Exhibit 2.4
STOCK PURCHASE AGREEMENT
by and among
PATHOLOGY ASSOCIATES INTERNATIONAL CORPORATION
(the "Company"),
SCIENCE APPLICATIONS INTERNATIONAL CORP.
(the "Stockholder")
and
XXXXXXX RIVER LABORATORIES, INC.
("Buyer")
Dated as of December 21, 2000
TABLE OF CONTENTS
SECTION 1. CERTAIN DEFINITIONS.............................................1
SECTION 2. PURCHASE AND SALE OF THE COMPANY SHARES.........................3
2.1 Purchase and Sale of the Company Shares................................3
2.2 Purchase Price.........................................................3
2.3 Adjustment to Purchase Price...........................................3
2.4 Closing................................................................4
2.5 Further Assurances.....................................................4
2.6 Transfer Taxes.........................................................4
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND
THE STOCKHOLDER.................................................4
3.1 General................................................................5
3.2 Organization and Qualification of the Company..........................5
3.3 Capitalization of the Company..........................................5
3.4 Subsidiaries or Other Investments......................................5
3.5 Authority; Binding Nature; No Conflict.................................5
3.6 Real Property..........................................................6
3.7 Title to Assets........................................................7
3.8 Sufficiency of Assets..................................................7
3.9 Financial Statements...................................................7
3.10 Taxes..................................................................8
3.11 Collectability of Accounts Receivable..................................9
3.12 Absence of Certain Changes.............................................9
3.13 Ordinary Course.......................................................11
3.14 Depositories; Powers of Attorney......................................11
3.15 Proprietary Rights....................................................11
3.16 Contracts.............................................................12
3.17 Government Contracts..................................................14
3.18 Litigation............................................................14
3.19 Compliance with Laws..................................................15
3.20 Insurance.............................................................15
3.21 Finder's Fee..........................................................15
3.22 Governmental Authorizations; Burdensome Agreements....................15
3.23 Corporate Records.....................................................16
3.24 Transactions with Interested Persons..................................16
3.25 Employee Benefit Programs.............................................16
3.26 Environmental Matters.................................................17
3.27 Non-Foreign Status....................................................18
3.28 Employees; Labor Matters..............................................18
3.29 Key Employees.........................................................19
3.30 Absence of Improper Payments..........................................19
3.31 Disclosure............................................................20
SECTION 4. ADDITIONAL REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER...20
4.1 General...............................................................20
4.2 Company Shares........................................................20
(i)
4.3 Authority.............................................................20
4.4 Agreements............................................................21
4.5 Investment Representations............................................21
SECTION 5. REPRESENTATIONS AND WARRANTIES OF BUYER........................22
5.1 General...............................................................22
5.2 Organization and Qualification of Buyer...............................22
5.3 Authority; Binding Nature, No Conflict................................22
5.4 Finder's Fee..........................................................23
5.5 Private Offering......................................................23
5.6 Investigation by Buyer................................................23
SECTION 6. COVENANTS OF THE COMPANY AND THE STOCKHOLDER...................24
6.1 General...............................................................24
6.3 Retention Bonuses.....................................................26
6.4 Consent...............................................................26
6.5 Notification; Updates to Disclosure Schedule..........................26
6.6 Consummation of Agreement.............................................27
6.7 Cooperation of the Company and Stockholder............................27
6.8 No Solicitation of Other Offers.......................................27
6.9 Confidentiality.......................................................27
6.10 No Transfer of Company Shares.........................................27
6.11 Affiliate Transactions................................................28
SECTION 7. COVENANTS OF BUYER.............................................28
7.1 General...............................................................28
7.2 Confidentiality.......................................................28
7.3 Consummation of Agreement.............................................28
7.4 Authorization from Others.............................................28
7.5 Notice of Breach......................................................28
7.6 Accrued Bonuses.......................................................29
SECTION 8. CERTAIN TAX MATTERS............................................29
8.1 General...............................................................29
8.2 Tax Periods Ending on or Before the Closing Date......................29
8.3 Tax Periods Beginning Before and Ending After the Applicable
Closing Date..........................................................29
8.4 Payment of Taxes......................................................29
8.5 Cooperation and Exchange of Information...............................29
8.6 Section 338 Election..................................................30
8.7 Audits................................................................30
SECTION 9. CONDITIONS TO CLOSING..........................................31
9.1 Conditions to the Obligations of the Parties..........................31
9.2 Conditions to the Obligations of Buyer................................31
9.3 Conditions to the Obligations of the Company and the Stockholder......33
SECTION 10. TERMINATION OF AGREEMENT.......................................33
10.1 Termination...........................................................34
10.2 Effect of Termination.................................................34
SECTION 11. INDEMNIFICATION................................................34
11.1 Survival..............................................................34
11.2 Indemnification by the Stockholder....................................35
(ii)
11.3 Limitations on Indemnification by the Stockholder.....................35
11.4 Indemnification by Buyer..............................................36
11.5 Limitations on Indemnification by Buyer...............................36
11.6 No Contribution.......................................................37
11.7 No Consequential Damages..............................................37
11.8 Notice; Defense of Claims............................................37
11.9 Sole Remedy...........................................................38
11.10 Right of Offset.......................................................38
SECTION 12. MISCELLANEOUS..................................................38
12.1 Governing Law.........................................................39
12.2 Notices...............................................................39
12.3 Entire Agreement......................................................40
12.4 Assignability; Binding Effect.........................................40
12.5 Captions..............................................................40
12.6 Execution in Counterparts.............................................40
12.7 Modification, Amendment, Waiver.......................................40
12.8 Press Releases and Public Announcements...............................40
12.9 Arbitration...........................................................41
12.10 Consent of Third Parties..............................................41
12.11 Expenses..............................................................41
12.12 Restrictions Under Securities Laws....................................42
12.13 Remedies..............................................................42
12.14 Severability..........................................................42
12.15 Non-solicitation......................................................42
Exhibit A - Working Capital Target Calculation
Exhibit B - Unsecured Subordinated Convertible Note
Exhibit C - Retention Bonuses
(iii)
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of December 21, 2000 by and among PATHOLOGY ASSOCIATES INTERNATIONAL
CORPORATION (the "Company"), SCIENCE APPLICATIONS INTERNATIONAL CORPORATION (the
"Stockholder") and XXXXXXX RIVER LABORATORIES, INC. ("Buyer").
WHEREAS, the Stockholder is the sole owner of all of issued and
outstanding capital stock of the Company (the "Company Shares"), which consists
of 100 shares of common stock, $0.01 par value per share, of the Company (the
"Common Stock"); and
WHEREAS, subject to the terms and conditions set forth herein, the
Stockholder desires to sell to Buyer, and Buyer desires to purchase from the
Stockholder, all of the Company Shares.
NOW, THEREFORE, in consideration of the mutual representations, warranties
and agreements, and upon the terms and subject to the conditions hereinafter set
forth, the parties hereto hereby agree as follows:
SECTION 1. CERTAIN DEFINITIONS.
For purposes of this Agreement:
"Adjusted Purchase Price" means the Purchase Price as adjusted to reflect
the Working Capital Adjustment.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consent" means any approval, consent, ratification, permission, waiver or
authorization (including any Governmental Authorization).
"Contract" means any written, oral or other agreement, contract,
subcontract, lease, understanding, instrument, note, warranty, insurance policy,
benefit plan or legally binding commitment or undertaking of any nature.
"Encumbrance" means any lien, pledge, hypothecation, charge, mortgage,
security interest, encumbrance, claim, infringement, interference, option, right
of first refusal, preemptive right or restriction of any nature (including any
restriction on the voting of any security, any restriction on the transfer of
any security or other asset, any restriction on the receipt of any income
derived from any asset, any restriction on the use of any asset and any
restriction on the possession, exercise or transfer of any other attribute of
ownership of any asset).
"Entity" means any corporation (including any non-profit corporation),
general partnership, limited partnership, limited liability partnership, joint
venture, estate, trust, company (including limited liability company or joint
stock company), firm or other enterprise, association, organization or entity.
"GAAP" means generally accepted accounting principles as in effect in the
United States applied on a consistent basis for all relevant periods.
"Governmental Authority" means any (a) nation, state, commonwealth,
province, territory, county, municipality, district or other jurisdiction of any
nature; (b) federal, state, local, municipal, foreign or other government; or
(c) governmental or quasi-governmental authority of any nature (including any
governmental division, department, agency, commission, instrumentality,
official, organization, unit, body or Entity and any court or other tribunal).
"Governmental Authorization" means any (a) permit, license, certificate,
franchise, permission, clearance, registration, qualification or authorization
issued, granted, given or otherwise made available by or under the authority of
any Governmental Authority or pursuant to any Law or (b) right under any
Contract with any Governmental Authority.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976,
as amended.
"Indebtedness" means, with respect to any Person, any and all obligations
of such Person (i) for borrowed money, (ii) evidenced by notes, bonds,
debentures or similar instruments, (iii) under or relating to letters of credit
(including any obligation to reimburse the letter of credit issuer with respect
to amounts drawn on such instruments), (iv) for the deferred purchase price of
goods or services (excluding trade payables incurred in the ordinary course of
business), (v) under capital leases, (vi) with respect to bank overdrafts or
otherwise reflected as negative cash in financial statements of such Person,
(vii) to pay any accrued dividends or dividends that have otherwise been
declared and not yet paid, (viii) to guarantee obligations or liabilities of any
other Person, and (ix) which are required by GAAP to be shown as debt on the
balance sheet of such Person.
"Independent Accountant" means such "Big 5" accounting firm as is mutually
agreed upon by the Stockholder and Buyer.
"Law" means any federal, state, local, municipal, foreign or other law,
statute, constitution, principle of common law, resolution, ordinance, code,
edict, decree, rule, regulation, ruling or requirement issued, enacted, adopted,
promulgated, implemented or otherwise put into effect by or under the authority
of any Governmental Authority.
"Liability" means any liability or obligation (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, whether incurred directly or
consequential and whether due or to become due), including any Tax or other
liability arising out of applicable statutory, regulatory or common law, any
contractual obligation and any obligation arising out of tort.
"Person" means any individual, Entity or Governmental Authority.
"Working Capital Adjustment" means any increase or decrease, as the case
may be, of the Purchase Price on a dollar for dollar basis for the amount by
which the Working Capital Value of the Company as of the Closing Date exceeds or
is less than the Working Capital Target.
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"Working Capital Target" means $7,848,000, the calculation of which is set
forth in Exhibit A hereto.
"Working Capital Value" means the book value of the Company's assets (net
of depreciation or amortization) less its liabilities as of the Closing Date,
determined (i) in accordance with GAAP consistent with the Company's past
practices and (ii) adjusted under the following circumstances: (a) as
specifically provided in this Agreement or any exhibit or schedule hereto, and
(b) to reflect those adjustments mutually agreed to by the Stockholder and Buyer
or as resolved by the Independent Accountant pursuant to Section 2.3(b) if the
Stockholder and Buyer are unable to agree. The fees and expenses described in
Section 12.11 hereof shall be fully paid or accrued as of the Closing Date and
shall be fully reflected in the determination of Working Capital Value.
SECTION 2. PURCHASE AND SALE OF THE COMPANY SHARES.
2.1 Purchase and Sale of the Company Shares. At the Closing, on the terms
and conditions set forth in this Agreement, the Stockholder shall sell, assign,
transfer and deliver to Buyer, and Buyer shall purchase, acquire and accept from
the Stockholder, the Company Shares. At the Closing, the Stockholder shall
deliver to Buyer certificates representing all of the Company Shares duly
endorsed in blank for transfer or shall be presented with stock powers duly
executed in blank, with such other documents as may be reasonably required by
Buyer to effect a valid transfer of the Company Shares by the Stockholder to
Buyer, free and clear of any and all Encumbrances.
2.2 Purchase Price. In consideration of the transfer by the Stockholder to
Buyer of the Company Shares, Buyer shall pay or cause to be paid to the
Stockholder aggregate consideration of $40,579,600 (the "Purchase Price"),
subject to adjustment as set forth in Section 2.3, comprised of (i) cash in the
amount of $28,579,600 (the "Initial Cash Payment") and (ii) an Unsecured
Subordinated Convertible Note in the original principal amount of $12,000,000 in
substantially the form of Exhibit B hereto (the "Note"). The Initial Cash
Payment shall be paid by Buyer at the Closing by wire transfer of immediately
available funds to an account which shall be specified by the Stockholder at
least three business days prior to the Closing or, if not so specified, by
certified check. The Note shall be duly executed and delivered by Buyer to the
Stockholder at the Closing.
2.3 Adjustment to Purchase Price. As soon as practicable after the
Closing, but in no event later than sixty (60) days after the Closing Date,
Buyer shall review the books and records of the Company. Within said period,
Buyer also shall (i) calculate the Working Capital Value of the Company as of
the Closing Date, (ii) prepare a statement setting forth a detailed calculation
of the Working Capital Adjustment and the Adjusted Purchase Price (the "Purchase
Price Statement"), and (iii) within three (3) days after completion of the
Purchase Price Statement, deliver the Purchase Price Statement to the
Stockholder. For purposes of calculating the Working Capital Adjustment, Buyer
may only make adjustments for items occurring after August 31, 2000. The
Stockholder shall have thirty (30) days after receipt of the Purchase Price
3
Statement to give Buyer written notice of its objection to any item or
calculation contained in the Purchase Price Statement. If the Stockholder does
not give Buyer written notice of its objection to the Purchase Price Statement
within such thirty (30) day period, such Purchase Price Statement shall be
deemed final and conclusive with respect to the determination of the Working
Capital Adjustment and the Adjusted Purchase Price and shall be binding on the
parties for such purposes. If, however, the Stockholder objects to any items or
calculations contained in the Purchase Price Statement, the parties shall meet
and shall attempt in good faith to resolve such objections. If the parties are
unable to resolve the Stockholder's objections within thirty (30) days following
such objection, such objections and Buyer's responses thereto will be reviewed
by the Independent Accountant, who shall resolve all such objections, make any
necessary revisions to the Purchase Price Statement, and deliver the Purchase
Price Statement (as so revised, if applicable) to Buyer and the Stockholder
within fifteen (15) days after receiving written instructions to resolve such
objections. The Purchase Price Statement as finalized by the Independent
Accountant shall be deemed final and conclusive with respect to the Working
Capital Adjustment and the Adjusted Purchase Price and shall be binding on the
parties for such purposes. The fees and expenses of the Independent Accountant
in resolving all such objections shall be borne (x) one-half by Buyer and (y)
one-half by the Stockholder.
If the Adjusted Purchase Price exceeds the Purchase Price, Buyer shall pay
to the Stockholder in cash the amount of such excess within seven (7) days after
final determination of the Adjusted Purchase Price pursuant to this Section 2.3.
If the Purchase Price exceeds the Adjusted Purchase Price, the Stockholder shall
pay to Buyer in cash the amount of such excess within seven (7) days after final
determination of the Adjusted Purchase Price pursuant to this Section 2.3.
2.4 Closing. The closing of the sale of the Company Shares by the
Stockholder to Buyer pursuant to the terms of this Agreement (the "Closing")
shall take place at the offices of Mintz, Levin, Cohn, Ferris, Glovsky and
Popeo, P.C., Xxx Xxxxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000 at 10:00 a.m.
local time on the first business day after all of the conditions to closing set
forth in Section 9 hereof are satisfied or, if applicable, waived, or at such
other time, date and place as may be otherwise mutually agreed upon by the
Company and Buyer (the "Closing Date").
2.5 Further Assurances. The Stockholder shall, from time to time after the
Closing at the request of Buyer, without further consideration, execute and
deliver further instruments of transfer and assignment and take such other
action as Buyer may reasonably request to more effectively transfer and assign
to, and vest in, Buyer the Company Shares and all rights thereto, and to
otherwise fully implement the provisions of this Agreement.
2.6 Transfer Taxes. All sales and transfer taxes, fees and duties, if any,
under applicable law incurred in connection with the sale and transfer of the
Company Shares pursuant to this Agreement will be borne and paid by the
Stockholder, and the Stockholder shall promptly reimburse each of Buyer and the
Company for any such tax, fee or duty which it is required to pay under
applicable law.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDER.
3.1 General. As a material inducement to Buyer to enter into this
Agreement and consummate the transactions contemplated hereby, the Company and
the Stockholder, jointly
4
and severally, hereby make to Buyer the representations and warranties contained
in this Section 3, subject to such exceptions as are specifically disclosed in
the section of the disclosure schedule attached hereto and made a part hereof
(the "Disclosure Schedule") corresponding to the Section of this Agreement to
which such exception is intended to apply. For purposes of this Agreement,
information shall be deemed to be "known" to or to the "knowledge" of the
Company or the Stockholder if that information is actually known, or reasonably
should be known after reasonable inquiry or investigation, by any officer or
director of the Company or Xxxxx X. Xxxxxx, Xxxx X. Xxxxxx or Xxxxxxx X.
Xxxxxxxx.
3.2 Organization and Qualification of the Company. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware with full corporate power and authority to own and
lease its properties and to conduct its business in the manner and in the places
where such properties are owned and leased or such business is currently
conducted. The copies of the Company's Certificate of Incorporation, as amended
to date, certified by the Delaware Secretary of State (the "Company Certificate
of Incorporation"), and of the Company's by-laws, as amended to date, certified
by the Company's Secretary, and heretofore delivered to Buyer's counsel, are
complete and correct at the date hereof, and no amendments thereto are pending.
The Company is not in violation of any provision of the Company Certificate of
Incorporation or by-laws. The Company is duly qualified to do business as a
foreign corporation in each jurisdiction where the nature of its properties or
the conduct of its business makes its qualification so necessary, except where
the failure to be so qualified could not reasonably be expected to have a
material adverse effect on the business, assets, properties, results of
operations or financial condition (a "Material Adverse Effect") of the Company.
3.3 Capitalization of the Company. The authorized capital stock of the
Company consists solely of 1,000 shares of Common Stock, 100 shares of which are
outstanding and none of which are held in treasury. All of the issued and
outstanding shares of Common Stock are validly issued, fully paid and
nonassessable and free of preemptive or similar rights. There are no outstanding
options, warrants, rights, commitments, preemptive rights or agreements of any
kind for the issuance or sale of any additional shares of capital stock of the
Company, and there are no outstanding securities convertible into such shares or
outstanding warrants, options or other rights to acquire any such convertible
securities. No capital stock of the Company has ever been issued in violation of
any federal or state law or in violation of any preemptive rights or any other
rights of any other Person. There are no voting trusts, voting agreements,
proxies or other agreements, instruments or undertakings with respect to the
voting of any capital stock of the Company to which the Company or the
Stockholder is a party and none of the outstanding shares of capital stock of
the Company is subject to a right of first refusal or similar right. The
Stockholder owns of record and beneficially, all of the issued and outstanding
shares of capital stock of the Company.
