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EXHIBIT 10.51
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AGREEMENT OF MERGER
BY AND AMONG
SABRATEK CORPORATION,
a Delaware corporation,
SBTK I ACQUISITION CORPORATION,
an Illinois corporation
AND
STRATEGIC REIMBURSEMENT SERVICES, INC.
an Illinois corporation
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June 29, 1999
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TABLE OF CONTENTS
Page
Section 1. Basic Transaction...............................................................................1
1A. The Merger......................................................................................1
1B. Closing.........................................................................................1
1C. Actions at the Closing; Effective Time..........................................................1
1D. Effect of Merger................................................................................2
1E. Notice of Dissenting Shares.....................................................................3
1F. Escrow Fund; Procedure..........................................................................3
1G. Closing of Transfer Records.....................................................................4
1H. Delivery of Merger Consideration to Public Official.............................................4
1I. Lost, Stolen or Destroyed Certificates..........................................................4
1J. Transferability Restriction.....................................................................4
Section 2. Conditions of the Obligations of the Buyer and the Transitory Subsidiary at the Closing.........4
2A. Representations and Warranties; Covenants.......................................................4
2B. Opinion of Counsel to the Target................................................................5
2C. Employment Agreements with Principals...........................................................5
2D. Termination of Certain Existing Agreements and Release..........................................5
2E. Contribution of Indebtedness....................................................................5
2F. Regulation D Questionnaire......................................................................5
2G. Litigation......................................................................................5
2H. Third Party Consents and Approvals..............................................................5
2I. Governmental Consents and Approvals.............................................................6
2J. Material Adverse Change.........................................................................6
2K. Proceedings.....................................................................................6
2L. Target Stockholder Approval.....................................................................6
2M. Consent of Target Stockholders..................................................................6
2N. HSR Approval ...................................................................................6
2O. Non-Compete and Non-Solicitation................................................................6
2P. Escrow Agreement................................................................................6
2Q. Closing Documents...............................................................................6
Section 3. Conditions of the Obligations of the Target at the Closing......................................7
3A. Representations and Warranties; Covenants.......................................................7
3B. Registration Rights Agreement...................................................................7
3C. Opinion of Counsel to the Buyer.................................................................7
3D. Target Stockholder Approval.....................................................................7
3E. Litigation......................................................................................7
3F. Material Adverse Change.........................................................................7
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3G. Price of Buyer Stock............................................................................8
3H. Governmental Consents and Xxxxxxxxx.............................................................0
0X. HSR Approval....................................................................................8
3J. Employment Agreements with Principals...........................................................8
3K. Escrow Agreement................................................................................8
3L. Closing Certificate.............................................................................8
Section 4. Covenants and Transfer Restrictions.............................................................8
4A. General.........................................................................................8
4B. Maintenance of Business.........................................................................8
4C. Third Party Notices and Consents................................................................9
4D. Governmental Notices and Consents...............................................................9
4E. Special Target Meeting; Consent of Target Stockholders..........................................9
4F. Operation of Business...........................................................................9
4G. Full Access....................................................................................11
4H. Compliance with Agreements and Laws............................................................11
4I. Payment of Obligations.........................................................................11
4J. Notice of Developments.........................................................................11
4K. Exclusivity....................................................................................11
4L. Tax Matters....................................................................................11
4M. Press Release and Announcements................................................................12
4N. Indemnification................................................................................12
4O. Transition.....................................................................................12
4P. Audit of Target Financial Statements...........................................................12
4Q. Amounts Due to Xxxxxxx Xxxxxxxx................................................................12
Section 5. Post-Closing Covenants.........................................................................13
5A. Non-Compete; Non-Solicitation..................................................................13
5B. Tax Matters....................................................................................14
5C. Defined Benefit Plan and Successor Target Plans................................................16
5D. Pooling Transfer Restriction...................................................................17
5E. Post-Closing Original Signatures...............................................................18
Section 6. Representations and Warranties Concerning the Target...........................................18
6A. Organization, Corporate Power and Licenses.....................................................18
6B. Capital Stock and Related Matters..............................................................18
6C. Subsidiaries; Investments......................................................................19
6D. Authorization; No Breach.......................................................................19
6E. Financial Statements...........................................................................19
6F. Absence of Undisclosed Liabilities.............................................................20
6G. Accounts Receivable............................................................................20
6H. Warranty; Certifications.......................................................................21
6I. No Material Adverse Effect.....................................................................21
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6J. Absence of Certain Developments................................................................21
6K. Assets.........................................................................................23
6L. Tax Matters....................................................................................23
6M. Contracts and Commitments......................................................................26
6N. Intellectual Property Rights...................................................................29
6O. Litigation, etc................................................................................29
6P. Brokerage......................................................................................30
6Q. Insurance......................................................................................30
6R. Employees......................................................................................30
6S. ERISA..........................................................................................30
6T. Compliance with Laws; Permits; Certain Operations..............................................32
6U. Environmental and Safety Matters...............................................................33
6V. Affiliated Transactions........................................................................34
6W. Customers......................................................................................34
6X. Real Property..................................................................................34
6Y. Disclosure.....................................................................................35
Section 7. Representations and Warranties of the Buyer and the Transitory Subsidiary......................35
7A. Organization, Power and Authority..............................................................35
7B. Authorization; No Breach.......................................................................35
7C. Capitalization of the Buyer....................................................................36
7D. Capitalization of Transitory Subsidiary........................................................36
7E. SEC Reports....................................................................................36
7F. Compliance with Laws...........................................................................36
7G. Financing the Deal.............................................................................36
7H. Xxxxxxxxxx.....................................................................................00
0X. Brokerage......................................................................................37
Section 8. Indemnification and Other Agreements...........................................................37
8A. Survival of Covenants and Representations and Warranties.......................................37
8B. General Indemnification........................................................................38
Section 9. Definitions....................................................................................41
Section 10. Termination....................................................................................49
10A. Conditions of Termination......................................................................49
10B. Effect of Termination..........................................................................50
Section 11. Miscellaneous..................................................................................50
11A. Dispute Resolution.............................................................................50
11B. Fees and Expenses..............................................................................51
11C. Remedies.......................................................................................52
11D. Consent to Amendments..........................................................................52
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11E. Successors and Assigns.........................................................................52
11F. Severability...................................................................................53
11G. Counterparts...................................................................................53
11H. Descriptive Headings; Interpretation...........................................................53
11I. Entire Agreement...............................................................................53
11J. No Third-Party Beneficiaries...................................................................53
11K. Schedules......................................................................................53
11L. Schedules and Exhibits.........................................................................54
11M. Governing Law..................................................................................54
11N. Notices........................................................................................54
11O. No Strict Construction.........................................................................55
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Exhibits:
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Exhibit A - Plan of Merger
Exhibit B - Articles of Incorporation of the Transitory Subsidiary
Exhibit C - Bylaws of the Transitory Subsidiary
Exhibit D - Merger Consideration Payments
Exhibit E - Escrow Agreement
Exhibit F - Escrow Terms
Exhibit G - Opinion of Counsel to the Target
Exhibit H - Xxxxxx X. Xxxxxx Employment Agreement
Exhibit I-1 - List of Employees to enter into Employment Agreement
and Principal Employment Terms
Exhibit I-2 - Form of Employment Agreement
Exhibit J - Form of Release Agreement
Exhibit K - Regulation D Questionnaire
Exhibit L - Consent of Target Stockholders
Exhibit M - Registration Rights Agreement
Exhibit N - Opinion of Counsel to the Buyer
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AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER (this "Agreement") is entered into as
of June 29, 1999 by and among Sabratek Corporation, a Delaware corporation (the
"Buyer"), SBTK I Acquisition Corporation, an Illinois corporation and a
wholly-owned subsidiary of the Buyer (the "Transitory Subsidiary"), and
Strategic Reimbursement Services, Inc., an Illinois corporation (the "Target").
The Buyer, the Transitory Subsidiary and the Target are sometimes referred to
herein individually as a "Party" and collectively as the "Parties." Certain
capitalized terms used herein are defined in Section 9 and in the remaining
portions of this Agreement.
This Agreement contemplates a transaction in which the Target
shall become a wholly-owned Subsidiary of the Buyer through a merger of the
Transitory Subsidiary with and into the Target. Stockholders of the Target will
receive capital stock of the Buyer, cash and contingent rights to additional
capital stock of the Buyer in exchange for their capital stock in the Target.
NOW, THEREFORE, in consideration of the mutual covenants,
agreements and understandings herein contained, the Parties hereby agree as
follows:
Section 1. Basic Transaction.
a. The Merger. On and subject to the terms and
conditions of this Agreement and in accordance with the
Business Corporation Act of 1983 of the State of Illinois
("BCA"), the Transitory Subsidiary shall merge with and
into the Target (the "Merger") at the Effective Time.
Following the Merger, (i) the separate corporate
existence of the Transitory Subsidiary shall cease, (ii)
the Target shall be the surviving corporation in the
Merger (the "Surviv ing Corporation") and shall succeed
to and assume all of the rights and obligations of the
Transitory Subsidiary in accordance with the BCA and
(iii) the Target shall be a wholly-owned Subsidiary of
the Buyer.
b. Closing. The closing of the Merger contemplated
hereunder (the "Closing") shall take place at the offices
of Xxxxxxxx & Xxxxx, Chicago, Illinois, or at such other
place as may be mutually agreeable to the Parties, at
10:00 a.m., local time, on the second business day
following the satisfaction or waiver of all conditions to
the obligations of the Parties to consummate the
transactions contemplated hereby (other than conditions
with respect to actions the respective Parties are to
take at the Closing itself) or such other date as the
Parties may mutually determine (the "Closing Date"). The
foregoing notwithstanding, the Closing shall be deemed to
occur at the Effective Time.
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c. Actions at the Closing; Effective Time. Subject to
the satisfaction or waiver of the conditions set forth in
Sections 2 and 3, at the Closing the Parties shall cause
the filing with the Secretary of State of the State of
Illinois of a plan of merger with regard to the Merger
meeting the requirements of the BCA (the "Plan of
Merger") executed in accordance with the BCA. Such Plan
of Merger is attached hereto as Exhibit A. The Merger
shall become effective at such time as the Plan of Merger
is duly filed with the Secretary of State of the State of
Illinois or at such later time as is agreed by the Buyer
and the Target and specified in the Plan of Merger (the
"Effective Time"). The Surviving Corporation may, at any
time after the Effective Time, take any action (including
executing and delivering any document) in the name and on
behalf of either the Target or the Transitory Subsidiary
in order to carry out and effectuate the transactions
contemplated by this Agreement.
d. Effect of Merger.
i. General. The Merger shall have the effects set
forth in Section 11.50 of the BCA.
ii. Articles of Incorporation. At the Effective Time,
the Articles of Incorporation of the Transitory
Subsidiary in effect immediately prior to the Effective
Time shall become the Articles of Incorporation of the
Surviving Corporation, without any modification or
amendment, except that the name of the Surviving
Corporation shall be changed to Strategic Reimbursement
Services, Inc. (attached as Exhibit B hereto).
iii. Bylaws. At the Effective Time, the Bylaws of the
Transitory Subsidiary in effect immediately prior to the
Effective Time shall become the Bylaws of the Surviving
Corporation, without any modification or amendment,
except that the name of the Surviving Corporation set
forth therein shall be changed to Strategic Reimbursement
Services, Inc. (attached as Exhibit C hereto).
iv. Directors. At the Effective Time, the directors of
the Transitory Subsidiary immediately prior to the
Effective Time and Xxxxxx X. Xxxxxx (the current sole
director of the Target) shall become the directors of the
Surviving Corporation.
v. Conversion of Target Shares. At and as of the
Effective Time,
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(A) Target Shares held in the treasury of the Target
immediately prior to the Effective Time shall be
canceled and extinguished without any conversion
thereof and no payment shall be made with respect
thereto.
(B) Each Target Share (other than any Dissenting Share)
of each particular class shall be converted
automatically and without any action on the part of
the holder thereof into the following rights,
subject to the subsequent provisions of this Section
1, and shall have no other rights:
(i) the right to receive the applicable Closing
Stock Consideration per Target Share as set
forth on Exhibit D attached hereto; and
(ii) the right, subject to the terms and conditions
of this Agreement, to receive the applicable
Escrow Stock Consideration per Target Share as
set forth on Exhibit D attached hereto.
(C) Each Dissenting Share shall be converted into the
right to receive payment from the Surviving
Corporation with respect thereto in accordance with
the BCA; provided, that each Dissenting Share which
after the Effective Time ceases to be a Dissenting
Share shall thereupon be deemed to be converted as
of the Effective Time into the right to receive the
Merger Consideration for such share, without
interest thereon.
From and after the Effective Time, all Target Shares
converted in accordance with Section 1D(v)(B) shall
no longer be outstanding and shall automatically be
canceled and shall cease to exist, and each holder
of a certificate representing any such Target Shares
shall cease to have any rights with respect thereto,
except the right to receive the Merger
Consideration, without any interest thereon.
vi. Conversion of Capital Stock of the Transitory
Subsidiary. At the Effective Time, each share of Common
Stock, par value $0.01 per share, of the Transitory
Subsidiary shall be converted automatically and without
any action on the part of the holder thereof into one
share of Common Stock, par value $0.01 per share, of the
Surviving Corporation.
e. Notice of Dissenting Shares. The Target shall give
the Buyer (i) prompt notice of any demand of appraisal
rights received by the Target prior
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to or at the Special Target Meeting and (ii) the
opportunity to direct all negotiations and proceedings
with respect to the appraisal rights and any related
demand of any Dissenting Stockholder. The Target shall
not, without the prior written consent of the Buyer,
voluntarily make any payment with respect to, or settle,
offer to settle or otherwise negotiate any such demand or
proceeding.
f. Escrow Fund; Procedure. At the Effective Time, the
Buyer shall deliver to U.S. Bank Trust National
Association (together with any successor thereto pursuant
to the Escrow Agreement, the "Escrow Agent") the Escrow
Stock Consideration to secure the indemnification rights
of the Buyer Parties pursuant to this Agreement. All of
the Escrow Stock Consideration so delivered to the Escrow
Agent, together with any proceeds of the investment or
sale thereof, and any income, dividends or distributions
thereon, shall be held, invested, administered and
distributed by the Escrow Agent in accordance with the
terms of the Escrow Agreement (attached as Exhibit E
hereto), and shall be dealt with by the Buyer and the
Target Stockholders Representative in accordance with
Exhibit F attached hereto. The Buyer and the Target
acknowledge that income earned with respect to the assets
held in the Escrow Fund shall be attributed for Tax
purposes to the Target Stockholders, who shall be
responsible for filing all necessary Tax Returns with
respect thereto and for the payment of all Taxes thereon
and related thereto.
g. Closing of Transfer Records. After the Effective
Time, transfers of Target Shares shall not be made on the
stock transfer books of the Surviving Corporation. If,
after the Effective Time, certificates representing
Target Shares are presented to the Surviving Corporation,
they shall be canceled and exchanged for the
consideration set forth in this Section 1 deliverable in
respect thereof pursuant to this Agreement in accordance
with the procedures contemplated by this Section 1.
h. Delivery of Merger Consideration to Public Official.
None of the Buyer, the Transitory Subsidiary, the Target,
the Surviving Corporation or any other Person shall be
liable to any former holder of Target Shares for any
amount properly delivered to a public official pursuant
to applicable abandoned property, escheat or similar
laws.
i. Lost, Stolen or Destroyed Certificates. If any
certificate representing Target Shares shall have been
lost, stolen or destroyed, upon the making of an
affidavit of that fact by the Person claiming such
certificate to be lost, stolen or destroyed, the Buyer
shall issue in exchange for such lost, stolen or
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destroyed certificate the Merger Consideration as
contemplated by this Section.
j. Transferability Restriction. The right of a Target
Stockholder to receive any Escrow Stock Consideration
shall not be sold, assigned, pledged, transferred or
otherwise disposed of (a "Transfer") by any Target
Stockholder, except by will, judicial order or the laws
of descent and distribution or intestacy. Any Transfer in
violation of this Section 1J shall be null and void.
This Section 1 and the defined terms used in this Section
(which are defined in Section 9) shall constitute the plan of merger
contemplated by Article 11 of the BCA.
