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Exhibit 2.12
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ASSET PURCHASE AGREEMENT
by and among
XXXXXX INTERNATIONAL INC.,
K.A.U., INC.,
HEALTH CARE COMMUNICATIONS, INC.
and
XXXXXXXX X. XXXXXX, M.D.,
XXXXXXX X. XXXXXX
and
XXXX XXXXXX
June 27, 1999
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TABLE OF CONTENTS
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Page
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1. DEFINITIONS..............................................................................................1
2.1. PURCHASE AND SALE OF ASSETS..............................................................................7
(a) SALE OF ASSETS..................................................................................9
(b) EXCLUDED ASSETS................................................................................9
(c) ASSUMED LIABILITIES............................................................................11
(d) SELLER'S LIABILITIES GENERALLY NOT ASSUMED.....................................................12
(e) AGREED CLOSING TIME............................................................................14
2.2 PURCHASE PRICE ......................................................................................14
(a) PURCHASE PRICE.................................................................................14
(b) EARNOUT AMOUNT.................................................................................14
(c) COLLAR MECHANISM...............................................................................18
(d) CHANGE OF CONTROL..............................................................................19
(e) POST-CLOSING GOVERNANCE........................................................................19
(f) ARBITRATION....................................................................................23
(g) ALLOCATION OF PURCHASE PRICE...................................................................24
(h) CLOSING PRORATIONS.............................................................................25
3. REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION...............................................25
(a) REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS.............................................25
(b) REPRESENTATIONS AND WARRANTIES OF K.A.U., INC. AND XXXXXX......................................26
4. REPRESENTATIONS AND WARRANTIES CONCERNING HCC...........................................................28
(a) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER...............................................29
(b) CAPITALIZATION.................................................................................29
(c) NONCONTRAVENTION...............................................................................29
(d) BROKERS' FEES..................................................................................30
(e) TITLE TO ASSETS................................................................................30
(f) CONDITION OF ASSETS............................................................................30
(g) SUBSIDIARIES...................................................................................30
(h) FINANCIAL STATEMENTS...........................................................................30
(i) LEGAL COMPLIANCE...............................................................................30
(j) TAX MATTERS....................................................................................31
(k) REAL PROPERTY..................................................................................32
(l) INTELLECTUAL PROPERTY..........................................................................33
(m) CONTRACTS......................................................................................37
(n) NOTES AND ACCOUNTS RECEIVABLE..................................................................38
(o) POWERS OF ATTORNEY.............................................................................39
(p) INSURANCE......................................................................................39
(q) LITIGATION.....................................................................................39
(r) EMPLOYEE BENEFITS..............................................................................40
(s) GUARANTIES.....................................................................................42
(t) ENVIRONMENTAL, HEALTH, AND SAFETY MATTERS......................................................42
(u) CERTAIN BUSINESS RELATIONSHIPS WITH HCC........................................................43
(vi EVENTS SUBSEQUENT TO MOST RECENT FISCAL YEAR END...............................................43
(w) UNDISCLOSED LIABILITIES........................................................................46
(xi GOVERNMENTAL LICENSES, PERMITS AND RELATED APPROVALS...........................................46
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(y) DISCLOSURE.....................................................................................46
(z) INVESTMENT.....................................................................................46
F. PRE-CLOSING COVENANTS...................................................................................47
(a) GENERAL........................................................................................47
(b) NOTICES AND CONSENTS...........................................................................47
(c) BULK SALES COMPLIANCE..........................................................................47
(d) OPERATION OF BUSINESS..........................................................................47
(e) PRESERVATION OF BUSINESS.......................................................................47
(f) FULL ACCESS....................................................................................48
(g) NOTICE OF DEVELOPMENTS.........................................................................48
(h) EXCLUSIVITY....................................................................................48
(i) AUDIT..........................................................................................49
(j) CONFIDENTIALITY................................................................................49
G. POST-CLOSING COVENANTS..................................................................................49
(a) GENERAL........................................................................................49
(b) LITIGATION SUPPORT.............................................................................49
(c) INSURANCE......................................................................................50
(d) CONFIDENTIALITY................................................................................50
(e) TAX DISTRIBUTION...............................................................................50
(f) PAYMENT OF TAXES AND FEES......................................................................51
(g) ACCESS TO RECORDS..............................................................................51
(h) ASSIGNABILITY..................................................................................51
H. THE CLOSING.............................................................................................52
I. CONDITIONS TO OBLIGATION TO CLOSE.......................................................................52
(a) CONDITIONS TO OBLIGATION OF XXXXXX.............................................................52
(b) CONDITIONS TO OBLIGATION OF THE SELLER.........................................................55
J. OBLIGATIONS OF SELLER AT CLOSING........................................................................57
(a) DOCUMENTS RELATING TO TITLE OF ASSETS..........................................................57
(b) POSSESSION.....................................................................................57
(c) THIRD PARTY CONSENTS...........................................................................57
(d) CHANGE OF NAME.................................................................................58
(e) ADDITIONALLY REQUESTED DOCUMENTS; POST CLOSING ASSISTANCE......................................58
K. OBLIGATIONS OF PURCHASER AT CLOSING.....................................................................58
(a) PURCHASE PRICE.................................................................................58
(b) CORPORATE GOOD STANDING AND CERTIFIED BOARD RESOLUTIONS........................................58
L. REMEDIES FOR BREACHES OF THIS AGREEMENT.................................................................58
(a) SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND COVENANTS.......................................58
(b) INDEMNIFICATION PROVISIONS FOR BENEFIT OF XXXXXX...............................................59
(c) INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE SELLER AND SHAREHOLDERS..........................61
(d) MATTERS INVOLVING THIRD PARTIES................................................................61
(e) DETERMINATION OF ADVERSE CONSEQUENCES..........................................................63
M. NON-COMPETITION COVENANT................................................................................63
(a) BASIC COVENTANT................................................................................63
(b) REMEDIES FOR BREACH OF NON-COMPETITION COVENANT................................................64
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(c) LIQUIDIATED DAMAGES............................................................................64
N. TERMINATION.............................................................................................64
(a) TERMINATION OF AGREEMENT.......................................................................64
(b) EFFECT OF TERMINATION..........................................................................65
O. MISCELLANEOUS...........................................................................................65
(a) [INTENTIONALLY OMITTED]........................................................................66
(b) PRESS RELEASES AND PUBLIC ANNOUNCEMENTS........................................................66
(c) NO THIRD-PARTY BENEFICIARIES...................................................................66
(d) ENTIRE AGREEMENT...............................................................................66
(e) SUCCESSION AND ASSIGNMENT......................................................................66
(f) COUNTERPARTS...................................................................................66
(g) HEADINGS.......................................................................................66
(h) NOTICES........................................................................................67
(i) GOVERNING LAW..................................................................................68
(j) AMENDMENTS AND WAIVERS.........................................................................68
(k) SEVERABILITY...................................................................................68
(l) EXPENSES.......................................................................................68
(m) CONSTRUCTION...................................................................................68
(n) INCORPORATION OF EXHIBITS, ANNEXES, AND SCHEDULES..............................................69
(o) SPECIFIC PERFORMANCE...........................................................................69
(p) XXXXXX GUARANTEE...............................................................................69
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement") is made and entered into
this 27th day of June, 1999, by and among XXXXXX INTERNATIONAL INC., an Ohio
corporation ("Xxxxxx"), K.A.U., INC., an Ohio corporation ("Purchaser"), HEALTH
CARE COMMUNICATIONS, INC., a New Jersey corporation ("HCC" or "Seller"), and
XXXXXXXX X. XXXXXX, M.D., XXXXXXX X. XXXXXX, and XXXX XXXXXX (collectively
referred to herein as "Shareholders").