3.4 Subsidiaries or Other Investments. The Company does not have any
subsidiaries and does not own, and has not agreed to purchase, any stock or
equity interest in any Entity.
3.5 Authority; Binding Nature; No Conflict.
5
(a) The Company has full right, power and authority to enter into this
Agreement and each agreement, document and instrument to be executed and
delivered by the Company pursuant to this Agreement (each a "Company Ancillary
Agreement" and collectively, the "Company Ancillary Agreements") and to
consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance by the Company of this Agreement and each Company
Ancillary Agreement have been duly authorized by all necessary action on the
part of the Company and the Stockholder and no other action on the part of the
Company or the Stockholder is required in connection therewith. This Agreement
and each Company Ancillary Agreement constitutes, or when executed and delivered
will constitute, legal, valid and binding obligations of the Company enforceable
in accordance with their respective terms, except as such enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or affecting generally the enforcement of creditors' rights and
except as the remedy of specific performance and other injunctive relief may be
unavailable in certain cases.
(b) The execution, delivery and performance by the Company of this
Agreement and each Company Ancillary Agreement does not and will not: (i)
violate any provision of the Company's Certificate of Incorporation or by-laws;
(ii) violate any Laws or require the Company to obtain any Consent from, or make
any material filing with, any Person that has not been obtained or made, except
as will be obtained or made prior to the Closing as set forth in Section 3.5 of
the Disclosure Schedule; and (iii) result in a breach of, constitute a default
under, accelerate any obligation under, or give rise to a right of termination
of any indenture or loan or credit agreement or any other Contract, instrument,
mortgage, lien, lease, permit, authorization, order, writ, judgment, injunction,
decree, determination or arbitration award to which the Company is a party or by
which the property of the Company is bound or affected, or result in the
creation or imposition of any Encumbrance on any of the Company's assets or
capital stock.
3.6 Real Property. Except as set forth in Section 3.6 of the Disclosure
Schedule, the Company does not own and has never owned any real property. All of
the real property leased by the Company is identified in Section 3.6(a) of the
Disclosure Schedule (the "Leased Real Property").
(a) Status of Leases and Leasehold Interests. Section 3.6(a) of the
Disclosure Schedule contains a complete and accurate list of all presently
effective leases, lease amendments or modifications, subleases, assignments,
licenses, guaranties and other agreements relating to the Company's use or
occupancy of the Leased Real Property (each a "Lease" and collectively, the
"Leases") and true and complete copies thereof have been delivered to Buyer or
made available to its counsel. Each Lease has been duly authorized and executed
by the Company and, to the knowledge of the Company and the Stockholder, the
other parties to each Lease, and each Lease is in full force and effect. The
Company is not in default under any provision of any Lease, nor has any event
occurred which, with notice or the passage of time, or both, would give rise to
such a default. To the Company's or Stockholder's knowledge, no other party to
any Lease is in default under any material provision of any such Lease, nor has
any event occurred which, with notice or the passage of time, or both, would
give rise to such a default. The Company has good and valid leasehold title to
the Leased Real Property, free and clear from all Encumbrances, except for (x)
Encumbrances for current Taxes not yet due and payable and (y) minor
Encumbrances that have arisen in the ordinary course of business and that do not
(in any individual case or in the aggregate) materially detract from the value
of the assets
6
subject thereto or materially impair the operations of the Company. Except for
rent amounts due pursuant to the Leases in the ordinary course of business, no
fees, security deposits, advances or other amounts are due but not yet paid on
with respect Leases.
(b) Consents. Except as set forth in Section 3.6(b) of the Disclosure
Schedule, (a) no Consent is required with respect to the transactions
contemplated by this Agreement from any other party to any Lease and (b) no
material filing with any Governmental Authority is required in connection
therewith.
(c) Condition of Real Property. To the knowledge of the Company or the
Stockholder, there are no defects in the physical condition of any land,
buildings or improvements constituting any of the Leased Real Property, which
are material to the use of such Leased Real Property, including without
limitation, structural elements, mechanical systems, parking and loading areas,
and to the knowledge of the Company or the Stockholder, all such buildings and
improvements are in good operating condition and repair, ordinary wear and tear
excepted.
(d) Compliance with Laws. The Company has not received any notice from any
Governmental Authority of any violation of any Law or Governmental Authorization
issued with respect to any Leased Real Property that has not been heretofore
corrected and no such violation exists which, individually or in the aggregate,
could have a material adverse effect on the Company or the operation or value of
any Leased Real Property. The use and operation by the Company of all
improvements located on or constituting part of the Leased Real Property are in
compliance with all applicable Laws and Governmental Authorizations. The Company
has not received any notice of any real estate tax deficiency or assessment that
has not been satisfied. To the knowledge of the Company or the Stockholder,
there exists no proposed material deficiency, claim or assessment with respect
to any of the Leased Real Property, nor is there any pending or threatened
condemnation of any Leased Real Property.
3.7 Title to Assets. The Company owns and has good and valid title to, all
assets purported to be owned by it, except for such imperfections of title which
are not material in character, amount or extent, and which do not materially
detract from the value, or materially interfere with the present use, of the
assets subject thereto or affected thereby. All of such assets are owned by the
Company and are free and clear of all Encumbrances, except for (x) any
Encumbrance for current Taxes not yet due and payable and (y) minor Encumbrances
that have arisen in the ordinary course of business and that do not (in any
individual case or in the aggregate) materially detract from the value of the
assets subject thereto or materially impair the operations of the Company.
3.8 Sufficiency of Assets. Section 3.8 of the Disclosure Schedule lists
all material items of equipment, machinery and other tangible assets owned,
leased or licensed by the Company. Such equipment, machinery and other assets
are adequate for the uses to which they are being put, are in good operating
condition and repair (ordinary wear and tear excepted) and are adequate for the
conduct of the business of the Company in the manner in which such business is
currently being conducted.
3.9 Financial Statements.
7
(a) The Company has delivered to Buyer unaudited balance sheets of the
Company as of January 31, 2000 (the "Base Balance Sheet") and statements of
income for the fiscal year then ended (the "FY2000 Financial Statements"). The
Company has delivered to Buyer an unaudited balance sheet (the "Interim Balance
Sheet") of the Company as of August 31, 2000 and statements of income for the
seven-month period then ended (the "Interim Financial Statements" and, together
with the FY2000 Financial Statements, the "Financial Statements"). All of the
Financial Statements have been prepared in accordance with GAAP consistent with
past practices, except that the Interim Balance Sheet is subject to normal
non-material year-end adjustments. All of the Financial Statements are complete
and correct in all material respects and present fairly in all material respects
the financial condition of the Company at the dates of such Financial Statements
and the results of its operations for the periods covered thereby.
(b) The Company has no Liabilities of any nature, except Liabilities (i)
stated or adequately reserved against on the Interim Balance Sheet, (ii) set
forth in Section 3.9(b) of the Disclosure Schedule, (iii) incurred in the
ordinary course of business of the Company consistent with past practice since
the date of the Interim Balance Sheet or (iv) incurred by the Company in
connection with the transactions contemplated by and consistent with the terms
of this Agreement.
3.10 Taxes.
(a) The Company has timely paid or caused to be paid all federal, state,
local, foreign and other taxes, including without limitation, income taxes,
estimated taxes, alternative minimum taxes, excise taxes, sales taxes, use
taxes, value-added taxes, gross receipts taxes, franchise taxes, capital stock
taxes, employment and payroll-related taxes, withholding taxes, stamp taxes,
transfer taxes, windfall profit taxes, environmental taxes and property taxes,
whether or not measured in whole or in part by net income, and all deficiencies,
or other additions to tax, interest, fines and penalties owed by it
(collectively, "Taxes"), required to be paid by it through the date hereof
whether or not disputed.
(b) The Company has timely filed all federal, state, local and foreign tax
returns (collectively, "Tax Returns") required to be filed by it through the
date hereof, has paid all Taxes shown as due on such Tax Returns and all such
returns correctly and accurately set forth the amount of any Taxes relating to
the applicable period. Except as set forth in Section 3.10(b) of the Disclosure
Schedule, no extension of time with respect to any date on which a Tax Return
was or is to be filed by the Company is in force, and no waiver or agreement by
the Company is in force for the extension of time for the assessment or payment
of any Taxes.
(c) No tax assessment or deficiency has been made or proposed against the
Company nor has the Company received any notice of any proposed tax audit,
assessment or deficiency. Except as set forth in Section 3.10 of the Disclosure
Schedule, no claim or proceeding is pending or, to the knowledge of the Company
or the Stockholder, has been threatened against or with respect to the Company
in respect of any Taxes. There is no Contract covering any employee or
independent contractor or former employee or independent contractor of the
Company that, considered individually or considered collectively with any other
such Contracts, will, or could reasonably be expected to, give rise directly or
indirectly to the payment of any amount that would not be deductible pursuant to
Section 280G or Section 162 of the Code.
8
Except as set forth in Section 3.10(c) of the Disclosure Schedule, the Company
is not and has never been, a party to or bound by any tax indemnity agreement,
tax sharing agreement, tax allocation agreement or similar agreement. The
Company has not filed a consent pursuant to the collapsible corporation
provisions of Section 341(f) of the Code (or any corresponding provision of
state, local or foreign tax law). The Company has not made a distribution of
stock of a controlled corporation to which Section 355(e) of the Code applies.
The Company has never entered into a closing agreement pursuant to Section 7121
of the Code.
3.11 Collectability of Accounts Receivable. Except as set forth in Section
3.11 of the Disclosure Schedule, all existing accounts receivable of the Company
(including those accounts receivable reflected on the Interim Balance Sheet that
have not yet been collected and those accounts receivable that have arisen since
the date of the Interim Balance Sheet and have not yet been collected) (i)
represent valid obligations of customers of the Company arising from bona fide
transactions entered into in the ordinary course of business and (ii) are
current, valid and enforceable and will be collected in full when due, without
any counterclaim or set off. The Company has no accounts or loans receivable
from any Person which is affiliated with the Company or from any director,
officer or employee of the Company.
3.12 Absence of Certain Changes. Except as set forth in Section 3.12 of
the Disclosure Schedule, since the date of the Interim Balance Sheet there has
not been:
(a) any change in the financial condition, properties, assets,
liabilities, business or operations of the Company, which change by itself or in
conjunction with all other such changes, whether or not arising in the ordinary
course of business, has had, or could reasonably be expected to have, a Material
Adverse Effect on the Company;
(b) any Liability incurred by the Company as guarantor or otherwise with
respect to the obligations of others or any cancellation of any Indebtedness or
claim owing to, or waiver of any material right of, the Company;
(c) any Encumbrance placed on any of the properties or assets of the
Company which remains in existence on the date hereof or will remain in
existence on the Closing Date, except for minor Encumbrances that have arisen in
the ordinary course of business and that do not (in any individual case or in
the aggregate) materially detract from the value of the properties or assets or
the Company;
(d) any purchase, sale or other disposition, or any agreement or other
arrangement for the purchase, sale or other disposition, of any of the
properties or assets of the Company other than in the ordinary course of
business;
(e) any material loss, damage or destruction to, or any material
interruption in the use of, any material assets of the Company;
(f) any declaration, setting aside or payment of any dividend by the
Company, or the making of any other distribution in respect of the capital stock
of the Company, or any direct or indirect redemption, purchase or other
acquisition by the Company of its capital stock;
9
(g) any sale, issuance or authorization of the issuance of (i) any capital
stock or other security of the Company, (ii) any option or right to acquire any
capital stock or any other security of the Company or (iii) any instrument
convertible into or exchangeable for any capital stock or other security of the
Company;
(h) any labor trouble or claim of unfair labor practices involving the
Company; any change in the compensation payable or to become payable by the
Company to any of its officers, employees, agents or independent contractors
other than normal increases in accordance with its usual practices; or any bonus
payment or arrangement made to or with any of such officers, employees, agents
or independent contractors other than normal bonuses in accordance with its
usual practices which were less than $10,000 individually or $25,000 in the
aggregate;
(i) any change in the corporate officers or senior management of the
Company;
(j) any payment or discharge of a Liability or Encumbrance of the Company
which was not shown on the Interim Balance Sheet or incurred in the ordinary
course of business thereafter;
(k) any obligation or Liability incurred by the Company to any of its
officers, directors, stockholders or employees, or any loans or advances made by
the Company to any of its officers, directors, stockholders or employees, except
normal compensation, benefits and expense allowances payable to officers or
employees;
(l) any material change in accounting methods or practices, credit
practices or collection policies used by the Company;
(m) any capital expenditure by the Company exceeding $25,000 individually
or $100,000 in the aggregate;
(n) any formation or acquisition of any subsidiary or equity interest or
other interest in any other Entity by the Company;
(o) any waiver of any material terms of any Contract (or series of related
Contracts) to which the Company is a party or by which it is bound, which
Contract involves or is likely to involve payment by or to the Company in excess
of $50,000;
(p) any acceleration, termination or cancellation of any Contract (or
series of related Contracts) to which the Company is a party or by which it is
bound, the acceleration, termination or cancellation of which has had or could
reasonably be expected to have a Material Adverse Effect;
(q) any delay or postponement of the payment of (i) any accounts payable
or (ii) any other Liabilities outside the ordinary course of the business;
(r) any termination or, to the knowledge of the Company or the
Stockholder, any oral or written threat or indication of intent by one or more
material distributors, customers, licensors or suppliers of the Company to
terminate its respective business relationships with the Company or that it will
not continue to do business with the Company on such terms and subject to
10
conditions at least as favorable to the Company as the terms and conditions
currently provided to the Company;
(s) any grant of any license or sublicense of any rights or material
modification of any rights under or with respect to, or settlement regarding any
infringement, misappropriation or alleged infringement or misappropriation of
rights in any Proprietary Rights;
(t) any entry into or termination of employment contracts or collective
bargaining agreements, whether written or oral, or material modifications of the
terms of any existing employment contract or collective bargaining agreement;
(u) any adoption, amendment, modification or termination of or payment
(other than routine payments of claims) pursuant to any Employee Plan or
Contract for the benefit of any director, officer or employee of the Company (or
other action with respect to any other Employee Plan) other than in the ordinary
course of business;
(v) any charitable pledge or other contribution or gift by the Company
outside the ordinary course of the business; and
(w) any agreement or understanding whether in writing or otherwise, for
the Company to take any of the actions specified in paragraphs (a) through (v)
above.
3.13 Ordinary Course. Since the date of the Interim Balance Sheet, the
Company has conducted its business only in the ordinary course and consistently
with its prior practices.
3.14 Depositories; Powers of Attorney. Sections 3.14(a) and (b) of the
Disclosure Schedule set forth, respectively, (a) the name and a brief
description of all bank accounts, lock-boxes, safe deposit boxes, money market
funds, certificates of deposit, stocks, bonds, notes and other securities in the
name of or owned by the Company and the names of all persons authorized to draw
thereon or to have access thereto and (b) the name of each person, corporation,
firm or other entity holding a general or special power of attorney from the
Company (a true, complete and correct copy of which has been delivered to
Buyer).
3.15 Proprietary Rights.
(a) The Company has exclusive ownership of, or the valid right to use, all
Proprietary Rights that are used in the business of the Company as presently
conducted. For purposes of this Agreement, "Proprietary Rights" shall mean
patents, trademarks, service marks, trade names and copyrights; all applications
to register any of the foregoing; all franchises, trade secrets, inventions,
customer lists, manufacturing or other processes, designs, computer software,
data compilations, research results and other confidential or legally protected
information. There are no claims or demands of any other Person pertaining to
any of the Proprietary Rights and no proceedings have been instituted, are
pending or, to the knowledge of the Company or the Stockholder, threatened,
which challenge the rights of the Company in respect thereof.
(b) The Company does not own or lease any patents, patent applications,
trademark applications, trademark registrations or registered copyrights.
11
(c) The Company is the owner by assignment or as a "work for hire" of all
Proprietary Rights created by the Company's employees. All employees have
entered into employee proprietary information and inventions agreements with the
Company (the "Inventions Agreements") in the form previously provided to Buyer.
The Inventions Agreements are in full force and effect. Neither the Company nor,
to the knowledge of the Company or the Stockholder, any other party thereto is
in default thereunder, and all of the rights of Company thereunder will continue
in full force and effect upon consummation of the transactions contemplated
hereby.
(d) There are no licenses or other Contracts under which the Company has
granted exclusive rights to others in Proprietary Rights owned or licensed by
the Company and used in the business of the Company as presently conducted.
(e) The Company has taken all reasonably prudent action to establish and
preserve its ownership of all Proprietary Rights with respect to its products,
services and technology. The Company has taken reasonably prudent action to
ensure that non-public information of the Company has not become available to
any Person other than employees and agents of the Company except pursuant to
enforceable written agreements requiring the recipients to maintain the
confidentiality of such information and appropriately restricting the use
thereof. To the knowledge of the Company or the Stockholder, no third party has
infringed any Proprietary Rights of the Company.
(f) To the knowledge of the Company and the Stockholder, the present
business, activities and products of the Company do not infringe any Proprietary
Rights of any other Person. No proceeding charging the Company with infringement
of any Proprietary Rights has been filed or, to the knowledge of the Company or
the Stockholder, is threatened to be filed. To the knowledge of the Company or
the Stockholder, the Company is not making unauthorized use of any confidential
information or trade secrets of any person.