Section 2. Conditions of the Obligations of the Buyer and the
Transitory Subsidiary at the Closing. The obligation of each
of the Buyer and the Transitory Subsidiary to consummate the
transactions contemplated hereby is subject to satisfaction as
of the Closing of the following conditions:
a. Representations and Warranties; Covenants. The
representations and warranties contained in Section 6
hereof (taking into account the exceptions referred to in
the introduction to such Section) shall be true and
correct in all material respects at and as of the Closing
Date as if made at and as of the Closing Date, except for
the effects of actions contemplated herein or permitted
hereunder prior to the Closing, and the Target shall have
performed in all material respects all of the covenants
required to be performed by the Target hereunder on or
prior to the Closing.
b. Opinion of Counsel to the Target. The Buyer shall
have received from Xxxxxxxxxxxx Xxxx & Xxxxxxxxx, special
counsel to the Target, an opinion substantially in the
form attached hereto as Exhibit G which shall be
addressed to the Buyer and dated as of the Closing Date.
c. Employment Agreements with Principals. The Target
shall have entered into an employment agreement with
Xxxxxx X. Xxxxxx substantially in the form attached
hereto as Exhibit H and with each of the individuals
listed on Exhibit I-1 (and on the certain respective
principal terms also set forth thereon) substantially in
the form attached hereto as Exhibit I-2, and each of such
employment agreements shall be in full force and effect
as of the Closing.
d. Termination of Certain Existing Agreements and
Release. All agreements, contracts and understandings
between any of the stockholders of the Target and their
Affiliates, on the one hand (including any employment,
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change of control, severance or similar agreement), and
the Target, on the other hand, shall have been canceled
or terminated without any liability to the Target, and
all of the stockholders of the Target shall have executed
and delivered to the Target a release of all past,
present and future liabilities and obligations (other
than any Indebtedness) of the Target to the stockholders
of the Target and their Affiliates substantially in the
form attached hereto as Exhibit J (the "Release"), and
such Release shall be in full force and effect as of the
Closing.
e. Contribution of Indebtedness. There shall have been
contributed to the capital of the Target all Indebtedness
of the Target to each of the stockholders of the Target
and their Affiliates in form and substance reasonably
satisfactory to the Buyer. Such contributions are
intended to be contributions to capital as contemplated
by Section 108(e)(6) of the Code.
f. Regulation D Questionnaire. Each of the stockholders
of the Target shall have delivered to the Buyer a fully
completed and duly executed Regulation D Questionnaire in
form and substance as attached hereto as Exhibit K.
g. Litigation. No suit, action or other proceeding
shall be pending before any court or governmental or
regulatory official, body or authority or threatened
seeking to restrain or prohibit (or seeking damages in
connection with) the transactions contemplated hereby or
that would have a Material Adverse Effect, and no
injunction, judgment, order, decree or ruling with
respect thereto shall be in effect.
h. Third Party Consents and Approvals. The Target
shall have received or obtained all third party consents
and approvals that are necessary for the consummation of
the transactions contemplated hereby or that are required
in order to prevent a breach of or default under, a
termination or modification of, or acceleration of the
terms of, any contract, agreement or document required to
be listed on the Target Disclosure Schedule corresponding
to Section 6D and which is expressly indicated on the
Target Disclosure Schedule as being subject to this
closing condition (collectively, the "Third Party
Approvals"), in each case on terms and conditions
reasonably satisfactory to the Buyer.
i. Governmental Consents and Approvals. The Parties
shall have received or obtained all governmental and
regulatory consents, permits and approvals (and shall
have made all filings) that are necessary for the
consummation of the transactions contemplated hereby
(collectively, the
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"Government Approvals"), in each case on terms and
conditions reasonably satisfactory to the Buyer.
j. Material Adverse Change. Since the date of this
Agreement, there shall have been no material adverse
change or development in the business, financial
condition, operating results, assets, operations, cash
flow or net worth of the Target.
k. Proceedings. All corporate and other proceedings
taken or required to be taken by the Target at or prior
to the Closing in connection with the transactions
contemplated hereby shall have been taken and all
documents incident thereto shall be reasonably
satisfactory in form and substance to the Buyer and its
counsel.
l. Target Stockholder Approval. The Target shall have
received the Requisite Stockholder Approval in relation
to this Agreement and the Plan of Merger.
m. Consent of Target Stockholders. All of the Target
Stockholders shall have duly entered into a written
consent substantially in the form attached hereto as
Exhibit L (the "Consent").
n. HSR Approval. All applicable waiting periods (and
any extensions thereof) under the Xxxx-Xxxxx-Xxxxxx Act
shall have expired or otherwise been terminated.
o. Non-Compete and Non-Solicitation. Each stockholder
of the Target (other than Xxxxxxx Xxxxxxxx) shall have
agreed to be bound by the non-compete, non-solicitation
and other restrictions contemplated by Section 5A of this
Agreement, and each such stockholder shall have duly
executed the signature page hereto labeled "Non-Compete
Signature Page to Agreement of Merger."
p. Escrow Agreement. The Buyer, the Escrow Agent and
the Target Stockholders Representative shall have entered
into the Escrow Agreement, and such agreement shall be in
full force and effect as of the Closing.
q. Closing Documents. At the Closing, the Target shall
have delivered to the Buyer all of the following
documents:
i. a certificate of an officer of the Target, dated the
Closing Date, stating that the conditions specified in
Section 1 and Sections 2A through 2M, have been fully
satisfied;
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ii. certified copies of the resolutions duly adopted by
the board of directors of the Target authorizing the
execution, delivery and performance of this Agreement and
each of the other agreements contemplated hereby;
iii. certified copies of the articles of incorporation
and the bylaws of the Target, each as in effect at the
Closing;
iv. copies of all Third Party Approvals and Governmental
Approvals; and
v. good standing certificates of the Target from its
jurisdiction of incorporation and each jurisdiction in
which the Target is qualified to do business as a foreign
corporation, in each case dated as of a recent date prior
to the Closing Date.
Any condition specified in this Section 2 may be waived if consented to
in writing by the Buyer at or prior to the Closing. All deliveries made at the
Closing shall be deemed to be simultaneously made, and no party shall be
obligated to consummate the transactions contemplated by this Agreement unless
and until all deliveries required hereunder have been fully made.
Section 3. Conditions of the Obligations of the Target at the
Closing. The obligations of the Target to consummate the
transactions contemplated hereby is subject to the
satisfaction as of the Closing of the following conditions:
a. Representations and Warranties; Covenants. The
representations and warranties contained in Section 7
hereof (taking into account the exceptions referred to in
the introduction to such Section) shall be true and
correct in all material respects at and as of the Closing
Date as if made at and as of the Closing Date, except for
the effects of actions contemplated herein or permitted
hereunder prior to the Closing, and the Buyer shall have
performed in all material respects all of the covenants
required to be performed by the Buyer hereunder at or
prior to the Closing.
b. Registration Rights Agreement. The Buyer shall have
entered into the Registration Rights Agreement,
substantially in the form attached hereto as Exhibit M,
and such agreement shall be in full force and effect as
of the Closing and shall not have been amended or
modified.
c. Opinion of Counsel to the Buyer. The Target shall
have received from Xxxxxxxx & Xxxxx, special counsel to
the Buyer, an opinion substantially in the form attached
hereto as Exhibit N, which shall be addressed to the
Target and dated as of the Closing Date.
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d. Target Stockholder Approval. The Target shall have
received the Requisite Stockholder Approval in relation
to this Agreement and the Plan of Merger.
e. Litigation. No suit, action or other proceeding
shall be pending before any court or governmental or
regulatory official, body or authority seeking to
restrain or prohibit the transactions contemplated
hereby, and no injunction, judgment, order, decree or
ruling with respect thereto shall be in effect.
f. Material Adverse Change. Since the date of this
Agreement, there shall have been no material adverse
change or development in the business, financial
condition, operating results, assets, operations, cash
flow or net worth of the Buyer.
g. Price of Buyer Stock. The closing price of Buyer
Stock on the principal market for such stock on the
trading day immediately preceding the Closing Date shall
not be less than $13.00.
h. Governmental Consents and Approvals. The Parties
shall have received or obtained all Governmental
Approvals that are necessary for the consummation of the
transactions contemplated hereby.
i. HSR Approval. All applicable waiting periods (and
any extensions thereof) under the Xxxx-Xxxxx-Xxxxxx Act
shall have expired or otherwise been terminated.
j. Employment Agreements with Principals. The Target
shall have entered into an employment agreement with
Xxxxxx X. Xxxxxx substantially in the form attached
hereto as Exhibit H and with each of the individuals
listed on Exhibit I-1 (and on the certain respective
principal terms also set forth thereon) substantially in
the form attached hereto as Exhibit I-2, and each of such
employment agreements shall be in full force and effect
as of the Closing.
k. Escrow Agreement. The Buyer, the Escrow Agent and
the Target Stockholders Representative shall have entered
into the Escrow Agreement, and such agreement shall be in
full force and effect as of the Closing.
l. Closing Certificate. The Buyer shall have delivered
to the Target a certificate of an officer of the Buyer,
dated the Closing Date, stating that the conditions
specified in Sections 3A, 3D, 3E and 3F have been fully
satisfied.
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Any condition specified in this Section 3 may be waived if consented to
in writing by the Target. All deliveries made at the Closing shall be deemed to
be simultaneously made, and no party shall be obligated to consummate the
transactions contemplated by this Agreement unless and until all deliveries
required hereunder have been fully made.
Section 4. Covenants and Transfer Restrictions.
a. General. Each of the Parties shall use reasonable
best efforts to take all action and to do all things
necessary, proper or advisable in order to consummate and
make effective the transactions contemplated by this
Agreement. At the Closing, the applicable Parties shall
execute and deliver the agreements and instruments
contemplated hereby to be executed and delivered at the
Closing.
b. Maintenance of Business. The Target shall (i)
maintain its assets in good operating condition and
repair (normal wear and tear excepted), (ii) maintain
insurance reasonably comparable to that in effect on the
date of the Latest Balance Sheet, (iii) maintain
inventory and supplies at customary operating levels
consistent with current practices, and replace in
accordance with past practice any inoperable, worn out or
obsolete assets with assets of comparable quality, (iv)
maintain its books, accounts and records in accordance
with past custom and practice as used in the preparation
of the Latest Balance Sheet and the financial statements
described in Section 6E below and (v) maintain in full
force and effect the existence of all Intellectual
Property Rights. The Target shall collect amounts due to
the Target and pay amounts owing by the Target only in
the ordinary course of business consistent with past
practice. The Target shall not offer or accept any
discounts with respect to the collection of accounts
receivable and other rights to payment other than in the
ordinary course of business consistent with past
practice.
c. Third Party Notices and Consents. The Target shall
give all required notices to third parties and use
reasonable best efforts to obtain any required third
party consents in connection with the matters
contemplated by this Agreement.
d. Governmental Notices and Consents. Each of the
Parties shall give any notices to, make any filings with,
and use reasonable best efforts to obtain, any
authorizations, consents and approvals of governments and
governmental agencies in connection with the matters
contemplated by this Agreement. The Buyer and the Target
each acknowledge that the Notification and Report Forms
and related material that are required to be filed with
the Federal Trade Commission and the Antitrust Division
of the
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United States Department of Justice under the
Xxxx-Xxxxx-Xxxxxx Act have already been filed as so
required, will use their reasonable best efforts to
obtain an early termination of the applicable waiting
period under the Xxxx-Xxxxx-Xxxxxx Act upon the election
of the Buyer in its sole discretion (in the event of such
election by the Buyer, the Target and the Buyer shall
each promptly file with the appropriate government
agencies any necessary or appropriate letters and other
forms to request such early termination) and will make
any further filings pursuant thereto that may be
necessary, proper or advisable in connection therewith.
e. Special Target Meeting; Consent of Target
Stockholders. The Target shall use its reasonable best
efforts to obtain the approval of this Agreement and the
Plan of Merger by the Target Stockholders in accordance
with its charter and bylaws and the BCA on the date of
this Agreement. The board of directors of the Target
shall unanimously recommend adoption of this Agreement
and the Plan of Merger by the Target Stockholders in
connection with the solicitation of such approval. In
addition, each of the Target Stockholders shall enter
into the Consent on or prior to the date of this
Agreement.
f. Operation of Business. The Target shall operate its
business only in the usual and ordinary course of
business consistent with past practice and use reasonable
best efforts to preserve the goodwill and organization of
its business and the relationships with its customers,
suppliers, employees and other Persons having business
relations with the Target. Without limiting the
generality of the foregoing, prior to the Closing, the
Target shall not:
i. take or omit to take any action that would require
disclosure under Section 6J below; provided that
notwithstanding clauses (iv) and (viii) of Section 6J,
the Target may declare and pay (x) bonuses to its
employees and (y) distributions of cash to its
stockholders so long as the Target has at Closing (i) at
least $750,000 of cash and/or other immediately available
funds, (ii) at least $2.1 million of accounts receivable
(not including any contingent rights to payment for
services rendered by the Target) and (iii) at least $18
million of contingent rights to payment for services
rendered by the Target (not including any accounts
receivable); provided further that if the Target at the
Closing has cash and/or other immediately available
funds, accounts receivable or contingent rights to
payment in an amount less than the respective minimum
amount set forth above in this sentence, then the number
of shares of Buyer Stock which comprises the Closing
Stock Consideration shall be reduced by a number equal to
(i) an amount equal to the aggregate of all such
shortfalls divided by (ii) $16.50, rounded up to the
nearest whole number.
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ii. take any action or omit to take any action which act
or omission would to have a Material Adverse Effect;
iii. (a) enter into any contract out of the ordinary
course of business or restricting in any material respect
the conduct of its business, (b) make any loans or
Investments (other than advances to the Target's
employees in the ordinary course of business consistent
with past custom and practice), (c) increase any
officer's or employee's compensation, incentive
arrangements or other benefits, except for increases or
bonuses made in the ordinary course of business
consistent with past custom and practice, (d) redeem,
purchase or otherwise acquire directly or indirectly any
of its issued and outstanding capital stock, or any
outstanding rights or securities exercisable or
exchangeable for or convertible into its capital stock
(except for the transactions contemplated by this
Agreement) or make any distribution or dividend to any of
its shareholders or other Persons (other than to Xxxxxxx
Xxxxxxxx as contemplated by Section 4Q), (e) amend its
articles of incorporation or bylaws or issue or agree to
issue any capital stock or any rights to acquire, or
securities convertible into or exchangeable for, any of
its capital stock, (f) directly or indirectly engage in
any transaction, arrangement or contract with any
officer, director, shareholder or other insider or
Affiliate of the Target which is not in the ordinary
course of business consistent with past practice and at
arm's length, (g) execute any guaranty, issue any debt or
borrow any money or (h) buy or sell any assets out of the
ordinary course of business consistent with past
practice;
iv. enter into any transaction, arrangement or contract
except on an arm's-length basis in the ordinary course of
business consistent with past custom and practice; or
v. extend, renew or enter into any material contract,
agreement or arrangement except upon the prior approval
of the chief executive officer or the chief financial
officer of the Buyer.
Notwithstanding the foregoing, nothing in this Section 4F
shall prohibit the Target from taking any action or omitting to take any action
as required or as expressly contemplated by this Agreement.
g. Full Access. The Target shall afford, and cause its
officers, directors, employees, attorneys, accountants
and other agents to afford, to the Buyer and its
accounting, legal and other representatives, full and
complete access at all reasonable times and during normal
business hours to the Target's personnel and to business,
financial, legal, tax, compensation and other data and
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information concerning the Target's affairs and
operations; provided, that the Buyer shall coordinate all
such access through and with the chief executive officer
of the Target.
h. Compliance with Agreements and Laws. The Target
shall (i) comply with all material obligations pursuant
to any material contract or agreement, whether oral or
written, express or implied and (ii) comply with all
material applicable laws.
i. Payment of Obligations. The Target shall pay and
discharge when payable all Taxes, assessments and
governmental charges imposed upon its properties or upon
the income or profits therefrom (in each case before the
same becomes delinquent and before penalties accrue
thereon unless contested in good faith by appropriate
proceedings) and pay and discharge all claims for labor,
materials or supplies in the ordinary course of business
consistent with past practice.
j. Notice of Developments. Each Party shall give
prompt written notice to the others in the event its own
representations and warranties (in Sections 6 and 7, as
applicable, taking into account the exceptions referred
to in the introduction to such Section) are discovered to
be untrue in any material respect as of the time made or
in the event such Party determines that such
representations and warranties shall be untrue as if made
at and as of the Closing Date. No disclosure by the
Target pursuant to this Section 4J, however, shall be
deemed to amend or supplement the Target Disclosure
Schedule or to cure any misrepresentation or breach of
warranty.
k. Exclusivity. Neither the Target nor any of its
representatives, officers, employees, directors or agents
shall, directly or indirectly, (i) submit, solicit,
initiate or encourage any proposal or offer from any
Person (other than the Buyer or the Transitory Subsidiary
in connection with the transactions contemplated hereby)
or enter into any agreement or accept any offer relating
to or consummate any (a) reorganization, liquidation,
dissolution or recapitalization of the Target, (b) merger
or consolidation involving the Target, (c) purchase or
sale of any assets or capital stock (or any rights to
acquire, or securities convertible into or exchangeable
for, any such capital stock) of the Target (other than in
the ordinary course of business consistent with past
custom and practice) or (d) similar transaction or
business combination involving the Target or its assets
(each of the foregoing transactions described in clauses
(a) through (d), a "Target Transaction") or (ii) furnish
any information with respect to, assist or participate in
or facilitate in any other manner any effort or attempt
by any Person to do or seek to do any of the foregoing.
The Target agrees to notify the Buyer immediately if
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any Person makes any proposal or offer or written inquiry
or contact with respect to a Target Transaction.
l. Tax Matters. Without the prior written consent of
the Buyer, which shall not be unreasonably withheld or
delayed, the Target shall not make or change any
election, change an annual accounting period, adopt or
change any accounting method, file any amended Tax
Return, enter into any closing agreement, settle any Tax
claim or assessment relating to the Target, surrender any
right to claim a refund of Taxes, consent to any
extension or waiver of the limitation period applicable
to any Tax claim or assessment relating to the Target, or
take any other similar action, or omit to take any action
relating to the filing of any Tax Return or the payment
of any Tax, if such election, adoption, change,
amendment, agreement, settlement, surrender, consent or
other action or omission would have the effect of
increasing the present or future Tax liability or
decreasing any present or future Tax asset of the Target
or the Buyer.
m. Press Release and Announcements. No press releases
or other releases of information related to this
Agreement or the transactions contemplated hereby will be
issued or released by the Buyer or the Target without the
prior consent of the other Party (which consent shall not
be unreasonably withheld or delayed), except as is
required or appropriate to disclose pursuant to
applicable law (including pursuant to securities laws and
any reporting requirements thereunder) or court order or
in any dispute resolution process contemplated by this
Agreement; provided that if disclosure is required or
appropriate by the Buyer pursuant to applicable law as
contemplated by this sentence, the Buyer shall notify the
Target Stockholders Representative prior to any such
disclosure and afford the Target Stockholder
Representative the opportunity to comment on any such
disclosure. Only the Buyer and its representatives shall
be permitted to communicate with financial analysts,
investors and the press regarding this Agreement and the
transactions contemplated hereby; the Parties to this
Agreement agree that all such contacts shall be directed
to the Buyer.
n. Indemnification. Subsequent to the Effective Time,
the Buyer shall not take, or permit to be taken, any
action to alter or impair any exculpatory or
indemnification provision for the benefit of any
individual now existing in the articles of incorporation
or bylaws of the Target insofar as such provision relates
to any act or inaction by such individual at any time
prior to the Effective Time.
o. Transition. The Target agrees to cooperate with the
Buyer, and to use its commercially reasonable efforts,
prior to the Closing to facilitate the
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expedient transition of ownership and operation of the
business of the Target to the Buyer at the Closing.
p. Audit of Target Financial Statements. At the
election of the Buyer, any financial statements of the
Target shall be audited by an independent accounting firm
selected by the Buyer, at the sole cost and expense of
the Buyer, and the Target shall promptly cooperate in
such audit. The Target shall grant such selected
accountant access to its books, records, employees and
agents and otherwise as customary in connection with a
year-end financial statement audit.
q. Amounts Due to Xxxxxxx Xxxxxxxx. Prior to the
Closing, the Target shall reissue and deliver to Xxxxxxx
Xxxxxxxx (and any others similarly situated) all dividend
and distribution checks previously issued to but not yet
cashed by him as set forth on Schedule 4Q.
r. Transfer Restrictions. None of the Target
Stockholders shall prior to termination of this Agreement
(without the express prior written consent of the Buyer)
directly or indirectly transfer, sell, assign, give,
mortgage, pledge, hypothecate, encumber or otherwise
dispose of, or permit to be sold, assigned, encumbered,
attached or otherwise disposed of, in any manner, the
whole or any part of the Target Shares of such
Stockholder, or the certificate or certificates
representing the same, or any interest therein, except by
will, judicial order or the laws of descent and
distribution or intestacy.
