a reformulation or change of such product, nor has there been any
acceptance of returned or defective goods of Seller in excess of $1,000 in the
aggregate for all such transactions with respect to products sold by it since
December 31, 1995.
2.16. No Brokers. Except for a fee due to X. Xxxxxxx &
Company, LLC (which fee shall be paid in its entirety by Buyer), neither Seller
nor Shareholder has employed, or otherwise engaged, any broker or finder or
incurred any liability for any brokerage or investment banking fees,
commissions, finders' fees or other similar fees in connection with the
transactions contemplated by this Agreement.
2.17. Assets Utilized in the Business. Except as set forth in
Section 2.17 of the Disclosure Schedule, the assets, properties and rights
owned, leased or licensed by Seller or used in connection with the Business and
that will be owned, leased or licensed by Seller as of the Closing Date, and all
the agreements to which Seller is a party, constitute all of the properties,
assets and agreements necessary to Seller in connection with the operation and
conduct by Seller of the Business as presently and as proposed to be conducted.
Included in Section 2.17 of the Disclosure Schedule are all services provided by
each Shareholder to Seller and all other arrangements involving each Shareholder
and Seller that are not included in the Purchased Assets.
2.18. Insurance. Section 2.18 of the Disclosure Schedule
contains a complete and correct list of all policies of insurance of any kind or
nature covering Seller, including policies of life, fire, theft, casualty,
product liability, workmen's compensation, business interruption, employee
fidelity and other casualty and liability insurance, indicating the type of
coverage, name of insured, the insurer, the expiration date of each policy, the
amount of coverage and whether on an "occurrence" or "claims made" basis. All
such policies are: (i) with insurance companies that are financially sound and
reputable and are in full force and effect; (ii) sufficient for compliance with
all material requirements of law and of all applicable material agreements; and
(iii) valid, outstanding and enforceable policies. Complete and correct copies
of such policies have been furnished to Buyer. All such insurance policies or
comparable coverage shall be continued in full force and effect through the
Closing Date.
2.19. No Misstatements or Omissions. No representation or
warranty by Seller or any Shareholder contained in this Agreement and no
statement contained in any certificate,
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list, Schedule, Exhibit or other instrument specified or referred to in this
Agreement, whether heretofore furnished to Buyer or hereafter furnished to Buyer
pursuant to this Agreement, contains or will contain any untrue statement of a
material fact or omits or will omit any material fact necessary to make the
statements contained therein, in light of the circumstances under which it was
made, not misleading.
2.20. Labor Matters.
(a) Except as set forth on Section 2.20(a) of the
Disclosure Schedule, no employees of Seller are covered by a collective
bargaining agreement or other agreement with any labor organization or employee
representation and no collective bargaining agreement or other agreement with
any labor organization or employee representation binding on Seller restricts
Seller from relocating or closing any or all of its business or operations.
(b) Except as set forth on Section 2.20(b) of the
Disclosure Schedule hereto, there are not currently pending, and during the past
five (5) years there has been, no strike, lockout, picketing, slow-downs, work
stoppages or similar labor controversies with respect to the Business and, to
the knowledge of each of Seller and the Shareholder, no such strikes, picketing,
lockouts, slow-downs, work stoppages or similar labor controversies are
threatened.
(c) Except as set forth on Section 2.20(c) of the
Disclosure Schedule, there has not existed during the past five (5) years, does
not currently exist and, to the knowledge of each of Seller and Shareholder, is
not currently threatened, any grievance, arbitration proceeding, charge or
complaint filed on behalf of an employee or labor organization, before the
National Labor Relations Board, the Equal Employment Opportunity Commission,
state and local civil rights agencies, federal or state departments of labor,
the various occupational health and safety agencies or any judicial or
arbitration forum with respect to Seller or the Business (collectively, "Labor
Claims").
(d) To the best knowledge of Seller and Shareholder, no
representation question exists or has been raised with respect to employees of
Seller during the past three (3) years. To the best knowledge of Seller and
Shareholder, there are no campaigns being conducted to solicit cards or
authorization from employees of Seller to be represented by any labor
organization.
(e) Seller is and has been in compliance with all
applicable laws, regulations, policies, procedures and contractual obligations
relating to employment, employment practices, wages, hours, discrimination,
safety and health of employees, workers compensation, unemployment insurance,
withholding of wages, and terms and conditions of employment. All employment
agreements, personnel manuals, handbooks, policy and procedure manuals
applicable to the employees of Seller have been disclosed and furnished to
Buyer.
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(f) Seller has not closed any plant or facility,
effectuated any mass layoff of employees as defined under the Workers Adjustment
and Retraining Notification Act ("WARN") (or other similar state law), or
implemented any early retirement or separation program during the past three (3)
years nor has Seller announced any such action. Set forth on Section 2.20(f) of
the Disclosure Schedule hereto is a list of all persons whose employment was
terminated by Seller during the past three (3) years whose compensation exceeded
$50,000 per annum.
(g) Except as set forth on Section 2.20(g) of the
Disclosure Schedule, Seller is not liable for any severance pay or other
payments to any employee or former employee due to the termination of employment
and will not have any liability under any benefit or severance plan, policy,
practice, program or agreement which exists or may be deemed to exist under any
applicable law, as a result of the transactions contemplated hereunder.
2.21. Financial Statements. Attached to Section 2.21 of the
Disclosure Schedule is the trial balance sheet of Seller as of December 31, 1999
(the "Trial Balance Sheet"). The Trial Balance Sheet has been derived from, and
agrees with, the books and records of Seller and fairly present the financial
position of Seller with respect to the matters set forth therein as of the date
thereof and the results of operations of Seller for the period set forth
therein.