RECITALS
A. The Seller desires to sell to Purchaser, and Purchaser desires to
purchase from Seller, substantially all of the assets of Seller as such exist on
the Closing Date, upon the terms and conditions set forth herein.
B. The Shareholders own all of the issued and outstanding capital stock
of HCC.
NOW, THEREFORE, in consideration of the premises and the mutual
undertakings and agreements herein made, the Parties agree as follows:
1. DEFINITIONS
"HCC" has the meaning set forth in the preamble above and shall include
all predecessor entities.
"HCC MATERIAL ADVERSE CHANGE" has the meaning set forth in Section
8(a)(xi).
"HCC MATERIAL ADVERSE EFFECT" has the meaning set forth in Section 4(i)
below.
"HCC SHARE" means any share of the common stock, no par value, of HCC.
"ADVERSE CONSEQUENCES" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, Liabilities, obligations, Taxes, liens, losses, expenses and
fees, including (without limitation) court costs and reasonable attorneys' fees
and expenses.
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"AFFILIATE" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Exchange Act.
"AFFILIATED GROUP" means any affiliated group within the meaning of
Code Section 1504(a) or any similar group defined under a similar provision of
state, local or foreign law.
"ASSUMED CONTRACTS" has the meaning set forth in Section 2.1(c)(iii)
below.
"ASSUMED LIABILITIES" has the meaning set forth in Section 2.1(c)
below.
"BASIS" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act or transaction that, a reasonable person would recognize,
forms or could form the basis for any specified consequence.
"CASH CLOSING PAYMENT" has the meaning set forth in Section 2.2(a)(i)
below.
"CLOSING" has the meaning set forth in Section 7 below.
"CLOSING DATE" has the meaning set forth in Section 7 below.
"CLOSING SHARES" has the meaning set forth in Section 2.2(a)(ii) below.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COBRA" means the requirements of Part 6 of Subtitle B of Title I of
ERISA and Code Section 4980B.
"CONTROLLED GROUP" has the meaning set forth in Code Section 1563.
"DISCLOSURE SCHEDULE" means the disclosure schedule delivered by the
Parties hereto pursuant to Section 2.1,3, and 4 below.
"EARNOUT AMOUNT" has the meaning set forth in Section 2.2(b) below.
"EBIT" means earnings before interest and taxes, calculated in
accordance with GAAP.
"EMPLOYEE BENEFIT PLAN" means any (a) nonqualified deferred
compensation or retirement plan or arrangement, (b) qualified defined
contribution retirement plan or arrangement which is an Employee Pension Benefit
Plan, (c) qualified defined benefit retirement plan or arrangement which is an
Employee Pension Benefit Plan
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(including any Multiemployer Plan), or (d) Employee Welfare Benefit Plan or
material fringe benefit or other retirement, bonus, or incentive plan or
program.
"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in ERISA
Section 3(2).
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in ERISA
Section 3(1).
"EMPLOYMENT AGREEMENTS" has the meaning set forth in Section 8(a)(vii)
below.
"ENCUMBRANCE" means any Security Interest, warrant, option, purchase
right, preemptive right or other right or claim of any character.
"ENVIRONMENTAL LAW" means any federal, state or local statute, law,
rule, regulation, ordinance, code, policy or rule of common law now or hereafter
in effect and in each case as amended, and any judicial or administrative
interpretation thereof, including any judicial or administrative order, consent
decree or judgment, relating to the environment, health, safety or Hazardous
Materials, including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended ("CERCLA") 42
U.S.C. Section 9601 ET SEQ.; the Hazardous Materials Transportation Act, as
amended, 49 U.S.C. Section 1801 ET. SEQ.; the Resource Conservation and Recovery
Act, as amended, 42 U.S.C. Section 6901 ET SEQ.; the Federal Water Pollution
Control Act, as amended, 33 U.S.C. Section 1251 ET SEQ.; the Toxic Substances
Control Act, 15 U.S.C. Section 2601 ET SEQ.; the Clean Air Act, 42 U.S.C.
Section 7401 ET SEQ.; the Safe Drinking Water Act, 42 U.S.C. Section 3808 ET
SEQ.; and their counterparts under any state or local laws.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE" means each entity which is treated as a single
employer with Seller for purposes of Code Section 414.
"ESCROW AGREEMENT" has the meaning set forth in Section 8(a)(xiv).
"EXCHANGE ACT" has the meaning set forth in Section 3(b)(v) below.
"EXCLUDED ASSETS" has the meaning set forth in Section 2.1(b) below.
"EXPIRATION DATE" has the meaning set forth in Section 13.
"FIDUCIARY" has the meaning set forth in ERISA Section 3(21).
"FINANCIAL STATEMENTS" has the meaning set forth in Section 4(h) below.
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"GAAP" means United States generally accepted accounting principles, as
in effect from time to time.
"HAZARDOUS MATERIALS" means (a) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become friable,
urea formaldehyde foam insulation, transformers or other equipment that contain
dielectric fluid containing polychlorinated biphenyls, and radon gas; (b) any
chemicals, materials or substances defined as or included in the definition of
"hazardous substances," "hazardous wastes," "hazardous materials," "extremely
hazardous wastes," "restricted hazardous wastes," "toxic substances," "toxic
pollutants," "contaminants" or "pollutants," or words of similar import, under
any applicable Environmental Law; and (c) any other chemical, material or
substance exposure to which is prohibited, limited or regulated by any
governmental authority.
""HCC Business" has the meaning set forth in Section 12 below.
"INDEMNIFIED PARTY" has the meaning set forth in Section 11(d)(i)
below.
"INDEMNIFYING PARTY" has the meaning set forth in Section 11(d)(i)
below.
"INSIDE SHAREHOLDERS" shall mean Xxxxxxxx X. Xxxxxx, M.D. and Xxxxxxx
X. Xxxxxx.
"INTELLECTUAL PROPERTY" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, together with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith, (c) all
copyrightable works, all copyrights, and all applications, registrations, and
renewals in connection therewith, (d) all mask works and all applications,
registrations, and renewals in connection therewith, (e) all trade secrets and
confidential business information (including ideas, research and development,
know-how, formulas, compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information, and business and marketing plans
and proposals), (f) all computer software (including related technical
documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
"XXXXXX" has the meaning set forth in the preface above.