Section 5. Post-Closing Covenants.
a. Non-Compete; Non-Solicitation.
i. Each of the Stockholders of the Target, other than
Xxxxxx Xxxxxxxx (the "Non-Compete Persons"), acknowledge
that they are familiar with the trade secrets of the
Target and with other Confidential Information concerning
the Target, including all (a) inventions, technology and
research and development of the Target, (b) customers and
clients and customer and client lists of the Target, (c)
products (including products under development) and
services of the Target and related costs and pricing
structures and manufacturing techniques, (d) accounting
and business methods and practices of the Target and (e)
similar and related Confidential Information and trade
secrets of the Target. Each Non-Compete Person further
acknowledges that such Person's services have been and
shall be of special, unique and extraordinary value to
the Target and that each such Person has been
substantially responsible for the growth and development
of the Target and the creation and preservation of the
Target's goodwill. Each Non-Compete
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Person acknowledges and agrees that the Target would be
irreparably damaged if such Person were to provide
services to any Person competing with the Target or
engaged in a similar business and that such competition
by such Non-Compete Person would result in a significant
loss of goodwill by the Target. Each Non-Compete Person
further acknowledges and agrees that the covenants and
agreements set forth in this Section 5A were a material
inducement to the Buyer to enter into this Agreement and
to perform its obligations hereunder, and that the Buyer
would not obtain the benefit of the bargain set forth in
this Agreement as specifically negotiated by the Parties
if any Non-Compete Person breached the provisions of this
Section 5A. Therefore, Xxxxxx X. Xxxxxx agrees that until
the third anniversary of the Closing and each of Xxxx
Xxxx, Xxxxx Xxxxxxxx and Xxxxxxx Xxxxxxxx agree that
until the first anniversary of the Closing, such
Non-Compete Person shall not directly or indirectly own
any interest in, manage, control, participate in (whether
as an officer, director, employee, partner, agent,
representative or otherwise), consult with, render
services for, or in any other manner engage anywhere in
the United States in any business competing with, or
similar to, the business conducted and proposed to be
conducted by the Target; provided that nothing herein
shall prohibit such Non-Compete Person from being a
passive owner of not more than 5% of the outstanding
stock of any class of a corporation which is publicly
traded so long such Non-Compete Person has no active
participation in the business of such Person. Each
Non-Compete Person acknowledges that the geographic
restrictions set forth above are reasonable and necessary
to protect the goodwill of the Target's business being
sold by the Non-Compete Persons pursuant to this
Agreement.
ii. For so long as a Non-Compete Person has continuing
obligations under Section 5A(i) above, such Person shall
not directly, or indirectly through another entity, (a)
induce or attempt to induce any employee of the Target to
leave the employ of the Target, or in any way interfere
with the relationship between the Target and any employee
thereof, (b) hire any person who was an employee of the
Target at any time during the six month period
immediately prior to the date on which such hiring would
take place or (c) call on, solicit or service any
customer, supplier, licensee, licensor or other business
relation of the Target in order to induce or attempt to
induce such Person to cease doing business with the
Target, or in any way interfere with the relationship
between any such customer, supplier, licensee or business
relation and the Target (including making any negative
statements or communications about the Target).
iii. If, at the time of enforcement of the covenants
contained in this Section 5A (the "Restrictive
Covenants"), a court shall hold that the duration,
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scope or area restrictions stated herein are unreasonable
under circumstances then existing, the Parties agree that
the maximum duration, scope or area reasonable under such
circumstances shall be substituted for the stated
duration, scope or area and that the court shall be
allowed to revise the restrictions contained herein to
cover the maximum period, scope and area permitted by
law. Each Non-Compete Person has had the opportunity to
consult with legal counsel regarding the Restrictive
Covenants and has determined and hereby acknowledges that
the Restrictive Covenants are reasonable in terms of
duration, scope and area restrictions and are necessary
to protect the goodwill of the Target's business and the
substantial investment in the Target made by the Buyer
hereunder. Each Non-Compete Person further acknowledges
and agrees that the Restrictive Covenants are being
entered into by such Person solely in connection with the
sale of the Target to the Buyer and not directly or
indirectly in connection with such Non-Compete Person's
employment or other relationship with the Target.
iv. If a Non-Compete Person breaches, or threatens to
commit a breach of, any of the Restrictive Covenants, the
Target shall have the following rights and remedies, each
of which rights and remedies shall be independent of the
others and severally enforceable, and each of which is in
addition to, and not in lieu of, any other rights and
remedies available to the Target at law or in equity: the
right to apply to have the Restrictive Covenants
specifically enforced by any court of competent
jurisdiction, it being agreed that any breach or
threatened breach of the Restrictive Covenants would
cause irreparable injury to the Target and that money
damages would not provide an adequate remedy to the
Target.
b. Tax Matters. The following provisions shall govern
the allocation of responsibility as between the Buyer and
the Target Stockholders for certain tax matters following
the Closing Date:
i. Tax Periods Ending on or Before the Closing Date.
The Buyer shall prepare or cause to be prepared, in a
manner consistent with those of prior tax returns, and
file or cause to be filed all Tax Returns for the Target
for all periods ending on or prior to the Closing Date
which are filed after the Closing Date. The Buyer shall
permit the Target Stockholders Representative to review
and comment on each such Tax Return described in the
preceding sentence prior to filing. The Buyer and the
Target Stockholders Representative shall use their
reasonable best efforts to resolve any disputes regarding
any such Tax Returns, and if such parties cannot resolve
such dispute between themselves, they shall follow the
dispute resolution process set forth in Section 11A. To
the extent permitted by applicable law, the Target
Stockholders shall include any income, gain, loss,
deduction or other
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tax items for such periods on their Tax Returns in a
manner consistent with the Schedule K-1s furnished by the
Target to the Target Stockholders for such periods. The
Target Stockholders shall reimburse the Buyer for Taxes
of the Target with respect to such periods within 15 days
of payment by the Buyer or the Target of such Taxes to
the extent such Taxes are not reflected in the reserve
for Tax liability (rather than any reserve for deferred
Taxes established to reflect timing differences between
book and Tax income) shown on the face of the Latest
Balance Sheet or as set forth on Schedule 6F.
ii. Tax Periods Beginning Before and Ending After the
Closing Date. The Buyer shall prepare or cause to be
prepared, in a manner consistent with those of prior tax
returns, and file or cause to be filed any Tax Returns of
the Target for Tax periods which begin before the Closing
Date and end after the Closing Date. The Buyer shall
permit the Target Stockholders Representative to review
and comment on each such Tax Return described in the
preceding sentence prior to filing. The Buyer and the
Target Stockholders Representative shall use their
reasonable best efforts to resolve any disputes regarding
any such Tax Returns, and if such parties cannot resolve
such dispute between themselves, they shall follow the
dispute resolution process set forth in Section 11A. The
Target Stockholders shall pay to the Buyer within 15 days
of the date on which Taxes are paid with respect to such
periods an amount equal to the portion of such Taxes
which relates to the portion of such Taxable period
ending on the Closing Date to the extent such Taxes are
not reflected in the reserve for Tax liability (rather
than any reserve for deferred Taxes established to
reflect timing differences between book and Tax income)
shown on the face of the Latest Balance Sheet. For
purposes of this Section, in the case of any Taxes that
are imposed on a periodic basis and are payable for a
Taxable period that includes (but does not end on) the
Closing Date, the portion of such Tax which relates to
the portion of such Taxable period ending on the Closing
Date shall (x) in the case of any Taxes other than Taxes
based upon or related to income, be deemed to be the
amount of such Tax for the entire Taxable period
multiplied by a fraction the numerator of which is the
number of days in the Taxable period ending on the
Closing Date and the denominator of which is the number
of days in the entire Taxable period, and (y) in the case
of any Tax based upon or related to income be deemed
equal to the amount which would be payable if the
relevant Taxable period ended on the Closing Date. Any
credits relating to a Taxable period that begins before
and ends after the Closing Date shall be taken into
account as though the relevant Taxable period ended on
the Closing Date. All determinations necessary to give
effect to the foregoing allocations shall be made in a
manner consistent with prior practice of the Target.
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iii. Cooperation on Tax Matters.
(1) The Buyer and the Target Stockholders shall
cooperate fully, as and to the extent reasonably
requested by the other party, in connection with the
filing of Tax Returns pursuant to this Section and
any audit, litigation or other proceeding with
respect to Taxes. Such cooperation shall include the
retention and (upon the other party's request) the
provision of records and information which are
reasonably relevant to any such audit, litigation or
other proceeding and making employees available on a
mutually convenient basis to provide additional
information and explanation of any material provided
hereunder. The Target and Target Stockholders agree
(A) to retain all books and records with respect to
Tax matters pertinent to the Target relating to any
taxable period beginning before the Closing Date
until the expiration of the statute of limitations
(and, to the extent notified by the Buyer or the
Target Stockholders, any extensions thereof) of the
respective taxable periods, and to abide by all
record retention agreements entered into with any
taxing authority, and (B) to give the other party
reasonable written notice prior to transferring,
destroying or discarding any such books and records
and, if the other party so requests, the Target or
the Target Stockholders, as the case may be, shall
allow the other party to take possession of such
books and records.
(2) The Buyer, the Target Stockholders
Representative and the Target Stockholders further
agree, upon request, to use their best efforts to
obtain any certificate or other document from any
governmental authority or any other Person as may be
necessary to mitigate, reduce or eliminate any Tax
that could be imposed (including, but not limited
to, with respect to the transactions contemplated
hereby).
(3) The Buyer, the Target Stockholders
Representative and the Target Stockholders further
agree, upon request, to provide the other party with
all information that either party may be required to
report pursuant to Section 6043 of the Code and all
Treasury Department Regulations promulgated
thereunder.
iv. Tax Sharing Agreements. All tax-sharing agreements
or similar agreements with respect to or involving the
Target shall be terminated as of the Closing Date and,
after the Closing Date, the Target shall not be bound
thereby or have any liability thereunder.
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v. Tax Free Transaction. The Parties shall agree to
report this transaction as a tax free transaction under
Section 368(a) of the Code and to comply with all
requirements imposed with regard to such.
c. Defined Benefit Plan and Successor Target Plans. The
Buyer acknowledges that the Target maintains the
Strategic Reimbursement Services, Inc. Employees' Defined
Benefit Pension Plan (the "Defined Benefit Plan") for its
current employees.
i. Target will amend the Defined Benefit Plan,
effective as of the Closing, or as soon thereafter as
practicable after complying with the notice requirement
of Section 204(h) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), to cease the
accrual of benefits and entry of new participants. The
Target will further amend the Defined Benefit Plan,
effective as of the Closing, to provide that excess funds
upon termination of the Defined Benefit Plan may not
under any circumstances revert to the Employer (as
defined in the Defined Benefit Plan); to provide that
excess assets upon termination be applied to increase
benefits or otherwise reallocated in a nondiscriminatory
manner to Participants (as defined in the Defined Benefit
Plan) in the Defined Benefit Plan. The Target and/or the
Surviving Corporation will terminate the Defined Benefit
Plan in a standard termination under Title IV of ERISA
effective as soon as reasonably practicable after the
Closing after complying with the notice requirements of
Section 4041 of ERISA, liquidate the trust for the
Defined Benefit Plan; and cause all assets of the Defined
Benefit Plan to be applied to the purchase of annuity
contracts or otherwise distributed to Participants.
Target and/or the Surviving Corporation may further amend
the Defined Benefit Plan in such manner consistently with
the foregoing as the Target and/or the Surviving
Corporation deem appropriate to carry out the termination
of the Defined Benefit Plan and to maintain its
qualification under section 401(a) of the Code pending
and upon its termination.
ii. Effective as of the Closing the Surviving
Corporation may at its option (a) adopt for the benefit
of its eligible employees the 401(k) plan of the Buyer,
or (b) adopt for the benefit of its eligible employees a
qualified defined contribution plan (as defined in
Section 414(i) of the Code on such terms as the Surviving
Corporation deems appropriate or (c) a combination of (a)
and (b). Any such employee benefit plan shall recognize
service with the Target before the Closing as service
with the employer for purposes of eligibility and (if
relevant) vesting.
d. Pooling Transfer Restriction. The Target and each
Target Stockholder expressly acknowledges and agrees that
the acquisition of the Target by the Buyer
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will be accounted for as a pooling-of-interests
transaction for financial, accounting and regulatory
purposes in accordance with GAAP and the rules and
regulations of the SEC governing pooling. Therefore, no
Target Stockholder shall sell, transfer or otherwise
dispose of any Buyer Shares owned by such Stockholder
until such time as financial statements/information that
includes at least 30 days of combined operations of the
Target and Buyer after the Closing Date shall have been
publicly reported by the Buyer (and no such transfer has
occurred in the 30 day period prior to the date of this
Agreement); provided that the Buyer shall issue a press
release which contains such requisite financial
statements/information and file a report with the SEC on
Form 8-K with respect thereto as soon as possible after
the Closing, but in any event not more than 45 days after
the Closing Date, unless agreed to in writing by the
Buyer and the Target Stockholders Representative. The
transfer restrictions set forth in this Section shall not
apply to a sale, transfer or other disposition of Buyer
Stock if, prior to such disposition, such Target
Stockholder delivers to the Buyer the written opinion of
a nationally recognized independent public accounting
firm to the effect that: (i) the disposition contemplated
by such Target Stockholder will not cause the acquisition
of the Target not to be treated as a pooling-of-interest
transaction for financial, accounting and regulatory
purposes in accordance with GAAP and the rules and
regulations of the SEC governing pooling (the "SEC
Pooling Rules"); or (ii) the disposition contemplated by
such Target Stockholder will not affect the treatment by
the Buyer of the acquisition of the Target because the
SEC Pooling Rules do not permit pooling-of-interest
accounting. The foregoing restriction on transfers by the
Target Stockholders shall be in addition to, and not in
lieu of, any securities law restrictions or any
restrictions set forth in this or any other Agreement.
The Target represents and warrants that its has not taken
any action which would adversely affect the ability of
the Buyer to account for the acquisition as a
pooling-of-interests transaction for financial,
accounting and regulatory purposes in accordance with
GAAP and the rules and regulations of the SEC governing
pooling, and shall not take any such action prior to the
Closing.
e. Post-Closing Original Signatures. The Target
Stockholders Representative shall secure and deliver to
the Buyer as promptly as practicable after the Closing
originally executed signature pages to each of this
Agreement and the other agreements and documents
contemplated hereby which are executed at the Closing by
facsimile from each applicable Target Stockholder, and
each Target Stockholder hereby covenants and agrees to
promptly so cooperate.
Section 6. Representations and Warranties Concerning the Target. The
Target represents and warrants to the Buyer and the Transitory
Subsidiary that, subject to the exceptions set forth in any
section of the Target Disclosure Schedule, the following
statements are true and correct as of the date of this
Agreement and will be true and correct as of the Closing Date.
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a. Organization, Corporate Power and Licenses. The
Target is a corporation duly organized, validly existing
and in good standing under the laws of the State of
Illinois and is qualified to do business in the State of
California. The Target possesses all requisite corporate
power and authority necessary to own and operate its
properties, to carry on its businesses as now conducted
and presently proposed to be conducted and to carry out
the transactions contemplated by this Agreement. The
copies of the Target's articles of incorporation and
bylaws which have been furnished to the Buyer's counsel
reflect all amendments made thereto at any time prior to
the date of this Agreement and are correct and complete.
Xxxxxx X. Xxxxxx is the sole director of the Target.
b. Capital Stock and Related Matters.
i. The authorized capital stock of the Target consists
of 5,000 shares of Class A Stock and 5,000 shares of
Class B Stock, of which 755 shares of Class A Stock and
245 shares of Class B Stock are issued and outstanding
and are held of record as set forth on the Target
Disclosure Schedule corresponding to this Section. As of
the date hereof and as of immediately prior to the
Closing, all of the outstanding shares of the Target's
capital stock are or shall be validly issued, fully paid
and nonassessable.
ii. Except as set forth in the immediately preceding
sentence, the Target does not have and as of the Closing
Date will not have outstanding any stock or securities
convertible or exchangeable for any shares of its capital
stock or containing any profit participation features,
nor any rights or options to subscribe for or to purchase
its capital stock or any stock or securities convertible
into or exchangeable for its capital stock or any stock
appreciation rights or phantom stock plans. The Target is
not subject to any obligation (contingent or otherwise)
to repurchase or otherwise acquire or retire any shares
of its capital stock or any warrants, options or other
rights to acquire its capital stock, other than as
expressly provided in this Agreement.
iii. Except for the Shareholders Agreement, dated as of
October 1, 1995, by and among the Target, Xxxxxx X.
Xxxxxx and certain other stockholders of the Target,
there are no statutory or contractual shareholder
preemptive rights or rights of first refusal or other
similar restrictions with respect to the Target Shares.
The Target has not violated any applicable federal or
state securities laws in connection with the offer, sale
or issuance of any of its capital stock. There are no
agreements, instruments or other documents defining the
rights of, or granting rights to, the Target's
securityholders. There are no agreements or
understandings binding on the Target or its
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shareholders with respect to the voting or transfer of
the Target's capital stock or with respect to any other
aspect of the Target's governance.
c. Subsidiaries; Investments. The Target does not have
any Subsidiaries. The Target does not own or hold the
right to acquire any shares of stock or any other
security or interest in any other Person. The Target has
never had any Subsidiaries. The Target does not have any
obligation to make any additional Investments in any
Person.
d. Authorization; No Breach.