2.22. Environmental Matters.
(a) Seller is in compliance with, and the Business has
been conducted in material compliance with, all Environmental Laws (as defined
below) and Environmental Permits (as defined below);
(b) no Site (as defined below) is a treatment, storage
or disposal facility, as defined in and regulated under the Resource
Conservation and Recovery Act, 42 U.S.C.ss.6901 et seq., is on or ever was
listed or is proposed for listing on the National Priorities List pursuant to
the Comprehensive Environmental Response, Compensation and Liability Act, 42
X.X.X.xx. 9601 et seq., or on any similar state list of sites requiring
investigation or cleanup;
(c) Neither Seller nor any Shareholder has received any
notice that remains pending or outstanding with respect to its business or any
Site from any governmental entity or person alleging that Seller is not in
material compliance with any Environmental Law;
(d) there has been no release of a Hazardous Substance
(as defined below) at, from, in, to, on or under any Site and no Hazardous
Substances are present in, on, about or migrating to or from any Site that could
give rise to an Environmental Claim (as defined below) against Seller;
(e) there are no pending or outstanding corrective
actions requested, required or being conducted by any governmental entity for
the investigation, remediation or cleanup of any Site, and there have been no
such corrective actions, whether still pending or otherwise;
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(f) the Business has obtained and holds all necessary
environmental permits, and those environmental permits will remain in full force
and effect after the consummation of the transactions contemplated hereby;
(g) there are no past or pending, or to the best
knowledge of each of Seller and the Shareholders threatened, Environmental
Claims against Seller or, with respect to the Business, Seller or the Purchased
Assets, the Shareholders, and neither Seller nor any Shareholder is aware of any
facts or circumstances which could be expected to form the basis for any
Environmental Claim against the Business;
(h) neither Seller, any predecessor of Seller, nor any
entity previously owned by Seller, has transported or arranged for the
treatment, storage, handling, disposal, or transportation of any Hazardous
Substance to any off-Site location that could result in an Environmental Claim
against Seller;
(i) there are no (i) underground storage tanks, active
or abandoned, (ii) polychlorinated biphenyl containing equipment, or (iii)
asbestos containing material at any Site; and
(j) there have been no environmental investigations,
studies, audits, tests, reviews or other analyses (which have been reduced to
writing) conducted by, on behalf of, or that are in the possession of Seller
with respect to any Site or any transportation, handling or disposal of any
Hazardous Substance that has not been delivered to Buyer prior to execution of
this Agreement.
As used herein, (i) "Environment" means all air, surface
water, groundwater, or land, including land surface or subsurface, including all
fish, wildlife, biota and all other natural resources; (ii) "Environmental
Claim" means any and all administrative or judicial actions, suits, orders,
claims, liens, notices, notices of violations, investigations, complaints,
requests for information, proceedings or other communications (written or oral),
whether criminal or civil, (collectively, "Claims") pursuant to or relating to
any applicable Environmental Law by any person (including, but not limited to,
any governmental entity, person and citizens' group) based upon, alleging,
asserting, or claiming any actual or potential (x) violation of or liability
under any Environmental Law, (y) violation of any environmental permit, or (z)
liability for investigatory costs, cleanup costs, removal costs, remedial costs,
response costs, natural resource damages, property damage, personal injury,
fines, or penalties arising out of, based on, resulting from, or related to the
presence, release, or threatened release into the Environment, of any Hazardous
Substances at any location, including, but not limited to, any off-Site location
to which Hazardous Substances or materials containing Hazardous Substances were
sent for handling, storage, treatment, or disposal; (iii) "Environmental Law"
means any and all Laws relating to the protection of health and the Environment,
worker health and safety, and/or governing the handling, use, generation,
treatment, storage, transportation, disposal, manufacture, distribution,
formulation, packaging, labeling, or release of Hazardous Substances, whether
now existing or subsequently amended or enacted, and the state analogies
thereto, all as amended or superseded from time to time; and any common law
doctrine, including, but not
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limited to, negligence, nuisance, trespass, personal injury, or property damage
related to or arising out of the presence, Release, or exposure to a Hazardous
Substance; (iv) "Hazardous Substance" means petroleum, petroleum hydrocarbons or
petroleum products, petroleum by-products, radioactive materials, asbestos or
asbestos-containing materials, gasoline, diesel fuel, pesticides, radon, urea
formaldehyde, lead or lead-containing materials, polychlorinated biphenyls; and
any other chemicals, materials, substances or wastes in any amount or
concentration which are now included in the definition of "hazardous
substances," "hazardous materials," "hazardous wastes," "extremely hazardous
wastes," "restricted hazardous wastes," "toxic substances," "toxic pollutants,"
"pollutants," "regulated substances," "solid wastes," or "contaminants" or words
of similar import, under any Environmental Law; and (v) "Site" means any of the
real properties currently or previously owned, leased, used or operated by
Seller, any predecessors of Seller or any entities previously owned by Seller,
including all soil, subsoil, surface waters and groundwater thereat.
2.23. No Material Adverse Change. Except as disclosed in
Section 2.23 of the Disclosure Schedule, since December 31, 1999, (a) no event,
condition or circumstance has occurred that could, or could be reasonably likely
to, have a material adverse effect on the Business, Purchased Assets or Assumed
Liabilities, or on the condition (financial or otherwise), results of operations
or prospects of Seller or the Business; and (b) the Business has been conducted
in the ordinary course and consistent with past practice.
2.24. No Undisclosed Liabilities.
(a) Seller does not have, and as of the Closing will not
have, any liabilities (whether accrued, contingent, known, unknown or otherwise)
other than those that are set forth on Schedule 2.24 of the Disclosure Schedule,
each of which was incurred in the ordinary course of business and none of which,
individually or in the aggregate, is material to the business, operations,
condition or prospects of the Business or the Purchased Assets.
(b) The accounts payable of Seller set forth in the
balance sheets referred to in Section 2.21 or arising subsequent thereto are the
result of bona fide transactions in the ordinary course of business and have
been paid or are not yet due and payable as at the Closing Date, in accordance
with the respective invoices relating thereto. Each of such accounts payable are
set forth on Exhibit A to this Agreement.
2.25. Solvency. Immediately prior to and upon consummation of
the transactions contemplated under this Agreement, Seller will be solvent, will
have assets having a fair value in excess of the amount required to pay its
liabilities (including, contingent, subordinated, unmatured and unliquidated
liabilities) as they become due and will have access to adequate capital for the
conduct of its business and the ability to pay its debts and such liabilities as
they mature.
2.26 Employee Benefits. (a) Except as set forth on Section
2.26 of the Disclosure Schedule, neither the Seller nor any other company or
entity, which together with the
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Seller constitutes a member of the Seller's "controlled group" or "affiliated
service group" (within the meaning of Sections 4001(a)(14) and/or (b) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") and/or
Sections 414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, as
amended (the "Code") (such group or groups and each member thereof hereinafter
referred to individually and collectively as the "Group")), has at any time
adopted or maintained, has any liability or is a fiduciary with respect to, or
has any present or future obligation to contribute to or make payment under (i)
any employee benefit plan (as defined in Section 3(3) of ERISA), or (ii) any
other benefit plan, program, contract or arrangement of any kind whatsoever
(whether for the benefit of present, former, retired or future employees,
officers, directors, consultants or independent contractors of the Seller or the
Group, or for the benefit of any other person or persons) including, without
limitation, with respect to disability, relocation, child care, educational
assistance, deferred compensation, pension, retirement, profit sharing, thrift,
savings, stock ownership, stock bonus, restricted stock, health, dental,
medical, life, hospitalization, stock purchase, stock option, incentive, bonus,
sabbatical leave, vacation, severance, cafeteria or other contribution, benefit
or payment of any kind, or (iii) any employment, consulting, service or other
contract or agreement of any kind whatsoever (all such employee benefit plans
and other benefit plans, programs, contracts or arrangements and such
employment, consulting, service or other contracts or agreements whether written
or oral hereinafter individually and collectively called the "Employee Benefit
Plan(s)").