3.16 Contracts. Section 3.16 of the Disclosure Schedule sets forth all
material Contracts to which the Company is a party or by which it or its
properties is bound (each a "Company Contract"). Without limiting the foregoing,
Section 3.16 of the Disclosure Schedule lists:
(a) each Company Contract relating to the employment of, or the
performance of services by, any employee, consultant or independent contractor,
and any Company Contract pursuant to which the Company is or may become
obligated to make any severance, termination or similar payment to any current
or former employee or director; and any Company Contract pursuant to which the
Company is or may become obligated to make any bonus or similar payment (other
than payments constituting base salary) to any current or former employee or
director in excess of $10,000 individually or $25,000 in the aggregate;
(b) each Company Contract for the purchase of any commodity, material or
equipment except purchase orders in the ordinary course;
(c) each Company Contract providing for the purchase of all or
substantially all of its requirements of a particular product from a supplier;
12
(d) each Company Contract for the sale or lease of its products or
services not made in the ordinary course of business;
(e) each Company Contract imposing any restriction on the right or ability
of the Company (A) to compete with any Person; (B) to acquire any product or
other asset or any services from any other Person; (C) to solicit, hire or
retain any Person as an employee, consultant or independent contractor, (D) to
develop, sell, supply, distribute, offer, support or service any product or any
technology or other asset to or for any other Person or class or category of
Persons, (E) to perform services for any other Person or class or category of
Persons, or (F) to transact business or deal in any other manner with any other
Person or class or category of Persons;
(f) each Company Contract for the purchase of any fixed asset for a price
in excess of $25,000 whether or not such purchase is in the ordinary course of
business;
(g) each indenture, mortgage, promissory note, loan agreement, guaranty or
other agreement or commitment for the borrowing of money or any guarantee
thereof (if applicable, a description on any prepayment penalties or similar
obligations);
(h) each Company Contract with any officer, employee, director or
stockholder of the Company or with any Persons controlled by or affiliated with
any of them;
(i) each Company Contract creating or involving any agency relationship,
distribution arrangement or franchise relationship;
(j) each Company Contract relating to the acquisition, issuance or
transfer of any securities;
(k) each Company Contract creating or relating to any partnership or joint
venture or any sharing of revenues, profits, losses, costs or liabilities;
(l) any Company Contract that contemplates or involves (A) the payment or
delivery of cash or other consideration to the Company in an amount or having a
value in excess of $50,000 in the aggregate or (B) the performance of services
by the Company having a value in excess of $50,000 in the aggregate;
(m) any other Company Contract that contemplates or involves (A) the
payment or delivery of cash or other consideration by the Company in an amount
or having a value in excess of $10,000 in the aggregate or (B) the performance
of services for the Company having a value in excess of $10,000 in the
aggregate, in each case other than Company Contracts that have a term of less
than 30 days or that may be terminated by the Company or its successor (without
penalty) within 30 days after the delivery of a termination notice by the
Company;
(n) all Contracts with Governmental Authorities; and
(o) any other Company Contract that is material to the business of the
Company.
13
The Company has made available to Buyer accurate and complete copies of
all written Company Contracts identified in Section 3.16 of the Disclosure
Schedule, including all amendments thereto. Section 3.16 of the Disclosure
Schedule provides an accurate description of the terms of each Company Contract
that is not in written form. Each Company Contract identified in Section 3.16 of
the Disclosure Schedule is in full force and effect, and is enforceable by the
Company in accordance with its terms, except as such enforcement may be limited
by bankruptcy, insolvency, reorganization, moratorium or similar laws relating
to or affecting generally the enforcement of creditors' rights and except as the
remedy of specific performance and other injunctive relief may be unavailable in
certain cases. Except as set forth in Section 3.16 of the Disclosure Schedule or
as could not reasonably be expected to have a Material Adverse Effect on the
Company (either individually or in the aggregate): (i) the Company has not
violated or breached, or committed any default under, any Company Contract
identified in Section 3.16 of the Disclosure Schedule, and, to the knowledge of
the Company or the Stockholder, no other party to such Company Contract has
violated or breached, or committed any default under, any such Company Contract;
(ii) to the knowledge of the Company or the Stockholder, no event has occurred,
and no circumstances or condition exists, that (with or without notice or lapse
of time) will, or could reasonably be expected to, (A) result in a violation or
breach of any of the provisions of any Company Contract identified in Section
3.16 of the Disclosure Schedule, (B) give any person the right to declare a
default under or exercise any remedy for breach of any Company Contract
identified in Section 3.16 of the Disclosure Schedule, (C) give any Person the
right to accelerate the maturity or performance of any Company Contract or (D)
give any Person the right to cancel, terminate or modify any Company Contract
identified in Section 3.16 of the Disclosure Schedule; (iii) the Company has not
received any notice or other communication regarding any actual or possible
violation or breach of, or default under any Company Contract; and (iv) the
Company has not waived any of its material rights under any Company Contract.
3.17 Government Contracts. Except as set forth in Section 3.16(n) of the
Disclosure Schedule, the Company is not a party to any Contract with any
Governmental Authority. The Company is not subject to any claims, penalties or
causes of action, the basis of which is an actual or alleged violation of, or
noncompliance with, any applicable Law (a) related to a Contract between the
Company and any Governmental Authority, which Contract relates or is related to
the business of the Company or (b) related to a Contract between the Company and
any other Person, which Contract relates or related to the business and renders
or rendered the Company a subcontractor at any tier to a prime contract with any
Governmental Authority. To the knowledge of the Company or the Stockholder,
there is no reasonable basis for any claim, penalty or cause of action against
the Company alleging a violation of, or noncompliance with, any applicable Law
related to any Contract described in clauses (a) or (b) above of this Section
3.17 to which the Company is a party and that relates or related to its
business. For purposes of this Section 3.17, claims, penalties and causes of
action alleging a violation of, or noncompliance with, any applicable Law
include, without limitation, those purporting to be based on failure to comply
with cost accounting standards, allowable costs, allocation of costs, omissions
or errors in disclosure statements, omissions or errors in certifications, false
or misleading statements or omissions in connection with claims for payments or
defective pricing.
3.18 Litigation. Section 3.18 of the Disclosure Schedule lists all pending
litigation and governmental or administrative proceedings or investigations to
which the Company is a
14
party. Except for the matters described in Section 3.18 of the Disclosure
Schedule, there is no litigation or governmental or administrative proceeding or
investigation pending or, to the knowledge of the Company or the Stockholder,
threatened against the Company. With respect to each matter set forth on Section
3.18 of the Disclosure Schedule, the Disclosure Schedule sets forth a
description of the matter, the forum (if any) in which it is being conducted,
the parties thereto and the type and amount of relief sought. For the purpose of
determining whether the Buyer Indemnified Parties are entitled to
indemnification under Section 11, the matters set forth in Section 3.18 of the
Disclosure Schedule shall not be deemed to modify the representations and
warranties set forth in this Section 3.18.
3.19 Compliance with Laws. The Company is in compliance in all material
respects with all Laws which apply to the Company or to the conduct of its
business.
3.20 Insurance. The Company does not maintain any insurance polices.
Section 3.20 of the Disclosure Schedule identifies all insurance policies
necessary to the Company's day to day operations that are maintained by the
Stockholder for the benefit of the Company, identifies any material claims made
thereunder, and includes a summary of the amounts and types of coverage and the
deductibles under each such insurance policy. Each of the insurance policies
identified in Section 3.20 of the Disclosure Schedule is in full force and
effect and all premiums with respect thereto are currently paid. The Company has
not received any notice or other communication regarding any actual or possible
(a) cancellation or invalidation of any insurance policy, (b) refusal of any
coverage or rejection of any claim under any insurance policy or (c) material
adjustment in the amount of the premiums payable with respect to any insurance
policy. Such insurance is sufficient for compliance by the Company with all Laws
and Contracts to which the Company is a party or by which it is bound. The
consummation of the transactions contemplated hereby will not cause such
insurance polices to cease to be in full force and effect.
3.21 Finder's Fee. Neither the Company nor the Stockholder has taken any
action or entered into any agreement pursuant to which the Company has incurred
or will become liable for any broker's commission or finder's fee relating to or
in connection with the transactions contemplated by this Agreement.
3.22 Governmental Authorizations; Burdensome Agreements. Section 3.22 of
the Disclosure Schedule lists all Governmental Authorizations required for the
Company to conduct its business as presently conducted. The Company has obtained
all such Governmental Authorizations, which are valid and in full force and
effect, and is operating in material compliance therewith. The Company is, and
at all times has been, in substantial compliance with the terms and requirements
of the Governmental Authorizations. The Company has never received any written
notice or, to the Company's or Stockholder's knowledge, other communication from
any Governmental Authority regarding (a) any actual or possible violation of or
failure to comply with any term or requirement of any Governmental
Authorizations or (b) any actual or possible revocation, withdrawal, suspension,
cancellation, termination or modification of any Governmental Authorizations.
The Company is not subject to or bound by any Contract, judgment, decree or
order which could, if performed in accordance with its terms, reasonably be
expected to have, either individually or in the aggregate, a Material Adverse
Effect on the Company.
15
3.23 Corporate Records. The corporate record books of the Company
accurately reflect all corporate action taken by its stockholders and boards of
directors and committees. The copies of the corporate records of the Company, as
made available to Buyer for review, are true and complete copies of the
originals of such documents.
3.24 Transactions with Interested Persons. None of the Company, the
Stockholder, any officer, supervisory employee or director of the Company or, to
the knowledge of Company or the Stockholder, any of their respective spouses or
immediate family members, owns directly or indirectly on an individual or joint
basis any material interest in, or serves as an officer or director or in
another similar capacity of, any competitor or supplier of Company, or any
organization which has a material Contract with the Company or (ii) has directly
or indirectly engaged in any transaction involving any lease or other
transaction of the transfer of any material (measured at the time of such
transaction or as of the date hereof) cash, property or rights to or from the
Company from, to or for the benefit of any affiliate or former affiliate of the
Company.
3.25 Employee Benefit Programs.
(a) Section 3.25 of the Disclosure Schedule sets forth all Employee Plans
(as hereinafter defined) to which the Company contributes or is obligated to
contribute, under which the Company has or may have any liability for premiums
or benefits, or which benefits any current or former employee, director,
consultant or independent contractor of Company or any beneficiary thereof (each
a "Company Plan"). For purposes of this Agreement, the term "Employee Plan"
means any plan, program, agreement, policy or arrangement (a "plan"), whether or
not reduced to writing, that is: (i) a welfare benefit plan within the meaning
of Section 3(1) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") (a "Welfare Plan"); (ii) a pension benefit plan within the
meaning of Section 3(2) of ERISA; (iii) a stock bonus, stock purchase, stock
option, restricted stock, stock appreciation right or similar equity-based plan;
or (iv) any other deferred-compensation, retirement, welfare-benefit, bonus
incentive or fringe-benefit plan whether for the benefit of a single individual
or a group of individuals. With respect to each Company Plan, the Company has
made available to Buyer accurate current and complete copies of each of the
following: (1) the plan document together with all amendments; (2) where
applicable, copies of any trust agreements, custodial agreements, insurance
policies, administration agreements and similar agreements and investment
management or investment advisory agreements; (3) copies of any summary plan
description, employee handbooks or similar employee communications and
administrative forms; (4) in the case of any plan that is intended to be
qualified under Section 401(a) of the Code, a copy of the most recent
determination letter from the IRS; and (5) in the case of any plan for which
Forms 5500 are required to be filed, a copy of the two most recently filed Forms
5500, with schedules attached.
(b) Neither the Company nor any corporation, trust, partnership or other
entity that would be considered as a single employer with the Company under
Section 4001(b)(1) of ERISA or Sections 414(b), (c), (m) or (o) of the Code has
ever maintained or been required to contribute to any Employee Plan subject to
Title IV of ERISA.
(c) Each Company Plan that is intended to be qualified under Section
401(a) of the Code is so qualified. Each Company Plan, including any associated
trust or fund, has been
16
administered in accordance with its terms and with applicable law, and nothing
has occurred with respect to any Company Plan that has subjected or could
subject the Company or any plan participant to a penalty under Section 502 of
ERISA or to an excise tax under the Code.
(d) All required contributions to and premium payments on account of each
Company Plan have been made or are reflected as liabilities on the Interim
Balance Sheet.
(e) Section 3.25 of the Disclosure Schedule sets forth each and every
pending or threatened lawsuit, claim or other controversy relating to a Company
Plan, other than claims for benefits in the ordinary course. No Company Plan is
the subject of an IRS or Department of Labor examination or a government
sponsored amnesty, voluntary compliance, self-correction or similar program.
(f) Other than as required under Section 601 et seq. of ERISA and
corresponding provisions of state law, no Company Plan that is a Welfare Plan
provides benefits or coverage following retirement or other termination of
employment.
(g) The Company does not contribute, and has never contributed, to any
"multiemployer plan" as defined in Section 3(37) of ERISA and has no actual or
potential withdrawal liability with respect to any such plan.
3.26 Environmental Matters.
(a) (i) The Company has never generated, transported, used, stored,
treated, disposed of, or managed any Hazardous Material (as defined below)
except in compliance with applicable Law; (ii) no Hazardous Material was
spilled, released to the environment or disposed of at the property located at
00 Xxxxxx'x Xxxxx, Xxxxxxxxx, Xxxxxxxx (the "Xxxxxx'x Mill Facility") that was
previously owned by the Xxxxxx'x Mill General Partnership, a Maryland general
partnership in which the Company previously owned a partnership interest (the
"Xxxxxx'x Mill Partnership") prior to or during the period in which the Company
was a partner of the Xxxxxx'x Mill Partnership, (iii) no Hazardous Material has
been spilled, released to the environment or disposed of at the Xxxxxx'x Court
Facility or any other site presently or formerly leased by the Company during
the Company's tenancy except in compliance with applicable Law, and to the
knowledge of the Company or the Stockholder, no Hazardous Material has ever been
located in the soil or groundwater at any such site; (vi) no Hazardous Material
has ever been transported from any site presently or formerly owned or leased by
the Company for treatment, storage, or disposal at any other place except in
compliance with applicable Law; (v) the Company does not presently own, lease or
operate nor has it previously owned, leased or operated any underground storage
tanks; and (vi) no Encumbrance has ever been imposed by any Governmental
Authority on any property, facility, machinery, or equipment owned or leased by
the Company in connection with the presence of any Hazardous Material.
(b) (i) The Company has no material liability under, nor has the Company
ever materially violated or failed to comply with, any applicable Environmental
Law (as defined below); (ii) the Company, any property owned, operated, leased,
or used by the Company, and any facilities and operations of the Company
thereon, are presently in compliance in all material respects with all
applicable Environmental Laws; (iii) except as set forth in Section 3.26(b) of
the
17
Disclosure Schedule, the Company has never been threatened with, entered into or
been subject to any judgment, consent decree, compliance order, or
administrative order with respect to any environmental or health and safety
matter or received any request for information, notice, demand letter,
administrative inquiry, or complaint or claim with respect to any Environmental
Law matter or the enforcement of any applicable Environmental Law.
(c) To the knowledge of the Company and to the Stockholder, no site owned
or leased by the Company contains any asbestos or asbestos-containing material,
any polychlorinated biphenyls ("PCBs") or equipment containing PCBs, or any urea
formaldehyde foam insulation.
(d) The Company has made available to Buyer copies of all documents,
records, and information in the possession of the Company concerning any
Environmental Law matter involving and/or naming the Company, whether generated
by the Company or others, including without limitation, environmental audits,
environmental risk assessments, site assessments, documentation regarding
off-site disposal of Hazardous Materials, spill control plans, and reports,
correspondence, permits, licenses, approvals, consents, and other authorizations
related to Environmental Law matters issued by any governmental agency.
(e) For purposes of this Section 3.26, (i) "Hazardous Material" shall mean
and include any hazardous waste, hazardous material, hazardous substance,
petroleum product, oil, toxic substance, pollutant, contaminant, or other
substance which may pose a threat to the environment or to human health or
safety, as defined or regulated under any Environmental Law; and (ii)
"Environmental Law" shall mean any environmental or health and safety-related
law, statute, regulation, rule, ordinance, or by-law at the federal, state, or
local level, whether existing as of the date hereof, or previously applicable to
the Company.
3.27 Non-Foreign Status. The Company is not a "foreign person" within the
meaning of Section 1445 of the Code and Treasury Regulations Section 1.1445-2.
3.28 Employees; Labor Matters. As of December 15, 2000, the Company
employed 487 full-time employees and 43 part-time employees. The Company has
previously provided to Buyer a true and complete list of all employees, officers
and directors of, and consultants to, the Company as of December 15, 2000
together with a current job title for and current compensation (including base
compensation, bonuses paid during the last 12 months and stock options or
restricted stock grants) payable to each such employee, officer, director and
consultant. The Company is not delinquent in payments to any of its employees
for any wages, salaries, commissions, bonuses or other direct compensation for
any services performed for it to the date hereof or amounts required to be
reimbursed to such employees. Upon termination of the employment of any of such
employees, neither the Company nor Buyer will by reason of the transactions
contemplated under this Agreement or anything done prior to the Closing by the
Company be liable to any of such employees for so-called "severance pay" or any
other payments. The Company has no policy, practice, plan or program of paying
severance pay or any form of severance compensation in connection with the
termination of employment. The Company is in compliance with all applicable Laws
respecting labor, employment, fair employment practices, work place safety and
health, terms and conditions of employment, wages and hours, and withholding of
taxes and reporting of income. There are no charges of
18
employment discrimination or unfair labor practices, nor are there any strikes,
slowdowns, stoppages of work, or any other concerted interference with normal
operations which are existing, pending or, to the knowledge of the Company or
the Stockholder, threatened against or involving the Company. Except as set
forth in Section 3.28 of the Disclosure Schedule, there are no grievances,
complaints or charges that have been filed against the Company under any dispute
resolution procedure (including, but not limited to, any proceedings under any
dispute resolution procedure under any collective bargaining agreement) that
could reasonably be expected to have a Material Adverse Effect on the Company,
and there is no pending arbitration or similar proceeding or claim. No
collective bargaining agreement is in effect or is currently being or, to the
knowledge of the Company or the Stockholder, is about to be negotiated by the
Company. The Company has not received any information indicating that any of its
employment policies or practices is currently being audited or investigated by
any Governmental Authority. The Company is, and has been, in compliance with the
requirements of the Immigration Reform Control Act of 1986 at all times since
the enactment of such Act.
3.29 Key Employees.
(a) Section 3.29 of the Disclosure Schedule contains a true and complete
list of all employees of and consultants to the Company who are viewed by
existing management of the Company as material contributors to the operating and
financial condition of the Company including, without limitation, all
pathologists employed by the Company (each a "Key Employee"). To the knowledge
of the Company or the Stockholder, no Key Employee is in violation of any
material term of any employment contract, patent disclosure agreement,
proprietary information agreement, non-competition agreement, nonsolicitation
agreement, confidentiality agreement or any other contract or agreement or any
restrictive covenant relating to the right of any such Key Employee to be
employed by the Company, or relating to the use of trade secrets or proprietary
information of others, and the continued employment of the Company's Key
Employees and the performance of the Company's Contracts with its independent
contractors does not subject the Company to any liability with respect to any of
the foregoing matters.
(b) Neither the Company nor the Stockholder has received any oral or
written notice that any Key Employee has any present intention of terminating
his or her employment with the Company.