(i) The execution, delivery and performance of this
Agreement and all of the other agreements and instruments
contemplated hereby to which the Target is a party, have
been duly authorized by the Target. This Agreement and
all of the other agreements and instruments contemplated
hereby to which the Target is a party constitute valid
and binding obligations of the Target, enforceable in
accordance with their respective terms, and when executed
and delivered by the Target in accordance with the terms
hereof shall each constitute a valid and binding
obligation of the Target, enforceable in accordance with
their respective terms.
(ii) The execution and delivery by the Target of this
Agreement and all other agreements and instruments
contemplated hereby to which the Target is or will become
a party, the fulfillment of and compliance with the
respective terms hereof and thereof by the Target do not
and shall not (i) conflict with or result in a breach of
the terms, conditions or provisions of, (ii) constitute a
default under (whether with or without the passage of
time, the giving of notice or both), (iii) result in the
creation of any Lien upon the Target's capital stock or
assets pursuant to, (iv) give any third party the right
to modify, terminate or accelerate any obligation under,
(v) result in a violation of or (vi) require any
authorization, consent, approval, exemption or other
action by or notice or declaration to, or filing with,
any third party or any court or administrative or
governmental body or agency pursuant to, the Target's
articles of incorporation or bylaws, or any agreement,
instrument, order, judgment or decree to which the Target
is subject, or to the knowledge of the Target, any law,
statute, rule or regulation to which the Target is
subject. Except as expressly set forth herein, the Target
is not a party to or bound by any written or oral
agreement or understanding with respect to a Target
Transaction other than this Agreement, and the Target has
terminated all discussions with third parties (other than
the Buyer) regarding Target Transactions.
e. Financial Statements. Attached hereto as the
Financial Statements Schedule are the following financial
statements:
i. the unaudited balance sheets of the Target as of
December 31, 1997 and December 31, 1998 and the related
statement of income for the fiscal years then ended (cash
basis only); and
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ii. the unaudited balance sheet of the Target as of May
31, 1999 (the "Latest Balance Sheet"), and the related
statements of income for the month then ended (cash basis
only).
Each of the foregoing financial statements (including in all cases the notes
thereto, if any), is accurate and complete in all material respects, is
consistent with the books and records of the Target (which, in turn, are
accurate and complete in all material respects) and fairly presents the
financial condition and operating results of the Target.
f. Absence of Undisclosed Liabilities.
i. To the knowledge of the Target, the Target does not
have any obligation or liability (whether accrued,
absolute, contingent, unliquidated or otherwise, whether
due or to become due and regardless of when asserted),
other than: (i) liabilities set forth on the liabilities
side of the Latest Balance Sheet (including any notes
thereto), (ii) liabilities and obligations which have
arisen after the date of the Latest Balance Sheet in the
ordinary course of business (none of which is a liability
resulting from noncompliance with any applicable laws,
breach of contract, breach of warranty (in excess of any
warranty reserve specifically established with respect
thereto and included on the Latest Balance Sheet), tort,
infringement, claim or lawsuit) and (iii) other
liabilities and obligations expressly disclosed in the
schedules referred to in this Section 6.
ii. The Target does not have any obligation or liability
(whether accrued, absolute, contingent, unliquidated or
otherwise, whether due or to become due and regardless of
when asserted) which would have a Material Adverse
Effect, other than: (i) liabilities set forth on the
liabilities side of the Latest Balance Sheet (including
any notes thereto), (ii) liabilities and obligations
which have arisen after the date of the Latest Balance
Sheet in the ordinary course of business (none of which
is a liability resulting from noncompliance with any
applicable laws, breach of contract, breach of warranty
(in excess of any warranty reserve specifically
established with respect thereto and included on the
Latest Balance Sheet), tort, infringement, claim or
lawsuit) and (iii) other liabilities and obligations
expressly disclosed in the schedules referred to in this
Section 6.
g. Accounts Receivable. All accounts receivable of the
Target and all rights and contingent rights to receive
payment for services rendered by the Target reflected on
the books and records of the Target as of the date hereof
and all accounts receivable and all rights and contingent
rights to receive payment for services rendered by the
Target to be reflected on the books and records of the
Target as of the Closing Date are or shall be valid
receivables,
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rights, contingent rights or the equivalent of the Target
arising in the ordinary course of business, and to the
knowledge of the Target, are or shall be current and
collectible, subject to no valid counterclaims or
setoffs, at the aggregate recorded amount therefor as
shown on the books and records of the Target as of the
Closing Date, as the case may be, upon satisfaction if
applicable of the respective contingency. To the
knowledge of the Target, no Person has any Lien on such
receivables or rights or contingent rights to payment of
the Target or any part thereof, and no agreement for
deduction, free goods, discount or other deferred price
or quantity adjustment has been made with respect to any
such receivables.
h. Warranty; Certifications. All services rendered by
the Target have been in conformity in all material
respects with all applicable contractual commitments and
all express and implied warranties, and to the knowledge
of the Target, the Target does not have any liability
(and, to the Target's knowledge, there is no reasonable
basis for any present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim or
demand against it giving rise to any such liability) for
damages in connection therewith in excess of any warranty
reserve specifically established with respect thereto and
included on the Latest Balance Sheet. No services
rendered by the Target are subject to any guaranty,
warranty or other indemnity beyond the applicable
standard terms and conditions of such service consistent
with past practice (including as a result of any course
of conduct between the Target and any Person or as a
result of any statements in any of the Target's product
or promotional literature). The Target Disclosure
Schedule corresponding to this Section includes copies of
such standard terms and conditions of service for the
Target (containing applicable guaranty, warranty and
indemnity provisions). The Target has not been notified
in writing of any claims for (and the Target has no
knowledge of any threatened claims for) any extraordinary
product returns, warranty obligations or product services
relating to any of its products or services.
i. No Material Adverse Effect. Since December 31, 1998,
there has occurred no fact, event or circumstance to the
knowledge of the Target which has had or would reasonably
be expected to have a Material Adverse Effect.
j. Absence of Certain Developments. Except as set forth
on the Target Disclosure Schedule and except as expressly
contemplated by this Agreement since December 31, 1998,
the Target has not:
i. issued any notes, bonds or other debt securities or
any capital stock or other equity securities or any
securities or rights convertible, exchangeable or
exercisable into any capital stock or other equity
securities;
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ii. borrowed any amount or incurred or become subject to
any material liabilities, except current liabilities
incurred in the ordinary course of business consistent
with past practice;
iii. discharged or satisfied any material Lien or paid
any material obligation or liability, other than current
liabilities paid in the ordinary course of business;
iv. declared, set aside or made any payment or
distribution of cash or other property to any of the
Target's shareholders with respect to such shareholder's
capital stock or other equity securities or purchased,
redeemed or otherwise acquired any shares of its capital
stock or other equity securities (including any warrants,
options or other rights to acquire its capital stock or
other equity securities);
v. mortgaged or pledged any of its properties or assets
or subjected them to any Lien, except for Permitted
Encumbrances;
vi. sold, assigned, transferred, leased, licensed or
otherwise encumbered any of its tangible assets, except
in the ordinary course of business consistent with past
practice, or canceled any material debts or claims;
vii. sold, assigned, transferred, leased, licensed or
otherwise encumbered any Intellectual Property Rights or
other intangible assets, disclosed any material
proprietary Confidential Information to any Person (other
than to the Buyer or the Transitory Subsidiary and other
than in the ordinary course of business consistent with
past practice in circumstances in which it has imposed
reasonable confidentiality restrictions), or abandoned or
permitted to lapse any Intellectual Property Rights;
viii. made or granted any bonus or any wage or salary
increase to any employee or group of employees (except as
required by pre-existing contracts described on the
Target Disclosure Schedule), or made or granted any
increase in any employee benefit plan or arrangement, or
amended or terminated any existing employee benefit plan
or arrangement or adopted any new employee benefit plan
or arrangement;
ix. suffered any extraordinary losses or waived any
rights of material value (whether or not in the ordinary
course of business or consistent with past practice) in
excess of $50,000 in the aggregate;
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x. made capital expenditures or commitments therefor
that aggregate in excess of $100,000;
xi. delayed or postponed the payment of any accounts
payable or any other liability or obligation or agreed
or negotiated with any party to extend the payment date
of any accounts payable or accelerated the collection
of any accounts or notes receivable, other than in the
ordinary course of business consistent with past
practice;
xii. made any loans or advances to, guarantees for the
benefit of, or any Investments in, any Persons (other
than advances to the Target's employees in the ordinary
course of business consistent with past practice);
xiii. made any charitable contributions or pledges
exceeding in the aggregate $10,000;
xiv. suffered any damage, destruction or casualty loss
exceeding in the aggregate $100,000, not covered by
insurance;
xv. made any change in any method of accounting or
accounting policies, other than those required by GAAP
which have been disclosed in writing to the Buyer, or
made any write-down in the value of its inventory that
is material or that is other than in the usual, regular
and ordinary course of business consistent with past
practice;
xvi. made any Investment in or taken any steps to
incorporate any Subsidiary;
xvii. amended its articles of incorporation, bylaws or
other organizational documents;
xviii. entered into any agreement or arrangement
prohibiting or restricting it from freely engaging in
any business or otherwise restricting the conduct of
its business;
xix. entered into any contract other than in the
ordinary course of business consistent with past
practice, entered into any other material transaction,
whether or not in the ordinary course of business or
consistent with past practice, or materially changed
any business practice; or
xx. agreed, whether orally or in writing, to do any of
the foregoing.
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k. Assets.
i. The Target has good and valid title to, a valid
leasehold interest in, or a valid license to use, the
properties and assets, tangible or intangible, used by
it, located on its premises or shown on the Latest
Balance Sheet or acquired thereafter, free and clear
of all Liens, except for properties and assets
disposed of in the ordinary course of business since
the date of the Latest Balance Sheet and except for
Liens disclosed on the Latest Balance Sheet (including
any notes thereto) and Permitted Encumbrances.
ii. All of the Target's buildings, equipment,
machinery, fixtures, improvements and other tangible
assets (whether owned or leased) are in good condition
and repair (ordinary wear and tear excepted) and are
fit for use in accordance with past practice and in
the ordinary course of the Target's business as
presently conducted and as presently proposed to be
conducted. To the knowledge of the Target, all such
assets have been installed and maintained in all
material respects in accordance with all applicable
laws, regulations and ordinances.
iii. The Target owns, has a valid leasehold interest
in, or has a valid license to use, all of the material
assets, properties and rights, whether tangible or
intangible, necessary for the conduct of its business
as presently conducted and as presently proposed to be
conducted.
l. Tax Matters.
i. The Target has filed all material Tax Returns
which it is required to file under applicable laws and
regulations, and such Tax Returns are complete and
correct in all material respects and have been
prepared in compliance in all material respects with
all applicable laws and regulations. The Target has
paid all Taxes due and owing by it (whether or not
such Taxes are shown or required to be shown on a Tax
Return) and has withheld and paid over to the
appropriate taxing authority all Taxes which it is
required to withhold from amounts paid or owing to any
employee, shareholder, creditor or other third party.
ii. Except as set forth on the Target Disclosure
Schedule corresponding to this Section:
(1) the Target has not waived any statute of
limitations with respect to any Taxes or agreed to
any extension of time for filing any Tax Return
which has not been filed; and the Target has not
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35
consented to extend to a date later than the date
hereof the period in which any Tax may be
assessed or collected by any taxing authority;
(2) since December 31, 1998, the Target has not
incurred any liability for Taxes other than in
the ordinary course of business;
(3) the Tax Returns of the Target are closed for
all tax years through December 31, 1992;
(4) to the knowledge of the Target, no foreign,
federal, state or local Tax audits or
administrative or judicial Tax proceedings are
pending or being conducted with respect to the
Target;
(5) the Target has not received from any foreign,
federal, state or local taxing authority
(including jurisdictions where the Target has
filed Tax Returns) any (i) written notice
indicating an intent to open an audit or other
review, (ii) request for information related to
Tax matters or (iii) notice of deficiency or
proposed adjustment for any amount of Tax
proposed, asserted or assessed by any taxing
authority against the Target;
(6) to the knowledge of the Target, there are no
material unresolved questions or claims
concerning the Target's Tax liability;
(7) the Target has never received any claim by a
taxing authority in a jurisdiction where the
Target does not file Tax Returns that the Target
is or may be subject to Taxes assessed by such
jurisdiction;
(8) the Target has not been a member of an
Affiliated Group or filed or been included in a
combined, consolidated or unitary income Tax
Return;
(9) the Target is not a party to or bound by any
Tax allocation or Tax sharing agreement;
(10) there are no Liens for Taxes (other than for
current Taxes not yet due and payable) upon the
assets of the Target;
(11) the Target shall not be required to (i) as a
result of a change in method of accounting for a
taxable period ending on or prior to the Closing
Date, include any adjustment in taxable income
for any taxable period (or portion thereof)
ending after the Closing Date, (ii) as a result
of any "closing agreement," as described in
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Section 7121 of the Code (or any corresponding
provision of state, local or foreign income Tax
law) executed on or before the Closing Date,
include any item of income in, or exclude any
item of deduction from, taxable income for any
taxable period (or portion thereof) ending after
the Closing Date, (iii) as a result of any sale
reported on the installment method where such
sale occurred on or prior to the Closing Date,
include any item of income in, or exclude any
item of deduction from, taxable income for any
taxable period (or portion thereof) ending after
the Closing Date, or (iv) as a result of any
prepaid amount received on or prior to the
Closing Date, include any item of income in, or
exclude any item of deduction from, taxable
income for any taxable period (or portion
thereof) ending after the Closing Date;
(12) the Target has not made any payments, and is
not and will not become obligated (under any
contract entered into on or before the Closing
Date) to make any payments, that will be
non-deductible under Section 280G of the Code
(or any corresponding provision of state, local
or foreign income Tax law); and
(13) the Buyer will not be required to deduct and
withhold any amount pursuant to Section 1445(a)
of the Code upon the Merger.
iii. The Target:
(1) has not made an election under Section
341(f) of the Code;
(2) is not presently liable for the Taxes of
another Person (1) under Treas. Reg. Section
1.1502-6 (or comparable provisions of state,
local or foreign law), (2) as a transferee or
successor or (3) by contract or indemnity or
otherwise;
(3) has been a validly electing S corporation
within the meaning of Sections 1361 and 1362 of
the Code at all times during its existence and
will be an S corporation up to and including the
Closing Date; and
(4) will not be liable for any Tax under Section
1374 of the Code in connection with the deemed
sale of Target's assets caused by the Section
338(h)(10) Election, and has not, in the past 10
years, (A) acquired assets from another
corporation in a transaction in which Target's
Tax basis for the acquired assets was
determined, in whole or in part, by reference to
the Tax basis of the acquired assets (or any
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37
other property) in the hands of the transferor
or (B) acquired the stock of any corporation
which is a qualified subchapter S subsidiary.
m. Contracts and Commitments.
i. Except as set forth on the Target Disclosure
Schedule, the Target (or to the knowledge of the
president of the Target, any employee of the Target
with respect to the business of the Target) is not a
party to or bound by any written or oral:
(1) pension, profit sharing, stock option,
employee stock purchase or other plan or
arrangement providing for deferred or other
compensation to employees or any other employee
benefit plan, arrangement or practice, whether
formal or informal;
(2) collective bargaining agreement or any other
contract with any labor union, or severance
agreements, programs, policies or arrangements;
(3) management agreement, contract for the
employment of any officer, individual employee or
other Person on a full-time, part-time,
consulting or other basis providing annual cash
or other compensation in excess of $50,000 or
providing for the payment of any cash or other
compensation or benefits upon the consummation of
the transactions contemplated hereby;
(4) material contract or agreement requiring the
consent of any party thereto upon a change in
control of the Target, containing any provision
which would result in a modification of any
rights or obligations of any party thereunder
upon a change in control of the Target or which
would provide any party any remedy (including
rescission or liquidated damages) in the event of
a change in control of the Target;
(5) contract under which it has advanced or
loaned monies to any other Person or otherwise
agreed to advance, loan or invest any funds;
(6) agreement or indenture relating to borrowed
money or other Indebtedness or the mortgaging,
pledging or otherwise placing a Lien on any
material asset or material group of assets of the
Target or any letter of credit arrangements;
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38
(7) guaranty of any obligation for borrowed
money or otherwise (other than endorsements made
for collection in the ordinary course of
business);
(8) lease or agreement under which the Target is
lessee of or holds or operates any property, real
or personal, owned by any other Person, except
for any lease of personal property under which
the aggregate annual rental payments do not
exceed $25,000;
(9) lease or agreement under which the Target is
lessor of or permits any third party to hold or
operate any property, real or personal, owned or
controlled by the Target;
(10) license or royalty agreements, other than
any license or royalty agreements related to
third party off-the-shelf software;
(11) nondisclosure or confidentiality agreements,
other than such entered into with customers in
the ordinary course of business and consistent
with past practice;
(12) contract or group of related contracts with
the same party or group of affiliated parties for
the purchase of raw materials, commodities,
supplies, products, equipment or other personal
property or for the receipt of services under
which the undelivered balance of such products
and services has a selling price in excess of
$50,000;
(13) contract or group of related contracts with
the same party or group of affiliated parties for
the sale of raw materials, commodities, supplies,
products or other personal property or for the
furnishing of services under which the
undelivered balance of such products or services
due from the Target has a selling price in excess
of $50,000;
(14) other contract or group of related contracts
with the same party or group of affiliated
parties continuing over a period of more than six
months from the date or dates thereof, not
terminable by the Target upon 30 days' or less
notice without penalty or involving more than
$50,000;
(15) contract relating to the marketing, sale,
advertising or promotion of its products;
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39
(16) warranty agreement with respect to products
sold or leased (other than any such agreement
containing the standard terms and conditions
described on the Target Disclosure Schedule
corresponding to this Section or indemnity
agreement with any supplier under which it is
obligated to indemnify such supplier against
product liability claims;
(17) agreements relating to the ownership of or
investments in any business or enterprise,
including investments in joint ventures and
minority equity investments;
(18) assignment, license, indemnification or
other agreement with respect to any intangible
property (including any Intellectual Property
Rights);
(19) agreement under which it has granted any
Person any registration rights (including demand
or piggyback registration rights);
(20) broker, agent, sales representative, sales
or distribution agreement or material agreement
relating to the export and/or import of any
goods or equipment;
(21) power of attorney or other similar agreement
or grant of agency;
(22) contract or agreement prohibiting it from
freely engaging in any business or competing
anywhere in the world; or
(23) other agreement which is material to its
operations or business prospects or involves an
annual consideration in excess of $50,000,
whether or not in the ordinary course of
business, other than any agreement specified by
paragraphs (a) through (v) above.