(b) In addition, (i) none of the Employee Benefit Plans
is subject to Title IV of ERISA; (ii) any and all amounts which the Seller or
the Group are required to pay as contributions or otherwise, or with respect to
the Employee Benefit Plans have been timely paid; (iii) each of the Employee
Benefit Plans has been established, maintained, operated and administered in
accordance with its terms and all applicable law; (iv) each of the Employee
Benefit Plans which is intended to be "qualified" within the meaning of Sections
401(a) and 501(a) of the Code has been determined by the Internal Revenue
Service ("IRS") to be so qualified and continues to be so qualified; (v) there
are no pending, threatened or anticipated claims involving any of the Employee
Benefit Plans, other than routine claims for benefits; (vi) neither the Seller
nor the Group is a party to, or participates in, or has any liability or
contingent liability with respect to any "single employer plan" (within the
meaning of Section 4001(a)(15) of ERISA) which has two or more contributing
sponsors at least two of whom are not under common control (a "Single Employer
Plan") or any "multiemployer plan," within the meaning of Section 4001(a)(3) of
ERISA, (a "Multiemployer Plan"); and (vii) neither the Seller nor the Group has
any obligation or commitment to establish, maintain, operate or administer any
Employee Benefit Plan not set forth on Section 2.26 of the Disclosure Schedule
or to amend any Employee Benefit Plan so as to increase benefits thereunder or
otherwise.
(c) A true and complete copy of each of the Employee
Benefit Plans (and all amendments thereto, whether currently effective or to
become effective at a later date), all contracts and agreements relating
thereto, or to the funding thereof and the most recent summary plan description
thereof (including summaries of material modification) have been provided to
Buyer. In the case of any Employee Benefit Plan which is not in written form, an
accurate and complete description of such Employee Benefit Plan has been
provided to Buyer.
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(d) No member of the Group has any obligation to any
retired or former employee of the Seller with respect to the provision of any
disability (long or short term), hospitalization, medical, dental or life
insurance benefits, whether insured or self-insured, or coverage under any
employee welfare benefit plan (within the meaning of Section 3(1) of ERISA) or
any similar benefit plan maintained by any member of the Group, other than as
required under Section 4980B of the Code or Part 6 of Title I of ERISA or any
similar state law. As of the Closing Date, the Seller has complied with all
notice and continuation of health care coverage requirements under Section 4980B
of the Code and Part 6 of Title I of ERISA or any applicable state law.
Section 3. Representations and Warranties of Buyer. Buyer represents
and warrants to Seller as follows:
3.1. Organization. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization, with full power and authority to conduct its business and to own
and operate its assets and properties as presently conducted and operated.
3.2. Authorization; Validity of Agreement. Buyer has the
right, power and authority to execute and deliver this Agreement and each of the
other Purchase Documents to which it is a party (the "Buyer Purchase Documents")
and to consummate the transactions contemplated hereby and thereby and to make
the representations set forth herein and therein. The execution and delivery of
the Buyer Purchase Documents and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized by Buyer
and no other proceedings on the part of Buyer are necessary to authorize the
Buyer Purchase Documents or the consummation of the transactions contemplated
hereby and thereby. Each of the Buyer Purchase Documents when delivered to
Seller will be duly and validly executed by Buyer and constitute the valid and
binding agreement of Buyer, enforceable against Buyer in accordance with its
terms, except as such enforceability may be subject to or limited by applicable
bankruptcy, insolvency, reorganization, or other similar laws, now or hereafter
in effect, affecting the enforcement of creditors' rights generally.
3.3. Consents and Approvals; No Violation. The execution,
performance and delivery by Buyer of the Buyer Purchase Documents and the
consummation by Buyer of the transactions contemplated hereby and thereby, and
compliance by Buyer with the provisions hereto and thereto will not: (a)
conflict with or breach any provision of the Certificate of Incorporation of
Buyer; (b) violate or breach in any respect any provision of, or constitute a
default (or an event which, with notice or lapse of time or both would
constitute a default) under, any of the terms, covenants, conditions or
provisions of, or give rise to a right to terminate or accelerate or increase
the amount of payment due under, any note, bond, mortgage, indenture, deed of
trust, license, franchise, permit, lease, contract, agreement or other
instrument, commitment or obligation to which Buyer is a party, or by which
Buyer or any of its properties or assets may be bound; (c) require Buyer to make
any filing or registration with, or obtain any other permit, authorization,
consent or approval of, any governmental or regulatory authority; (d)
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violate any order, writ, injunction, decree, judgment, or ruling of any court or
governmental authority applicable to Buyer or any of its assets; or (e) violate
any statute, law, rule or regulation applicable to Buyer.
Section 4. Conditions Precedent to Buyer's Duty to Close. Buyer's
obligation to effect the transactions contemplated hereby is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
provided, however, that Buyer shall have the right to waive all or any part of
each such condition and to close the transactions contemplated hereby without,
however, releasing Seller from any covenant, obligation, agreement or condition
contained herein or from any liability for any loss or damage sustained by Buyer
by reason of the breach by Seller of any covenant, obligation, agreement or
condition contained herein or by reason of any misrepresentation made by
Seller):
(a) All of Seller's representations and warranties in
this Agreement shall have been true and correct in all respects when made and
shall be true and correct in all respects as of the Closing Date, with the same
force and effect as if made on the Closing Date, except for such representations
and warranties which are made as of a specific date, which shall be true and
correct in all respects as of such date
(b) Buyer shall have received Seller's Closing Documents
as provided in Section 1.5 hereof.
(c) The covenants and agreements of Seller contained in
this Agreement and required to be complied with or performed on or prior to the
Closing Date shall have been complied with or performed in all respects.
(d) Buyer shall have received a certificate dated the
Closing Date and executed by an executive officer of Seller certifying the
satisfaction of the conditions referred to in sections 4(a) and 4(c) and
certifying that Seller has paid all pre-petition and post-petition tax
liabilities due to government agencies.
(e) Buyer's satisfaction with its due diligence
examination of the Business;
(f) The Board of Directors of Buyer shall have approved
the transactions contemplated hereby;
(g) Buyer's satisfaction with Seller's compliance with
all applicable bulk sales laws;
(h) No events shall have occurred which, individually or
in the aggregate, have, or are reasonably likely to have, a material adverse
effect on the Purchased Assets or the Business; and
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(i) Buyer shall have completed to its sole satisfaction
an audit of the Purchased Assets.