3.30 Absence of Improper Payments. The Company: (a) has not made any
contributions, payments or gifts of its property to or for the private use of
any official, employee or agent of any Governmental Authority where either the
payment or the purpose of such contribution, payment or gift is illegal under
any applicable Law, (b) has not established or maintained any unrecorded fund or
asset for any purpose other than promotional funds, or intentionally made any
false or artificial entries on its books or records for any reason, (c) has not
made any payments to any person where the Company intended or understood that
any part of such payment was to be used for any other purpose other than that
described in the documents supporting the payment, or (d) has not made any
contribution, or reimbursed any political gift or contribution made by any other
person, to candidates for public office, whether federal, state or local, where
such contribution would be in violation of applicable law.
19
3.31 Disclosure. The representations, warranties and statements contained
in this Agreement and in the certificates and schedules delivered by the Company
pursuant to this Agreement to Buyer do not contain any untrue statement of a
material fact, and do not omit to state a material fact required to be stated
therein or necessary in order to make such representations, warranties or
statements not misleading in light of the circumstances under which they were
made.
SECTION 4. ADDITIONAL REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER.
4.1 General. As a material inducement to Buyer to enter into this
Agreement and consummate the transactions contemplated hereby, the Stockholder
hereby makes to Buyer each of the representations and warranties set forth in
this Section 4, subject to such exceptions as are specifically disclosed in the
section of the Disclosure Schedule corresponding to the Section of this
Agreement to which such exception is intended to apply.
4.2 Company Shares. The Stockholder owns of record and beneficially the
Company Shares. Such Company Shares were, and when delivered by the Stockholder
to Buyer pursuant to this Agreement will be duly authorized, validly issued,
fully paid, non-assessable and free and clear of any and all Encumbrances.
4.3 Authority.
(a) The Stockholder has full right, power and authority to enter into this
Agreement and each agreement, document and instrument to be executed and
delivered by or on behalf of the Stockholder pursuant to this Agreement (each a
"Stockholder Ancillary Agreement" and collectively, the "Stockholder Ancillary
Agreements") and to consummate the transactions contemplated hereby and thereby.
This Agreement and each Stockholder Ancillary Agreement will constitute legal,
valid and binding obligations of the Stockholder, enforceable in accordance with
their respective terms except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or affecting generally
the enforcement of creditors' rights and except as the remedy of specific
performance and other injunctive relief may be unavailable in certain cases. The
Stockholder has full right, power and authority to transfer, sell and deliver
the Company Shares to Buyer pursuant to this Agreement.
(b) The execution, delivery and performance by the Stockholder of this
Agreement and each Stockholder Ancillary Agreement does not or will not: (i)
violate any provision of the organizational documents of the Stockholder, (ii)
violate any Laws, or require the Stockholder to obtain any Consent or waiver
from, or make any filing with, any Person that has not been obtained or made or
that will be obtained or made prior to the Closing as set forth in Section 4.3
of the Disclosure Schedule; and (iii) result in a breach of, constitute a
default under, accelerate any obligation under, or give rise to a right of
termination of, any indenture or loan or credit agreement or any other Contract,
instrument, mortgage, lien, lease, permit, authorization, order, writ, judgment,
injunction, decree, determination or arbitration award to which the Stockholder
is a party or by which the property of the Stockholder is bound or affected, or
result in the creation or imposition of any Encumbrance on any assets of the
Company or Company Shares.
20
4.4 Agreements. Except as set forth in Section 4.4 of the Disclosure
Schedule, there are no agreements to which the Stockholder is a party relating
to the business of the Company or to the Stockholder's rights and obligations as
a stockholder of the Company. The Stockholder does not own, directly or
indirectly any material interest in any customer, competitor or supplier of the
Company, or any Entity which has a Contract with the Company. The Stockholder
has not at any time transferred any of the stock of the Company held by or for
such holder to any employee of the Company. The execution, delivery and
performance of this Agreement by the Stockholder will not violate or result in a
default or acceleration of any obligation under any Contract involving the
Company to which the Stockholder is a party.
4.5 Investment Representations.
(a) The Note and the shares of Common Stock, $0.01 par value per share, of
Xxxxxxx River Laboratories International, Inc. (together with the Note, the
"Securities") to be issued upon conversion of the Note will be acquired for
investment for the Stockholder's own account, not as a nominee or agent, and not
with a view toward distribution of any part thereof, and the Stockholder has no
present plan or intention of selling, granting participation in, or otherwise
disposing of or distributing any of the Securities.
(b) The Stockholder acknowledges and understands that the Securities will
not be registered under the Securities Act of 1933, as amended (the "Securities
Act") in reliance on an exemption from registration under the Securities Act,
and that the reliance by Buyer on such exemption is predicated on the
representations of the Stockholder set forth herein.
(c) The Stockholder understands that none of Securities may be sold,
transferred or otherwise disposed of without registration under the Securities
Act or an exemption therefrom, and that in the absence of an effective
registration statement covering the Securities or an available exemption from
registration under the Securities Act, the Securities must be held indefinitely.
The Stockholder agrees that, in addition to any other applicable limitations on
the transfer of the Securities, in no event will it make a transfer, pledge or
other disposition of any of the Securities other than (i) pursuant to an
effective registration statement under the Securities Act or (ii) pursuant to an
exemption from registration provided for under the Securities Act. At the
expense of the Stockholder or its transferee, the Stockholder shall furnish to
Buyer an opinion of counsel reasonably satisfactory to Buyer to the effect that
such transfer, pledge or other disposition may be made without registration
under the Securities Act.
(d) The Stockholder (i) by reason of its business and financial
experience, has such knowledge, sophistication and experience in business and
financial matters as to be capable of evaluating the merits and risks of its
investment in the Securities, and (ii) believes its financial condition and
investments are such that it is able to bear the economic risk of a complete
loss of the Securities. The Stockholder has had the opportunity to consult with
its own advisers with respect to his proposed investment in Buyer.
(e) The Stockholder agrees that the Note shall carry substantially the
following legend:
21
THIS UNSECURED SUBORDINATED CONVERTIBLE NOTE (THIS "NOTE") AND THE
SHARES OF CAPITAL STOCK ISSUED UPON ANY CONVERSION HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY
NOT BE SOLD OR OTHERWISE TRANSFERRED TO ANY PERSON, INCLUDING A
PLEDGEE, UNLESS (1) EITHER (A) A REGISTRATION STATEMENT WITH RESPECT
THERETO SHALL BE EFFECTIVE UNDER THE SECURITIES ACT, OR (B) THE
COMPANY SHALL HAVE RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO
THE COMPANY THAT AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT IS AVAILABLE, AND (2) THERE SHALL HAVE BEEN COMPLIANCE WITH ALL
APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF BUYER.
5.1 General. As a material inducement to the Company and the Stockholder
to enter into this Agreement and consummate the transactions contemplated
hereby, Buyer hereby makes the representations and warranties to the Company and
the Stockholder contained in this Section 5.
5.2 Organization and Qualification of Buyer. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of State of
Delaware with full corporate power and authority to own and lease its properties
and to conduct its business in the manner and in the places where such
properties are owned or leased or such business is currently conducted. The
copies of Buyer's Certificate of Incorporation, certified by the Delaware
Secretary of State, and of Buyer's by-laws, certified by Buyer's Secretary, as
heretofore delivered to Company's counsel, are complete and correct at the date
hereof, and no amendments thereto are pending. Buyer is not in violation of any
term of its Certificate of Incorporation or by-laws. Buyer is duly qualified to
do business as a foreign corporation in each jurisdiction where the nature of
its properties or the conduct of its business makes its qualification so
necessary, except where the failure to be so qualified could not reasonably be
expected to have a Material Adverse Effect on Buyer.
5.3 Authority; Binding Nature, No Conflict.
(a) Buyer has full right, power and authority to enter into this Agreement
and each agreement, document and instrument to be executed and delivered by
Buyer pursuant to this Agreement (each a "Buyer Ancillary Agreement" and
collectively "Buyer Ancillary Agreements," and, together with the Company
Ancillary Agreements and the Stockholder Ancillary Agreements, the "Ancillary
Agreements") and to consummate the transactions contemplated hereby. The
execution, delivery and performance by Buyer of this Agreement and each Buyer
Ancillary Agreement have been duly authorized by all necessary action on the
part of Buyer and no other action on the part of Buyer or its stockholders is
required in connection therewith. This Agreement and each Buyer Ancillary
Agreement constitutes, or when executed
22
and delivered by Buyer, will constitute legal, valid and binding obligations of
Buyer enforceable in accordance with their respective terms except as may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or affecting generally the enforcement of creditors' rights and
except as the remedy of specific performance and other injunctive relief may be
unavailable in certain cases.
(b) The execution, delivery and performance by Buyer of this Agreement and
each Buyer Ancillary Agreement does not and will not (i) violate any provision
of the Certificate of Incorporation or by-laws of Buyer; (ii) violate any Laws,
or require Buyer to obtain any Consent or waiver from, or make any filing with,
any Person that has not been obtained or made or will be obtained or made prior
to the Closing; and (iii) provided that all necessary consents and waivers under
the Credit Agreement (as hereinafter defined) are obtained, does not and will
not result in a breach of, constitute a default under, accelerate any obligation
under, or give rise to a right of termination of any indenture or loan or credit
agreement or any other Contract, instrument, mortgage, lien, lease, permit,
authorization, order, writ, judgment, injunction, decree, determination or
arbitration award to which Buyer is a party or by which the property of Buyer is
bound or affected, or result in the creation or imposition of Encumbrance on any
of Buyer's assets or its capital stock.
5.4 Finder's Fee. Buyer has not incurred or become liable for any broker's
commission or finder's fee relating to or in connection with the transactions
contemplated by this Agreement.
5.5 Private Offering. Neither Buyer, any of its affiliates nor anyone on
its behalf, has issued, sold or offered any securities of Buyer to any person
under circumstances that would cause the issuance of the Note pursuant to this
Agreement to be subject to the registration requirements of the Securities Act.
Assuming that the representations and warranties of the Stockholder contained in
Section 4.5 of this Agreement are true and correct as of the date hereof and as
of the Closing Date, the offering of the Note will be made in compliance in all
material respects with applicable federal and state securities laws.
5.6 Investigation by Buyer. Buyer has conducted its own independent review
and analysis of the business, assets, condition, operations and prospects of the
Company and acknowledges that Buyer has been provided access to the properties,
premises and records of the Company for this purpose. In entering into this
Agreement, Buyer has relied solely upon its own investigation and analysis and
the representations and warranties contained herein and in the Disclosure
Statement, and Buyer agrees, to the fullest extent permitted by law, that
neither the Company, the Stockholder nor any of their respective directors,
officers, employees, affiliates, agents or representatives shall have any
liability or responsibility whatsoever to Buyer on any basis (including, without
limitation, in contract or tort, or otherwise) based upon any information
provided or made available, or statements made, to Buyer prior to the execution
of this Agreement, except (i) to the extent the Company or Stockholder makes
specific representations and warranties in this Agreement with respect thereto
but always subject to the limitations and restrictions contained in this
Agreement, or (ii) to the extent the Company or the Stockholder or any of their
respective directors, officers, employees, affiliates, agents or representatives
commits fraud with respect to the information that it provides or makes
available to Buyer.
23
SECTION 6. COVENANTS OF THE COMPANY AND THE STOCKHOLDER.
6.1 General. The Company and the Stockholder, jointly and severally,
hereby make the covenants and agreements set forth in this Section 6 and the
Stockholder agrees to use all commercially reasonable efforts or to vote
appropriately to cause the Company to comply with such agreements and covenants.
6.2 Conduct of Business. Between the date of this Agreement and the
Closing Date (the "Pre-Closing Period"), except as specifically consented to by
Buyer in writing, which consent may be withheld in the sole discretion of Buyer,
the Company will:
(a) conduct its business only in the ordinary course and in accordance
with all Laws;
(b) refrain from making any purchase, sale or disposition of any asset or
property other than in the ordinary course of business, from making any capital
expenditures (including capitalized lease obligations) in excess of $10,000 in
the aggregate and from mortgaging, pledging, subjecting to a lien or otherwise
encumbering any of its properties or assets;
(c) refrain from incurring any obligations or Liabilities except in the
ordinary course of business;
(d) refrain from (i) lending money to any Person (except that the Company
may make routine travel advances to employees in the ordinary course of
business) or (ii) incurring or guaranteeing any Indebtedness;
(e) refrain from forming any subsidiary or acquiring any equity interest
or other interest in any other Entity;
(f) refrain from making any change or incurring any obligation to make a
change in its Certificate of Incorporation, by-laws, capital structure or
authorized or issued capital stock, including but not limited to the issuance of
any option, warrant, call, conversion right or commitment of any kind with
respect to the Company's capital stock;
(g) refrain from declaring, setting aside or paying any dividend, making
any other distribution in respect of its capital stock or making any direct or
indirect redemption, purchase or other acquisition of its stock;
(h) refrain from (i) establishing, adopting or amending any Employee
Plans, (ii) other than in the ordinary course of business, paying any bonus or
making any profit-sharing payment, cash incentive payment or similar payment to,
or increasing the amount of the wages, salary commissions, fringe benefits or
other compensation or remuneration payable to, any of its directors, officers or
employees, (iii) hiring any new employee other than in the ordinary course of
business consistent with past practices or (iv) terminating any Key Employee;
(i) use all commercially reasonable efforts to prevent any change with
respect to its banking arrangements;
24
(j) use commercially reasonable efforts to preserve intact its current
business organization, keep available the services of its current officers and
employees and maintain its relations and goodwill with all suppliers, customers,
landlords, creditors, employees and other Persons having business relationships
with the Company;
(k) maintain in effect at all times all insurance of the kind, in the
amount and with the insurers set forth in Section 3.20 of the Disclosure
Schedule;
(l) furnish Buyer with unaudited monthly balance sheets and statements of
income of the Company within twenty (20) days after each month end for each
month ending more than twenty (20) days before the Closing;
(m) permit Buyer and its authorized representatives to have reasonable
access during regular business hours to all its properties, assets, records, Tax
Returns, Contracts and documents and furnish to Buyer and its authorized
representatives such financial and other information with respect to its
business or properties as they may from time to time reasonably request;
(n) promptly notify Buyer of (A) any notice or other communication from
any Person alleging that the Consent of such Person is or may be required in
connection with the transactions contemplated by this Agreement and (B) any
legal proceedings commenced or, to the knowledge of the Company or the
Stockholder threatened against, relating to or involving or otherwise affecting
the Company which relate to the consummation of the transactions contemplated by
this Agreement;
(o) use all commercially reasonable efforts to maintain its properties,
facilities, equipment and other assets in as good working order and condition as
of the date of this Agreement, ordinary wear and tear excepted;
(p) perform all its material obligations under all Contracts relating to
or affecting its business, assets, properties, equipment and rights;
(q) (i) refrain from entering into, or permitting any of the assets owned
or used by the Company to become bound by, any material Contract other than in
the ordinary course of business, (ii) waive any material right or remedy under
any material Contract (including, without limitation, any Contract disclosed in
the Disclosure Schedule) other than in the ordinary course of business;
(r) comply with all material respects with all applicable Laws,
Governmental Authorizations, consent orders, decrees and judgments;
(s) refrain from changing any of its methods of accounting or accounting
practices in any material respect;
(t) refrain from making any tax election; and
(u) refrain from commencing or settling any legal proceeding.
25
6.3 Retention Bonuses. Prior to the Closing Date, the Company shall offer
to each individual set forth on Exhibit C hereto (each a "Recipient") a
retention bonus in the amount set forth next to such individual's name on
Exhibit C (each a "Retention Bonus" and collectively the "Retention Bonuses");
provided, however, that the aggregate amount of all Retention Bonuses offered by
the Company shall not exceed $3,227,400. Each Retention Bonus shall be payable
by the Company in three annual installments (each a "Retention Payment")
commencing on the date that is 30 days after the first anniversary of the
Closing Date, provided that, a Recipient shall be eligible to receive a
Retention Payment only if such Recipient remained employed by the Company from
the Closing Date through the date of the applicable Retention Payment and,
provided further that, notwithstanding the foregoing, a Recipient shall be
entitled to receive his or her full Retention Bonus in the event that the
Recipient dies or becomes permanently incapacitated while employed by Company.
The Company's obligation to make, and each Recipient's right to receive, a
Retention Bonus shall be evidenced by a written letter agreement in form and
substance satisfactory to Buyer among the Company, the Stockholder and the
Recipient (each a "Retention Agreement").
6.4 Consent. Prior to the Closing Date, the Stockholder and the Company
will use all commercially reasonable efforts to obtain all Consents required to
permit the consummation by the Stockholder and the Company of the transactions
contemplated by this Agreement.
6.5 Notification; Updates to Disclosure Schedule.
(a) Prior to the Closing, the Company and the Stockholder shall promptly
notify Buyer in writing of: (i) the discovery by the Company or the Stockholder
of any event, condition, fact or circumstance that occurred or existed on or
prior to the date of this Agreement and that caused or constitutes in any
material respect an inaccuracy in or breach of any representation or warranty
made by the Company or the Stockholder in this Agreement; (ii) any event,
condition, fact or circumstance that occurs, arises or exists after the date of
this Agreement and that would cause or constitute in any material respect an
inaccuracy in or breach of any representation or warranty made by the Company or
the Stockholder in this Agreement if (A) such representation or warranty had
been made as of the time of the occurrence, existence or discovery of such
event, condition, fact or circumstance or (B) such event, condition, fact or
circumstance had occurred, arisen or existed on or prior to the date of this
Agreement; and (iii) any material breach of any covenant or obligation of the
Company or the Stockholder.
(b) If any event, condition, fact or circumstance that is required to be
disclosed pursuant to Section 6.5(a) requires any change in the Disclosure
Schedule, or if any such event, condition, fact or circumstance would require
such a change assuming the Disclosure Schedule were dated as of the date of the
occurrence, existence or discovery of such event, condition, fact or
circumstance, then the Company and the Stockholder shall promptly deliver to
Buyer an update to the Disclosure Schedule specifying such change; provided
that, no such update shall be deemed to supplement or amend the Disclosure
Schedule for the purpose of determining whether any of the conditions set forth
in Section 9.2 have been satisfied and (ii) no update made pursuant to Section
6.5(a)(i) shall be deemed to supplement or amend the Disclosure Schedule for the
purpose of determining the accuracy of any of the representations and warranties
made by the Company or the Stockholder in this Agreement.