ii. All of the contracts, agreements and instruments
set forth or required to be set forth on the Target
Disclosure Schedule corresponding to this Section and
with respect to which the Target does or may
recognize sales or revenues and all of the material
contracts, agreements and instruments set forth or
required to be set forth on the Target Disclosure
Schedule corresponding to this Section are valid,
binding and enforceable in accordance with their
respective terms and shall be in full force and
effect in accordance with their terms upon
consummation of the transactions contemplated hereby;
provided that the representations and warranties set
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forth in this sentence shall only be to the knowledge
of the Target if and to the extent such relate to any
regulatory or governmental investigation that is or
may become pending that do or would affect whether
any such contracts, agreements or instruments are
valid, binding and enforceable or are in full force
and effect. The Target has performed all material
obligations required to be performed by it and is not
in default under or in breach of nor in receipt of
any claim of default or breach under any such
contract, agreement or instrument to which the Target
is subject; no event has occurred which is
controllable by or known to the Target which with the
passage of time or the giving of notice or both would
result in a default, breach or event of noncompliance
by the Target under any of these contracts,
agreements or instruments to which the Target is
subject; the Target does not have any present
expectation or intention of not fully performing on a
timely basis all such obligations required to be
performed by the Target under any contract, agreement
or instrument to which the Target is subject.
iii. To the knowledge of the Target, all contracts,
agreements and instruments set forth or required to
be set forth on the Target Disclosure Schedule
corresponding to this Section with respect to which
the Target does not recognize sales or revenues or
which are not material are valid, binding and
enforceable in accordance with their respective terms
and shall be in full force and effect in accordance
with their terms upon consummation of the
transactions contemplated hereby. The Target has
performed all material obligations required to be
performed by it and is not in default under or in
breach of nor in receipt of any claim of default or
breach under any such contract, agreement or
instrument to which the Target is subject; no event
has occurred which is controllable by or known to the
Target which with the passage of time or the giving
of notice or both would result in a default, breach
or event of noncompliance by the Target under any of
these contracts, agreements or instruments to which
the Target is subject; the Target does not have any
present expectation or intention of not fully
performing on a timely basis all such obligations
required to be performed by the Target under any
contract, agreement or instrument to which the Target
is subject.
iv. The Target does not have any knowledge of any
breach or cancellation or anticipated cancellation by
the other parties to any contract, agreement,
instrument or commitment to which it is a party.
v. The Buyer has been supplied with a true and
correct copy of each of the written instruments,
plans, contracts and agreements and an accurate
description of each of the oral arrangements,
contracts and agreements which are referred to on the
Target Disclosure Schedule corresponding to this
Section, together with all amendments, waivers or
other changes thereto.
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n. Intellectual Property Rights. (a) There have
been no claims received by the Target asserting the
invalidity, misuse or unenforceability of any of the
Intellectual Property Rights owned or used by the
Target and, to the Target's knowledge, there is no
basis for any such claim, (b) the Target has not
received any notices of, and has no knowledge of any
facts which indicate a likelihood of, any
infringement or misappropriation by, or conflict
with, any third party with respect to any
Intellectual Property Rights (including any demand or
request that the Target license any rights from a
third party), (c) the conduct of the Target's
businesses has not infringed, misappropriated or
conflicted with and does not infringe, misappropriate
or conflict with any Intellectual Property Rights of
other Persons, (d) to the Target's knowledge, the
Intellectual Property Rights owned by or licensed to
the Target have not been infringed, misappropriated
or conflicted by other Persons and (e) the Target has
not transferred or otherwise disposed of any
Intellectual Property owned or used by it in the
two-year period prior to the date of this Agreement.
The transactions contemplated by this Agreement will
have no material adverse effect on the Target's
right, title or interest in and to the Intellectual
Property Rights listed on the Target Disclosure
Schedule corresponding to this Section and all of
such Intellectual Property Rights shall be owned or
available for use by the Target on substantially
identical terms and conditions immediately after the
Closing.
o. Litigation, etc. There are no (and, during the
two years preceding the date hereof, there have not
been any) actions, suits, proceedings (including any
arbitration proceedings) or orders pending against or
affecting the Target, or to the knowledge of the
Target, investigations or claims pending or
threatened against or affecting the Target (or to the
actual knowledge of the president of the Target,
pending or threatened against or affecting any of the
officers, directors, employees or past or current
clients or customers of the Target with respect to
the business or proposed business activities of the
Target), or pending or threatened by the Target
against any Person, at law or in equity, or before or
by any governmental department, commission, board,
bureau, agency or instrumentality (including any
actions, suits, proceedings or investigations with
respect to the transactions contemplated by this
Agreement); the Target is not subject to any
arbitration proceedings under collective bargaining
agreements or otherwise or any governmental
investigations or inquiries; and, to the Target's
knowledge, there is no basis for any of the
foregoing. The foregoing includes, without
limitation, actions pending or threatened involving
the prior employment of any of the Target's
employees, their use in connection with the Target's
businesses of any information or techniques allegedly
proprietary to any of their former employers or their
obligations under any agreements with prior
employers. The Target is not subject to any judgment,
order or decree of any court or other governmental
agency. To the actual knowledge of the president of
the
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Target, there are no actions, suits, proceedings
(including any arbitration proceedings), orders,
investigations or claims pending or threatened
against or affecting any past or current client or
customer of the Target that would reasonably be
expected to have an adverse impact on the Target or
its receivables or revenues.
p. Brokerage. There are and shall be no claims for
brokerage commissions, finders' fees or similar
compensation in connection with the transactions
contemplated by this Agreement based on any
arrangement or agreement to which the Target is a
party or to which the Target is subject.
q. Insurance. The Target Disclosure Schedule
corresponding to this Section contains a description
of each insurance policy maintained by the Target
with respect to its properties, assets and business,
and each such policy shall be in full force and
effect as of the Closing. The Target is not in
default with respect to its obligations under any
insurance policy maintained by it, and the Target has
never been denied insurance coverage. The Target has
no self-insurance or co-insurance programs.
r. Employees.
i. To the Target's knowledge, no executive or key
employee of the Target and no group of employees of
the Target has any plans to terminate employment with
the Target. The Target has no material labor
relations problems (including any union organization
activities, threatened or actual strikes or work
stoppages or material grievances). The Target
Disclosure Schedule corresponding to this Section
contains a correct and complete list of all employees
of the Target who are not citizens of the United
States and who are not permanent residents of the
United States (together with a listing of each such
employee's visa status and visa expiration date).
None of the Target nor, to Target's knowledge, any of
its other employees or consultants are subject to any
noncompete, nondisclosure, confidentiality,
employment, consulting or other agreement or
judgment, decree or order of any court or
administrative agency, relating to, affecting or in
conflict with the present or proposed business
activities of the Target or such Person's duties to
the Target, except for agreements between the Target
and its present and former employees. The Target has
not received any notice alleging that any violation
of any such agreements has occurred. The Target
Disclosure Schedule corresponding to this Section
contains a correct and complete list of all employees
and consultants of the Target which have executed and
delivered to the Target any (i) agreement providing
for the nondisclosure by such Person of any
confidential information of the Target or (ii)
agreement providing for the assignment or license by
such Person to the Target of any
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Intellectual Property Rights (an "Inventions
Agreement"). No current employee or consultant of the
Target has excluded works or inventions made prior to
his or her employment with the Target from any
Inventions Agreement between the Target and such
Person.
ii. The Target has provided to the Buyer a true,
complete and correct list as of the date of this
Agreement of all employees and officers of the Target
and their current compensation (salary, bonus and
other compensation).
s. ERISA.
i. The Target does not have any obligation to
contribute to (or any other liability, including
current or potential withdrawal liability, with
respect to) any "multiemployer plan" (as defined in
Section 3(37) of ERISA).
ii. The Target does not maintain or have any
obligation to contribute to (or any other liability
with respect to) any plan or arrangement, whether or
not terminated, which provides medical, health, life
insurance or other welfare-type benefits for current
or future retired or terminated employees or any
dependents of such employees (except for limited
continued medical benefit coverage required to be
provided under Section 4980B of the Code ("COBRA") or
as required under applicable state law).
iii. The Target does not maintain, contribute to or
have any actual or potential liability under (or with
respect to) any employee plan which is a "defined
benefit plan" (as defined in Section 3(35) of ERISA),
other than the Defined Benefit Plan. The Defined
Benefit Plan does not have an "accumulated funding
deficiency" as such term is defined in Section
302(a)(2) of ERISA.
iv. The Target does not maintain, contribute to or
have any actual or potential liability under (or with
respect to) any employee plan which is a "defined
contribution plan" (as defined in Section 3(34) of
ERISA), whether or not terminated.
v. Except as set forth on the Target Disclosure
Schedule corresponding to this Section under the
heading "Other Plans" (the "Other Plans"), the Target
does not maintain, contribute to or have any actual
or potential liability under (or with respect to) any
plan or arrangement providing benefits or
remuneration to current or former employees or
independent contractors, including any employment
contract, bonus or incentive plan, plan for deferred
compensation, employee health or other welfare
benefit plan, severance arrangement or other material
policy, program or arrangement, whether or not
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terminated. The attached Target Disclosure Schedule
corresponding to this Section sets forth the
aggregate amount of bonuses and other incentive
compensation reasonably expected to be paid by the
Target through the Closing.
vi. The fair market value of the assets of each plan
that is a defined benefit plan equals or exceeds the
present value of all vested and non-vested benefit
liabilities thereunder determined in accordance with
applicable PBGC methods, factors and assumptions
applicable to a defined benefit plan terminating as
of the date of the last actuarial valuation. With
respect to each such plan, all required contributions
which are due for all periods ending prior to or as
of the Closing Date (including periods from the first
day of the current plan year to the Closing Date and
including all quarterly contributions required in
accordance with the Code) shall have been made, and
all other contributions have been properly accrued in
accordance with acceptable accounting principles.
With respect to the Defined Benefit Plan and the
Other Plans set forth on the Target Disclosure
Schedule corresponding to this Section (the "Plans"),
all required payments, premiums, contributions,
reimbursements or accruals for all periods ending
prior to or as of the Closing Date shall have been
made or properly accrued. None of the Plans has any
material unfunded liabilities which are not reflected
on the most recent actuarial valuation of the Defined
Benefit Plan (the "Latest Actuarial Valuation") in
the case of the Defined Benefit Plan, or on the
Latest Balance Sheet.
vii. The Plans and all related trusts, insurance
contracts and funds have been maintained, funded and
administered in compliance in all material respects
with the applicable provisions of ERISA, the Code and
other applicable laws. The Target has timely complied
with all reporting and disclosure obligations as they
apply to the Plans, and the Target has complied with
the requirements of COBRA. To the Target's knowledge,
none of the Target or any trustee or administrator of
any Plan has engaged in any transaction with respect
to the Plans which would subject the Target or any
trustee or administrator of the Plans, or any party
dealing with any such Plan, nor do the transactions
contemplated by this Agreement constitute
transactions which would subject any such party, to
either a civil penalty assessed pursuant to Part
502(i) of ERISA, or any other penalty or excise tax
or the tax or penalty on prohibited transactions
imposed by Section 4975 of the Code or any other
penalty or excise tax. No actions, suits or claims
with respect to the assets of the Plans (other than
routine claims for benefits) are pending or, to the
Target's knowledge, threatened which could result in
or subject the Target to any liability and there are
no circumstances which would give rise to or be
expected to give rise to any such actions, suits or
claims.
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viii. A favorable determination letter from the
Internal Revenue Service has been received by the
Target with respect to the Defined Benefit Plan to
the effect that it is qualified under Section 401(a)
of the Code (including requirements imposed by the
Tax Reform Act of 1986 and subsequent legislation),
and, to the Target's knowledge, there are no
circumstances which would cause the Defined Benefit
Plan to lose such qualified status, except for the
enactment of subsequent legislation, under which the
time for the Defined Benefit Plan to adopt responsive
amendments and apply for a favorable determination
letter does not expire prior to December 31, 2000.
ix. The Target has provided the Buyer with (a) the
most recent favorable determination letter issued
with respect to the Defined Benefit Plan, (b) true
and complete copies of all documents pursuant to
which the Plans are maintained and administered,
including the most recent summary plan description
and (c) the two most recent annual reports (Form 5500
and attachments) for the Plans.
x. For purposes of this Section 6S, the term
"Target" includes all organizations under common
control with the Target pursuant to Section 414 of
the Code.
xi. The section of the Target Disclosure Schedule
corresponding to this Section lists all agreements,
contracts, plans and arrangements which would
obligate the Target to pay any separation, severance,
termination or similar benefit, and, except with
respect to vesting and payment of benefits in
connection with the termination of the Defined
Benefit Plan in accordance with this Section 6S, none
of the Plans call for the payment of any benefits or
the vesting of any rights in benefits, solely as a
result of the Merger or solely as a result of a
change in control or ownership within the meaning of
Section 280G of the Code.
t. Compliance with Laws; Permits; Certain
Operations.
i. The Target has complied in all material respects
and is in compliance in all material respects with
all material applicable laws, ordinances, codes,
rules, requirements and regulations of foreign,
federal, state and local governments and all agencies
thereof relating to the operation of its business and
the maintenance and operation of its properties and
assets. No notices have been received by and to the
knowledge of the Target no claims have been filed
against the Target alleging a violation of any such
laws, ordinances, codes, rules, requirements or
regulations.
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ii. The Target holds and is in compliance with all
permits, licenses, bonds, approvals, certificates,
registrations, accreditations and other
authorizations of all foreign, federal, state and
local governmental agencies required for the conduct
of its business and the ownership of its properties
(including as the same relate to International Trade
Laws and Regulations and Environmental and Safety
Requirements), and the Target Disclosure Schedule
corresponding to this Section sets forth a list of
all of such material permits, licenses, bonds,
approvals, certificates, registrations,
accreditations and other authorizations. No notices
have been received by the Target alleging the failure
to hold any of the foregoing. All of such permits,
licenses, bonds, approvals, accreditations,
certificates, registrations and authorizations will
be available for use by the Target, as the case may
be, immediately after the Closing.
iii. To the knowledge of the Target, there are no
proposed or pending laws, statutes, regulations or
the like (or changes thereto) which would have a
Material Adverse Effect.
u. Environmental and Safety Matters.
i. Except as set forth on the attached Target
Disclosure Schedule corresponding to this Section, to
the knowledge of the Target:
(1) The Target has complied with and is in
compliance with all Environmental and Safety
Requirements. The Target has not received any
oral or written notice, report or information
regarding any actual or alleged violation of
Environmental and Safety Requirements or any
liabilities or potential liabilities relating to
it or its facilities arising under Environmental
and Safety Requirements.
(2) Neither this Agreement nor the consummation
of the transactions contemplated hereby will
result in any obligations for site investigation
or cleanup, or notification to or consent of any
government agencies or third parties under any
Environmental and Safety Requirements (including
any so called "transaction-triggered" or
"responsible property transfer" laws and
regulations).
(3) None of the following exists at any property
or facility owned, occupied or operated by the
Target or any of its predecessors:
(1) underground storage tanks;
(2) asbestos-containing material in any form or
condition;
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47
(3) materials or equipment containing
polychlorinated biphenyls; or
(4) landfills, surface impoundments or other
disposal areas.
(4) The Target has not treated, stored, disposed
of, arranged for or permitted the disposal of,
transported, handled or Released any substance
(including any hazardous substance) or owned,
occupied or operated any facility or property
(and no such property or facility is contaminated
by any such substance) in a manner that has given
or could give rise to any liabilities (including
any liability for response costs, corrective
action costs, personal injury, natural resource
damages, property damage or attorneys fees or any
investigative, corrective or remedial
obligations) pursuant to CERCLA or any other
Environmental and Safety Requirements.
(5) The Target has not, either expressly or by
operation of law, assumed or undertaken any
liability or corrective, investigatory or
remedial obligation of any other Person relating
to any Environmental and Safety Requirements.
(6) No Environmental Lien has attached to any
property owned, leased or operated by the Target.
v. Affiliated Transactions. Except as set forth on
the Target Disclosure Schedule corresponding to this
Section, no officer, director, shareholder, employee
or Affiliate of the Target or, to the Target's
knowledge, any individual related by blood, marriage
or adoption to any such individual or any entity in
which any such Person or individual owns any
beneficial interest, is a party to any agreement,
contract, commitment or transaction with the Target
or has any material interest in any material property
used by the Target (including any Intellectual
Property Rights).
w. Customers. The Target has not received any notice
from any material customer of the Target to the
effect that, and the Target has no reason to believe
that, such customer will stop, or materially decrease
the rate of, buying products or services of the
Target (whether as a result of the consummation of
the transactions contemplated hereby or otherwise).
x. Real Property. The Target does not own any real
property. The Target Disclosure Schedule
corresponding to this Section sets forth a list of
all of the leases, subleases and licenses ("Leases")
of real property (the "Leased Real Property") in
which the Target has a leasehold, subleasehold
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48
and licensed interest. The Target holds a valid and
existing leasehold, subleasehold or license interest
under each of the Leases. With respect to each Lease
listed on the attached Target Disclosure Schedule
corresponding to this Section, there are no disputes,
oral agreements, or forbearance programs in effect as
to such Lease and the Target has not assigned,
transferred, conveyed, mortgaged, deeded in trust or
encumbered any interest in the Lease. Except for the
Leased Real Property, there is no real property which
is leased or otherwise used in the Target's business.
y. Disclosure. Neither this Agreement, any of the
exhibits or schedules attached hereto nor any of the
written statements, documents, certificates or other
items prepared and supplied to the Buyer by or on
behalf of the Target with respect to the transactions
contemplated hereby, when taken together as a whole,
contain any untrue statement of a material fact or
omit a material fact necessary to make each statement
contained herein or therein, in light of the
circumstances in which they were made, not
misleading.