(j) Buyer shall have obtained the financing required to
fund the purchase hereunder and the transactions contemplated by the parties
hereto on terms and conditions acceptable to Buyer.
(k) Buyer shall have received the appraisal in respect
of the Warrants in the form attached hereto as Exhibit 4(k) (the "Appraisal").
Section 5. Conditions Precedent to Obligation of Seller and Shareholder
to Close. The obligation of Seller and Shareholder to consummate the
transactions contemplated hereby is subject to the satisfaction, at or prior to
the Closing, of each of the following conditions provided, however, that Seller
and Shareholder together shall have the right to waive all or any part of each
such condition and to close the transactions contemplated hereby without,
however, releasing Buyer from any covenant, obligation, agreement or condition
contained herein or from any liability for any loss or damage sustained by
Seller or Shareholder by reason of the breach by Buyer of any covenant,
obligation, agreement or condition contained herein or by reason of any
misrepresentation made by Buyer:
(a) All of Buyer's representations and warranties in
this Agreement shall have been true and correct in all respects when made and
shall be true and correct in all respects as of the Closing Date, with the same
force and effect as if made on the Closing Date, except for such representations
and warranties which are made as of a specific date, which shall be true and
correct in all respects as of such date
(b) Seller shall have received the Cash Purchase Price
and the Warrants.
(c) Seller shall have received Buyer's Closing
Documents, as provided in Section 1.5 hereof.
(d) The covenants and agreements of Seller contained in
this Agreement and required to be complied with or performed on or prior to the
Closing Date shall have been complied with or performed in all material
respects.
(e) Seller shall have received a certificate dated the
Closing Date and executed by an executive officer of Buyer certifying the
satisfaction of the conditions referred to in Sections 5(a) and 5(d).
(f) Seller shall have received the Appraisal.
Section 6. Other Covenants of the Parties.
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6.1. Conduct of Business. During the period from the date
hereof through the Closing Date, Seller shall conduct its business in the
ordinary course, consistent with past practices. Without limiting the generality
of, and in addition to, the foregoing, prior to the Closing Date, Seller shall
not and Shareholder shall not permit Seller to, except as Buyer may otherwise
consent to in writing:
(a) authorize for issuance, issue, sell, deliver or
agree or commit to issue, sell or deliver (whether through the issuance or
granting of options, warrants, commitments, subscriptions, rights to purchase or
otherwise) any stock of any class or any other securities;
(b) enter into, adopt or amend any bonus, profit
sharing, compensation, severance, termination, stock option, stock appreciation
right, restricted stock, performance unit, pension, retirement, deferred
compensation, employment, severance or other employee benefit agreements,
trusts, plans, funds or other arrangements of or for the benefit or welfare of
any employee, or increase in any manner the compensation or fringe benefits of
any employee or pay any benefit not required by any existing plan and
arrangement (including, without limitation, the granting of stock options, stock
appreciation rights, shares of restricted stock or performance units),
discretionary bonuses or incentive or performance-based compensation, take any
action to fund or in any other way secure the payment of compensation or
benefits to any employee or under any Employee Benefit Plan, except to the
extent required under applicable law;
(c) acquire, sell, lease, transfer or dispose of any of
its properties or assets except in the ordinary course of business and
consistent with past practice or enter into any commitment or transaction in
excess of $1,000;
(d) except as may be required by law, take any action to
terminate or materially amend any of its Employee Benefit Plans with respect to
or for the benefit of employees;
(e) modify any policy or procedure with respect to
credit to customers or collection of receivables;
(f) pay, discharge or satisfy before it is due any claim
or liability of Seller, or fail to pay any such item in a timely manner given
Seller's prior practices;
(g) cancel any debts or waive any claims or rights in
excess of $1,000;
(h) except to the extent required by applicable law,
change any accounting principle or method or make any election for purposes of
foreign, federal, state or local income taxes;
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(i) take or suffer any action that would result in the
creation, or consent to the imposition, of any Lien on any of the properties or
assets of Seller;
(j) except in the ordinary course of business consistent
with past practice, amend, waive, surrender or terminate or agree to the
amendment, waiver, surrender or termination of any contract, lease or approval;
(k) exercise any right or option under any lease or
extend or renew any contract or lease;
(l) completely or partially withdraw (within the meaning
of Section 4201 of ERISA) from any Multiemployer Plan or withdraw (within the
meaning of Section 4063 of ERISA) from any Single Employer Plan;
(m) incur a "plant closing" or "mass layoff", within the
meaning of the Worker Adjustment and Retraining Notification Act;
(n) take any action that interferes with Buyer's
relationship with Seller's employees and not to be a direct or indirect party to
any action or activity which would deprive Buyer of the services of any of
Seller's employees; or
(o) enter into any Contract to do, or take, or agree in
writing or otherwise to take or consent to, any of the foregoing actions.
6.2. Access to Information. From the date hereof until the
Closing Date, Seller and Shareholder shall, and shall cause each of Seller's
officers, directors, employees, agents, accountants and counsel to, upon
reasonable notice: (i) afford the officers, employees and authorized agents,
accountants, counsel and representatives of Buyer reasonable access, during
normal business hours, to: (A) the offices, properties, plants, other
facilities, books, contracts and records of Seller and Shareholder related to
the Business and any records concerning Seller maintained and accumulated by its
representatives, and (B) those officers, directors, employees, agents,
accountants and counsel of Seller who have any knowledge relating to Seller or
the Purchased Assets, and (ii) furnish to the officers, employees and authorized
agents, accountants, counsel and representatives of Buyer such additional
financial and operating data and other information regarding the Purchased
Assets (including, without limitation, any contracts, licenses and patents in
effect as of the date hereof and any contracts or licenses being negotiated or
entered into between the date hereof and the Closing Date), properties and
goodwill of Seller as Buyer may from time to time reasonably request.
6.3. Employee Matters.
(a) Prior to the Closing Date, Buyer shall prepare and
deliver to Seller a list of the employees of Seller which it intends to hire
("Buyer's List"). On the Closing Date, Buyer shall offer employment effective as
of the Closing Date to all employees of Seller
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identified on Buyer's List (all such employees who accept such offer of
employment being the "Transferred Employees"). In addition to the obligations of
Seller set forth below, all responsibility for employees of Seller, other than
Transferred Employees, including, without limitation, claims arising out of the
decision not to include such employees on Buyer's List, shall be the
responsibility of Seller.