26
6.6 Consummation of Agreement. The Company and the Stockholder shall use
their commercially reasonable efforts to perform and fulfill all conditions and
obligations on their parts to be performed and fulfilled under this Agreement,
to the end that the transactions contemplated by this Agreement shall be fully
carried out. To this end, the Company will use its commercially reasonable
efforts to obtain prior to the Closing all necessary authorizations or approvals
of its Stockholder and Board of Directors.
6.7 Cooperation of the Company and Stockholder. The Company and the
Stockholder shall cooperate with all reasonable requests of Buyer and Buyer's
counsel and accountants in connection with the consummation of the transactions
contemplated hereby.
6.8 No Solicitation of Other Offers. Unless and until this Agreement shall
have been terminated, neither the Company nor the Stockholder shall, nor shall
the Company or the Stockholder permit any of its directors, officers, employees
or agents to, directly or indirectly, (i) take any action to solicit, initiate
submission of or encourage, proposals or offers from any Person relating to any
acquisition or purchase of all or a portion of the assets of, or any equity
interest in, the Company, any merger or business combination with the Company or
any public or private offering of interests in the Company (an "Acquisition
Proposal"), (ii) participate in any discussions or negotiations regarding an
Acquisition Proposal with any Person other than Buyer and its representatives,
(iii) furnish any information or afford access to the properties, books or
records of the Company or the Stockholder to any Person that may consider making
or has made an offer with respect to an Acquisition Proposal other than Buyer
and its representatives, or (iv) otherwise cooperate in any way with, or assist
or participate in, facilitate or encourage, any effort or attempt by any other
Person to do any of the foregoing. The Company will promptly notify Buyer upon
receipt of any offer or indication that any Person is considering making an
offer with respect to an Acquisition Proposal or any request for information
relative to the Company or for access to the properties, books and records of
the Company, and will promptly reject any such offer or request.
6.9 Confidentiality. The Company and the Stockholder agree that, until the
second anniversary of this Agreement, they and their officers, directors, agents
and representatives will hold in strict confidence, and will not use, any
confidential or proprietary data or information obtained from Buyer with respect
to its business or financial condition except for the purpose of evaluating,
negotiating and completing the transactions contemplated hereby. Information
generally known in Buyer's industry or which has been disclosed to the Company
or the Stockholder by third parties which have a right to do so or independently
developed or acquired by the Company or the Stockholder shall not be deemed
confidential or proprietary information for purposes of this Agreement. If the
transactions contemplated by this Agreement are not consummated, the Company and
the Stockholder will return to Buyer (or certify that they have destroyed) all
copies of such data and information, including but not limited to financial
information, customer lists, business and corporate records, worksheets, Tax
Returns, lists, memoranda, and other documents prepared by or made available to
the Company or the Stockholder in connection with the transaction.
6.10 No Transfer of Company Shares. Unless and until this Agreement shall
have been terminated in accordance with its terms, the Stockholder shall not
directly or indirectly enter into any Contract to sell, exchange, deliver,
assign, pledge, encumber or otherwise transfer
27
or dispose of any Company Shares, nor shall the Stockholder directly or
indirectly enter into any Contract or grant any right of any kind to acquire,
dispose of, vote or otherwise control in any manner any Company Shares.
6.11 Affiliate Transactions. All accounts and loans receivable of the
Company from the Stockholder shall have been paid in full prior to the Closing.
SECTION 7. COVENANTS OF BUYER.
7.1 General. Buyer hereby makes the covenants and agreements set forth in
this Section 7.
7.2 Confidentiality. Buyer agrees that, unless and until the Closing has
been consummated or until the second anniversary of any termination of this
Agreement, Buyer and its officers, directors, agents and representatives will
hold in strict confidence, and will not use any confidential or proprietary data
or information obtained from the Company or the Stockholder with respect to the
business or financial condition of the Company except for the purpose of
evaluating, negotiating and completing the transactions contemplated hereby.
Information generally known in the industries of the Company or the Stockholder
or which has been disclosed to Buyer by third parties which have a right to do
so or independently developed or acquired by Buyer shall not be deemed
confidential or proprietary information for purposes of this Agreement. If the
transactions contemplated by this Agreement are not consummated, Buyer will
return to the Company (or certify that it has destroyed) all copies of such data
and information, including but not limited to financial information, customer
lists, business and corporate records, worksheets, Tax Returns, lists,
memoranda, and other documents prepared by or made available to Buyer in
connection with the transaction. Notwithstanding the foregoing, Buyer shall be
permitted to disclose such information about the Company, its Stockholder and
the transactions contemplated hereby as may be legally required, and to its
legal, tax and financial advisors.
7.3 Consummation of Agreement. Buyer shall use all commercially reasonable
efforts to perform and fulfill all conditions and obligations on its part to be
performed and fulfilled under this Agreement, to the end that the transactions
contemplated by this Agreement shall be carried out.
7.4 Authorization from Others. Prior to the Closing, Buyer will use all
commercially reasonable efforts to obtain all Consents required to be obtained
by it to permit the consummation by Buyer of the transactions contemplated by
this Agreement, including any necessary authorizations or approvals of its Board
of Directors.
7.5 Notice of Breach. Prior to the Closing, Buyer shall give prompt notice
to the Company and the Stockholder of (a) the occurrence or existence or
non-occurrence or non-existence of any event, condition, fact or circumstance of
which they are aware that would be likely to cause any representation or
warranty of Buyer contained in this Agreement to be untrue or inaccurate in any
material respect at or prior to the Closing and (b) any material failure of
Buyer to comply with or
28
satisfy any covenant, condition, or agreement to be complied with or satisfied
by it hereunder and of which Buyer is aware and Buyer shall use all commercially
reasonable efforts to prevent or promptly remedy the same.
7.6 Accrued Bonuses. Buyer acknowledges that the Company has accrued on
its balance sheet aggregate bonuses consistent with past practice (excluding
acquisition-related bonuses) for the purpose of paying bonuses to its employees
(the "Accrued Bonus Amount"). Buyer agrees to cause the Company to use the full
Accrued Bonus Amount to pay bonuses to employees in such individual amounts to
be determined by the Company after the Closing.
SECTION 8. CERTAIN TAX MATTERS.
8.1 General. The following provisions shall govern the allocation of
responsibility between the Stockholder and Buyer for certain tax matters
following the applicable Closing Date.
8.2 Tax Periods Ending on or Before the Closing Date. The Stockholder
shall prepare or cause to be prepared and file or cause to be filed all Tax
Returns of the Company (i) that are due on or before the Closing Date, (ii) that
relate to taxable periods ending on or prior to the Closing Date but are
required to be filed and paid after the applicable Closing Date, (iii) that
relate to Taxes that are imposed on any member of any affiliated group with
which the Company files or has filed a Tax Return on a consolidated, combined,
affiliated or unitary basis for a taxable period commencing on or before the
applicable Closing Date and (iv) that relate to taxes relating from any election
described in Section 338 of the Code and any comparable election under state and
local law. Such Tax Returns shall be prepared in accordance with the Company's
past custom and practice. In preparing such Tax Returns, the Stockholder shall
consult with Buyer in good faith and shall provide Buyer with drafts of such Tax
Returns (together with the relevant back-up information) for review at least ten
days prior to filing upon request by Buyer.
8.3 Tax Periods Beginning Before and Ending After the Applicable Closing
Date. Buyer shall prepare or cause to be prepared and file or cause to be filed
any Tax Returns of the Company for tax periods which begin before the Closing
Date and end on or after the Closing Date. Such Tax Returns shall be prepared in
accordance with the Company's past custom and practice. In preparing such Tax
Returns, Buyer shall consult with the Stockholder in good faith and shall
provide the Stockholder with drafts of such Tax Returns (together with the
relevant back-up information) for review at least ten days prior to filing.
8.4 Payment of Taxes. The Stockholder shall pay or cause to be paid when
due and payable (i) all Taxes with respect to the Company for (A) any taxable
period ending on or before the Closing Date, and (B) the portion of any taxable
period ending after the Closing Date for the taxable period prior to the
Closing, in each case to the extent such Taxes exceed the amount, if any,
accrued for such Taxes as current Taxes payable on the Interim Balance Sheet and
(ii) all Taxes resulting from any election described in Section 338 of the Code
and any comparable election under state and local Law.
8.5 Cooperation and Exchange of Information. The Stockholder and Buyer
will provide each other with such cooperation and information as either of them
reasonably may
29
request of the other in filing any Tax Return, amended Tax Return or claim for
refund, determining a liability for Taxes or a right to a refund of Taxes,
participating in or conducting any audit or other proceeding in respect of
Taxes. Such cooperation and information shall include providing copies of
relevant Tax Returns or portions thereof, together with accompanying schedules,
related work papers and documents relating to rulings or other determinations by
tax authorities. Buyer and Stockholder shall make their respective employees
available on a basis mutually convenient to both parties to provide explanations
of any documents or information provided hereunder. Each of the Stockholder and
Buyer shall retain all Tax Returns, schedules and work papers, records and other
documents in its possession relating to tax matters of the Company and the
business and assets of the Company for each taxable period first ending after
the Closing Date and for all prior taxable periods until the later of (i) the
expiration of the statute of limitations of the taxable periods to which such
Tax Returns and other documents relate, without regard to extensions except to
the extent notified by the other party in writing of such extensions for the
respective tax periods, or (ii) six years following the due date (without
extension) for such Tax Returns. Any information obtained under this Section 8.5
shall be kept confidential in accordance with the provisions of this Agreement
except as may be otherwise necessary in connection with the filing of Tax
Returns or claims for refund or in conducting an audit or other proceeding.
8.6 Section 338 Election. At Buyer's written request, the Stockholder
shall (i) cooperate in the preparation of an election under Section 338(h)(10)
of the Code (the "338 Election") (and any corresponding elections under state,
local or foreign Law) and (ii) jointly file such election (and any corresponding
elections under state, local or foreign Law) with Buyer on a timely basis and
comply with the rules and regulations applicable to such Section 338 Election
(and any corresponding elections under state, local or foreign Law). The
allocation of the Purchase Price and the Liabilities of the Company for purposes
of making such Section 338 Election will be determined by Buyer and its
accounting firm, which shall be binding on the Stockholder. The Stockholder will
pay any Tax, including any liability of the Company for any Tax, as a result of
making such 338 Election (and any corresponding elections under state, local or
foreign Law) on a timely basis.
8.7 Audits.
(a) The Stockholder shall have sole and exclusive responsibility for,
control of, and authority to settle, any audits of the Company's Tax Returns and
of any Tax Returns which include the Company to the extent those Tax Returns
relate to periods ending on or prior to the Closing Date. The Stockholder shall
allow the Company and its advisors to participate (at Buyer's or Company's
expense) in any audits of such Tax Returns to the extent that such returns
relate to the Company and the outcome of the audit could have and adverse effect
on the Company for taxable periods ending after the Closing Date. The
Stockholder will not settle any such audit in a manner which would adversely
affect the Company after the Closing Date without the prior written consent of
the Company or Buyer, which consent shall not unreasonably be withheld and shall
not be necessary to the extent that the Stockholder has indemnified Buyer
against the effect of such settlement.
(b) Buyer shall have sole and exclusive responsibility for, control of,
and authority to settle, any audits of the Company's Tax Returns and of any Tax
Returns including the Company
30
that are not described in Section 8.7(a). Buyer shall allow the Stockholder and
its advisors to participate (at Stockholder's expense) in any audits of such Tax
Returns to the extent that such returns relate to the Company and the outcome of
the audit could have an adverse effect on the Stockholder. Buyer will not settle
any such audit in a manner which would adversely affect the Stockholder without
prior written consent of the Stockholder, which consent shall not unreasonably
be withheld and shall not be necessary to the extent that Buyer has indemnified
the Stockholder against the effect of any such settlement.
SECTION 9. CONDITIONS TO CLOSING.
9.1 Conditions to the Obligations of the Parties. The obligations of each
of the Company, the Stockholder and Buyer to consummate the transactions
contemplated by this Agreement are subject to the fulfillment, prior to or at
the Closing, of the following conditions unless waived in writing by all
parties:
(a) No Litigation. There shall have been no determination by Buyer, the
Company or the Stockholder, as the case may be, acting in good faith, that the
consummation of the transactions contemplated by this Agreement has become
inadvisable or impracticable by reason of the institution or threat by any
Person of litigation, proceedings or other action against Buyer, the Company or
the Stockholder.
(b) Xxxx-Xxxxx-Xxxxxx. The waiting period applicable to the consummation
of the transactions contemplated hereby under the HSR Act shall have expired or
been terminated and, on the Closing Date, any Consent required under any foreign
antitrust Law shall have been terminated.
9.2 Conditions to the Obligations of Buyer. The obligation of Buyer to
consummate the transactions contemplated by this Agreement are subject to the
fulfillment, prior to or at the Closing, of the following conditions precedent
unless waived in writing by Buyer:
(a) Representations, Warranties and Covenants. Each of the representations
and warranties of the Company and the Stockholder contained in this Agreement
and in the certificates and schedules delivered to Buyer in connection herewith
and qualified as to materiality shall be true and correct in all respects as of
the date of this Agreement and as of the Closing Date as though made on and as
of the Closing Date (in each case without giving effect to any update to the
Disclosure Schedule after the date of this Agreement) except in each case to the
extent that representations and warranties expressly made as of an earlier date
need only be true and correct as of such earlier date (in each case without
giving effect to any update to the Disclosure Schedule). Each of the
representations and warranties of the Company and the Stockholder contained in
this Agreement and in the certificates and schedules delivered to Buyer in
connection herewith not so qualified shall be true and correct in all material
respects as of the date of this Agreement and as of the Closing Date as though
made on and as of the Closing Date (in each case without giving effect to any
update to the Disclosure Schedule after the date of this Agreement) except in
each case to the extent that representations and warranties expressly made as of
an earlier date need only be true and correct as of such earlier date (in each
case without giving effect to any update to the Disclosure Schedule). The
Company and the Stockholder
31
shall, on or before the Closing, have performed in all material respects all of
their obligations hereunder which by the terms hereof are to be performed on or
before the Closing.
(b) No Material Change. There shall have been no material adverse change
in the financial condition, properties, assets, liabilities, business, prospects
or operations of the Company since the date of this Agreement.
(c) Agreements and Documents. Buyer shall have received the following
agreements and documents, each of which shall have been duly authorized,
executed and delivered and shall be in full force and effect at the Closing:
(i) a services agreement in form and substance mutually satisfactory
to the Stockholder and Buyer relating to the use of the Stockholder's
network by the Company following the Closing and such other matters as may
be mutually agreed upon by the parties;
(ii) Retention Agreements from all Key Employees;
(iii) releases in form and substance mutually satisfactory to the
Stockholder and Buyer, executed by the Stockholder and the officers and
directors of the Company;
(iv) a certificate of the Company's President and Chief Financial
Officer dated as of the Closing executed on behalf of the Company to the
effect that the conditions set forth in Sections 9.1 and 9.2 have been
satisfied;
(v) written resignations of all officers and directors of the
Company, effective as of the Closing Date;
(vi) the valid and effective termination of agreements between the
Company and the Stockholder;
(vii) a certificate of corporate and tax good standing from the
Secretary of State of Delaware as of a recent date;
(viii) certificates of corporate and tax good standing from the
Secretary of State of each jurisdiction in which the Company is qualified
to do business;
(ix) a certificate of the Secretary or Assistant Secretary of the
Stockholder dated as of the Closing Date and certifying: (i) that attached
thereto are copies of the resolutions of the Board of Directors of the
Stockholder and the Company approving this Agreement and the Company
Ancillary Agreements and Stockholder Ancillary Agreements (as applicable)
and the transactions contemplated hereby and thereby and (ii) the names
and signatures of the officers of the Stockholder and the Company
authorized to sign this Agreement, the Company Ancillary Agreements and
Stockholder Ancillary Agreements (as applicable) and the other documents,
instruments or certificates to be delivered pursuant hereto and thereto.
(d) Financing. Buyer shall have received the following:
32
(i) all required financing to consummate the transaction
contemplated hereby upon commercially reasonable terms satisfactory to
Buyer, provided that Buyer shall use its good faith efforts to obtain such
financing;
(ii) all approvals and consents of the required lenders under that
certain Credit Agreement dated as of September 29, 1999, by and among
Buyer, various financial institutions from time to time, DLJ Capital
Funding, Inc., as Syndication Agent and Union Bank of California, N.A. as
Administrative Agent (as amended); and
(iii) evidence of Buyer's compliance with all applicable
requirements under that certain Indenture dated as of September 29, 1999
respecting 13 1/2 % Senior Subordinated Notes due 2009.
(e) Consents. The Company or the Stockholder shall have made all filings
with and notifications of Governmental Authorities and other Persons required to
be made by the Company or the Stockholder in connection with the execution and
delivery of this Agreement, the performance of the transactions contemplated
hereby and the continued operation of the business of the Company by Buyer
subsequent to the Closing. The Company, the Stockholder and Buyer shall have
received all Consents and Governmental Authorizations, in form and substance
reasonably satisfactory to Buyer, from all applicable Governmental Authorities
and other Persons, required to permit the continuation of the business of the
Company and the consummation of the transactions contemplated by this Agreement,
and to avoid a breach, default, termination, acceleration or modification of any
indenture, loan or credit agreement or any other material Contract, instrument,
mortgage, lien, lease, permit, authorization, order, writ, judgment, injunction,
decree, determination or arbitration award as a result of, or in connection
with, the execution and performance of this Agreement and the consummation of
the transactions contemplated hereby.
9.3 Conditions to the Obligations of the Company and the Stockholder. The
obligation of the Company and the Stockholder to consummate the transactions
contemplated by this Agreement is subject to the fulfillment, prior to or at the
Closing, of the following conditions precedent unless waived in writing by the
Company and the Stockholder:
(a) Representations, Warranties and Covenants. Each of the representations
and warranties contained in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and as of the Closing Date as
though made on and as of the Closing Date except in each case to the extent that
representations and warranties expressly made as of an earlier date need only be
true and correct in all respects as of such earlier date. Buyer shall, on or
before the Closing, have performed in all material respects all of its
obligations hereunder which, by the terms hereof are to be performed on or
before the Closing.
(b) Agreements and Documents. Stockholder shall have received the Note,
which shall have been duly authorized, executed and delivered and shall be in
full force and effect at the Closing.
SECTION 10. TERMINATION OF AGREEMENT.