Section 7. Representations and Warranties of the Buyer and the
Transitory Subsidiary. The Buyer and the Transitory Subsidiary
represent and warrant to the Target that, subject to the
exceptions set forth in any section of the Buyer Disclosure
Schedule, the following statements are true and correct as of
the date of this Agreement and will be true and correct as of
the Closing Date.
a. Organization, Power and Authority. The Buyer is
duly organized, validly existing and in good standing
under the laws of the State of Delaware. The
Transitory Subsidiary is duly organized, validly
existing and in good standing under the laws of the
State of Illinois. The Buyer and the Transitory
Subsidiary possess all requisite corporate power and
authority necessary to carry out the transactions
contemplated by this Agreement. The Buyer has all
requisite corporate and other power and authority and
all necessary governmental approvals to own, lease
and operate its properties and to carry on its
business as now being conducted, except where the
failure to have such power, authority and
governmental approvals would not have a material
adverse effect on the Buyer and its Subsidiaries
taken as a whole.
b. Authorization; No Breach. The execution,
delivery and performance of this Agreement and all
other agreements contemplated hereby to which the
Buyer and the Transitory Subsidiary are a party have
been duly authorized by both the Buyer and the
Transitory Subsidiary. This Agreement and all other
agreements contemplated hereby to which the Buyer and
the Transitory Subsidiary are a party, when executed
and delivered by the Buyer or the Transitory
Subsidiary, as the case may be, in accordance with
the terms hereof, shall each constitute a valid and
binding obligation of the Buyer and
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49
the Transitory Subsidiary, enforceable in accordance
with its terms. The execution and delivery by the
Buyer and the Transitory Subsidiary of this Agreement
and all other agreements contemplated hereby to which
either the Buyer, or the Transitory Subsidiary are a
party, the purchase of the Target Shares hereunder,
and the fulfillment of and compliance with the
respective terms hereof and thereof by the Buyer and
the Transitory Subsidiary, do not and shall not (i)
conflict with or result in a breach of the terms,
conditions or provisions of, (ii) constitute a
default under (whether with or without the passage of
time, the giving of notice or both), (iii) give any
third party the right to modify, terminate or
accelerate any obligation under, (iv) result in a
violation of or (v) require any authorization,
consent, approval, exemption or other action by or
notice or declaration to, or filing with, any court
or administrative or governmental body or agency
pursuant to, the organizational documents of the
Buyer and the Transitory Subsidiary, or any law,
statute, rule or regulation to which the either party
is subject, or any agreement, instrument, order,
judgment or decree to which either party is subject.
The Buyer Stock to be issued in connection with the
Merger is duly authorized and when issued in
accordance with this Agreement (and upon receipt of
the consideration to be paid for such stock) will be
validly issued, fully paid and nonassessable.
c. Capitalization of the Buyer. The authorized
capital stock of the Buyer consists of 25,000,000
shares of the Buyer Stock and 12,500,000 shares of
preferred stock, par value $0.01 per share (the
"Buyer Preferred Stock"). As of the close of
business on June 1, 1999, (a) 10,817,112 shares of
the Buyer Stock were issued and outstanding and (b)
no shares of the Buyer Preferred Stock were issued
and outstanding. As of the close of business on June
1, 1999, 100,000 shares of the Buyer Stock were held
in treasury. All of the issued and outstanding shares
of the Buyer Stock are duly authorized, validly
issued, fully paid and non-assessable.
d. Capitalization of Transitory Subsidiary. The
capital stock of the Transitory Subsidiary consists
of 1,000 shares of Common Stock, par value $0.01 per
share, of which 100 shares are issued and
outstanding. The Transitory Subsidiary has no other
class of securities authorized, issued or
outstanding. All of the issued and outstanding shares
of capital stock of the Transitory Subsidiary have
been duly authorized and are validly issued, fully
paid and nonassessable. The Buyer holds of record and
owns beneficially all of the outstanding shares of
each class of capital stock of the Transitory
Subsidiary. There are no outstanding options,
warrants, purchase rights, subscription rights,
conversion rights, exchange rights or other contracts
or commitments that could require the Transitory
Subsidiary to issue, sell or otherwise cause to
become outstanding any additional capital stock of
the
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Transitory Subsidiary. There are no outstanding stock
appreciation, phantom stock, profit participation or
similar rights with respect to the Transitory
Subsidiary.
e. SEC Reports. The Buyer has heretofore filed with
the Securities Exchange Commission true and complete
copies of all forms, reports, schedules, statements
and other documents required to be filed by it since
December 31, 1997 under the Securities Act and the
Exchange Act (as such documents have been amended
since the time of their filing, collectively, the
"Buyer SEC Documents"). As of their respective dates
or, if amended, as of the date of the last such
amendment, the Buyer SEC Documents, including,
without limitation, any financial statements and
schedules included therein, complied in all material
respects with the applicable requirements of the
Securities Act and the Exchange Act, as the case may
be, and the applicable rules and regulations of the
Securities Exchange Commission thereunder.
f. Compliance with Laws. The Buyer and its
Subsidiaries have complied with all laws (including
Federal and state securities laws), statutes,
regulations, rules, ordinances and judgments,
decrees, orders, writs and injunctions, of any court
or governmental entity relating to any of the
property owned, leased or used by them, or applicable
to their business, including, but not limited to,
equal employment opportunity, discrimination,
occupational safety and health, environmental,
insurance, regulatory, antitrust laws, ERISA and laws
relating to Taxes, except to the extent that any such
non-compliance would not have a material adverse
effect on the Buyer and its Subsidiaries taken as a
whole.
g. Financing the Deal. The Buyer has the ability to
fully finance the transactions contemplated by this
Agreement out of its cash, liquid short-term
investments and/or available lines of credit.
h. Litigation. The Buyer has not asserted a right to
indemnification against any seller of any business
acquired by it in the past three years, and the Buyer
has not been involved in any litigation or other
proceeding (including any arbitration) with any
seller of any business acquired by it in the past
three years.
i. Brokerage. There are no claims for brokerage
commissions, finders' fees or similar compensation in
connection with the transactions contemplated by this
Agreement based on any arrangement or agreement to
which the Buyer or the Transitory Subsidiary is a
party or to which the Buyer or the Transitory
Subsidiary is subject, except for compensation to and
expenses of EGS Securities, Inc.
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Section 8. Indemnification and Other Agreements.
a. Survival of Covenants and Representations and
Warranties. The covenants and representations and
warranties of the Buyer and the Target in this
Agreement and the schedules and exhibits attached
hereto, or in any closing certificate or the like,
shall survive the Closing (even if the Buyer knew or
had reason to know of any misrepresentation or breach
of warranty at the time of Closing) as follows:
i. the covenants of the Buyer and the Target
contained in this Agreement shall terminate on the
Survival Expiration Date, except that the covenants
of the Buyer specified in this Agreement to be
performed after the Closing (including pursuant to
Sections 1F, 5B, 8 and 11A of this Agreement) shall
continue until the expiration of the applicable
statute of limitations, plus 60 days;
ii. all representations and warranties of the Buyer
(other than those contained in Sections 7E and 7F)
and the Target in this Agreement and the schedules
and exhibits attached hereto or in any closing
certificate or the like delivered by the Buyer or the
Target in connection with this Agreement shall
terminate on the Survival Expiration Date; and
iii. all representations and warranties of the Buyer
contained in Sections 7E and 7F shall survive until
the expiration of the applicable statute of
limitations;
provided that any representation or warranty in respect of which indemnity may
be sought under Section 8B, and the indemnity with respect thereto, shall
survive the time at which it would otherwise terminate pursuant to this Section
8A if notice of the inaccuracy or breach or potential inaccuracy or breach
thereof giving rise to such right or potential right of indemnity shall have
been given to the Party against whom such indemnity may be sought prior to such
time as contemplated by this Section 8.
b. General Indemnification.
i. Indemnification by the Target Stockholders. The
Buyer, the Transitory Subsidiary and their respective
officers, directors, employees, agents,
representatives, successors and permitted assigns
(collectively, the "Buyer Parties") shall be held
harmless and indemnified as contemplated by this
Section 8 by the Target Stockholders against any
loss, liability, demand, claim, action, cause of
action, cost, damage, deficiency, Tax, penalty, fine
or expense, whether or not arising out of third party
claims (including interest, penalties, reasonable
attorneys' fees and expenses and all amounts paid in
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investigation, defense or settlement of any of the
foregoing) (collectively, "Losses"), which any such
Buyer Party may suffer, sustain or become subject to,
as a result of, in connection with, relating or
incidental to or by virtue of: (a) any breach of any
representation or warranty of the Target under this
Agreement or any of the schedules or exhibits
attached hereto, or in any of the agreements,
certificates or other instruments or documents
furnished by the Target pursuant to this Agreement;
(b) any nonfulfillment or breach of any covenant,
agreement or other provision by the Target or the
Target Stockholders under this Agreement or any of
the schedules and exhibits attached hereto or in any
of the agreements, certificates or other instruments
or documents furnished by the Target or the Target
Stockholders pursuant to this Agreement required to
be performed or complied with by the Target or the
Target Stockholders; or (c) any claim by any Person
(other than the Buyer or the Transitory Subsidiary)
with respect to, or arising as a result of, any
Target Transaction (other than the Target Transaction
that is the subject of this Agreement); or (d) any
liability of the Target or the Target Stockholders
(x) for any Taxes of the Target with respect to any
taxable period (or portion thereof) ending on or
prior to the Closing Date (or for any taxable period
beginning before and ending after the Closing Date to
the extent allocable to the portion of such period
beginning before and ending on the Closing Date) to
the extent such Taxes are not reflected in the
reserve for Tax liability (rather than any reserve
for deferred Taxes established to reflect timing
differences between book and Tax income) shown on the
face of the Latest Balance Sheet (rather than in any
notes thereto) and (y) for the unpaid Taxes of any
Person (other than the Target) under Treas. Reg.
Section 1.1502-6 (or any similar provision of state,
local or foreign law), as a transferee or successor,
by contract or otherwise. The indemnification rights
of the Buyer Parties pursuant to this Agreement shall
be limited as specified in Section 8B(ii).
ii. Indemnification Limitations. The rights of the
Buyer Parties to indemnification shall be limited as
follows:
(a) The Buyer Parties shall not be entitled to indemnification
from and against any Losses resulting from, arising out of, relating
to, in the nature of, or caused by the breach of any representation or
warranty of the Target contained in Section 6 until the Buyer Parties
have suffered Losses by reason of all such breaches in excess of a
$250,000 aggregate threshold (the "Threshold"), at which point the
Buyer Parties shall have the right to be indemnified from and against
all such Losses exceeding in the aggregate $175,000 (that is, the Buyer
Parties shall bear a one time aggregate deductible of $175,000).
(b) The right of the Buyer to seek a distribution out of the
Escrow Fund as contemplated by, among other things Section 8B(iii)
below, shall constitute the exclusive
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remedy of the Buyer Parties with respect to any Losses resulting from,
arising out of, relating to, in the nature of, or caused by the breach
of any representation or warranty of the Target contained in Section 6
and the covenants of the Target contained in this Agreement.
(c) The Buyer Parties agree not to (and shall not be entitled
to) bring a claim for indemnification hereunder for any breach or
inaccuracy or nonfulfillment of any covenant of the Target hereunder of
which the Buyer had actual knowledge of on or before the date of this
Agreement. The Target Stockholders Representative shall have the burden
of proof with respect to the actual knowledge of the Buyer.
iii. Special Indemnification Rights. Notwithstanding
among other things Section 8B(ii)(c), the Buyer
Parties shall be entitled to indemnification
hereunder as contemplated by this Section 8 for any
breach or inaccuracy of representation and warranty
contained in Sections 6B(i), 6D(i) and/or 6L(iii)(c)
(x) even if any Buyer Party knew or had reason to
know of any such misrepresentation or breach of
warranty and (y) as though no exceptions to such
representations and warranties were contained in the
Target Disclosure Schedule.
iv. Right to Distributions from Escrow Fund. The
Buyer (on behalf of any of the Buyer Parties) shall
be entitled to receive from the Escrow Fund a
distribution equal to each amount for which any Buyer
Party is entitled to indemnification pursuant to this
Section 8 (which right to indemnification shall be
asserted by the Buyer in accordance with Exhibit F).
v. Indemnification by the Buyer. The Buyer shall,
with respect to the representations, warranties,
covenants and agreements made by the Buyer and the
Transitory Subsidiary, indemnify the stockholders of
the Target and their successors and permitted assigns
(collectively, the "Seller Parties") and hold them
harmless against any Losses which the Seller Parties
may suffer, sustain or become subject to, as a result
of, in connection with, relating or incidental to or
by virtue of: (a) any breach of any representation or
warranty of the Buyer or the Transitory Subsidiary
under this Agreement or any of the schedules or
exhibits attached hereto, or in any of the
agreements, certificates or other instruments or
documents furnished by such Buyer pursuant to this
Agreement; (b) any nonfulfillment or breach of any
covenant, agreement or other provision by the Buyer
or the Transitory Subsidiary under this Agreement or
any of the schedules and exhibits attached hereto; or
(c) any events or circumstances which arise or occur
after the Closing Date.
vi. Nature of Certain Indemnification Obligations.
The covenants and agreements made by the
stockholders of the Target under this Agreement and
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the agreements contemplated hereby shall be several
obligations of the stockholders of the Target.
vii. Defense of Third Party Claims. Any Person making
a claim for indemnification under this Section 8B (an
"Indemnitee") shall notify the indemnifying party (an
"Indemnitor") of the claim in writing promptly after
receiving written notice of any action, lawsuit,
proceeding, investigation or other claim against it
(if by a third party), describing the claim, the
amount thereof (if known and quantifiable) and the
basis thereof; provided that the failure to so notify
an Indemnitor shall not relieve the Indemnitor of its
obligations hereunder except to the extent that (and
only to the extent that) such failure shall have
caused the damages for which the Indemnitor is
obligated to be greater than such damages and
expenses related thereto would have been had the
Indemnitee given the Indemnitor prompt notice
hereunder. Any Indemnitor shall be entitled to
participate in the defense of such action, lawsuit,
proceeding, investigation or other claim giving rise
to an Indemnitee's claim for indemnification at such
Indemnitor's expense, and at its option (subject to
the limitations set forth below) shall be entitled to
assume the defense thereof by appointing a reputable
counsel reasonably acceptable to the Indemnitee to be
the lead counsel in connection with such defense;
provided that, prior to the Indemnitor assuming
control of such defense it shall first (a) verify to
the Indemnitee in writing that such Indemnitor shall
be fully responsible for all liabilities and
obligations relating to such claim for
indemnification and that it shall provide full
indemnification (whether or not otherwise required
hereunder) to the Indemnitee with respect to such
action, lawsuit, proceeding, investigation or other
claim giving rise to such claim for indemnification
hereunder and (b) enter into an agreement with the
Indemnitee in form and substance reasonably
satisfactory to the Indemnitee which agreement
unconditionally guarantees the payment and
performance of any liability or obligation which may
arise with respect to such action, lawsuit,
proceeding, investigation or facts giving rise to
such claim for indemnification hereunder; provided
further that if the Indemnitor has assumed the
defense thereof, the fees and expenses of counsel to
the Buyer Parties related thereto and incurred after
the Indemnitor undertakes the defense thereof, shall
not be deemed to be Losses of the Buyer Parties with
respect to such action, lawsuit, proceeding,
investigation or other claim; and provided further,
that:
(1) the Indemnitee shall be entitled to participate
in the defense of such claim and to employ counsel of its
choice for such purpose; provided that the fees and expenses
of such separate counsel shall be borne by the Indemnitee
(other than any fees and expenses of such separate counsel
that are incurred prior to the date the
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Indemnitor effectively assumes control of such defense which,
notwithstanding the foregoing, shall be borne by the
Indemnitor);
(2) the Indemnitor shall not be entitled to assume
control of such defense and shall pay the fees and expenses of
counsel retained by the Indemnitee if (A) the claim for
indemnification relates to or arises in connection with any
criminal proceeding, action, indictment, allegation or
investigation; (B) the Indemnitee reasonably believes an
adverse determination with respect to the action, lawsuit,
investigation, proceeding or other claim giving rise to such
claim for indemnification would be materially detrimental to
or injure the Indemnitee's reputation or future business
prospects; or (C) the claim seeks an injunction or equitable
relief against the Indemnitee; (D) the Indemnitee has been
advised in writing by counsel that a reasonable likelihood
exists of a conflict of interest between the Indemnitor and
the Indemnitee (which conflict is not waivable); or (E) upon
petition by the Indemnitee, the appropriate court rules that
the Indemnitor failed or is failing to vigorously prosecute or
defend such claim or (F) if the claim for indemnification
related thereto exceeds or is expected to exceed in the
reasonable judgment of the Indemnitee the amount of the Escrow
Account less the amount of all other then pending indemnity
claims against the Escrow Account (not taking into account
whether such amounts are in dispute); and
(3) if the Indemnitor shall control the defense of
any such claim, the Indemnitor shall obtain the prior written
consent (which consent shall not be unreasonably withheld or
delayed) of the Indemnitee before entering into any settlement
of a claim or ceasing to defend such claim if, pursuant to or
as a result of such settlement or cessation, injunctive or
other equitable relief will be imposed against the Indemnitee
or if such settlement does not expressly and unconditionally
release the Indemnitee from all liabilities and obligations
with respect to such claim, without prejudice, or if such
claim relates to Taxes (in which case consent shall not be
unreasonably withheld).
viii. Certain Waivers and Consents. No stockholder
of the Target shall be entitled to make any claim for
indemnification hereunder against the Target by
reason of the fact that such stockholder is or was a
shareholder, director, officer, employee or agent of
the Target or is or was serving at the request of the
Target as a partner, trustee, director, officer,
employee or agent of another entity (whether such
claim is for judgments, damages, penalties, fines,
costs, amounts paid in settlement, losses, expenses
or otherwise) with respect to any action, suit,
proceeding, complaint, claim or demand brought by any
of the Buyer Parties against such stockholder
pursuant to this Agreement and no such stockholder
shall have any claims or right to contribution or
indemnity from the Target with respect to any amounts
paid pursuant to this Section 8B.