(b) If applicable pursuant to the Worker Adjustment and
Retraining Notification Act of 1988 ("WARN"), Seller has provided or shall
provide timely and effective notice to its employees and any applicable unit of
government with respect to any employment loss suffered by such employees as the
result of the termination of their employment by Seller and any failure of Buyer
to employ them at the Closing. Nothing contained in this Section 6.3 shall be
deemed to constitute a requirement that Buyer employ or offer employment to such
employees. In the event that WARN requires notice to such employees and Seller
fails to provide timely and effective notice under WARN, Seller and Shareholder
shall indemnify and hold Buyer harmless from and against any liability to such
employees or any unit of government that may result to Buyer from such failure,
including but not limited to, fines, back pay and reasonable attorney's fees.
(c) Buyer shall not be responsible for any payments,
expenses and costs paid or required to be paid in connection with the employment
or termination of employment of any employees of Seller who are identified on
Buyer's List and do not accept Buyer's offer of employment with Buyer.
(d) Seller shall remain responsible for (i) payment of
any and all wages, accrued vacation pay, bereavement pay, jury duty pay,
disability income, supplemental unemployment benefits, fringe benefits or other
perquisites of employment, termination indemnities or similar benefits (whether
arising under any plan, program, policy or arrangement of Seller or under
applicable local law), payroll taxes and other payroll related expenses and (ii)
payments to or under employee benefit plans (within the meaning of section 3(3)
of ERISA) maintained or contributed to by Seller, in either case arising out of
or relating to the employment of any of the Transferred Employees by Seller
prior to the Closing Date.
(e) Multi-employer Pension Plans. With respect to any
Multiemployer Plans, Buyer and Seller agree that in the event consummation of
the transactions contemplated by this Agreement causes any complete withdrawal
(as described in Section 4203 of ERISA) or any partial withdrawal (as described
in Section 4205 or ERISA) from the Multiemployer Plans or any such withdrawal
otherwise has occurred or does occur, Seller recognizes that it is solely
responsible for any and all liability under Title IV of ERISA arising from
withdrawals (collectively, the "Withdrawal Liability") and, notwithstanding
anything to the contrary in Section 9 hereof, to the extent the Multiemployer
Plans attempt to assess Withdrawal Liability against Buyer, Seller shall
indemnify, defend and hold harmless Buyer from and against and in respect of any
and all losses, damages, liabilities, taxes, interest and/or sanctions
(including reasonable attorneys' fees)
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(g) Seller shall retain responsibility and liability for
all workers' compensation claims of the Transferred Employees to the extent
relating to events, conditions or circumstances that occur or exist prior to the
Closing Date. Buyer shall have sole responsibility and liability for any
workers' compensation claims of Transferred Employees to the extent relating to
any event, condition or circumstance that occurs after the Closing Date.
(h) COBRA Indemnification and Information.
Notwithstanding anything to the contrary contained in Section 9 hereof, Seller
shall pay and shall assume, indemnify, defend, and hold harmless Buyer from and
against and in respect of any and all losses, damages, claims for benefits,
liabilities, taxes, and sanctions that arise under the Section 4980B of the
Code, or Part 6 of Title I of ERISA or any similar state law (individually and
collectively "COBRA"), interest and penalties, costs, and expenses (including,
without limitation, disbursements and reasonable legal fees incurred in
connection with any action, suit, proceeding, claim, appeal, demand, assessment,
or judgment) imposed upon, incurred by, or assessed against Buyer and any of its
employees arising by reason of or relating to any failure of Seller to comply
with the continuation health care coverage provisions of COBRA which failure
occurred with respect to any current or prior employee of Seller or any
qualified beneficiary of such employee (as defined in COBRA) prior to the
Closing Date or as otherwise required as a result of any transactions or matters
contemplated by this Agreement.
(i) In respect of grievances or Labor Claims of
Transferred Employees to the extent relating to their employment by Seller
including, without limitation, any such grievances or Labor Claims filed before
state or local authorities for which payment has not been made prior to the
Closing Date, Seller shall retain responsibility and liability for all amounts
due with respect thereto including, without limitation, the payment of any
amounts in the nature of back pay or employee compensation, and any state or
federal taxes in connection with such back pay or employee compensation.
Handling of such grievances and Labor Claims shall be at Seller's cost and
expense. Buyer shall have sole responsibility and liability for any Labor Claims
of Transferred Employees that relate to their employment with Buyer.
(j) Nothing in this Section 6.3 shall limit the at will
nature of the employment of the Transferred Employees or the right of Buyer to
alter or terminate any employee benefit plan, program or arrangement.
6.4. Notice of Developments. Prior to the Closing Date, Seller
shall promptly notify Buyer in writing of: (i) all events, circumstances, facts
and occurrences arising subsequent to the date of this Agreement that could
result in any material breach of a representation or warranty or covenant of
Seller or Shareholder in this Agreement or which could have the effect of making
any representation or warranty of Seller or Shareholder in this Agreement untrue
or incorrect in any respect, and (ii) all other material developments affecting
the Purchased Assets, liabilities, Business, financial condition, operations,
results of operations, customer or supplier relations, employee relations,
projections or prospects of Seller.
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6.5. Non-disclosure of Confidential Information. Neither
Seller nor Shareholder, nor any affiliate of the foregoing, shall divulge,
communicate, or use to the detriment of the Company or for the benefit of any
other Person, or misuse in any way, any confidential information pertaining to
the Business or the Purchased Assets. For purposes hereof, "confidential
information" means information, including but not limited to, technical or non
technical data, a formula, pattern, compilation, program, device, method,
technique, drawing, process, financial data, or list of actual or potential
customers or suppliers, that: (i) is sufficiently secret to derive economic
value, actual or potential, from not being generally known to other persons who
can obtain economic value from its disclosure or use; and (ii) is the subject of
efforts that are reasonable under the circumstance to maintain its secrecy or
confidentiality.
6.6. Non-solicitation of Employees. Until the third
anniversary of the Closing Date, neither Seller nor Shareholder, nor any
affiliate of the foregoing, shall, directly or indirectly, for itself or for any
other person, firm, corporation, partnership, association or other entity,
attempt to employ or enter into any contractual arrangement with any employee or
former employee of Seller, unless such employee or former employee has not been
employed by Buyer for a period in excess of one year.