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"XXXXXX MATERIAL ADVERSE CHANGE" has the meaning set forth in Section
8(b)(vii) below.
"XXXXXX SHARES" has the meaning set forth in Section 2.2(a)(ii) below.
"KNOWLEDGE" means the actual knowledge of any given party plus such
additional knowledge that such person would have if such person made a
reasonably diligent inquiry with respect thereto (such inquiry not extending
beyond the books and records, property and senior management of the Seller or
the Shareholders as applicable).
"KNOWLEDGE OF THE SELLER" means the Knowledge of all directors and
officers of HCC, Xxxxxxxx X. Xxxxxx, M.D., Xxxxxxx X. Xxxxxx and Xxxx Xxxxxx.
"LIABILITY" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including (without limitation) any liability for Taxes.
"MARKET VALUE" has the meaning set forth in Section 2.2(a)(ii) below.
"Most Recent Balance Sheet" has the meaning set forth in Section 4(h)
below.
"Most Recent Financial Statements" has the meaning set forth in Section
4(h) below.
"Most Recent Fiscal Year End" has the meaning set forth in Section 4(h)
below.
"MULTIEMPLOYER PLAN" has the meaning set forth in ERISA Section 3(37).
"NON-ASSUMED LIABILITIES" has the meaning set forth Section 2.1(d)
below.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"PARTIES" means the Purchaser, Xxxxxx, Seller and Shareholders.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PERSON" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an
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unincorporated organization, or a governmental entity (or any department,
agency, or political subdivision thereof).
"PROHIBITED TRANSACTION" has the meaning set forth in ERISA Section 406
and Code Section 4975.
"PURCHASE PRICE" has the meaning set forth in Section 2.2(a) below.
"PURCHASER" has the meaning set forth in the preamble above.
"REGISTRATION RIGHTS AGREEMENT" has the meaning set forth in Section
4(z) below.
"REPORTABLE EVENT" has the meaning set forth in ERISA Section 4043.
"SEC" has the meaning set forth in Section 3(b)(v) below.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITY INTEREST" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar liens, (b) liens for Taxes not yet due and payable or for Taxes that
the taxpayer is contesting in good faith through appropriate proceedings, (c)
purchase money liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of Business and
not incurred in connection with the borrowing of money.
"SELLER" has the meaning set forth in the preface above.
"SELLER'S ASSETS" has the meaning set forth in Section 2.1(a) below.
"SELLER'S BUSINESS" means HCC's Business.
"SHAREHOLDERS" has the meaning set forth in the preamble above.
"SUBSIDIARY" means any corporation or other entity with respect to
which a specified Person (or a Subsidiary thereof) owns a majority of the common
stock or other voting equity or has the power to vote or direct the voting of
sufficient securities to elect a majority of the directors or other governing
body.
"TAX" means any federal, state, local, or foreign income, goods and
services, gross receipts, license, payroll, employment, excise, severance,
stamp, occupation, premium, windfall profits, environmental (including taxes
under Code Section 59A), customs duties, capital stock, capital, franchise,
profits, withholding, social security
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(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"TAX RETURN" means any return, declaration, report, written claim for
refund, or information return relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"THIRD PARTY CLAIM" has the meaning set forth in Section 11(d)(i)
below. CC.
2.1. PURCHASE AND SALE OF ASSETS.
(a) SALE OF ASSETS. Subject to, and effective as of, the
Closing, Seller, upon the terms and conditions hereinafter set forth, hereby
sells, assigns, conveys, transfers and delivers to Purchaser, free and clear of
all Encumbrances, all of the assets, rights, properties, claims, contracts and
business of the Seller at the Closing Date of every kind, nature, character and
description, tangible and intangible, real, personal or mixed, wherever located
(the "Seller's Assets"), including but not limited to the following:
(i) Equipment and Other Tangible Property. All
vehicles, equipment, furniture, supplies and
all other tangible personal property used in
or intended for use in the operation of
Seller's Business and owned by Seller
(collectively, the "Equipment"), and all
warranties, and guaranties, if any, express
or implied, existing with respect to the
Equipment for the benefit of Seller.
(ii) Records. All of Seller's records, financial
and non-financial, relating to present and
past operations of Seller's Business,
whether in the possession or under the
control of the Seller or Shareholders.
(iii) Contracts. All contracts, oral or written,
including but not limited to, outstanding
customer contracts, contracts for goods or
supplies or other items used in the
operation of Seller's Business, to which
Seller is a party.
(iv) Real Property. All leasehold interests in
real property leased by Seller in the
operation of Seller's Business.
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(v) Intangible Assets. All intangible assets of
HCC relating to Seller's Business relating
to its past, current and presently
contemplated future services and/or products
for HCC's business and all of Seller's
rights, title and interests in and to the
patents, patent registrations, patent
applications, trademarks, trademark
applications, trademark registrations,
service marks, service xxxx applications,
service xxxx registrations, trade names,
copyrights, copyright applications,
copyright registrations, permits, licenses,
processes, formulas, inventions, trade
secrets and royalties (including any rights
to xxx for breach or past infringement)
owned by Seller and relating to Seller's
Business, including, but not limited to, all
rights possessed by Seller in and to the
name "Health Care Communications, Inc."
(vi) Governmental Permits and Licenses. All
permits, licenses, consents and any other
forms of governmental approval possessed by
Seller as have been or are required or are
appropriate for the operation of Seller's
Business as it is currently being operated.
(vii) Goodwill. All goodwill related to the
operation of Seller's Business.
(viii) Accounts Receivable. All accounts receivable
of Seller in existence on the Closing Date,
including all notes, bonds and other
evidences of such accounts receivable.
(ix) Cash/Prepaid Expenses. The cash held in the
cash accounts of Seller listed on Section
2.1(a)(ix) of Disclosure Schedules, and all
prepaid expenses of Seller in existence as
of the Closing Date which have benefit to
Seller's Business after the Closing.
(x) MIS and Materials. All management
information systems and software owned by
Seller and all customer, subscriber and
vendor lists, catalogs, research material,
technical information, technology,
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specifications, designs, drawings,
processes, and quality control data owned by
Seller.
(xi) Warranties. All other warranties existing
for the benefit of Seller or owned by Seller
related to the operation of Seller's
Business.
(xii) Other Assets. All other assets of Seller
used or useful in the operation of Seller's
Business.
(b) EXCLUDED ASSETS. Notwithstanding the provisions of Section 2.1(a)
hereof, Seller is not selling and Purchaser is not purchasing (and therefore the
term "Seller's Assets" shall not include) the following (collectively, the
"Excluded Assets"):
(i) Seller's rights, claims or causes of action
against third parties relating to the
assets, properties, business or operations
of Seller which may arise in connection with
the discharge by Seller of Non-Assumed
Liabilities.