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Section 9. Definitions. For the purposes of this Agreement, the
following terms have the meanings set forth below:
"Affiliate" of any particular Person means any other Person
controlling, controlled by or under common control with such particular Person,
where "control" means the possession, directly or indirectly, of the power to
direct the management and policies of a Person whether through the ownership of
voting securities, contract or otherwise.
"Affiliated Group" means any affiliated group as defined in
Code ss.1504 that has filed a consolidated return for federal income tax
purposes (or any similar group under state, local or foreign law) for a period
during which the Target was a member.
"Agreement" has the meaning set forth in the Preamble.
"BCA" has the meaning set forth in Section 1A.
"Buyer" has the meaning set forth in the Preamble.
"Buyer Disclosure Schedule" means the schedule entitled "Buyer
Disclosure Schedule" heretofore delivered by the Target and initialed by the
Parties for identification, which schedule is arranged in sections corresponding
to the numbered and lettered subsections contained in Section 7.
"Buyer Parties" has the meaning set forth in Section 8B(i).
"Buyer Preferred Stock" has the meaning set forth in Section
7E.
"Buyer SEC Documents" has the meaning set forth in Section 7C.
"Buyer Stock" means shares of common stock, par value $0.01
per share, of the Buyer, together with the associated preferred stock purchase
rights, as appropriate.
"Ceiling" has the meaning set forth in Section 8B(ii).
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended.
"Class A Stock" means the Class A Common Stock, par value
$0.01 per share, of the Target.
"Class B Stock" means the Class B Common Stock, par value
$0.01 per share, of the Target.
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"Class B Stock" has the meaning set forth in Section 6B(i).
"Closing" has the meaning set forth in Section 1B.
"Closing Date" has the meaning set forth in Section 1B.
"Closing Stock Consideration" means 1,636,363 shares of Buyer
Stock, less any reduction pursuant to Section 4F(i).
"COBRA" has the meaning set forth in Section 6S(ii).
"Code" means the Internal Revenue Code of 1986, as amended,
and any reference to any particular Code section shall be interpreted to include
any revision of or successor to that section regardless of how numbered or
classified.
"Confidential Information" means all information of a
confidential or proprietary nature (whether or not specifically labeled or
identified as "confidential"), in any form or medium, that is or was disclosed
to, or developed or learned by, any stockholder of the Target and that relates
to the business, products, services or research or development of the Target or
their respective suppliers, distributors or customers. Confidential Information
includes, but is not limited to, the following: internal business information
(including information relating to strategic and staffing plans and practices,
business, training, marketing, promotional and sales plans and practices, cost,
rate and pricing structures and accounting and business methods); identities of,
individual requirements of, specific contractual arrangements with, and
information about, the Target's suppliers, distributors and customers and their
confidential information; trade secrets, know-how, compilations of data and
analyses, techniques, systems, formulae, research, records, reports, manuals,
documentation, models, data and data bases relating thereto; inventions,
innovations, improvements, developments, methods, designs, analyses, drawings,
reports and all similar or related information (whether or not patentable) and
(v) other Intellectual Property Rights. Confidential Information shall not
include information that a stockholder of the Target can demonstrate is publicly
known through no wrongful act or breach of any obligation of confidentiality or
was rightfully received by such stockholder from a third party without a breach
of any obligation of confidentiality by such third party.
"Consent" has the meaning set forth in Section 2M.
"Defined Benefit Plan" has the meaning set forth in Section
5C.
"Dispute Notice" has the meaning set forth in Section
8B(iv)(b).
"Dissenting Share" means any Target Share the appraisal of the
fair market value of which under the BCA has been properly demanded in
accordance with the BCA and with respect to which the right to such an appraisal
under such Section has not terminated (whether on account of
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a vote by the holder thereof in favor of, or a written consent by the holder
thereof to, the Merger, a waiver or withdrawal of such demand or otherwise).
"Dissenting Stockholder" means the holder of a Dissenting
Share.
"Effective Time" has the meaning set forth in Section 1C.
"Environmental Lien" shall mean any Lien, whether recorded or
unrecorded, in favor of any governmental entity, relating to any liability of
the Target arising under any Environmental and Safety Requirements.
"Environmental and Safety Requirements" shall mean all
federal, state, local and foreign statutes, regulations, ordinances and other
provisions having the force or effect of law, all judicial and administrative
orders and determinations, all contractual obligations and all common law, in
each case concerning public health and safety, worker health and safety and
pollution or protection of the environment (including, without limitation, all
those relating to the presence, use, production, generation, handling,
transport, treatment, storage, disposal, distribution, labeling, testing,
processing, discharge, Release, threatened Release, control or cleanup of any
hazardous or otherwise regulated materials, substances or wastes, chemical
substances or mixtures, pesticides, pollutants, contaminants, toxic chemicals,
petroleum products or byproducts, asbestos, polychlorinated biphenyls, noise,
radiation or radon), each as amended and as now or hereafter in effect.
"ERISA" has the meaning set forth in Section 5C.
"Escrow Agent" has the meaning set forth in Section 1F.
"Escrow Agreement" means an Escrow Agreement substantially in
the form of Exhibit E attached hereto.
"Escrow Fund" means all assets from time to time held pursuant
to the Escrow Agreement.
"Escrow Stock Consideration" means a number of shares of Buyer
Stock equal to (i) the number of shares of Buyer Stock which comprise the
Closing Stock Consideration multiplied by (ii) 0.10, rounded down to the nearest
whole number of shares.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"GAAP" means United States generally accepted accounting
principles.
"Government Approvals" has the meaning set forth in Section
2I.
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"Xxxx-Xxxxx-Xxxxxx Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended from time to time.
"Indebtedness" means at a particular time, without
duplication, (i) any indebtedness for borrowed money or issued in substitution
for or exchange of indebtedness for borrowed money, (ii) any indebtedness
evidenced by any note, bond, debenture or other debt security, (iii) any
indebtedness for the deferred purchase price of property or services with
respect to which a Person is liable, contingently or otherwise, as obligor or
otherwise (other than trade payables and other current liabilities incurred in
the ordinary course of business which are not more than six months past due),
(iv) any commitment by which a Person assures a creditor against loss (including
contingent reimbursement obligations with respect to letters of credit), (v) any
indebtedness guaranteed in any manner by a Person (including guarantees in the
form of an agreement to repurchase or reimburse), (vi) any obligations under
capitalized leases with respect to which a Person is liable, contingently or
otherwise, as obligor, guarantor or otherwise, or with respect to which
obligations a Person assures a creditor against loss, (vii) any indebtedness
secured by a Lien on a Person's assets and (viii) any unsatisfied obligation for
"withdrawal liability" to a "multiemployer plan" as such terms are defined under
ERISA; provided that Indebtedness shall not include accrued but unpaid employee
compensation or any obligations to reimburse employees for travel and related
business expenses.
"Indemnitee" has the meaning set forth in Section 8B(vii).
"Indemnitor" has the meaning set forth in Section 8B(vii).
"Institute" has the meaning set forth in Section 11A.
"Intellectual Property Rights" means all (i) patents, patent
applications, patent disclosures and inventions, (ii) internet domain names,
trademarks, service marks, trade dress, trade names, logos and corporate names
and registrations and applications for registration thereof together with all of
the goodwill associated therewith, (iii) copyrights (registered or unregistered)
and copyrightable works and registrations and applications for registration
thereof, (iv) mask works and registrations and applications for registration
thereof, (v) computer software, data, data bases and documentation thereof, (vi)
trade secrets and other confidential information (including ideas, formulas,
compositions, inventions (whether patentable or unpatentable and whether or not
reduced to practice), know-how, manufacturing and production processes and
techniques, research and development information, drawings, specifications,
designs, plans, proposals, technical data, copyrightable works, financial and
marketing plans and customer, client and supplier lists and information, costs
and pricing structures, manufacturing techniques, accounting and business
methods and practices and similar and related Confidential Information and trade
secrets), (vii) other intellectual property rights and (viii) copies and
tangible embodiments thereof (in whatever form or medium); provided that
Intellectual Property shall not include any third party off-the-shelf software.
"Inventions Agreement" has the meaning set forth in Section
6R(i).
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"Investment" as applied to any Person means (i) any direct or
indirect purchase or other acquisition by such Person of any notes, obligations,
instruments, stock, securities or ownership interests (including partnership
interests and joint venture interests) of any other Person and (ii) any capital
contribution by such Person to any other Person.
"Latest Actuarial Valuation" has the meaning set forth in
Section 6S(vi).
"Latest Balance Sheet" has the meaning set forth in Section
6E(ii).
"Leases" has the meaning set forth in Section 6X.
"Leased Real Property" has the meaning set forth in Section
6X.
"Lien" or "Liens" means any mortgage, pledge, security
interest, encumbrance, lien or charge of any kind (including any conditional
sale or other title retention agreement or lease in the nature thereof), any
sale of receivables with recourse against the Target, any filing or agreement to
file a financing statement as debtor under the Uniform Commercial Code or any
similar statute (other than to reflect ownership by a third party of property
leased to the Target under a lease which is not in the nature of a conditional
sale or title retention agreement), or any subordination arrangement in favor of
another Person.
"Loss" or "Losses" has the meaning set forth in Section 8B(i).
"Material Adverse Effect" means a material and adverse change
or development in the business, financial condition, operating results, assets,
operations, cash flow or net worth of the Target.
"Merger" has the meaning set forth in Section 1A.
"Merger Consideration" means the Closing Stock Consideration
and the Escrow Stock Consideration.
"Non-Compete Persons" has the meaning set forth in Section
5A(i).
"Other Plans" has the meaning set forth in Section 6S(v).
"Party" or "Parties" has the meaning set forth in the
Preamble.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted Encumbrances" shall mean (i) statutory liens for
current Taxes or other governmental charges not yet due and payable or the
amount or validity of which is being contested in good faith by appropriate
proceedings by the Target and for which appropriate reserves have been
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established in accordance with GAAP; (ii) mechanics', carriers', workers',
repairers' and similar statutory liens arising or incurred in the ordinary
course of business for amounts which are not delinquent and which are not,
individually or in the aggregate, material to the Target's business; (iii)
zoning, entitlement, building and other land use regulations imposed by
governmental agencies having jurisdiction over the Leased Real Property which
are not violated by the current use and operation of the Leased Real Property;
and (iv) covenants, conditions, restrictions, easements and other similar
matters of record affecting title to the Leased Real Property which do not
materially impair the occupancy or use of the Leased Real Property for the
purposes for which it is currently used in connection with the Target's
business.
"Person" means an individual, a partnership, a corporation, a
limited liability target, an association, a joint stock target, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Plan of Merger" has the meaning set forth in Section 1C.
"Plans" has the meaning set forth in Section 6S(vi).
"Release" shall have the meaning set forth in CERCLA.
"Requisite Stockholder Approval" means the affirmative vote in
favor of the Plan of Merger and adoption of this Agreement of the following: (i)
the holders of greater than 66.66 percent of the Class A Stock; (ii) the holders
of greater than 66.66 percent of the Class B Stock; and (iii) the holders of
greater than 66.66 percent of the Class A Stock and the Class B Stock voting
together as a single class.
"Restrictive Covenants" has the meaning set forth in Section
5A(iii).
"Section 338(h)(10) Election" has the meaning set forth in
Section 5B(iii).
"Securities Act" means the Securities Act of 1933, as amended.
"Seller Parties" has the meaning set forth in 8B(v).
"Special Target Meeting" has the meaning set forth in Section
4E.
"Subsidiary" means, with respect to any Person, any
corporation, limited liability Target, partnership, association or other
business entity of which (i) if a corporation, a majority of the total voting
power of shares of stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by that Person or
one or more of the other Subsidiaries of that Person or a combination thereof,
or (ii) if a limited liability Target, partnership, association or other
business entity, a majority of the partnership or other similar ownership
interest thereof is at the time
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owned or controlled, directly or indirectly, by that Person or one or more
Subsidiaries of that Person or a combination thereof. For purposes hereof, a
Person or Persons shall be deemed to have a majority ownership interest in a
limited liability Target, partnership, association or other business entity if
such Person or Persons shall be allocated a majority of limited liability
Target, partnership, association or other business entity gains or losses or
shall be or control any managing director or general partner of such limited
liability Target, partnership, association or other business entity.
"Survival Expiration Date" means the earlier of (i) the one
year anniversary of the Closing Date or (ii) the date of issuance of the first
independent audit report on the combined company (that is, the Target and the
Buyer together) following the consummation of the Merger.
"Surviving Corporation" has the meaning set forth in Section
1A.
"Target" has the meaning set forth in Section 6S(x).
"Target Disclosure Schedule" means the schedule entitled
"Target Disclosure Schedule" heretofore delivered by the Target and initialed by
the Parties for identification, which schedule is arranged in sections
corresponding to the lettered and numbered subsections contained in Section 6.
"Target Shares" means any share of Class A Stock and any share
of Class B Stock of the Target outstanding immediately prior to the Effective
Time.
"Target Stockholder" means any Person who or which holds any
Target Share immediately prior to the Effective Time.
"Target Stockholders Representative" initially means Xxxxxx X.
Xxxxxx. In the event that Xxxxxx X. Xxxxxx ceases to serve as the Target
Stockholders Representative for any reason, Xxxx Xxxx, Xxxxx Xxxxxxxx and
Xxxxxxx Xxxxxxxx shall then replace such individual in such capacity, who shall
serve together in such capacity and while serving together shall act upon the
written direction of a majority of such individuals. The Target Stockholders
shall promptly elect an individual to serve as Target Stockholders
Representative if and after the above succession rules are exhausted. The
individual serving as the Target Stockholders Representative shall not be
entitled to any remuneration. Upon any change in or succession pursuant to the
foregoing, the then acting or successor Target Stockholders Representative shall
immediately notify the Buyer of such change or succession (including the name of
the individual then serving as the Target Stockholders Representative). The
Target Stockholders Representative is authorized to act as contemplated by this
Agreement and the exhibits hereto. In acting or refraining from acting
(including without limitation in determining whether to dispute any claim or
other matter, in determining what further action, if any, to take with respect
to a disputed claim or other matter and in determining what actions to take or
not take in connection with any arbitration or other dispute), the Target
Stockholders Representative shall have complete discretion provided the Target
Stockholders Representative acts in good faith. Without limiting the generality
of the foregoing, the Target
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Stockholders Representative may, in good faith employ accountants, attorneys and
other representatives or advisors, and undertake the dispute, defense or
settlement of any claim or other matter.
"Target Transaction" has the meaning set forth in Section 4K.
"Tax Return" means any return, information report or filing
with respect to Taxes, including any schedules attached thereto and including
any amendment thereof.
"Tax" or "Taxes" means federal, state, county, local, foreign
or other income, gross receipts, ad valorem, franchise, profits, sales or use,
transfer, registration, excise, utility, environmental, communications, real or
personal property, capital stock, license, payroll, wage or other withholding,
employment, social security, severance, stamp, occupation, alternative or add-on
minimum, estimated and other taxes of any kind whatsoever (including
deficiencies, penalties, additions to tax, and interest attributable thereto)
whether disputed or not.
"Third Party Approvals" has the meaning set forth in Section
2H.
"Threshold" has the meaning set forth in Section 8B(ii)(x).
"Transitory Subsidiary" has the meaning set forth in the
Preamble.
Section 10. Termination.
a. Conditions of Termination. This Agreement
may be terminated at any time prior to the Closing:
i. by the mutual written consent of the Parties;
ii. by the Buyer by written notice to the Target
given on or prior to 5:00 p.m. on the seventh
business day after the date of this Agreement if the
Buyer determines that it is not satisfied with the
results of its due diligence with respect to the
accounts receivable of the Target and the rights and
contingent rights to receive payment for services
rendered by the Target.
iii. by the Buyer if there shall be any proposed
or pending laws, statutes, regulations or the like
(or changes thereto), or if any of such shall have
been enacted or otherwise become effective, which
would have a Material Adverse Effect;
iv. by the Buyer if there has been a material
misrepresentation, material breach of warranty or
material breach of a covenant by the Target in the
representations and warranties or covenants set forth
in this Agreement or the
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schedules and exhibits attached hereto, which in the
case of any breach of covenant has not been cured
within ten business days after written notification
thereof by the Buyer to the Target;
v. by the Target if there has been a material
misrepresentation, material breach of warranty or
material breach of covenant by the Buyer or the
Transitory Subsidiary in the representations and
warranties or covenants set forth in this Agreement
or the schedules and exhibits attached hereto, which
in the case of any breach of covenant has not been
cured within ten days after written notification
thereof by the Target to the Buyer; or
vi. by the Buyer or the Seller if the
transactions contemplated hereby have not been
consummated by June 30, 1999;
provided that the Party electing termination pursuant to clause (vi) of this
Section 10A is not in breach of any of its representations, warranties,
covenants or agreements contained in this Agreement or the schedules and
exhibits attached hereto and has acted in good faith to consummate the
transactions contemplated by this Agreement within the contemplated time
periods.
b. Effect of Termination. In the event of
termination of this Agreement as provided above, this
Agreement shall forthwith become void and of no
further force and effect, except that the covenants
and agreements set forth in Sections 10A, 00X, 00X,
00X, 00X, 00X, 00X, 00X, 11I, 11J, 11M, 11N and 11O
shall survive such termination indefinitely, and
except that nothing in Section 10A or this Section
10B shall be deemed to release any Party from any
liability for any breach by such Party of the terms
and provisions of this Agreement or to impair the
right of any Party to compel specific performance by
another Party of its obligations under this
Agreement.