6.7. Non-Competition. Until the completion of the Earn-Out
Period (such period as herein adjusted, the "Non Competition Period"), neither
Seller nor any Shareholder, nor any affiliate of the foregoing, shall (i)
directly or indirectly, engage in, have any interest in or engage in any
transaction with, any sole proprietorship, partnership, corporation or business
or any other person or entity (whether as an employee, officer, director,
partner agent, security holder, creditor, consultant or otherwise) that directly
or indirectly engages in the Business in the United States; provided, however,
that nothing contained herein shall be deemed to prevent or restrict Seller or
Shareholder, or their affiliates, from owning up to 1% of the shares of any
class of capital stock of any corporation whose shares are listed on a national
securities exchange or are regularly traded in the over-the-counter market so
long as neither Seller nor Shareholder do not actively participate or engage in
the conduct of the business of any such other corporation, and (ii) directly or
indirectly, solicit business from any person or entity that was a customer of
Seller at any time prior to the Closing Date. Notwithstanding the foregoing, in
the event that the (a) aggregate Earn-Out Payments shall equal the Maximum
Amount prior to the expiration of the Earn-Out Period, the Non Competition
Period shall end on the date one (1) year following the date on which the Seller
shall receive the Maximum Amount (after giving effect to all prior Earn-Out
Payments) or (b) Seller shall terminate its right to any Earn-Out Payments, the
Non Competition Period shall end on the date one year following such
termination.
Seller and Shareholder each acknowledges that the provisions
of this Section 6.7, and the period of time, geographic area and scope and type
of restrictions on its activities set forth herein, are reasonable and necessary
for the protection of Buyer and are an essential inducement to Buyer's entering
into the transaction documents to which it is a party and consummating the
transactions contemplated thereby.
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6.8. Public Statements. From and after the date hereof and
until the Closing Date, neither Buyer, on the one hand, or Seller or
Shareholder, on the other hand, shall, or permit any affiliate thereof to,
either make, issue or release any press release or any oral or written public
announcement or statement concerning or with respect to, or acknowledgment of
the existence of, or reveal the terms, conditions and status of the transactions
contemplated hereby, without the prior written consent of the other party or
parties hereto, as the case may be (which consent shall not be unreasonably
withheld or delayed), unless such announcement is required by law or a
governmental authority, in which case the other parties shall be given notice of
such requirement prior to such announcement and the parties shall consult with
each other as to the scope and substance of such disclosure.
6.9. Change of Name. Simultaneously with the Closing, Seller
shall take such action necessary to change its name to a name that does not
include the words "Xxxxxxx Xxxxxxxx, Incorporated", "HCI" or words similar
thereto.
6.10. Purchase Price Allocation. The Purchase Price shall be
allocated among the Purchased Assets and the goodwill of the Business in
accordance with Exhibit H annexed hereto. Buyer and Seller agree to report the
transactions contemplated under this Agreement in a manner consistent with the
terms of this Agreement (including, without limitation, Exhibit H) and neither
will take any position inconsistent herewith in any tax return, refund claim,
litigation or otherwise.
6.11. Sale of Real Property. In the event that, during the
period of twenty-four (24) months immediately following the Closing Date, the
Owned Real Property purchased hereunder is sold by Buyer to an unaffiliated
third party, Buyer shall pay Seller twenty-five percent (25%) of the net
proceeds in excess of $400,000 received by it.
6.12. Other Actions. Each of the parties hereto shall use all
reasonable efforts to: (i) take, or cause to be taken, all actions, (ii) do, or
cause to be done, all things, and (iii) execute and deliver all such documents,
instruments and other papers, as in each case may be necessary, proper or
advisable under applicable laws, or reasonably required in order to carry out
the terms and provisions of this Agreement and to consummate and make effective
the transactions contemplated hereby.
6.13. Exclusivity. From and after the date hereof and until
the Closing, unless this Agreement is terminated as provided in Section 7
hereto, neither Seller nor Shareholder shall, and neither shall knowingly permit
Seller or any of their respective affiliates, officers, directors, employees,
agents or representatives, directly or indirectly, to encourage, solicit,
initiate or participate in discussions or negotiations with, provide any
information to, receive any proposals or offers from, or enter into any
agreement with, any third party, in each case other than Buyer, that involves
the sale, joint venture or the other disposition of all or any portion of
Seller, the Purchased Assets or the Business or any merger, consolidation,
recapitalization or other business combination of any kind involving Seller. If
Seller or Shareholder receives or
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becomes aware of any offer or proposed offer, Seller or Shareholder, as the case
may be, shall promptly notify Buyer.
6.14. Special Loan. Subject to this Section 6.14, if and to
the extent that Shareholder and/or Seller shall have federal, state or city
income tax liability for the fiscal year ending December 31, 2000 (the "Tax
Liability"), Buyer shall lend to Shareholder on or before January 11, 2001, an
amount equal to such income tax liability not to exceed $175,000. Such loan
shall be made pursuant to the terms of a secured promissory note (the "Note") in
form and substance satisfactory to Buyer and shall be issued by Shareholder,
bearing interest at the rate of 6% per annum payable annually or, at the option
of the issuer, at the maturity thereof. The Note, among other things, shall be
nonrecourse of to the Shareholder, except that Seller and Shareholder shall
grant to Buyer a first priority security interest in and to all right, title and
interest of Seller and Shareholder in and to Sections 1.3(c) of this Agreement
and Sections 4 and 5 of the Warrants. Principal under the Note shall be payable
five (5) years after the date of issuance thereof but shall be prepaid in part
or in full, as the case may be, in the amount of (a) 30% of the amounts payable
to Seller under Section 1.3(c) of this Agreement, (b) 52% of the amounts payable
to Seller under Section 4 and/or Section 5 of the "Y" Warrants and (c) 100% of
the amounts payable to Seller under Section 4 and/or Section 5 of the "Z"
Warrants in each case, at the time of payment by Buyer or Parent, as the case
may be, of such amounts. The Note may be prepaid at anytime in whole or in part
without penalty. Seller and Shareholder shall cause the calculation of the Tax
Liability to be calculated by Seller's certified public accountant, Xxxxx Xxxxx,
not later than January 6, 2001, subject to the review and comments of Buyer's
independent public accountants.
Section 7. Termination.
7.1. This Agreement may be terminated at any time prior to the
Closing:
(a) by the mutual agreement of Buyer and Seller;
(b) by Buyer or Seller (if such party is not in breach
of or default under this Agreement) giving written notice to such effect to the
other party if the Closing shall not have occurred on or before November 30,
2000, or such later date as the parties shall have agreed upon prior to the
giving of such notice; or
(c) by either Buyer or Seller in the event of a material
breach by or default of the other party hereto.
Upon termination of this Agreement pursuant to this Section 7,
all obligations of the parties shall terminate except those under Section 6.5;
provided, however, that no such termination shall relieve Seller or the
Shareholders of any liability to Buyer, or Buyer of any liability to Seller, by
reason of any breach of or default under this Agreement.
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Section 8. Survival of Representations and Warranties.
8.1. Survival of Representations and Warranties of Seller and
Shareholder. Notwithstanding any right of Buyer fully to investigate the affairs
of Seller and notwithstanding any knowledge of facts determined or determinable
by Buyer pursuant to such investigation or right of investigation, Buyer has the
right to rely fully upon the representations and warranties of Seller and
Shareholder contained in this Agreement or in any other Transaction Document.