(ii) All corporate minute books, stock transfer
books and other corporate records having to
do with the corporate organization and
capitalization of Seller and the corporate
seal of Seller.
(iii) All refunds of any Tax Seller or any
Shareholder has paid.
(iv) Shares of the capital stock of the Seller,
including, without limitation, shares held
by the Seller as treasury shares.
(v) The right of Seller to enforce the
obligations of the Purchaser to pay, perform
or discharge the liabilities and obligations
of Seller assumed by Purchaser herein and
all other rights of Seller under this
Agreement and the agreements executed in
connection herewith.
(vi) Any and all employment agreements, and
employment related contracts and employment
related understandings between Seller and
any of Seller's employees.
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(vii) Any and all agreements, contracts and
understandings listed below:
(a) Consulting Agreement by and between
HCC and Xxxxxx X'Xxxxxx.
(b) Agreement with AT&T.
(c) Agreement, with an effective date of
October 12, 1998, by and between
Xxxxxxxx Travel Management and HCC.
(viii) Any and all agreements, contracts and
understandings, and any bank or investment
accounts, relating to any employee benefit
plan, program, agreement or arrangement
maintained by Seller.
(ix) Any and all books and records relating to
the lawsuits and/or claims described on
Section 4(q) of the Disclosure Schedule.
(x) That amount of cash equal to the sum of (aa)
all checks which (1) have been written and
dispatched to the payee thereof but (2) have
not yet been collected (i.e., withdrawn from
the Seller's account(s)) and (bb) an amount
equal to the total sum of (x) all payroll,
(y) all payroll taxes (e.g., FICA, FUTA,
etc) (the employer's portion as well as the
employee's portion) and (z) all income tax
withholdings from employee salaries, which,
in the case of each of (x), (y) and (z),
shall have accrued (i.e., which shall
ultimately be due and payable to one or more
tax authorities or the relevant employees,
as the case may be), as of the close of
business on the Closing Date, in respect of
the "current" pay period (i.e., the pay
period during which the Closing Date shall
fall).
(xi) Any and all copyrights, trademarks and other
Intellectual Property relating to the WINING
AND DINING series of books, as well as any
and all accounts receivable, books and
records, agreements and inventory relating
thereto.
(xii) Any and all insurance policies.
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(xiii) Summit Bank Account Number 4026028659,
unless the agreement, dated December 22,
1998 with ILAR is assigned to and assumed by
Purchaser under this Agreement (in which
case such account will be conveyed to
Purchaser).
(xiv) Summit Bank Account Number 0226338215,
unless the agreement, dated December 18,
1996, with ISSTDR is assigned to and assumed
by Purchaser under this Agreement (in which
case such account will be conveyed to
Purchaser).
(c) ASSUMED LIABILITIES. Subject to, and effective as of the Closing,
Purchaser hereby assumes, and agrees to pay and perform in accordance with their
respective terms, the following specific liabilities:
(i) Those specific liabilities listed on Section
2.1(c)(i) of the Disclosure Schedules.
(ii) All accounts payable and accrued expenses of
the Seller, existing as of the close of
business on the Closing Date, which shall
have arisen in the Ordinary Course of
Business, except for any accounts payable
relating to the WINING AND DINING SERIES.
(iii) All obligations arising or to be performed
after the Closing Date under those
contracts, purchase orders, leases of real
and personal property and other obligations
which are set forth or referred to on
Section 2.1(c)(iii) of the Disclosure
Schedule (which shall be subject to updating
in accordance with Section 5(g) hereof)
("Assumed Contracts") only to the extent
that such contracts, purchase orders, leases
and other obligations are validly assigned
to Purchaser (and, in the case of rental
payments under leases of real or personal
property, only to the extent that such
rental payments relate to periods after the
Closing Date) (collectively, with the other
liabilities assumed by Purchaser pursuant to
Section 2.1(c)(i) and (ii), the "Assumed
Liabilities"). Notwithstanding the
foregoing, all executory contracts with
third parties set forth on Section
2.1(c)(ii) of the Disclosure Schedule
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shall be assigned by Seller and assumed by
Purchaser, but only with respect to the
executory portions thereof such that
Purchaser shall be obligated to render any
performance required by such contracts
arising or to be performed after the Closing
Date, but any obligations or liabilities
under such contracts arising or to be
performed prior to the Closing Date shall
remain solely the responsibility of Seller.
(d) SELLER'S LIABILITIES GENERALLY NOT ASSUMED. Except as set forth in
this Agreement, Purchaser is not, (i) by reason of its purchase of the Seller's
Assets, (ii) by reason of any other act or failure to act on its part in
connection with the transactions contemplated by this Agreement, or (iii) for
any other reason, assuming any Liabilities or obligations of Seller whatsoever
and shall not become liable in any manner for any Liabilities or obligations of
the Seller.
Without limiting the generality of the foregoing and notwithstanding
any other provision hereof, each of the following is a Liability of the Seller
that Purchaser does not assume (all Liabilities of Seller not assumed under this
Agreement being, collectively, the "Non-Assumed Liabilities"):
(i) any Liability of the Seller arising from
indebtedness for borrowed money or long-term
debt of the Seller;
(ii) other than the Assumed Liabilities, any
Liability of the Seller arising from, or in
connection with, the conduct of the Seller's
Business or the ownership of the Seller's
Assets by the Seller prior to the Closing
Date, including, without limitation, all
liabilities arising by reason of any
violation by the Seller, by acts or events
or omissions arising or occurring prior to
the Closing Date, of any federal, state or
local law, rule, regulation, ordinance or
any requirement of any government authority;
(iii) any Liability of the Seller relating to the
operation of Seller's Business prior to the
Closing Date for Taxes owed to any taxing
authority (including, without limitation,
any transfer or sales Taxes incurred in
connection with the transactions
contemplated hereby);
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(iv) any Liability of the Seller arising out of
or related to past, present or future
litigation involving the Seller as the owner
and operator of the Seller's Business or the
Assets prior to the Closing Date;
(v) any Liability in respect of any contract to
which the Seller is a party or beneficiary
which is not a contract included in the
Seller's Assets or otherwise assigned or
transferred or subcontracted to Purchaser
pursuant to this Agreement;
(vi) any Liability accruing prior the Closing
Date under any employee benefit plan of or
sponsored by the Seller;
(vii) any Liability arising out of the employment
or termination of employment by Seller, in
either case at or prior to the Closing Date,
of any person employed in the Seller's
Business, including, without limitation, any
Liability for accrued vacation pay for
Seller employees and any Liability for
severance pay;
(viii) any Liability of the Seller or any present
or former director or officer of the Seller
arising from any claim, action or
proceeding, including, without limitation,
any derivative action, brought by or on
behalf of any present or former holder of
any debt or equity security of the Seller or
by any lender to the Seller, including,
without limitation, any Liability arising
from any indemnification, reimbursement or
advance in connection therewith;
(ix) any Liability listed on Section 2.1(d)(ix)
of the Disclosure Schedule; and,
(x) any other Liability of the Seller which is
not an Assumed Liability.