33
10.1 Termination. At any time prior to the Closing, this Agreement may be
terminated as follows:
(a) by mutual written consent of all of the parties to this Agreement;
(b) by written notice of the Company or the Stockholder to Buyer, provided
that neither the Company nor the Stockholder is in material breach of this
Agreement, (i) if Buyer is in material breach of this Agreement and such breach
shall remain uncured for a period of ten (10) business days after the Company
shall have given written notice of such breach to Buyer or (ii) if by January
31, 2001, any of the conditions in Section 9.1 or Section 9.3 shall not have
been satisfied, complied with or performed (unless such failure of satisfaction,
noncompliance or nonperformance is the result directly or indirectly of any
intentional or willful action or intentional or willful failure to act on the
part of the Company or the Stockholder) and the Company and the Stockholder
shall not have waived such failure of satisfaction, noncompliance or
nonperformance; or
(c) by written notice of Buyer to the Company and Stockholder, provided
that Buyer is not in material breach of this Agreement, (i) if the Company or
the Stockholder is in material breach of this Agreement and such breach shall
remain uncured for a period of ten (10) business days after Buyer shall have
given written notice of such breach to the Company and, if applicable, the
Stockholder or (ii) if by January 31, 2001, any of the conditions in Section 9.1
or Section 9.2 shall not have been satisfied, complied with or performed (unless
such failure of satisfaction, noncompliance or nonperformance is the result
directly or indirectly of any intentional or willful action or intentional or
willful failure to act on the part of Buyer) and Buyer shall not have waived
such failure of satisfaction, noncompliance or nonperformance.
10.2 Effect of Termination. All obligations of the parties hereunder shall
cease upon any termination pursuant to Section 10.1; provided, however, that the
provisions of Sections 6.9 and 7.2 hereof shall survive any termination of this
Agreement.
SECTION 11. INDEMNIFICATION.
11.1 Survival. All representations and warranties contained in this
Agreement or expressly incorporated herein by reference or in any schedule or
certificate delivered by any party incident to the transactions contemplated
hereby may be relied upon by the party receiving the same and shall (subject to
the provisions of Sections 11.3(b) and 11.5(b) hereof) survive the Closing for a
period of two years (the "Termination Date"); provided, however, that if any
time prior to the Termination Date any party seeking indemnification hereunder
delivers to the party from which it is seeking indemnification a written notice
of a Buyer Indemnifiable Claim or Stockholder Indemnifiable Claim, as the case
may be, then such claim shall survive until such time as it is fully and finally
resolved. No covenant or agreement of any party hereto shall survive the
Closing, except that any covenant or agreement that, by its terms or context, is
intended to survive the Closing, shall survive the Closing for the period
specified therein or contemplated thereby. For the purpose of determining the
aggregate amount of Losses suffered by a Buyer Indemnified Party or Stockholder
Indemnified Party, each representation and warranty (whether made as of the date
of this Agreement or as of the Closing Date) contained in this Agreement under
which indemnification is sought hereunder shall be read without regard to,
34
and as if such representation or warranty did not contain, materiality or
similar qualifications that may be contained therein.
11.2 Indemnification by the Stockholder. From and after the Closing Date,
the Stockholder and its successors and permitted assigns shall indemnify and
hold harmless Buyer, its subsidiaries and affiliates and their respective
stockholders, officers, directors, employees and agents (individually, a "Buyer
Indemnified Party" and collectively, the "Buyer Indemnified Parties") from and
against and in respect of all losses, liabilities, obligations, damages,
deficiencies, actions, suits, proceedings, demands, assessments, orders,
judgments, fines, penalties, costs and expenses (including the reasonable fees,
disbursements and expenses of attorneys, accountants and consultants) of any
kind or nature whatsoever (whether or not arising out of third-party claims and
including all amounts paid in investigation, defense or settlement of the
foregoing) (a "Loss" or "Losses") sustained, suffered or incurred by any Buyer
Indemnified Party arising out of or resulting from: (i) any inaccuracy in or
breach of any representation or warranty made by the Company or the Stockholder
in this Agreement (after giving effect to any update of the Disclosure Schedule
after the date of this Agreement other than an update made pursuant to Section
6.5(a)(i) of this Agreement after the date of this Agreement) or in any schedule
or certificate delivered in connection with this Agreement; (ii) any breach of
any covenant or agreement made by the Company or the Stockholder in this
Agreement or in any schedule or certificate delivered in connection with this
Agreement; (iii) any Liability of the Company for Taxes arising from an event or
transaction occurring prior to the Closing (including, without limitation, any
Liability arising out of any item set forth in Section 3.10 of the Disclosure
Schedule) and any Liability for Taxes incurred as a result of the Section 338
Election; (iv) any Liability of the Stockholder under Section 1 of the Retention
Agreements; or (v) any Liability relating to or arising out of any item set
forth in Section 3.18 of the Disclosure Schedule. Claims under clauses (i)
through (v) of this Section 11.2 are collectively referred to herein as "Buyer
Indemnifiable Claims," and Losses in respect of such claims are collectively
referred to herein as "Buyer Indemnifiable Losses."
11.3 Limitations on Indemnification by the Stockholder.
(a) Deductible; Maximum Indemnification. Except as set forth in Section
11.3(b) below, no indemnification shall be payable by the Stockholder with
respect to Buyer Indemnifiable Losses until the cumulative amount of all Buyer
Indemnifiable Losses exceeds Two Hundred Fifty Thousand Dollars ($250,000) in
the aggregate (the "Deductible Amount"), whereupon the Stockholder shall be
liable for the full amount of all such Buyer Indemnifiable Losses. Except as set
forth in Section 11.3(b) below, the maximum aggregate Buyer Indemnifiable Losses
for which the Stockholder will be obligated to indemnify the Buyer Indemnified
Parties shall be $25,000,000 (the "Maximum Amount").
(b) No Limitation on Certain Claims. Notwithstanding anything herein to
the contrary, Buyer Indemnified Claims arising out of or resulting from (i) any
inaccuracy or breach of Section 3.10 or any Loss arising under Section 11.2(iii)
shall survive the Closing until the termination of any applicable statute of
limitations plus 30 days; (ii) any inaccuracy or breach of Section 3.25 shall
survive the Closing until the termination of any applicable statute of
limitations plus 30 days; (iii) any inaccuracy or breach of Section 3.26 shall
survive the Closing for a period of five years; (iv) any inaccuracy or breach of
Section 3.2, 3.3, 3.5(a), 3.21, 4.2 or
35
4.3(a) or any Loss arising under Section 11.2(iv) or 11.2(v) shall survive the
Closing indefinitely; and (v) fraud or intentional misrepresentation by the
Company or the Stockholder or a deliberate or willful breach by the Company or
the Stockholder of any of their representations or warranties under this
Agreement or in any schedule or certificate delivered in connection with this
Agreement shall survive the Closing indefinitely. Buyer Indemnifiable Losses
arising out of or resulting from: (A) Buyer Indemnifiable Claims described in
clauses (i), (iv) and (v) above shall not be subject to the Deductible Amount or
the Maximum Amount, (B) Buyer Indemnifiable Claims described in clause (ii)
above shall be subject to the Deductible Amount and the Maximum Amount, and (C)
Buyer Indemnifiable Claims described in clause (iii) above shall be subject to
the Deductible Amount and shall, with respect to Buyer Indemnifiable Claims made
after the third anniversary of the Closing (but not any claims made prior to
such date), be subject to the Maximum Amount.
(c) Claims Relating to Accounts Receivable. Notwithstanding anything
herein to the contrary, Buyer Indemnified Parties shall only be entitled to
receive an amount equal to one-half of all Buyer Indemnified Losses resulting
from any inaccuracy or breach of Section 3.11; provided, however, the Buyer
Indemnified Parties shall be entitled to receive from the Stockholder the full
amount of their out-of-pocket costs and expenses for the reasonable fees,
disbursements and expenses of attorneys, accountants and consultants incurred in
attempting to collect any accounts receivable of the Company existing on the
Closing Date which are not collected by the Company and for which a Buyer
Indemnified Party is entitled to indemnification under Section 11.2.
11.4 Indemnification by Buyer. From and after the Closing Date, Buyer and
its successors and permitted assigns shall indemnify and hold harmless the
Stockholder, its successors and permitted assigns, and its subsidiaries and
affiliates and their respective stockholders, officers, directors, employees and
agents (individually, a "Stockholder Indemnified Party" and collectively, the
"Stockholder Indemnified Parties") from and against and in respect of all Losses
sustained, suffered or incurred by any Stockholder Indemnified Party arising out
of or resulting from: (i) any inaccuracy in or breach of any representation or
warranty made by Buyer in this Agreement or in any schedule or certificate
delivered in connection with this Agreement; (ii) any breach of any covenant or
agreement made by Buyer in this Agreement or in any schedule or certificate
delivered in connection with this Agreement; or (iii) any Liability of the
Company under Section 2 of the Retention Agreements. Claims under clauses (i)
through (iii) of this Section 11.4 are collectively referred to herein as
"Stockholder Indemnifiable Claims," and Losses in respect of such claims are
collectively referred to as "Stockholder Indemnifiable Losses."
11.5 Limitations on Indemnification by Buyer.
(a) Deductible; Maximum Indemnification. Except as set forth in Section
11.5(b) below, no indemnification shall be payable by Buyer with respect to
Stockholder Indemnifiable Losses until the cumulative amount of all Stockholder
Indemnifiable Losses exceeds the Deductible Amount, whereupon Buyer shall be
liable for the full amount of all such Stockholder Indemnifiable Losses. Except
as set forth in Section 11.5(b) below, the maximum aggregate Stockholder
Indemnifiable Losses for which Buyer will be obligated to indemnify the
Stockholder Indemnified Parties shall be the Maximum Amount.
36
(b) No Limitation on Certain Claims. Notwithstanding anything herein to
the contrary, Stockholder Indemnifiable Claims arising out of or resulting from
(i) any inaccuracy or breach of Section 5.2, 5.3(a) or 5.4 or any Loss arising
under Section 11.5(b)(iii), or (ii) fraud or intentional misrepresentation by
Buyer or a deliberate or willful breach by Buyer of any of its representations
or warranties under this Agreement or in any schedule or certificate delivered
in connection with this Agreement, shall survive the Closing indefinitely and
Stockholder Indemnifiable Losses arising out of or resulting from any of the
foregoing shall not be subject to the Deductible Amount or the Maximum Amount.
11.6 No Contribution. The Stockholder shall have no right of contribution,
indemnity or any other right or remedy against the Company in connection with
any indemnification obligation or any other liability to which it may become
subject under or in connection with this Agreement.
11.7 No Consequential Damages. The parties hereby waive as against each
other any claims as to consequential, special, exemplary or punitive damages,
except to the extent consequential, special exemplary or punitive damages are
awarded to a third party (pursuant to a settlement, arbitration ruling or
judgment) against an indemnified party in circumstances under which such
indemnified party is entitled to indemnification hereunder.
11.8 Notice; Defense of Claims.
(a) Notice of Claims. Promptly and no later than fifteen (15) days after
receipt by an indemnified party of notice of any claim, liability or expense to
which the indemnification obligations hereunder would apply, the indemnified
party shall give notice thereof in writing (a "Claim Notice") to the
indemnifying party, but the omission to so notify the indemnifying party
promptly will not relieve the indemnifying party from any liability except to
the extent that the indemnifying party shall have been prejudiced as a result of
the failure or delay in giving such Claim Notice. Such Claim Notice shall state
the information then available regarding the amount and nature of such claim,
liability or expense and shall specify the provision or provisions of this
Agreement under which the liability or obligation is asserted.
(b) Third Party Claims. With respect to third party claims, if within 20
days after receiving the Claim Notice the indemnifying party gives written
notice (the "Defense Notice") to the indemnified party stating that it disputes
and intends to defend against such claim, liability or expense at its own cost
and expense, then counsel for the defense shall be selected by the indemnifying
party (subject to the consent of the indemnified party which consent shall not
be unreasonably withheld) and the indemnified party shall not be required to
make any payment with respect to such claim, liability or expense as long as the
indemnifying party is conducting a good faith and diligent defense at its own
expense; provided, however, that the assumption of defense of any such matters
by the indemnifying party shall relate solely to the claim, liability or expense
that is subject or potentially subject to indemnification.
The indemnifying party shall have the right, with the consent of the
indemnified party, which consent shall not be unreasonably withheld, to settle
all indemnifiable matters related to claims by third parties which are
susceptible to being settled provided the indemnifying parties' obligation to
indemnify the indemnified party therefor will be fully satisfied. The
indemnifying
37
party shall at all times control the conduct of the defense, provided that the
indemnifying party shall keep the indemnified party apprised of the status of
the claim, liability or expense and any resulting suit, proceeding or
enforcement action, shall furnish the indemnified party with all documents and
information that the indemnified party shall reasonably request and shall
consult with the indemnified party prior to acting on major matters, including
settlement discussions. Notwithstanding anything herein stated, the indemnified
party shall at all times have the right to participate in such defense at its
own expense directly or through counsel.
If no Defense Notice is given by the indemnifying party, or if such
diligent good faith defense is not being or ceases to be conducted, the
indemnified party shall, at the expense of the indemnifying party, undertake the
defense of (with counsel selected by the indemnified party, including local
counsel), and shall have the right to compromise or settle (exercising
reasonable business judgment), such claim, liability or expense. If such claim,
liability or expense is one that by its nature cannot be defended solely by the
indemnifying party, then the indemnified party shall make available all
information and assistance that the indemnifying party may reasonably request
and shall cooperate with the indemnifying party in such defense.
(c) Non-Third Party Claims. With respect to non-third party claims, if
within 45 days after receiving the Claim Notice the indemnifying party does not
give written notice to the indemnified party that it contests such indemnity,
the amount of indemnity payable for such claim shall be as set forth in the
Claim Notice. If the indemnifying party provides written notice to the
indemnified party within such 45-day period that it contests such indemnity, the
parties shall attempt in good faith to reach an agreement with regard thereto
within 30 days of delivery of the indemnifying party's notice.
11.9 Sole Remedy. From and after the Closing, the sole and exclusive
remedy of the parties hereto with respect to any and all monetary claims (other
than claims described in Sections 2.3, 11.3(b)(iv) and 11.5(b)(ii)) relating to
this Agreement and the transactions contemplated hereby shall be the
indemnification provisions set forth in this Section 11. The sole and exclusive
remedy of the parties hereto with respect to any and all monetary claims
relating to the Working Capital Adjustment shall be the dispute resolution
provisions set forth in Section 2.3. With respect to non-monetary damages or
relief (such as breaches of covenants to be performed after the Closing Date) or
claims described in Sections 11.3(b)(iv) and 11.5(b)(ii), the remedies set forth
in this Section 11 are cumulative and shall not be construed to restrict or
otherwise affect any other remedies that may be available to the indemnified
party under any agreement, pursuant to law or otherwise. In determining Losses
hereunder, due account shall be taken of all relevant factors, including,
without limitation, the net present value of (i) any insurance proceeds (net of
any negative tax effects) and (ii) any deduction, credit, amortization,
exclusion from income or other tax benefit realized by the indemnified party on
the account of any Loss.
11.10 Right of Offset. Without limiting any of Buyer's rights hereunder,
any amounts due to the Stockholder under the Note may be offset in accordance
with the terms of the Note in order to satisfy any unpaid amounts that become
due to any Buyer Indemnified Party under this Agreement.
SECTION 12. MISCELLANEOUS.
38
12.1 Governing Law. This Agreement shall be construed under and governed
by the internal laws of Maryland without regard to its conflict of laws
provisions.
12.2 Notices. Any notice, request, demand or other communication required
or permitted hereunder shall be in writing and shall be deemed to have been
given if delivered or sent by facsimile transmission or overnight courier of
national reputation, upon receipt, or if sent by registered or certified mail,
upon the sooner of the date on which receipt is acknowledged or the expiration
of three days after deposit in United States post office facilities properly
addressed with postage prepaid. All notices to a party will be sent to the
addresses set forth below or to such other address or person as such party may
designate by notice to each other party hereunder:
TO THE COMPANY:
Pathology Associates International Corporation
00 Xxxxxx'x Xxxx Xxxxx, Xxxxx 0
Xxxxxxxxx, XX 00000
Fax: 000-000-0000
Attn: President
TO THE STOCKHOLDER: Science Applications International Corporation
00 Xxxxxxxx Xxxxxx
Xxxxx 000, XX X-0
Xx Xxxxx, XX 00000
Fax: 000-000-0000
Attn: Xxxxx X. Xxxxxx
With a copy to: Science Applications International Corporation
00000 Xxxxxx Xxxxx Xxxxx, XX F-3
Xxx Xxxxx, XX 00000
Fax: 000-000-0000
Attn: Xxxxxxx X. Xxxxxxx, Esq.
TO BUYER: Xxxxxxx River Laboratories, Inc.
000 Xxxxxxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Fax: 000-000-0000
Attn: Xxxxxx X. Xxxxxxxxxxx, Esq.
With a copy to: Mintz, Levin, Cohn, Ferris, Glovsky and
Popeo, P.C.
Xxx Xxxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Fax: 000-000-0000
Attn: Xxxxxxx X. Xxxxxx, Esq.
Any notice given hereunder may be given on behalf of any party by his counsel or
other authorized representatives.
39
12.3 Entire Agreement. This Agreement, including the schedules and
exhibits referred to herein and the other writings specifically identified
herein or contemplated hereby, is complete, reflects the entire agreement of the
parties with respect to its subject matter, and supersedes all previous written
or oral negotiations, commitments and writings.
12.4 Assignability; Binding Effect. This Agreement shall only be
assignable by Buyer to a corporation or partnership controlling, controlled by
or under common control with Buyer upon written notice to the Company and the
Stockholder, and such assignment shall not relieve Buyer of any liability
hereunder. This Agreement may not be assigned by the Stockholder or the Company
without the prior written consent of Buyer. This Agreement shall be binding upon
and enforceable by, and shall inure to the benefit of, the parties hereto and
their respective successors and permitted assigns.
12.5 Captions. The captions in this Agreement are for convenience only and
shall not affect the construction or interpretation of any term or provision
hereof.
12.6 Execution in Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same document.
12.7 Modification, Amendment, Waiver. No modification or amendment of any
provision of this Agreement shall be effective unless approved in writing by the
parties to the Agreement. No party shall be deemed to have waived compliance by
any other party with respect to any provision of this Agreement unless such
waiver is in writing, and the failure of any party at any time to enforce any of
the provisions of this Agreement shall in no way be construed as a waiver of
such provisions and shall not affect the rights of any party thereafter to
enforce such provisions in accordance with their terms. No waiver of any
provision of this Agreement shall be deemed to be a waiver of any other
provision of this Agreement. No waiver of any breach of any provision of this
Agreement shall be deemed the waiver of any subsequent breach thereof or of any
other provision of this Agreement.