All such representations and warranties shall survive the execution and delivery
of this Agreement and the Closing hereunder until the second anniversary of the
Closing, except that the representation and warranties contained in Section 2.2
and Section 2.8 shall survive until ninety (90) days after the expiration of the
applicable statute of limitations and any extensions thereof.
8.2. Survival of Representations and Warranties of Buyer.
Notwithstanding any right of Buyer fully to investigate the affairs of Seller
and Shareholder and notwithstanding any knowledge of facts determined or
determinable by Buyer pursuant to such investigation or right of investigation,
Seller has the right to rely fully upon the representations and warranties of
Buyer contained in this Agreement or in any other Transaction Document. All such
representations and warranties shall survive the execution and delivery of this
Agreement and the Closing hereunder until the second anniversary of the Closing.
Section 9. Indemnification.
9.1. Indemnification by Seller and Shareholder. Seller and
Shareholder shall, jointly and severally, indemnify and defend Parent, Buyer and
each of their officers, mangers, employees, members, agents, advisors or
representatives (each, a "Buyer Indemnitee") against, and hold each Buyer
Indemnitee harmless from, any loss, liability, obligation, deficiency, damage or
expense including, without limitation, interest, penalties, reasonable
attorneys' and consultants' fees and disbursements (collectively, "Damages"),
that any Buyer Indemnitee may suffer or incur based upon, arising out of,
relating to or in connection with any of the following (whether or not in
connection with any third party claim):
(a) any breach of any representation or warranty made by
Seller or any Shareholder contained in this Agreement or in any other Purchase
Document or in respect of any third party claim made based upon facts alleged
which, if true, would constitute any such breach;
(b) either Seller's or Shareholder's failure to perform
or to comply with any covenant or condition required to be performed or complied
with by Seller or the Shareholders contained in this Agreement or in any other
Purchase Document;
(c) the ownership or operation of the Business or the
Purchased Assets prior to the Closing Date; or
9.2. Indemnification by Buyer. Buyer and Parent shall, jointly
and severally, indemnify and defend Seller and each of Seller's officers,
directors, employees, shareholders,
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agents, advisors or representatives (each, a "Seller Indemnitee") against, and
hold each Seller Indemnitee harmless from, any Damages that such Seller
Indemnitee may suffer or incur arising from, related to or in connection with
any of the following:
(a) any breach of any representation or warranty made by
Buyer contained in this Agreement or in any other Purchase Document or in
respect of any claim made based upon facts alleged which, if true, would
constitute any such breach;
(b) Buyer's failure to perform or to comply with any
covenant or condition required to be performed or complied with by Buyer
contained in this Agreement or in any other Purchase Document.
9.3. Indemnification Procedures.
(i) Promptly after notice to an indemnified party of any
claim or the commencement of any action or proceeding, including any actions or
proceedings by a third party (hereafter referred to as "Proceeding" or
"Proceedings"), involving any Damage referred to in sections 9.1 and 9.2, such
indemnified party shall, if a claim for indemnification in respect thereof is to
be made against an indemnifying party pursuant to this section 9, give written
notice to the indemnifying party, setting forth in reasonable detail the nature
thereof and the basis upon which such party seeks indemnification hereunder;
provided, however, that the failure of any indemnified party to give such notice
shall not relieve the indemnifying party of its obligations hereunder, except to
the extent that the indemnifying party is actually prejudiced by the failure to
give such notice.
(ii) In the case of any Proceeding by a third party
against an indemnified party, the indemnifying party shall, upon notice as
provided above, assume the defense thereof, with counsel reasonably satisfactory
to the indemnified party, and, after notice from the indemnifying party to the
indemnified party of its assumption of the defense thereof, the indemnifying
party shall not be liable to such indemnified party for any legal or other
expenses subsequently incurred by the indemnified party in connection with the
defense thereof (but the indemnified party shall have the right, but not the
obligation, to participate at its own cost and expense in such defense by
counsel of its own choice) or for any amounts paid or foregone by the
indemnified party as a result of any settlement or compromise thereof that is
effected by the indemnified party (without the written consent of the
indemnifying party).
(iii) Anything in this Section 9 notwithstanding, if
both the indemnifying party and the indemnified party are named as parties or
subject to such Proceeding and either party determines with advice of counsel
that there may be one or more legal defenses available to it that are different
from or additional to those available to the other party or that a material
conflict of interest between such parties may exist in respect of such
Proceeding, then the indemnifying party may decline to assume the defense on
behalf of the indemnified party or the indemnified party may retain the defense
on its own behalf, and, in either such case, after notice to such effect is duly
given hereunder to the other party, the indemnifying party shall be
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relieved of its obligation to assume the defense on behalf of the indemnified
party, but shall be required to pay any legal or other expenses including,
without limitation, reasonable attorneys' fees and disbursements, incurred by
the indemnified party in such defense.
(iv) If the indemnifying party assumes the defense of
any such Proceeding, the indemnified party shall cooperate fully with the
indemnifying party and shall appear and give testimony, produce documents and
other tangible evidence, allow the indemnifying party access to the books and
records of the indemnified party and otherwise assist the indemnifying party in
conducting such defense. No indemnifying party shall, without the consent of the
indemnified party, consent to entry of any judgment or enter into any settlement
or compromise which does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such indemnified party of a release from all
liability in respect of such claim or Proceeding. Provided that proper notice is
duly given, if the indemnifying party shall fail promptly and diligently to
assume the defense thereof, then the indemnified party may respond to, contest
and defend against such Proceeding and may make in good faith any compromise or
settlement with respect thereto, and recover from the indemnifying party the
entire cost and expense thereof including, without limitation, reasonable
attorneys' fees and disbursements and all amounts paid or foregone as a result
of such Proceeding, or the settlement or compromise thereof. The indemnification
required hereunder shall be made by periodic payments of the amount thereof
during the course of the investigation or defense, as and when bills or invoices
are received or loss, liability, obligation, damage or expense is actually
suffered or incurred.
9.4. Right to Set-Off. Buyer shall have the right to set-off
the amount of any and all Damages for which Seller or Shareholder may become
liable to Buyer under any provisions of this Agreement against any sums
otherwise payable to Seller hereunder or under any other agreement, document or
instrument executed and delivered pursuant to this Agreement or contemplated
hereby including, without limitation, any amounts payable to Seller pursuant to
Sections 1.3, 6.11 hereof and Sections 4 and 5 of the Warrants or bonus amounts
under Employment Agreement. Buyer will not exercise any right to set-off until
it has given Seller and Shareholder not less than ten (10) days notice within
which period Seller and Shareholder shall have the right to pay the amount of
the Damages proposed by Buyer in cash. The remedies provided herein shall be
cumulative and shall not preclude assertion by any party hereto of any other
rights or the seeking of any other remedies against any other party hereto.