NOTWITHSTANDING ANY PROVISION HEREIN TO THE CONTRARY,
PURCHASER SHALL NOT ASSUME OR BECOME LIABLE IN ANY MANNER FOR ANY LIABILITY OR
OBLIGATION OF THE SELLER, AND THE SELLER SHALL REMAIN SOLELY RESPONSIBLE FOR,
ANY AND
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ALL LIABILITIES AND OBLIGATIONS OF THE SELLER, OTHER THAN THE ASSUMED
LIABILITIES.
(e) AGREED CLOSING TIME. Unless the Parties otherwise agree in writing,
the transfer of assets and assumption of liabilities contemplated herein shall
be deemed effective as of the close of business on the Closing Date.
2.2 PURCHASE PRICE.
(a) PURCHASE PRICE. At the Closing, Xxxxxx shall pay the
Seller (subject to a portion thereof being immediately escrowed, as provided
below) a purchase price of Eight Million Two Hundred Eighty Thousand Dollars
($8, 280,000) (the "Purchase Price"), to be paid in such combination of cash and
shares of Xxxxxx common stock, no par value ("Xxxxxx Shares"), as Seller may
designate; provided, however, that in no event shall Seller be entitled to
receive more than $5,541,000 of the Purchase Price in cash. For these purposes,
each Xxxxxx Share shall be deemed to have a value (its "Market Value") equal to
the historical average of the NASDAQ National Market System closing price for
Xxxxxx Shares during the twenty (20) trading days immediately preceding the
Closing. Of the $8,280,000 of Purchase Price, a total of $1,000,000 in cash
and/or Xxxxxx Shares (at Market Value) shall be paid and/or delivered to The
Fifth Third Bank, as escrow agent (the "Escrow Agent") under the Escrow
Agreement. The remainder of the cash and Xxxxxx Shares shall be paid and
delivered to Seller. Seller shall have the right to determine the composition
(i.e., cash vs. Xxxxxx Shares) of the $1,000,000 to be escrowed. The total
amount of cash actually paid to Seller at the Closing (i.e., not escrowed) shall
be referred to as the "Cash Closing Payment" and the total number of Xxxxxx
Shares actually delivered to Seller at the Closing shall be referred to as the
"Closing Shares". The $1,000,000 in cash and/or Xxxxxx Shares delivered to the
Escrow Agent at Closing shall be referred to as the "Escrow Fund". The Seller
shall, three days prior to the Closing Date, notify Xxxxxx of (i) the
composition of the Escrow Fund (i.e., how much cash and how much in Market Value
of Xxxxxx Shares) and (ii) the amount of the Cash Closing Payment. Such notice
shall be consistent with the terms of this Section 2.2(a).
(b) EARNOUT AMOUNT. In addition to the Purchase Price, Xxxxxx
shall pay to Seller as additional consideration an amount up to Ten Million Four
Hundred Thousand Dollars ($10,400,000), if post-Closing, the Purchaser meets the
specified EBIT Targets, all as more fully described below ("Earnout Amount").
Each Earnout Amount payment represents consideration paid for the assets of
Seller.
(i) FORM OF PAYMENT. The Earnout Amount shall be
paid Thirty-three percent (33%) in
additional Xxxxxx
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Shares and Sixty-seven percent (67%) in
cash. The number of Xxxxxx Shares to be
issued will be equal to the Earnout Amount,
if any, to be paid in Xxxxxx Shares for the
respective year divided by the historical
average NASDAQ National Market System
closing share price for Xxxxxx Shares in the
twenty (20) trading days preceding the
payment date.
(ii) EBIT TARGET. For purposes of calculating
EBIT for this Section 2.2, (i) to the extent
that Purchaser renders services to Xxxxxx or
its Subsidiaries or other Affiliates, such
services shall be charged at arm's length
rates which do not exceed those rates
provided by the Purchaser to its most
favored customers; and (ii) EBIT shall NOT
include (i.e., shall not be reduced by) life
insurance expense for key man life insurance
for the Shareholders, goodwill or
non-compete amortization, expenses incurred
in connection with the resolution of
disputes with respect to the EBIT
calculation, any costs or expenses incurred
by Purchaser or Xxxxxx in connection with
their negotiation, preparation, execution or
consummation of this Agreement or the other
agreements contemplated hereby or Xxxxxx
general corporate overhead allocations,
except for corporate services rendered to
Purchaser which were customarily provided to
HCC by an unrelated third party, which shall
be charged at the rates charged to Xxxxxx'x
other Subsidiaries and Affiliates. The
parties further acknowledge that situations
shall also arise where it is clear that SOME
allocation of expense is appropriate, but
unclear as to how much is appropriate. The
parties agree that all such allocations
shall be made on a reasonable basis (e.g.,
if Purchaser occupies only 10% of any
particular space, it will not be allocated
90% of the rent). For example, if insurance
is procured on a group basis for all of the
Xxxxxx companies, the cost of the insurance
must be reasonably allocated among all of
the Xxxxxx companies, including Purchaser.
Xxxxxx and the Purchaser shall make
available to Seller and its representatives
such books, records and other information
(including accountant's work papers) as
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Seller may reasonably request to review and
confirm the calculations of EBIT proffered
by Purchaser under this Section 2.2. If the
Purchaser meets the EBIT Targets set forth
below for 1999, 2000, and 2001, Xxxxxx shall
pay Seller the Earnout Amounts set forth
below:
YEAR ENDING EBIT TARGET TARGET EARNOUT
----------- ----------- --------------
December 31, 1999 $1,030,600 $ 4,000,000
December 31, 2000 $2,775,900 $ 3,200,000
December 31, 2001 $4,043,500 $ 3,200,000
---------- -----------
$7,850,000 $10,400,000
In addition to the sums described above, if the
cumulative EBIT for the period between the Closing
Date and December 31, 2001 (the "Earnout Period")
exceeds $8,889,150, Xxxxxx will pay an additional
Earnout Amount equal to 10% of the excess over
$8,889,150, but in no event shall such additional
Earnout Amount exceed $500,000.
(iii) PARTIAL EARNOUT AMOUNT. Partial Earnout
Amount will be paid once the following
minimum percentages of EBIT Target have been
met:
YEAR ENDED MINIMUM EBIT PERCENTAGE
---------- -----------------------
December 31, 1999 66.7%
December 31, 2000 45%
December 31, 2001 40%
Cumulative Earnout: 55%
The formula for calculating the Partial
Earnout Amount to be paid in 1999 will be:
(EA% - 50%)/(1-50%) x (Target Earnout
Amount).