12.8 Press Releases and Public Announcements. At all times Buyer and the
Company shall obtain the prior written consent of the Stockholder, and the
Company and the Stockholder shall obtain the prior written consent of Buyer,
prior to issuing, or permitting any of their representatives to issue, any press
release or make any other public disclosure or announcement or otherwise make
any disclosure to any third person concerning the transactions contemplated
hereby or the terms and conditions hereof or thereof; provided, however, that no
party shall be prohibited from (a) supplying any such information to any of
their representatives, attorneys, advisors, financing sources and otherwise to
the extent necessary to complete the transactions so long as such
representatives, attorneys, advisors, financing sources and others are made
aware of and agree to be bound by the terms of this Section, (b) furnishing any
such information pursuant to or as required by an applicable Law, or (c)
disclosing any such information as necessary to comply with applicable stock
exchange or SEC disclosure obligations. Should any disclosure be required to be
made pursuant to clause (b) or (c) above, then to the extent practicable the
party required to make such disclosure shall consult with the other parties
hereto prior to making such release or disclosure. The foregoing
notwithstanding, the parties hereto agree and acknowledge
40
that a joint press release shall be issued upon the Closing hereunder which
shall be mutually acceptable to all parties hereto.
12.9 Arbitration. Any dispute, controversy or claim arising out of or in
connection with this Agreement or any Ancillary Agreement (a "Claim") shall be
resolved by binding arbitration in accordance with the provisions of this
Section 12.9. Any such arbitration shall be conducted in Frederick, Maryland.
Upon the initiation of any Claim, the parties involved in such Claim shall
attempt to mutually agree upon an arbitrator(s) to arbitrate the dispute. If the
parties are unable to mutually agree upon an arbitrator(s) within 10 days
following the initiation of such Claim, the parties shall request the American
Arbitration Association (the "AAA") to appoint, on an expedited basis, three
arbitrators who shall have substantial experience as arbitrators, be experienced
in corporate transactions and the subject matter of the dispute and be able to
commence arbitration proceedings (with at least an initial hearing), according
to the requirements of this Section 12.9 and the Commercial Arbitration Rules
and other complimentary rules of the AAA (the "Rules"), within 30 days after
appointment. The arbitration proceeding shall be administered by the
arbitrator(s) in accordance with the Rules as such arbitrator(s) deem
appropriate. The decision of the arbitrator(s) shall be final and binding
provided that such decision is in written form and recites the decision and all
findings and orders relative to the implementation thereof. Each of the parties
hereto hereby irrevocably submits to the jurisdiction of all federal and state
courts of competent jurisdiction located in the Commonwealth of Massachusetts
for the purpose of enforcing the decision of the arbitrator(s) and hereby waives
and agrees not to seek any review by any court of any other jurisdiction which
may be called upon to grant an enforcement of the judgment of any such court.
Final judgment against either party may be enforced in other jurisdictions by
suit, action or proceeding on the judgment, or in any other manner provided by
or pursuant to the laws of such other jurisdiction. Prior to receipt of the
decision of the arbitrator(s), each party shall pay its own expenses in
connection with any arbitration proceeding initiated hereunder and shall share
the costs of the arbitrator(s). The arbitrator(s) may order that the prevailing
party is entitled to have its costs (including AAA fees and attorney and other
professional fees) paid by the other party; provided, however, that the
arbitrator(s) shall have discretion to apportion the responsibility for the
costs of the parties in the event that the decision of the arbitrator(s) is not
solely in favor of one of the parties. Notwithstanding anything to the contrary
contained herein, a party may seek injunctive relief without complying with the
provisions of this Section 12.9; provided, however, that the parties agree that
any arbitrator appointed hereunder shall have the authority to issue injunctive
orders for specific enforcement.
12.10 Consent of Third Parties. Anything to the contrary in this Agreement
notwithstanding, to the extent that the transactions contemplated by this
Agreement require the Consent of a third party, this Agreement shall not
constitute an agreement to effect such transaction if it would constitute a
breach or violation of any Contract or Consent or adversely affect Buyer's
rights thereunder.
12.11 Expenses. Each of the parties hereto shall bear its own costs and
expenses, including fees and disbursements of their counsel and accountants, in
connection with the negotiation and execution of this Agreement and each
agreement executed in connection herewith and the consummation of the
transactions contemplated hereby and thereby.
41
12.12 Restrictions Under Securities Laws. The Company and the Stockholder
acknowledge that they are aware (and their stockholders, partners, members,
directors, members of governing bodies, employees, advisors, representatives and
affiliates who are or will be apprised of matters relating to this Agreement,
the agreements executed in connection herewith, or the transactions contemplated
hereby and thereby have been advised), that the United States securities laws
prohibit any person who has material non-public information about a company from
purchasing or selling securities of such company. The Company and the
Stockholder agree that they shall not, directly or indirectly, alone or with
others, in any manner acquire or attempt to acquire or dispose of or attempt to
dispose of any securities of Xxxxxxx River Laboratories International, Inc. or
any other person in violation of applicable securities laws, and that it shall
instruct its representatives who are apprized of matters relating to this
Agreement or the agreements executed in connection herewith, or the transactions
contemplated hereby and thereby to comply with such prohibitions.
12.13 Remedies. The parties hereto agree and acknowledge that money
damages may not be an adequate remedy for breach of the provisions of this
Agreement and that any party hereto shall be entitled, in its sole discretion,
to apply to any court of competent jurisdiction for specific performance or
injunctive relief (without the need to post any bond or other security) in order
to enforce or prevent any violations of the provisions of this Agreement pending
a final determination of such matters. Unless expressly set forth herein to the
contrary, all remedies set forth herein are cumulative and are in addition to
any and all remedies provided either party at law or in equity.
12.14 Severability. Any provision of this Agreement which may be
determined to be prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this
Agreement, and any such prohibition or unenforceability in such jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction. Moreover, if any one or more provisions contained in this
Agreement shall for any reason be held by any court of competent jurisdiction to
be excessively broad as to time, duration, geographical scope, activity or
subject, it shall be construed, by limiting and reducing it, so as to be
enforceable to the extent compatible with the applicable law as it shall then
appear.
12.15 Non-solicitation. The parties agree that for a period of one year
from the Closing Date, neither the Stockholder on the one hand nor Buyer or the
Company on the other hand, without the prior written consent of the other party,
shall directly or indirectly solicit for employment or hire any employee,
consultant, officer or director of the other party. Notwithstanding the
foregoing, the parties shall not be precluded from hiring any such employee,
consultant, officer or director who (i) responds to any public advertisement
placed by the hiring party, (ii) initiates employment discussions with the
hiring party, as evidenced by the hiring party's written records or (iii) has
been terminated by the other party prior to commencement of employment
discussions between the hiring party and such employee, consultant, officer or
director.
[Remainder of Page Intentionally Left Blank]
42
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed as of the date set forth above by their duly authorized
representatives.
PATHOLOGY ASSOCIATES
INTERNATIONAL CORPORATION
By:_____________________________________
Name:___________________________________
Title:__________________________________
SCIENCE APPLICATIONS
INTERNATIONAL CORPORATION
By:_____________________________________
Name:___________________________________
Title:__________________________________
XXXXXXX RIVER LABORATORIES, INC.
By:_____________________________________
Name:___________________________________
Title:__________________________________
43
EXHIBIT A
EXHIBIT B
THIS UNSECURED SUBORDINATED CONVERTIBLE NOTE (THIS "NOTE") AND THE SHARES OF
CAPITAL STOCK ISSUED UPON ANY CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY APPLICABLE
STATE SECURITIES LAWS AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED TO ANY
PERSON, INCLUDING A PLEDGEE, UNLESS (1) EITHER (A) A REGISTRATION STATEMENT WITH
RESPECT THERETO SHALL BE EFFECTIVE UNDER THE SECURITIES ACT, OR (B) THE COMPANY
SHALL HAVE RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT IS AVAILABLE, AND (2) THERE
SHALL HAVE BEEN COMPLIANCE WITH ALL APPLICABLE STATE SECURITIES OR "BLUE SKY"
LAWS.
XXXXXXX RIVER LABORATORIES, INC.
UNSECURED SUBORDINATED CONVERTIBLE NOTE
$12,000,000 January __, 2000 (the "Effective Date")
XXXXXXX RIVER LABORATORIES, INC., a Delaware corporation (the
"Company"), for value received, hereby promises to pay to the order of Science
Applications International Corporation, a Delaware corporation (the "Holder"),
the principal amount of TWELVE MILLION DOLLARS ($12,000,000), together with
interest thereon calculated from the date hereof in accordance with the
provisions of this Note. This Note is subordinate and junior in right of payment
in full in cash of all "Senior Debt" of the Company as described in Section 4
below. Xxxxxxx River Laboratories International, Inc. (f/k/a Xxxxxxx River
Laboratories Holdings, Inc.) (the "Parent"), the corporate parent of the
Company, is executing this Note solely to agree to the provisions of Sections 2
and 6 below and for no other purpose, as further described in Section 9 below.
1. Payment in Cash.
1.1 Mandatory Payments of Interest and Principal. Commencing on the
Effective Date, interest shall accrue on the unpaid principal amount of this
Note outstanding from time to time at the rate of two percent (2%) per annum
(the "Basic Interest Rate") (computed on the basis of a 365-day year and the
actual number of days elapsed in any year). Interest shall not be compounded.
Beginning on January ____, 2002, the Company shall pay to the Holder quarterly
payments of accrued interest and quarterly principal payments of $750,000 on the
___ day of each January, April, July and October. The Company shall pay the
entire remaining unpaid principal balance amount on January __, 2006 (the
"Maturity Date"), together with any accrued and unpaid interest.
1.2 Prepayments. (a) From the period beginning on the Effective Date
and ending on _____, 2001 [90 days after Effective Date], the Company may, at
its option, prepay the entire outstanding principal amount of this Note,
together with interest accrued thereon, except that such interest shall be
calculated at the rate of twelve percent (12%) per annum (the "Increased
Interest Rate") accruing from the Effective Date through the date of prepayment.
The Company shall send written notice to the Holder of its election to make a
prepayment on this Note pursuant to this Section 1.2(a) by registered or
certified mail, return receipt requested, at least five (5) days prior to the
date of prepayment.
(b) Beginning on January ____, 2003, the Company may, at its option,
at any time and from to time, prepay all or any portion of the outstanding
principal amount of this Note, together with interest accrued thereon, without
penalty or premium. The Company shall send written notice to the Holder of its
election to make a prepayment on this Note pursuant to this Section 1.2(b) by
registered or certified mail, return receipt requested, at least thirty (30)
days prior to the date of prepayment. Unless the Company receives, at least (10)
ten days prior to the date of prepayment, written notice from the Holder of such
Holder's election to convert the Note pursuant to Section 2 below, the Company
shall pay the full amount which the Company intends to prepay, plus interest
accrued on the outstanding principal amount through the date of prepayment
specified in the Company's notice.
2. Payment by Optional Conversion.
2.1 Conversion; Conversion Price. The Holder has the right, at its option,
at any time after January 31, 2002 and until this Note is paid in full, to
convert, in lieu of payment of cash, the then-outstanding principal balance of
this Note (or any portion thereof in an amount not less than $3,000,000) into
that number of fully paid and nonassessable shares of the Parent's Common Stock,
par value $.01 per share ("Common Stock"), equal to (i) the principal amount
hereof that the Company elects to convert divided by (ii) the Conversion Price.
The Conversion Price shall be equal to the product of (A) $_________ per share
(which is the Market Price (as hereafter determined) of the Common Stock in
effect on December 21, 2000), and (B) one hundred and two percent (102%). Common
Stock into which this Note may be converted is referred to herein as "Conversion
Stock." "Market Price" shall mean the average of the closing price of the Common
Stock on the New York Stock Exchange, or if there has been no sales on such
exchange on any day, the average of the highest bid and lowest asked prices on
such exchange at the end of such day, in each such case averaged over a period
of the thirty (30) calendar days prior to the December 21, 2000. Notwithstanding
anything contained herein to the contrary, no conversion may be made of
principal in any amount less than $3,000,000 and in no event shall the amount of
any interest accrued hereunder be convertible into shares of Common Stock.
2.2 Changes in Common Stock. If the Parent shall (i) combine the
outstanding shares of Common Stock into a lesser number of shares, (ii)
subdivide the outstanding shares of Common Stock into a greater number of
shares, or (iii) issue additional shares of Common Stock as a dividend or other
distribution with respect to the Common Stock, the number of shares of
Conversion Stock shall be equal to the number of shares which the Holder would
have been entitled to receive after the happening of any of the events described
above if such shares had been issued immediately prior to the happening of such
event, such adjustment to become effective concurrently with the effectiveness
of such event. The Conversion Price in effect immediately prior to any such
combination of Common Stock shall, upon the effectiveness of such combination,
be proportionately increased. The Conversion Price in effect immediately prior
to any such subdivision of Common Stock or at the record date of such dividend
shall upon the effectiveness of such subdivision or immediately after the record
date of such dividend be proportionately reduced.
2.3 Reorganizations and Reclassification. If there shall occur any capital
reorganization or reclassification of the Common Stock (other than a change in
par value or a subdivision or combination as provided for in Section 2.2), then,
as part of any such reorganization or reclassification, lawful provision shall
be made so that the Holder shall have the right thereafter to receive upon the
conversion hereof the kind and amount of shares of stock or other securities or
property which such Holder would have been entitled to receive if, immediately
prior to any such reorganization or reclassification, such Holder had held the
number of shares of Common Stock which were then purchasable upon the conversion
of this Note. In any such case, appropriate adjustment (as reasonably determined
by the Board of Directors of the Parent) shall be made in the application of the
provisions set forth herein with respect to the rights and interests thereafter
of the Holder such that the provisions set forth in this Section 2 (including
provisions with respect to adjustment of the Conversion Price) shall thereafter
be applicable, as nearly as is reasonably practicable, in relation to any shares
of stock or other securities or property thereafter deliverable upon the
exercise of this Note.
2.4 Merger, Consolidation or Sale of Assets. (a) If there shall be a
merger or consolidation of the Parent with or into another corporation (other
than a merger or reorganization involving only a change in the state of
incorporation of the Parent or the acquisition by the Parent of other businesses
where the Parent survives as a going concern), or the sale of all or
substantially all of the Parent's capital stock or assets to any other person,
then as a part of such transaction, provision shall be made so that the Holder
shall thereafter be entitled to receive the number of shares of stock or other
securities or property of the Parent, or of the successor corporation resulting
from the merger, consolidation or sale, to which the Holder would have been
entitled if the Holder had converted this Note immediately prior thereto. In any
such case, appropriate adjustment shall be made in the application of the
provisions of this Section 2 to the end that the provisions of this Section 2
shall be applicable after that event in as nearly equivalent a manner as may be
practicable.
(b) Notwithstanding any provision of this Note to the contrary, if
there shall occur a Change of Control (as hereafter defined) of the Parent, the
Holder, may elect, at its option, to (i) convert this Note pursuant to Section
2.1 above or (ii) relinquish all of its rights hereunder to convert this Note,
in which case it shall be entitled to receive interest on the outstanding
principal balance of this Note at a rate equal to the Increased Interest Rate
beginning on the Effective Date. For purposes hereof, "Change of Control" shall
mean the consummation of any transaction, the result of which is that any person
[other than DLJ] becomes owner, directly or indirectly, by merger, sale of
assets or otherwise, of 51% or more of the voting rights of the Parent. The
Parent shall send written notice to the Holder of its election to enter into a
transaction giving rise to a Change in Control by registered or certified mail,
return receipt requested, at least twenty (20) days prior to the effective date
of such transaction. The Holder shall notify the Parent and the Company in
writing no later than five (5) days prior to the effective date of the
transaction giving rise to the Change of Control of its election pursuant to
this Section 2.4(b). If the Holder elects to increase the interest rate of this
Note to the Increased Interest Rate pursuant to clause (ii), the amount of
interest due hereunder shall be recalculated from the Effective Date, the
Company shall receive credit for any
interest previously paid at the Basic Interest Rate and the amount of past due
interest based on such recalculation shall be due and payable on the next
quarterly interest payment date.
2.5 Mechanics of Conversion. Before the Holder of this Note shall be
entitled to convert the same into shares of Common Stock of the Parent pursuant
to this Section 2, it shall surrender this Note duly endorsed, at the office of
the Parent , and shall give written notice by mail, postage prepaid, to the
Parent at its principal corporate office, of the election to convert the same
and shall state therein the name or names in which the certificate or
certificates for shares are to be issued. The Parent shall, promptly thereafter,
issue and deliver to such Holder, or the nominee or nominees of such Holder, at
the address specified by such Holder, a certificate or certificates for the
number of shares as aforesaid, provided, however, that if the person in whose
name certificates are requested to be registered is other than the registered
owner of this Note, the Parent may require, prior to issuance of a certificate
in the name of such other person, that it receive reasonable transfer
documentation including opinions or other evidence that the issuance of
certificates in such other name as requested does not and will not cause a
violation of the Securities Act of 1933, as amended (the "Securities Act"), any
similar Federal statute at the time in effect or any applicable state securities
laws. Such conversion shall be deemed to have been made immediately prior to the
close of business on the date of such surrender of this Note with such notice,
and the person or persons entitled to receive the shares of stock issuable upon
such conversion shall be treated for all purposes as the record holder or
holders of such shares as of such date. In the event of a conversion of less
than the entire outstanding principal amount of this Note, the Company and the
Parent, if applicable shall deliver to the Holder a new note substantially in
the form of this Note, representing the portion of the principal amount of this
Note so surrendered in connection with such conversion but which was not
converted.
2.6 Reservation of Stock Issuable Upon Conversion. The Parent shall at all
times reserve and keep available out of its authorized but unissued shares of
Common Stock, solely for the purpose of effecting the conversion of this Note,
such number of its shares of Common Stock as shall from time to time be
sufficient to effect the conversion of this Note.
2.7 Securities Act of 1933. Upon conversion of this Note, the Holder will
be required to execute and deliver to the Parent an instrument, in form
satisfactory to the Parent, representing that the shares issuable upon
conversion hereof are being acquired for investment and not with a view to
distribution within the meaning of the Securities Act.
2.8 No Fractional Shares and Certificates. No fractional shares shall be
issued upon conversion of this Note and the number of shares of Common Stock to
be issued shall be rounded down to the nearest whole share and the Company shall
pay to the Holder in cash an amount equal to the Conversion Price then in effect
multiplied by the fractional share.