Section 11. Miscellaneous.
a. Dispute Resolution.
i. To the extent feasible, the Parties and the
Non-Compete Persons desire to resolve any
controversies or claims or issues arising out of or
relating to this Agreement through discussions and
negotiations between each other. Such parties agree
to use their reasonable best efforts to attempt to
resolve any disputes, controversies, claims or issues
arising out of or relating to this Agreement by
face-to-face negotiations with each other.
ii. In the event that, after good faith discussions, such
controversies, claims or issues cannot be resolved
solely between such parties, then such parties shall,
within 10 days after any of such parties thereto
gives notice to
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the other parties, jointly submit their dispute to
nonbinding mediation in the City of Chicago,
Illinois. Such nonbinding mediation shall be
administered by a reputable mediator mutually agreed
upon by such parties.
iii. In the event of any dispute, controversy,
claim or issue relating to this Agreement having been
submitted to nonbinding mediation and the said
dispute, controversy, claim or issue is not resolved
following nonbinding mediation, or such longer period
as agreed between the parties, then the dispute
(other than any dispute relating to any claim arising
out of the ownership of Buyer Stock) shall be
referred to binding arbitration in the City of
Chicago, Illinois. Such arbitration process shall be
administered by the American Arbitration Association
(the "Institute") in accordance with its then -
prevailing rules for arbitration of business disputes
(except as otherwise provided by this Agreement), by
three independent and impartial arbitrators, one of
whom shall be appointed by the Buyer, one of whom
shall be appointed by the Target Stockholders
Representative (or as appropriate, the respective
Non-Compete Person) and one of whom shall be
appointed by the Institute (collectively, the
"Arbitrator"). Notwithstanding anything to the
contrary provided in Section 11 of this Agreement,
the arbitration shall be governed by the United
States Arbitration Act, 9 U.S.C. Section 1 et. seq.
The Arbitrator shall permit and facilitate such
discovery as it shall determine appropriate in the
circumstances, taking into account the needs of a
reputable mediator as mutually agreed by the parties
thereto and the desirability of making discovery
expeditious and cost effective. The Arbitrator may
issue such interim orders in accordance with
principles of equity as may be necessary to protect
any party from irreparable harm during the pendency
of any arbitration, including entry of a preliminary
injunction. Any such order shall be without prejudice
to the final determination of the controversy. Each
party hereby agrees that such arbitration shall be
completed and a final arbitration decision rendered
within 60 days of the submission of the respective
dispute to arbitration, and each of such parties
shall take all actions appropriate and necessary to
cause such arbitration to be so completed within such
60 day period. The Arbitrator shall not be empowered
to award any party any punitive damages in connection
therewith, and each party hereby irrevocably waives
any right to recover such punitive damages. The
determination of the Arbitrator as to a dispute shall
be final and binding for all purposes of this
Agreement.
iv. Each party to any such mediation or
arbitration shall use its best efforts and utmost
diligence to safeguard and to protect against
disclosure, misuse, espionage, loss and theft and
shall keep and maintain in strict confidence and
shall not disclose to any third party any information
that may be disclosed to it in connection with such
mediation or arbitration
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proceeding, other than to its employees and agents
who require access to such information to perform
their duties and other than is required or
appropriate to disclose pursuant to applicable law
(including pursuant to securities laws and any
reporting requirements thereunder) or court order or
in any mediation or arbitration contemplated by this
Agreement; one Arbitrator shall to the extent
permitted by the rules and regulations of the
Institute and also any mediator shall be likewise
bound by this confidentiality provision and neither
shall make public its opinion or findings in
connection with the relevant proceeding.
v. The fees and expenses of the mediator and/or
the Arbitrator shall be equally shared by the parties
and each of the parties shall bear its own costs and
expenses in connection with process; provided that if
the right of a party or parties to indemnification
for any particular matter is upheld or sustained in
such mediation or arbitration, the other party or
parties to such mediation or arbitration shall bear
all of the fees and expenses of the mediator or the
Arbitrator, all of their own costs and expenses and
the reasonable costs and expenses (including
reasonable attorneys' fees and expenses) of the party
or parties whose claim to indemnity is so upheld or
sustained.
vi. The Target Stockholders Representative shall
be deemed for purposes of this Section to be a Party
and shall represent the Target Stockholders in any
proceeding or dispute contemplated by this Section.
b. Fees and Expenses. Each Party shall pay all
of its own fees and expenses (including fees and
expenses of legal counsel, accountants, investment
bankers and other representatives and consultants) in
connection with this Agreement and the consummation
of the transactions contemplated hereby. The
foregoing notwithstanding, the Target shall not pay
any fees or expenses in connection with the
transactions contemplated by this Agreement (it being
understood that any fees or expenses associated with
the Target's review, execution or delivery of this
Agreement, or the Target's performance of its
obligations under this Agreement prior to the
Closing, shall be borne by the Buyer). If any legal
action or other proceeding relating to this
Agreement, the agreements contemplated hereby, the
transactions contemplated hereby or thereby or the
enforcement of any provision of this Agreement or the
agreements contemplated hereby is brought against any
Party, the prevailing Party in such action or
proceeding shall be entitled to recover all
reasonable expenses relating thereto (including
attorneys' fees and expenses) from the Party against
which such action or proceeding is brought in
addition to any other relief to which such prevailing
Party may be entitled.
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c. Remedies. The Buyer shall have all rights
and remedies set forth in this Agreement and all
rights and remedies which the Buyer has been granted
at any time under any other agreement or contract
executed in connection with the transactions
contemplated hereby and, with respect to any
additional rights the Buyer may have against the
Target and the Target Stockholders, all of the rights
which the Buyer would have under applicable law. Each
of the Parties acknowledges and agrees that the other
Parties would be damaged irreparably in the event any
of the provisions of this Agreement are not performed
in accordance with their specific terms or otherwise
are breached. Accordingly, each of the Parties agrees
that the other Parties shall be entitled to an
injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce
specifically this Agreement and the terms and
provisions hereof in any action instituted in any
court of the United States or any state thereof
having jurisdiction over the Parties and the matter.
d. Consent to Amendments. This Agreement may be
amended, or any provision of this Agreement may be
waived; provided that any such amendment or waiver
shall be binding upon the Target only if set forth in
a writing executed by the Target and referring
specifically to the provision alleged to have been
amended or waived, and any such amendment or waiver
shall be binding upon the Buyer only if set forth in
a writing executed by the Buyer and referring
specifically to the provision alleged to have been
amended or waived. No course of dealing between or
among the Parties shall be deemed effective to
modify, amend or discharge any part of this Agreement
or any rights or obligations of any Party under or by
reason of this Agreement.
e. Successors and Assigns.
i. This Agreement and all covenants and
agreements contained herein and rights, interests or
obligations hereunder, by or on behalf of any of the
Parties hereto, shall bind and inure to the benefit
of the respective successors and permitted assigns of
the Parties hereto whether so expressed or not,
except that neither this Agreement nor any of the
covenants and agreements herein or rights, interests
or obligations hereunder may be assigned or delegated
by the Target prior to the Closing, without the prior
written consent of the Buyer; provided that the
obligation of the Buyer shall be assigned at Closing
to a trust with respect to the Target Bonus Plan.
The Buyer may (at any time prior to the Closing), in its sole
discretion, assign in whole or in part its rights and obligations pursuant to
this Agreement; provided that the Buyer shall remain primarily liable for its
obligations under this Agreement following any such assignment. In connection
with any such assignment, the Buyer shall cause the prospective assignee to
execute and
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deliver to the Parties a counterpart to this Agreement and an acknowledgment by
such Person agreeing to be bound by all terms and provisions hereof as a "Buyer"
hereunder. The Buyer may assign this Agreement and its rights and obligations
hereunder in connection with a merger or consolidation involving the Buyer or in
connection with a sale of stock or assets of the Buyer or other disposition of
the Buyer.
f. Severability. Whenever possible, each
provision of this Agreement shall be interpreted in
such manner as to be effective and valid under
applicable law, but if any provision of this
Agreement or the application of any such provision to
any Person or circumstance shall be held to be
prohibited by, illegal or unenforceable under
applicable law in any respect by a court of competent
jurisdiction, such provision shall be ineffective
only to the extent of such prohibition or illegality
or unenforceability, without invalidating the
remainder of such provision or the remaining
provisions of this Agreement.
g. Counterparts. This Agreement may be executed
simultaneously in counterparts (including by means of
telecopied signature pages), any one of which need
not contain the signatures of more than one Party,
but all such counterparts taken together shall
constitute one and the same Agreement.
h. Descriptive Headings; Interpretation. The
headings and captions used in this Agreement and the
table of contents to this Agreement are for reference
purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Any
capitalized terms used in any schedule or exhibit
attached hereto and not otherwise defined therein
shall have the meanings set forth in this Agreement.
The use of the word "including" herein
shall mean "including without limitation." The
Parties intend that each representation, warranty and
covenant contained herein shall have independent
significance. If any Party has breached any
representation, warranty or covenant contained herein
in any respect, the fact that there exists another
representation, warranty or covenant relating to the
same subject matter (regardless of the relative
levels of specificity) which the Party has not
breached shall not detract from or mitigate the fact
that the Party is in breach of the first
representation, warranty or covenant.
i. Entire Agreement. This Agreement and the
agreements and documents referred to herein contain
the entire agreement and understanding between the
Parties with respect to the subject matter hereof and
supersede all prior agreements and understandings,
whether written or oral, relating to such subject
matter in any way.
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j. No Third-Party Beneficiaries. This Agreement
is for the sole benefit of the Parties and their
permitted successors and assigns and nothing herein
expressed or implied shall give or be construed to
give any Person, other than the Parties and such
permitted successors and assigns, any legal or
equitable rights hereunder.
k. Schedules. Nothing in any schedule attached
hereto shall be adequate to disclose an exception to
a representation or warranty made in this Agreement
unless such schedule identifies the exception with
reasonable particularity. Without limiting the
generality of the foregoing, the mere listing (or
inclusion of a copy) of a document or other item
shall not be adequate to disclose an exception to a
representation or warranty made in this Agreement,
unless the representation or warranty has to do with
the existence of the document or other item itself.
l. Schedules and Exhibits. All schedules and
exhibits attached hereto or referred to herein are
hereby incorporated in and made a part of this
Agreement as if set forth in full herein.
m. Governing Law. The corporate law of the
State of Illinois shall govern all issues and
questions concerning the relative rights and
obligations of the Target and the holders of its
equity securities. All other issues and questions
concerning the construction, validity, enforcement
and interpretation of this Agreement and the
schedules and exhibits hereto shall be governed by,
and construed in accordance with, the laws of the
State of Illinois without giving effect to any choice
of law or conflict of law rules or provisions
(whether of the State of Illinois or any other
jurisdiction) that would cause the application of the
laws of any jurisdiction other than the
State of Illinois. In furtherance of the foregoing,
the internal law of the State of Illinois shall
control the interpretation and construction of this
Agreement (and all schedules and exhibits hereto),
even though under that jurisdiction's choice of law
or conflict of law analysis, the substantive law of
some other jurisdiction would ordinarily apply.
n. Notices. All notices, demands or other
communications to be given or delivered under or by
reason of the provisions of this Agreement shall be
in writing and shall be deemed to have been given
when delivered personally to the recipient, one day
after being sent to the recipient by reputable
overnight courier service (charges prepaid), upon
machine-generated acknowledgment of receipt after
transmittal by facsimile or five days after being
mailed to the recipient by certified or registered
mail, return receipt requested and postage prepaid.
Such notices, demands and other communications shall
be sent to the Buyer and the Target at the addresses
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indicated below or to such other address or to the
attention of such other person as the recipient party
has specified by prior written notice to the sending
party.
The Target
----------
Strategic Reimbursement Services, Inc.
0000 X. Xxxxxxxxx Xxxx
Xxxxx 000
Xxxxxxx Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxx, President
Phone: (000) 000-0000
Facsimile: (000) 000-0000
with copies to:
(which shall not constitute notice to the Target)
Xxxxxxxxxxxx Xxxx & Xxxxxxxxx
8000 Sears Tower
000 Xxxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxx
Phone: (000) 000-0000
Facsimile: (000) 000-0000
The Buyer:
----------
Sabratek Corporation
0000 Xxxxx Xx. Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Attn: Chief Financial Officer
Phone: (000) 000-0000
Facsimile: (000) 000-0000
with copy to:
(which shall not constitute notice to the Buyer)
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Xxxxxxxx & Xxxxx
000 Xxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxx
Phone: (000) 000-0000
Facsimile: (000) 000-0000
o. No Strict Construction. The Parties have
participated jointly in the negotiation and drafting
of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by
the Parties, and no presumption or burden of proof
shall arise favoring or disfavoring any Party by
virtue of the authorship of any of the provisions of
this Agreement.
* * * * *
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement of Merger on the date first written above.
STRATEGIC REIMBURSEMENT SERVICES, INC.
By: /s/ Xxxxxx X. Xxxxxx
-------------------------------------
Its: President
------------------------------------
SABRATEK CORPORATION
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------------
Its: President
------------------------------------
SBTK I ACQUISITION CORPORATION
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------------
Its: President
------------------------------------
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SIGNATURE PAGE OF TARGET STOCKHOLDERS
TO AGREEMENT OF MERGER
THE UNDERSIGNED HAS RECEIVED AND REVIEWED A COPY OF THE
AGREEMENT OF MERGER AND UNDERSTANDS THE TERMS AND CONDITIONS
THEREOF. DEFINED TERMS USED HEREIN SHALL HAVE THE MEANINGS ASCRIBED
THERETO IN THE AGREEMENT OF MERGER.
EACH OF THE UNDERSIGNED REPRESENTS AND WARRANTS TO THE BUYER THAT (i)
THE NUMBER AND TYPE OF TARGET SHARES SET FORTH ON THE TARGET DISCLOSURE SCHEDULE
CORRESPONDING TO SECTION 6B OF THE AGREEMENT OF MERGER ACROSS FROM THE NAME OF
THE RESPECTIVE UNDESIGNED IS TRUE AND CORRECT IN ALL RESPECTS, (ii) THE TARGET
HAS BEEN A VALIDLY ELECTING S CORPORATION WITHIN THE MEANING OF SECTION 1361 AND
1362 OF THE CODE AT ALL TIMES DURING ITS EXISTENCE AND WILL BE AN S CORPORATION
UP TO AND INCLUDING THE CLOSING DATE AND (iii) THE UNDERSIGNED HAS AND WILL HAVE
FULL AUTHORITY TO SURRENDER THE CERTIFICATE OR CERTIFICATES REPRESENTING HIS
TARGET SHARES IN CONNECTION WITH THE MERGER AND HAS GOOD AND MARKETABLE TITLE TO
SUCH TARGET SHARES, FREE AND CLEAR OF ANY LIEN, PLEDGE, MORTGAGE, SECURITY
INTEREST, CLAIM, LEASE, CHARGE, OPTION, RIGHT OF FIRST REFUSAL, EASEMENT,
SERVITUDE, TRANSFER RESTRICTION UNDER ANY SHAREHOLDER OR SIMILAR AGREEMENT,
ENCUMBRANCE OR ANY OTHER RESTRICTION OR LIMITATION WHATSOEVER.
XXXXXXX XXXXXXXX REPRESENTS AND WARRANTS TO THE BUYER THAT HE HAS
CONSULTED WITH COUNSEL PRIOR TO SIGNING THIS AGREEMENT.
EACH OF THE UNDERSIGNED HEREBY AGREES TO BE BOUND BY AND TO
PERFORM THE APPLICABLE COVENANTS SET FORTH IN THE AGREEMENT WITH
RESPECT TO THE TARGET STOCKHOLDERS.
THE UNDERSIGNED AGREES TO VOTE ALL OF HIS, HER OR ITS TARGET SHARES IN
FAVOR OF THE APPROVAL AND ADOPTION OF THIS AGREEMENT AND THE PLAN OF MERGER AND
THE TRANSACTIONS CONTEMPLATED THEREBY OR SHALL ENTER INTO AN EQUIVALENT WRITTEN
CONSENT
74
SIGNATURE PAGE OF TARGET STOCKHOLDERS
TO AGREEMENT OF MERGER - CONTINUED
THE SIGNATURE OF THE UNDERSIGNED CONSTITUTES HIS, HER OR ITS
ACKNOWLEDGMENT OF AND CONSENT TO THE CREATION OF THE TARGET STOCKHOLDERS
REPRESENTATIVE PURSUANT TO THE AGREEMENT OF MERGER AND THE DELEGATION TO THE
TARGET STOCKHOLDERS REPRESENTATIVE OF ALL OF THE RIGHTS, POWERS AND
RESPONSIBILITIES DELEGATED THERETO IN THE AGREEMENT OF MERGER.
TARGET STOCKHOLDERS:
/s/ Xxxxxx X. Xxxxxx
Date: June 29, 1999 ------------------------------------
--------------- Signature
Printed Name: Xxxxxx X. Xxxxxx
/s/ Xxxx Xxxx
Date: June 29, 1999 ------------------------------------
--------------- Signature
Printed Name: Xxxx Xxxx
/s/ Xxxxx Xxxxxxxx
Date: June 29, 1999 ------------------------------------
--------------- Signature
Printed Name: Xxxxx Xxxxxxxx
/s/ Xxxxxxx Xxxxxxxx
Date: June 29, 1999 ------------------------------------
--------------- Signature
Printed Name: Xxxxxxx Xxxxxxxx
/s/ Xxxxxxx Xxxxxxxx
Date: June 29, 1999 ------------------------------------
--------------- Signature
Printed Name: Xxxxxxx Xxxxxxxx
75
The undersigned hereby agrees to act as the Target Stockholders
Representative in accordance with the provisions of the Agreement of Merger and
to be bound by and perform the obligations of the Target Stockholders
Representative set forth therein.
/s/ Xxxxxx X. Xxxxxx
---------------------------
Xxxxxx X. Xxxxxx
Date: June 29, 1999
----------------------
76
NON-COMPETE SIGNATURE PAGE
TO AGREEMENT OF MERGER
Each of the undersigned hereby acknowledge that he or she has received,
reviewed and understands the non-compete, non-solicitation and other
restrictions set forth in Section 5B of the Agreement of Merger, and each of the
undersigned hereby agrees to be bound by and to comply with such restrictions
and provisions in return for the Merger Consideration and other valuable
consideration (the receipt of which is hereby acknowledged).
/s/ Xxxxxx X. Xxxxxx
Date: June 29, 1999 ------------------------------------
--------------- Signature
Printed Name: Xxxxxx X. Xxxxxx
/s/ Xxxx Xxxx
Date: June 29, 1999 ------------------------------------
--------------- Signature
Printed Name: Xxxx Xxxx
/s/ Xxxxx Xxxxxxxx
Date: June 29, 1999 ------------------------------------
--------------- Signature
Printed Name: Xxxxx Xxxxxxxx
/s/ Xxxxxxx Xxxxxxxx
Date: June 29, 1999 ------------------------------------
--------------- Signature
Printed Name: Xxxxxxx Xxxxxxxx