The formula for calculating the Partial
Earnout Amount to be paid in 2000, 2001 and
cumulative will be: EA% x (Target Earnout
Amount).
EA% is defined as the result of dividing the
actual EBIT for any given period by the EBIT
Target for such period and MP% is defined as
the Minimum EBIT Percentage set forth above.
If EBIT does not reach the Minimum EBIT
Percentage, no payment will be made. The EA%
is capped at 100% for the annual
calculation. If the
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Purchaser is unable to meet the EBIT Target
in any given year, Seller shall have the
right to recapture (and, accordingly Xxxxxx
shall pay to Seller in accordance with this
Section 2.2) missed Earnout Amounts (i.e.,
any of the $10,400,000 not previously paid)
if the Purchaser meets the total cumulative
EBIT of $7,850,000 for the Earnout Period.
Any Partial Earnout relating to total
cumulative EBIT for the Earnout Period would
be similarly calculated. For example, if
total cumulative EBIT were $6,000,000 (i.e.,
approximately 76.43% of the $7,850,000
cumulative EBIT Target), the total Earned
Amount for the Earnout Period would be
approximately ($10,400,000) (.7643), or
$7,948,720. If $5,000,000 in Earned Amounts
had previously been paid, Seller would be
due an additional $2,948,720.
(iv) DISPUTES WITH RESPECT TO EBIT: Within 15 business days of
the date on which the external auditors of Xxxxxx complete their audit of
Purchaser for any given year during the Earnout Period, Xxxxxx shall deliver to
Seller a statement showing, in reasonable detail, such auditor's determination
of EBIT for such year and the Earnout Amount, if any, which Xxxxxx contends is
due to the Seller with respect to such year or other period (the "Xxxxxx Earnout
Statement"). If Seller disagrees with any Xxxxxx Earnout Statement, Seller shall
notify Xxxxxx of such disagreement within forty-five (45) days of receipt
thereof and shall have the right to have the EBIT calculation for the period in
question ascertained by a "Big 5" accounting firm (other than Xxxxxx'x
then-external auditors) selected by Seller and reasonably acceptable to Xxxxxx
(the "Independent Auditors"). Should Seller not object to the Xxxxxx Earnout
Statement within such 45-day period, then Xxxxxx shall pay the appropriate
Earnout Amount, if any, within ten (10) days of expiration of the forty-five
(45) day period; provided, however, that in the event Seller shall give to
Xxxxxx a notice stating that Seller agrees with the Xxxxxx Earnout Statement,
Xxxxxx shall pay the appropriate Earnout Amount, if any, within ten (10) days
after the giving of such notice. Xxxxxx shall cause its external auditors to
promptly share with the Independent Auditors the work papers and other materials
utilized by Xxxxxx'x external auditors in calculating the EBIT for the period in
question and Xxxxxx and Purchaser shall, and shall instruct the external
auditors to, promptly lend all reasonable assistance as may be requested by the
Independent Auditors. The Independent Auditors shall calculate the EBIT for the
period utilizing the principles set forth in this Section 2.2(b) and in Section
2.2(e). If the EBIT for the period in question as calculated by the Independent
Auditors differs by less than 2.5% from the EBIT as calculated by Xxxxxx'x
external auditors, Seller shall pay the entire cost and expense of the
Independent Auditors. If the EBIT for the year in question as calculated by the
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Independent Auditors exceeds the EBIT as calculated by Xxxxxx'x external
auditors by 2.5% or more, Xxxxxx shall bear the entire cost and expense of the
Independent Auditors. The calculation of EBIT as calculated by the Independent
Auditors shall be final, conclusive and binding on the Parties and Xxxxxx shall
pay the appropriate Earnout Amount, if any, within ten (10) days after the
Independent Auditors inform the Parties of the EBIT calculation.
(v) FORFEITURE OF EARNOUT AMOUNTS. The Seller and the Shareholders shall forfeit
all rights to any unearned future Earnout Amounts if the following event occurs
during the period beginning as of the Closing Date and continuing until the
later of (i) eighteen months following the Closing Date or (ii) approval and
implementation of a succession plan has begun (the entire period referred to
herein as "Period 1"):
(A) One of the Inside Shareholders resigns (not due to death or
disability or due to a breach of such Inside Shareholder's Employment
Agreement by Employer who, following notice of such breach, fails to
cure the breach within sixty (60) days) or is fired "for cause".
The Seller and the Shareholders shall forfeit all rights to any unearned future
Earnout Amounts if any of the following events occur during the period beginning
at the end of Period 1 and continuing until December 31, 2001 ("Period 2"):
(A) Both of the Inside Shareholders are no longer employed by the
Purchaser, for any reason (except for death, disability or breach of
such Inside Shareholder's Employment Agreement by Employer who,
following notice of such breach, fails to cure the breach within sixty
(60) days); or
(B) One of the Inside Shareholders is terminated "for cause."
For purposes of this Section only, "for cause" shall mean: (i)
the appropriation (or attempted appropriation) of a material business
opportunity of the Company, including attempting to secure or securing any
material personal profit in connection with any transaction entered into on
behalf of the Company which is unlawful or in violation of the Company's rights;
(ii) the intentional misappropriation (or attempted misappropriation) of any of
the Company's funds or material property; or (iii) the conviction of, the
indictment for (or its procedural equivalent), or the entering of a guilty plea
or plea of no contest with respect to, a felony, the equivalent thereof, or any
other crime for which imprisonment of greater than three (3) months is
mandatorily imposed; provided however that should the Inside Shareholder be
indicted and later either be acquitted or have the charges dropped against him,
Xxxxxx shall pay any Earnout Amount which was withheld due to such indictment.
(c) COLLAR MECHANISM. Xxxxxx and Purchaser shall exercise
their commercially reasonable best efforts in cooperating with Seller and the
Shareholders
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in attempting to obtain a "collar" on all Xxxxxx Shares held by them, including
those in escrow. Such cooperation shall include, but not be limited to, not
unreasonably withholding or delaying their consent to reasonable modifications
to the Escrow Agreement designed to implement such collar or collars.
(d) CHANGE OF CONTROL. The Earnout Amount shall become due and
payable in full upon a Change of Control as defined hereafter; provided, however
that if the Change of Control does not result in a change that materially
compromises the ability of the current management of HCC to cause the Purchaser
to achieve the EBIT Targets, then this provision shall not apply and the Earnout
Amounts shall be paid in accordance with this Agreement.