Section 10. Miscellaneous.
10.1. Transaction Fees and Expenses. Each party hereto shall
bear such costs, fees and expenses as may be incurred by it in connection with
this Agreement and the transactions contemplated hereby.
10.2. Notices. Any notice, demand, request or other
communication which is required, called for or contemplated to be given or made
hereunder to or upon any party hereto shall be deemed to have been duly given or
made for all purposes: if (a) in writing and sent by (i) messenger or a
recognized national overnight courier service for next day delivery with
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receipt therefor, or (ii) certified or registered mail, postage paid, return
receipt requested, or (b) sent by facsimile transmission with a written copy
thereof sent on the same day by postage paid first-class mail or (c) by personal
delivery to such party at the following address:
To Buyer or Parent:
American Medical Alert Corp.
0000 Xxxxxx Xxxxxxxxx
Xxxxxxxxx, Xxx Xxxx 000000
Attention: Mr. Xxxxxx Xxxxxx
Telecopier No.: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxx LLP
The Chrysler Building
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxx
Telecopier No.: (000) 000-0000
To Seller or any Shareholder at:
Xxxxxxx Xxxxxxxx, Incorporated
000 X. 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xx. Xxxxx Xxxxxxxx
Telecopier No.: (000) 000-0000
with respect to each of Seller and the Shareholders, with a copy to:
Xxxxxxx & Xxxxxxx
000 Xxxxxxxxxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxxxx, Esq.
Telecopier No.: (000) 000-0000
or such other address as either party hereto may at any time, or from time to
time, direct by notice given to the other party in accordance with this section.
The date of giving or making of any such notice or demand shall be, in the case
of clause (a)(i), the date of the receipt, in the case of clause (a)(ii), five
business days after such notice or demand is sent, and, in the case of clause
(b), the business day next following the date such notice or demand is sent. A
copy of any notice to the Shareholders shall be sent concurrently to Seller and
a copy of any notice to Seller shall be sent concurrently to the Shareholders.
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10.3. Amendment. Except as otherwise provided herein, no
amendment of this Agreement shall be valid or effective unless in writing and
signed by or on behalf of the party against whom the same is sought to be
enforced.
10.4. Waiver. No course of dealing of any party hereto, no
omission, failure or delay on the part of any party hereto in asserting or
exercising any right hereunder, and no partial or single exercise of any right
hereunder by any party hereto shall constitute or operate as a waiver of any
such right or any other right hereunder. No waiver of any provision hereof shall
be effective unless in writing and signed by or on behalf of the party to be
charged therewith. No waiver of any provision hereof shall be deemed or
construed as a continuing waiver, as a waiver in respect of any other or
subsequent breach or default of such provision, or as a waiver of any other
provision hereof unless expressly so stated in writing and signed by or on
behalf of the party to be charged therewith. Buyer's receipt of information
contained herein shall not be deemed to waive any of Buyer's rights under the
indemnification provisions of Section 9.
10.5. Governing Law. This Agreement shall be governed by, and
interpreted and enforced in accordance with, the laws of the State of New York
applicable to agreements made and to be performed entirely in that state.
10.6. Jurisdiction. Each of the parties hereto hereby
irrevocably consents and submits to the exclusive jurisdiction of the Federal
and State Courts of New York County in connection with any Proceeding arising
out of or relating to this Agreement or the transactions contemplated hereby,
waives any objection to venue in such New York County and agrees that service of
any summons, complaint, notice or other process relating to such Proceeding may
be effected in the manner provided by Section 10.2.
10.7. Remedies. In the event of any actual or prospective
breach or default by any party hereto, the other parties shall be entitled to
equitable relief, including remedies in the nature of rescission, injunction and
specific performance. All remedies hereunder are cumulative and not exclusive.
Nothing contained herein and no election of any particular remedy shall be
deemed to prohibit or limit any party from pursuing, or be deemed a waiver of
the right to pursue, any other remedy or relief available now or hereafter
existing at law or in equity (whether by statute or otherwise) for such actual
or prospective breach or default, including the recovery of damages.
10.8. Severability. The provisions hereof are severable and if
any provision of this Agreement shall be determined to be legally invalid,
inoperative or unenforceable in any respect by a court of competent
jurisdiction, then the remaining provisions hereof shall not be affected, but
shall, subject to the discretion of such court, remain in full force and effect,
and any such invalid, inoperative or unenforceable provision shall be deemed,
without any further action on the part of the parties hereto, amended and
limited to the extent necessary to render such provision valid, operative and
enforceable.
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10.9. Further Assurances. Each party hereto covenants and
agrees promptly to execute, deliver, file or record such agreements,
instruments, certificates and other documents and to perform such other and
further acts as the other party hereto may reasonably request or as may
otherwise be necessary or proper to consummate and perfect the transactions
contemplated hereby.
10.10. Assignment. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto,
their heirs and their respective successors and assignees; provided, however,
that Seller and Shareholder shall not assign their respective rights or delegate
any duties hereunder without the prior written consent of Buyer.
10.11. No Third Party Beneficiaries. Nothing contained in this
Agreement, whether express or implied, is intended, or shall be deemed, to
create or confer any right, interest or remedy for the benefit of any Person
other than as otherwise provided in this Agreement.
10.12. Entire Agreement. This Agreement (including all the
schedules and exhibits hereto), together with the Exhibits, Schedules,
certificates and other documentation referred to herein or required to be
delivered pursuant to the terms hereof, contains the terms of the entire
agreement among the parties with respect to the subject matter hereof and
supersedes any and all prior agreements, commitments, understandings,
discussions, negotiations or arrangements of any nature relating thereto.
10.13. Headings. The headings contained in this Agreement are
included for convenience and reference purposes only and shall be given no
effect in the construction or interpretation of this Agreement.
10.14. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
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SELLER: XXXXXXX XXXXXXXX, INCORPORATED
By: /s/ Xxxxx Xxxxxxxx
-------------------------------
Name: Xxxxx Xxxxxxxx
Title: President
BUYER: HCI ACQUISITION CORP.
By: /s/ Xxxxxx X. Xxxxxx
-------------------------------
Name: Xxxxxx X. Xxxxxx
Title: President
PARENT: AMERICAN MEDICAL ALERT CORP.
By: /s/ Xxxxxx X. Xxxxxx
-------------------------------
Name: Xxxxxx X. Xxxxxx
Title: President
SHAREHOLDER: /s/ Xxxxx Xxxxxxxx
----------------------------------
XXXXX XXXXXXXX
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