3. No Rights as Shareholder. Nothing contained in this Note shall be construed
as conferring upon the Holder hereof or its transferees the right to vote or to
receive dividends or to consent or to receive notice as a shareholder in respect
of any meeting of shareholders for the election of directors of the Parent or of
any other matter, or any rights whatsoever as a shareholder of the Parent ,
unless and to the extent converted.
4. Unsecured; Subordination. (a) This Note is an unsecured obligation of the
Company. This Note is subordinate and junior in right of payment to the prior
payment in full in cash of all Senior Debt of the Company. "Senior Debt" of the
Company shall mean all indebtedness of the Company (of any kind or nature,
whether contingent or otherwise) now outstanding or hereafter created, assumed
or guaranteed by the Company (but excluding any indebtedness of the Company that
is (i) incurred in connection with the Company's acquisition of assets or
interests in any person or entity and (ii) convertible into shares of the
Company or the Parent), unless the instrument evidencing the same expressly
provides that such indebtedness shall not constitute "Senior Debt" for purposes
of this Note, in each case including any extension or renewal thereof and any
refinancing or replacement of such indebtedness (whether such extension,
renewal, refinancing or replacement is for a lesser, the same or a greater
principal amount than the then existing or original amount of such
indebtedness), and the Holder agrees, if requested by the Company, to execute an
intercreditor and subordination agreement with, and in a form satisfactory to,
the lender(s) of any such Senior Debt.
(b) Subordination Riders to be provided by Xxxxx Xxxxx.
5. Events of Default. For purposes of this Note, an Event of Default shall be
deemed to have occurred if:
(a) the Company fails to pay when due and payable (whether at
maturity or otherwise) the full amount of any principal payment of this Note,
and such failure is not cured within ten (10) days after the occurrence thereof;
(b) the Company fails to pay when due and payable (whether at
maturity or otherwise) the full amount of interest then accrued on any Note, and
such failure is not cured within ten (10) days after the occurrence thereof; or
(c) the Company makes an assignment for the benefit of creditors or
admits in writing its ability to pay its debts generally as they become due; or
an order, judgment or decree is entered adjudicating the Company bankrupt or
insolvent; or any order for relief with respect to the Company is entered under
the Federal Bankruptcy Code; or the Company petitions or applies to any tribunal
for the appointment of a custodian, trustee, receiver or liquidator of the
Company or of any substantial part of the assets of the Company, or commences
any proceeding relating to the Company under any bankruptcy reorganization,
arrangement, insolvency, readjustment of debt, dissolution or liquidation law of
any jurisdiction; or any such petition or application is filed, or any such
proceeding is commenced, against the Company and either (A) the Company by any
act indicates its approval thereof, consent thereto or acquiescence therein or
(B) such petition, application or proceeding is not dismissed with sixty (60)
days.
Upon the occurrence of an Event of Default, the Holder shall have the
option to declare the entire outstanding principal balance of this Note,
together with accrued and unpaid interest thereon, to be immediately due and
payable and the Holder shall also be entitled to exercise all of the rights and
remedies afforded by the Uniform Commercial Code as from time to time in effect
in the Commonwealth of Massachusetts or afforded by other applicable law.
6. Registration Rights
(a) Piggyback Registration.
(i) Participation. If the Parent elects to file a registration
statement under the Securities Act covering the offer and sale of any Common
Stock (or equity securities converted into Common Stock) in connection with any
public offering (other than a registration statement on Form S-8 or Form S-4, or
their successors, or any other form for a similar limited purpose, or any
registration statement covering only securities proposed to be issued in
exchange for securities or assets of another corporation), the Parent shall give
written notice thereof to the Holder at least seven (7) business days before
filing. The Holder shall have a Piggyback Registration Right to participate in
such offering upon the giving of notice to the Parent within three (3) business
days of receipt by it of notice from the Parent. If the Holder notifies the
Parent of its intent to exercise such Piggyback Registration Right, subject to
(a) (ii) and (a)(iii) below, the Parent shall include in such registration
statement such number of shares of Common Stock held by the Holder following a
full or partial conversion of this Note ("Registrable Securities") as requested
by the Holder. If the public offering is underwritten, such Registrable
Securities shall be included in the underwriting for the public offering on the
same terms and conditions as the securities otherwise being sold in such
offering.
(ii) Underwriters' Cutback. If the public offering is underwritten
and, in the opinion of the managing underwriter of such offering the inclusion
of any or all of the shares of Registrable Securities requested to be registered
would be impracticable, then the number of shares of Registrable Securities to
be included in the offering shall be reduced (including the possibility that the
underwriter(s) shall not allow the registration of any Registrable Securities),
with the participation in such offering to be in the following order of
priority: (1) first, securities to be issued by the Parent shall be included,
and (2) second, any other Common Stock required to be included pursuant to any
demand registration right granted to any other holder of Common Stock shall be
included, and (3) third, Registrable Securities and any other Common Stock
entitled to registration rights requested to be included, on a pro rata basis,
shall be included.
(iii) Underwriting Agreement. In connection with any registration
under this Section 6 (a) involving an underwriting, the Parent shall not be
required to include any Registrable Securities in such registration unless the
Holder accepts the terms of the underwriting as determined by the underwriters
selected by the Parent (provided that such terms must be consistent with the
applicable provisions of this Note and provided, further, that any inability of
the Holder to agree with the underwriters shall not restrict the ability of the
Parent to proceed with the registration).
(b) Demand Registration Rights.
(i) In General. Subject to clause (ii) of this Section (b), the
Holder may request, on not more than two occasions, by written notice to the
Parent that the Parent file a Registration Statement under the Securities Act
covering the Registrable Securities, provided, however, that the Holder shall
not exercise such Demand Registration Right unless the
reasonably anticipated aggregate price to the public, net of underwriting
discounts and commissions, is in excess of $6,000,000.
(ii) Effectiveness. Subject to the following sentences, the Parent
shall be obligated to prepare, file and use its best efforts to cause a
Registration Statement to become effective in connection with each Demand
Registration requested pursuant to (b), and to remain effective for a period of
ninety days or until the sale of all securities registered thereunder. If (A)
the Parent withdraws a Registration Statement filed pursuant to a Demand
Registration prior to the effectiveness thereof, or (B) the sale of securities
to which a Registration Statement filed pursuant to a Demand Registration
applies is not consummated other than by action of the Selling Holder, such
Registration Statement shall not be counted in determining the number of
registrations in which Holder's securities have been included or otherwise
adversely affect Holder's rights hereunder.
(iii) Managing Underwriter. The managing underwriter or underwriters
of any underwritten public offering covered by a Demand Registration shall be
selected by the Parent.
(iv) Parent's Right to Defer. If the Parent is requested to effect a
Demand Registration, the Parent shall have the right to defer such filing for a
period of not more than 180 days after receipt of the request for such
registration from the Holder of Registrable Securities requesting such
registration; provided that during such time the Parent may not file a
registration statement (other than a registration statement on Form S-4 or Form
S-8 or a registration statement already approved by the Board) for securities to
be issued and sold for its own account or that of anyone other than the Holder
of Registrable Securities requesting such registration.
(v) Notwithstanding the foregoing, the Parent shall not be obligated
to take any action pursuant to this section (b): (A) if the Parent, within ten
(10) days of the receipt of the request of the Holder pursuant to (b)(i) above,
gives notice of its bona fide intention to effect the filing of a Registration
Statement with the U.S. Securities and Exchange Commission within ninety (90)
days of receipt of such request (other than with respect to a registration
statement relating to a Rule 145 transaction, an offering solely to employees or
any other registration which is not appropriate for the registration of
Registrable Securities); (B) during the period starting with the date sixty (60)
days prior to the Parent's estimated date of filing of, and effective date of,
any Registration Statement pertaining to securities of the Parent (other than a
registration of securities in a Rule 145 transaction or with respect to an
employee benefit plan), provided that the Parent is actively employing in good
faith all reasonable effort to cause such Registration Statement to become
effective, (c) within six (6) months after the effective date of any other
Registration Statement on Form S-1 or Form S-3 of the Parent or (d) if the
Parent, within ten (10) days of the receipt of the request of the Holder
pursuant to (b)(i) above, gives notice that the board of directors of the Parent
has determined in the exercise of its good faith business judgment that the
filing of a registration statement would unreasonably interfere with the
Parent's strategic financing plans, provided, however, that the Parent shall not
use this right under this clause (d) more than once in any twelve (12) month
period.
(c) "Stand-Off" Agreement. The Holder, if requested by the Parent and the
managing underwriter of an offering by the Parent of Common Stock or other
securities of the Parent
pursuant to a Registration Statement covering Common Stock to be sold on its
behalf to the public agrees not to sell, make any short sale of, loan, grant any
option for the purchase of, publicly or otherwise transfer or dispose of any
Registrable Securities or other securities of the Parent held by the Holder
other than shares included in the registration for the period of ninety (90)
days following the effective date of such Registration Statement, provided all
officers and directors are similarly bound.
(d) Indemnification.
(i) Indemnification by the Parent. The Parent agrees to indemnify
and hold harmless the Holder of Registrable Securities which has included
Registrable Securities in a registration statement, its officers, directors and
agents and each person, if any, who controls such Holder within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act from and
against any and all losses, claims, damages, liabilities and expenses (including
reasonable costs of investigation) arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained in any
registration statement or final prospectus relating to the Registrable
Securities or in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or based upon any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, except insofar as such losses, claims,
damages, liabilities or expenses arise out of, or are based upon, any such
untrue statement or omission based upon information furnished to the Parent by
the Holder of the Registrable Securities or on such Holder's behalf expressly
for use therein; provided, that with respect to any untrue statement or omission
made in any preliminary prospectus, the indemnity agreement contained in this
paragraph shall not apply to the extent that any such loss, claim, damage,
liability or expense results from the fact that a current copy of the prospectus
was not sent or given to the person asserting any such loss, claim, damage,
liability or expense at or prior to the written confirmation of the sale of the
Registrable Securities concerned if it is determined that it was the
responsibility of the Holder of such Registrable Securities to provide such
person with a current copy of the prospectus and such current copy of the
prospectus would have cured the defect giving rise to such loss, claim, damage,
liability or expense. The Parent also agrees to indemnify any underwriters of
the Registrable Securities, their officers and directors and each person who
controls such underwriters on substantially the same basis as that of the
indemnification of the Holder of such Registrable Securities provided in this
section (d).
(ii) Indemnification by the Holder of Registrable Securities. The
Holder of Registrable Securities, to the extent it is selling Registrable
Securities ("Selling Holder"), agrees to indemnify and hold harmless the Parent,
its directors and officers and each person, if any, who controls the Parent
within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act to the same extent as the foregoing indemnity from the Parent
to the Selling Holder, but only with respect to, and to the extent that,
information furnished by the Selling Holder or on the Selling Holder's behalf
expressly for use in any registration statement or final prospectus relating to
the Registrable Securities (or any amendment or supplement thereto, or any
preliminary prospectus) which contained an untrue statement or alleged untrue
statement of a material fact or omitted or allegedly omitted to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading. Notwithstanding anything to the contrary contained
herein, the liability of the Holder hereunder shall be limited to the
proportion of any such loss, claim, damage, liability or expense that is equal
to the proportion that the public offering price of the shares of Registrable
Securities sold by the Holder bears to the total public offering price of all
securities sold in such offering. In case any action or proceeding shall be
brought against the Parent or its directors or officers, or any such controlling
Person, in respect of which indemnity may be sought against such Selling Holder,
such Selling Holder shall have the rights and duties given to the Parent, and
the Parent or its directors or officers or such controlling Person shall have
the rights and duties given to such Selling Holder, by the preceding subsection.
The Selling Holder also agrees to indemnify and hold harmless the underwriters
on substantially the same basis of that of the indemnification of the Parent
provided in the preceding subsection.
(e) Contribution. If the indemnification provided for herein is
unavailable to the Parent, the Selling Holder or the underwriters in respect of
any losses, claims, damages, liabilities, expenses or judgments referred to
herein, then each such indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities,
expenses and judgments (i) as between the Parent and the Selling Holder on the
one hand and the underwriters on the other, in such proportion as is appropriate
to reflect the relative benefits received by the Parent and the Selling Holder
on the one hand and the underwriters on the other from the offering of the
Registrable Securities, or if such allocation is not permitted by applicable
law, in such proportion as is appropriate to reflect not only such relative
benefits but also the relative fault of the Parent and the Selling Holder on the
one hand and of the underwriters on the other in connection with the statements
or omissions which resulted in such losses, claims, damages, liabilities,
expenses or judgments, as well as any other relevant equitable considerations
and (ii) as between the Parent on the one hand and each Selling Holder on the
other, in such proportion as is appropriate to reflect the relative fault of the
Parent and of each Selling Holder in connection with such statements or
omissions, as well as any other relevant equitable considerations. The relative
benefits received by the Parent and the Selling Holder on the one hand and the
underwriters on the other shall be deemed to be in the same proportion as the
total proceeds from the offering (net of underwriting discounts and commissions
but before deducting expenses) received by the Parent and the Selling Holder
bear to the total underwriting discounts and commissions received by the
underwriters, in each case as set forth in the table on the cover page of the
prospectus. The relative fault of the Parent on the one hand and of each Selling
Holder on the other shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by such party, and the party's relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Parent and the Holder agree that it would not be just and equitable if
contribution pursuant to this section were determined by pro rata allocation or
by any other method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages, liabilities, expenses or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such indemnified
party in connection
with investigating or defending any such action or claim. Notwithstanding the
provisions of this section, no underwriter shall be required to contribute any
amount in excess of the amount by which the total price at which the Registrable
Securities underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages which such underwriter has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission, and no Selling Holder shall be required to
contribute any amount in excess of the amount by which the total price at which
the Registrable Securities of such Selling Holder were offered to the public
exceeds the amount of any damages which such Selling Holder has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(f) Registration Expenses.
(i) Registrations Rights. The Parent shall bear all registration
expenses incurred in connection with Piggyback Registration Rights and Demand
Registration Rights, which may include the reasonable attorneys' fees and costs
of one special counsel to the Holder (unless Parent's counsel is willing to
serve as counsel to the Holder in connection with such registrations).
(ii) Expenses of Registrant. The Parent shall pay its internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of
any annual audit, the fees and expenses incurred in connection with any listing
of the securities to be registered on a securities exchange, and the fees and
expenses of any person, including special experts, retained by the Parent .
(f) Termination of Registration Rights. Notwithstanding anything to the
contrary contained herein, the registration rights set forth herein shall
terminate at any time that the Holder is able to sell all of its Registrable
Securities under Rule 144 of the Securities Act in a single transaction without
exceeding the volume limitations thereunder.
7. General.
(a) Governing Law. This Note shall be governed by and construed in
accordance with the law of The State of Maryland.
(b) Severability. If any term or provision of this Note shall be held
invalid, illegal or unenforceable, the validity of all other terms and
provisions hereof shall in no way be affected thereby.
(c) Successors and Assigns; Transferability. This Note shall be binding
upon the Company and its successor and assigns and shall inure to the benefit of
the Holder and its successors and permitted assigns (which shall include
permitted transferees). This Note may not be assigned by the Holder, except to
an Affiliate of the Holder. For purposes hereof, an "Affiliate" shall mean any
person who, directly or indirectly, controls, is controlled by or is under
common control with, the Holder.
(d) Notices. All notices, requests, consents and demands shall be made in
writing and shall be mailed postage prepaid, or delivered by hand, to the
Company or to the Holder thereof at their respective addresses set forth below
or to such other address as may be furnished in writing to the other party
hereto:
If to the Holder: _______________
_______________
_______________
_______________
If to the Company to: _______________
_______________
_______________
_______________
If to the Parent to: _______________
_______________
_______________
_______________
All notices, requests, consents and other communications hereunder shall be
deemed to have been given either (i) if by hand, at the time of the delivery
thereof to the receiving party at the address of such party set forth above,
(ii) if made by telex, telecopy or facsimile transmission, at the time that
receipt thereof has been acknowledged by electronic confirmation or otherwise,
(iii) if sent by overnight courier, on the next business day following the day
such notice is delivered to the courier service, or (iv) if sent by registered
or certified mail, on the 5th business day following the day such mailing is
made.
(e) Saturdays, Sundays, Holidays. If any date that may at any time be
specified in this Note as a date for the making of any payment or the giving of
notices under this Note shall fall on Saturday, Sunday or on a day which in
Maryland shall be a legal holiday, then the date for the making of that payment
or the giving of notices shall be the next subsequent day which is not a
Saturday, Sunday or legal holiday.
8. Right of Off-Set. If and to the extent that the Holder or its
successors or permitted assigns pursuant to that certain Stock Purchase
Agreement dated as of December 21, 2000, by and among the Company, Pathology
Associates International Corporation and the Holder (the "Stock Purchase
Agreement") is required to make any payment under the Stock Purchase Agreement
to the
Company or to any Buyer Indemnified Party (as defined in the Stock Purchase
Agreement) and has failed to do so within the time required in the Stock
Purchase Agreement, the Company may elect to deduct the amount of any such
payment from amounts due to the Holder under this Note, provided that the
Company gives the Holder five (5) days' prior notice of the Company's intention
to so offset and the Holder is permitted to pay to the Company such unpaid
amount during such (5) day period, it being agreed that during such five (5) day
period, the Holder shall not be permitted to convert this Note, notwithstanding
any provision hereof to the contrary. The amount of any such deduction shall
reduce by an equal amount the obligation of the Company to make such payment to
the Holder. The Company shall provide to the Holder an accounting of amounts
offset against payments due hereunder.
9. Parent's Limited Obligations. By its signature below, the Parent agrees
to its obligations set forth in Sections 2 and 6 above, but assumes no liability
for any other obligation hereunder. By its acceptance of this Note, the Holder
acknowledges and agrees that Parent's obligations hereunder are limited solely
to Sections 2 and 6 above, and that Parent shall have no liability whatsoever
hereunder as co-maker, endorser, guarantor or other party responsible for
payment or performance hereunder (except for Sections 2 and 6 above).
IN WITNESS WHEREOF, the Company has executed and delivered this Note
on January ____ , 2001.
XXXXXXX RIVER LABORATORIES, INC.
Attest By_________________________________
_____________________________ Its _______________________________
Sections 2 and 6 above agreed to:
XXXXXXX RIVER LABORATORIES INTERNATIONAL, INC.
By: _______________________
Its: ______________________
EXHIBIT C