Change of Control ("COC") shall mean any of the following
events: (a) any Person or "group" (within the meaning of Rule 13d-5 under the
Exchange Act), together with its Affiliates, other than Xxxxxxx Xxxxxx and
Xxxxxxxxxxx X. Xxxxxx, shall beneficially own (within the meaning of Rule
13d-3), directly or indirectly, the lesser of (i) an amount of Capital Stock of
Xxxxxx entitled to twenty percent (20%) or more of the Total Voting Power of
Xxxxxx or (ii) an amount of Capital Stock of Xxxxxx entitled to a percentage of
the Total Voting Power of Xxxxxx in excess of the aggregate of such Capital
Stock beneficially owned, directly or indirectly, by Xxxxxxx Xxxxxx and
Xxxxxxxxxxx X. Xxxxxx; (b) Xxxxxxx Xxxxxx and Xxxxxxxxxxx X. Xxxxxx together
cease to own shares of Capital Stock of Xxxxxx representing at least ten percent
(10%) of the Total Voting Power of Xxxxxx; or (c) during any period of two
consecutive years, individuals who at the beginning of such period constituted
the Board of Directors of Xxxxxx (together with any new directors whose election
by such Board of Directors or whose nomination for election by the shareholders
of Xxxxxx was approved by a vote of sixty-six and 2/3 percent (66-2/3%) of the
directors of Xxxxxx then still in office who were either directors at the
beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
Board of Directors of Xxxxxx then in office.
For purposes of this section, "Total Voting Power" shall mean
the total number of votes which may be cast in the election of directors of
Xxxxxx at any meeting of stockholders of Xxxxxx if all securities entitled to
vote in the election of directors of Xxxxxx (on a fully diluted basis, assuming
the exercise, conversion or exchange of all rights, warrants, options and
securities outstanding on such date which are or may thereafter become
exercisable for, exchangeable for or convertible into, such voting securities)
were present and voted at such meeting (other than votes that may be cast only
upon the happening of a contingency).
(e) POST-CLOSING GOVERNANCE. In order to give the Shareholders
and Seller full opportunity to achieve the benefits of the Earnout Amounts, the
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Parties agree as follows with respect to the operations of the Purchaser for
the period beginning as of the Closing Date and ending December 31, 2001, unless
otherwise specified herein or as otherwise agreed to in writing by the Parties:
(i) The Purchaser will be maintained as a
separate legal entity with separate
accounting for its financial performance,
and shall be audited by an independent
auditor chosen by Xxxxxx.
(ii) The executive officers of the Purchaser,
namely, Xxxxxxxx X. Xxxxxx, M.D. and Xxxxxxx
X. Xxxxxx, shall have the primary
responsibility for the day to day operations
of the Purchaser and shall be the two most
senior managers of the Purchaser (i.e., in
the event that any officer or employee of
Purchaser is technically senior to either of
the Inside Shareholders, such officer or
employee shall not have powers or
responsibilities regarding the day to day
operations of the Purchaser).
(iii) The Inside Shareholders shall prepare an
operating budget, a fixed assets budget, and
a working capital budget for each of 1999
(pro-rated), 2000, and 2001, (collectively
the "Budgets") to be submitted to and
approved by Xxxxxx. The Budgets shall be
prepared consistent with EBIT Targets. The
Budgets shall be prepared in substantially
the same form as attached hereto as Exhibit
2.3(e).
(iv) The Inside Shareholders shall have the
powers delegated to them as set forth in
their respective Employment Agreements.
(v) The Inside Shareholders shall have the right
to approve (i) any merger of the Purchaser
with or into any other entity, (ii) any
acquisition by Purchaser of any other
business and (iii) the engagement of
Purchaser in a business different from
Seller's Business.
(vi) Except as otherwise agreed to by the Inside
Shareholders and Xxxxxx or as provided in
the Employment Agreements or on 2.2(e)(vi)
of the
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Disclosure Schedules, the Inside
Shareholders shall at all times during their
employment by Purchaser follow and adhere to
the lawful procedures, policies and
practices of Purchaser, including without
limitation, all such procedures, policies
and practices as they relate to operations,
accounting, cash management, travel, and
human resources as are established by
Purchaser from time to time.
(vii) In the event that the Purchaser shall
provide services for Xxxxxx Subsidiaries and
other Affiliates, such services shall be
charged at arm's length rates that do not
exceed those rates given to the Purchaser's
most favored customers.
(viii) The Purchaser shall be obligated to pay its
employees bonuses if such bonuses are earned
in accordance with Xxxxxx'x or Purchaser's
policy or customary past practice of HCC;
provided, however that if HCC customary past
practice is in conflict with Xxxxxx'x or
Purchaser's policy, Xxxxxx'x or Purchaser's
policy shall govern.
(ix) The Inside Shareholders shall develop and
implement in conjunction with their Xxxxxx
supervisor a succession plan delineating
their respective successors for the next
three years.
(x) Unless otherwise agreed to by the Inside
Shareholders, (A) the Inside Shareholders
shall be based at the headquarters of the
Purchaser and (B) in the event that
Purchaser moves its headquarters from its
current location, it shall not move such
headquarters to any location more than 15
miles from its current location.
Notwithstanding the foregoing, the Inside Shareholders shall
not take any action under this Section 2.2(e) that is not, or would cause the
Purchaser not to be, in compliance with the laws, rules and regulations of
federal, state and local governmental authorities (including, without
limitation, tax reporting and tax compliance) applicable to the Purchaser.
Section 2.2. (e) (the foregoing items (i) through (x) only
shall not apply if (i) the Purchaser does not obtain the Minimum EBIT
Percentages set forth
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in Section 2.2(b) above, (ii) an Inside Shareholder resigns or is terminated for
"cause" (as such term is defined in the Employment Agreements); provided however
that if an Inside Shareholder resigns (a) due to a disability under Section 6 of
his Employment Agreement or (b) because the Employer breached its
duties/obligations set forth in the Employment Agreement and, following notice
of such breach, failed to cure the breach within thirty (30) days, then this
provision shall not apply, (iii) the Purchaser experiences a negative EBIT for
two (2) consecutive quarters or (iv) the Seller breaches Section 12 (Non-Compete
Covenant) herein or either of the Inside Shareholders breach the Non-Compete
Covenants contained in their respective Non-Competition and Non-Disclosure
Agreements.
The elimination of the foregoing items (i) through (x) shall
not impair any rights arising under the Employment Agreements of the Inside
Shareholders.
The Earnout Amounts shall become immediately due and payable
upon the occurrence of any of the following events:
(i) A Change of Control of Xxxxxx as set forth
in Section 2.2(d) herein;
(ii) A material breach of this Section 2.2(e) by
Purchaser or Xxxxxx, provided Xxxxxx
receives notice of such breach and has not
cured such breach in thirty days or such
longer time as may be reasonably necessary
to cure such breach provided Purchaser or
Xxxxxx is diligently pursuing such cure and
such period does not exceed sixty (60) days;
(iii) Purchaser or Xxxxxx xxxxx or otherwise
conveys (A) substantially all of Purchaser's
assets or (B) any asset (if the loss of such
asset materially and adversely affects the
operations or income-producing ability of
Purchaser) to any third party; or
(iv) Xxxxxx shall cease to have beneficial
ownership (as defined above) of that number
of shares of capital stock of the Purchaser
entitled to cast a majority of the votes
eligible to be cast by all outstanding
shares of the Purchaser.
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(f) ARBITRATION.
(i) In the event of a dispute arising under this
Section 2.2(d) or (e), the Parties agree to
submit such dispute to binding arbitration
if so requested by any party hereto pursuant
to subparagraph (ii) below. The arbitration
shall be conducted by three arbitrators, who
shall be appointed pursuant to the rules of
the American Arbitration Association
("AAA"). The arbitration shall be held in
Columbus, Ohio, and shall be conducted in
accordance with the commercial arbitration
rules of the AAA, except that the rules set
forth in this Section 2.2(f) shall govern
such arbitration to the extent they conflict
with the rules of the AAA.
(ii) Upon written notice by a party to the other
parties of a request for arbitration
hereunder, the parties shall use their best
efforts to cause the arbitration to be
conducted in an expeditious manner. All
other procedural matters shall be within the
discretion of the arbitrators. In the event
a party fails to comply with the procedures
in any arbitration in a manner deemed
material by the arbitrators, the arbitrators
shall fix a reasonable period of time for
compliance and, if the party does not comply
within said period, a remedy deemed just by
the arbitrators, including an award of
default, may be imposed.
(iii) The determination of the arbitrators shall
be final and binding on the parties.
Judgment upon the award rendered by the
arbitrators may be entered in any court
having jurisdiction. The parties shall each
be responsible for their own expenses in
connection with such arbitration, including
without limitation counsel fees and fees or
experts; provided, however, that the parties
shall share equally in the expense of the
arbitrators and of the AAA.
(iv) Notwithstanding (iii) above, the arbitrator
may, at its discretion, award reasonable
counsel and AAA (including arbitrator) fees
and expenses to any one or more of the
parties if the arbitrator determines that
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such award would be just and equitable in
light of the circumstances.
(g) ALLOCATION OF PURCHASE PRICE.
(i) Purchaser and Seller agree that Purchaser
and Seller shall allocate the sum of the
Purchase Price, the Earnout Amounts (if
any), the additional Earnout Amounts (if
any), and the Assumed Liabilities among the
Seller's Assets and the covenant not to
compete (set forth in Section 12 of this
Agreement) as of the Closing Date, in
accordance with Section 2.2(g)(i) of the
Disclosure Schedules, Section 1060 of the
Code and the regulations promulgated
thereunder.
(ii) Purchaser and Seller shall timely file with
the appropriate tax authorities the IRS Form
8594 and shall use the allocation set forth
in Section 2.2(g)(i) of the Disclosure
Schedules in the preparation of IRS Form
8594 and of all Tax Returns (including any
attachments thereto) and for all other tax
purposes. In the event any party hereto
receives notice of an audit in respect of
the allocation of the Purchase Price, the
Earnout Amounts (if any), the additional
Earnout Amounts (if any), and Assumed
Liabilities specified herein, such party
shall notify the other party in writing as
to the date and subject of such audit as
promptly as reasonably practicable.
(iii) If any Tax Return filed by Purchaser or
Seller relating to the transactions
contemplated hereby is challenged by the tax
authority with which such Tax Return was
filed on the basis of the allocation set
forth in Section 2.2(g)(i) of the Disclosure
Schedules as finally adjusted, the filing
party shall assert in good faith the
validity and correctness of such allocation.
If any such Tax Return is challenged as
herein described, the party filing such Tax
Return shall keep the other party apprised
of its decisions and the current status and
progress of all administrative and judicial
proceedings, if any, that are undertaken at
the election of such party with respect
thereto.
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(h) CLOSING PRORATIONS
(i) PERSONAL PROPERTY TAXES. All personal
property Taxes relating to any and all
personal property conveyed pursuant to this
Agreement shall be pro-rated between
Purchaser and the Seller in accordance with
the relationship of the Closing Date to the
entire relevant Tax year. Subject to the rest
of this Section h(i), any payment owed in
respect of such pro-ration shall be made at
Closing. If the amount of said personal
property Taxes is not known at the Closing,
then such personal property Taxes shall be
apportioned on the basis of the personal
property Taxes assessed for the preceding Tax
year, with a reapportionment as soon as the
new Tax rate and valuation can be
ascertained.
(ii) UTILITIES. All utility charges relating to
any locations of the Seller covered by real
property leases constituting Assumed
Contracts shall be pro-rated between
Purchaser and the Seller in accordance with
the relationship of the Closing Date to the
entire relevant period covered by such
charge.
3. REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION
(a) REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS. Each
of the Shareholders, individually, represents and warrants to Xxxxxx that the
statements contained in this Section 3(a) are correct and complete as of the
date of this Agreement with respect to himself or herself (but not with respect
to any other Shareholders).
(i) AUTHORIZATION OF TRANSACTION. Such
Shareholder has full power and authority to
execute and deliver this Agreement and to
perform his or her obligations hereunder.
This Agreement constitutes the valid and
legally binding obligation of such
Shareholder, enforceable against him or her
in accordance with its terms and conditions.
Such Shareholder need not give any notice to,
make any filing with, or obtain any
authorization, consent, or approval of any
government or governmental agency in order to
consummate the transactions contemplated by
this Agreement.
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(ii) NONCONTRAVENTION. Neither the execution and
the delivery of this Agreement by such
Shareholder, nor the consummation by him or
her of the transactions contemplated hereby,
will (A) violate any constitution, statute,
regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other
restriction of any government, governmental
agency, or court to which such Shareholder is
subject or (B) conflict with, result in a
breach of, constitute a default under, result
in the acceleration of, create in any party
the right to accelerate, terminate, modify,
or cancel, or require any notice under any
agreement, contract, lease, license,
instrument, or other arrangement to which
such Shareholder is a party or by which he or
she is bound or to which any of his or her
assets is subject.
(iii) BROKERS' FEES. Such Shareholder has no
liability or obligation to pay any fees or
commissions to any broker, finder, or agent
with respect to the transactions contemplated
by this Agreement for which Xxxxxx could
become liable or obligated.
(iv) HCC SHARES. Such Shareholder holds of record
and owns beneficially the number of HCC
Shares set forth next to his or her name in
Section 3(a)(iv) of the Disclosure Schedule,
free and clear of any Encumbrances other than
restrictions on transfer imposed by federal
and state securities laws and regulations.
Such Shareholder is not a party to any voting
trust, proxy, or other agreement or
understanding with respect to the voting of
any capital stock of HCC.
(b) REPRESENTATIONS AND WARRANTIES OF K.A.U., INC. AND
XXXXXX. Each of Purchaser and Xxxxxx represents and warrants to the Sellers that
the statements contained in this Section 3(b) are correct and complete as of the
date of this Agreement.
(i) ORGANIZATION OF XXXXXX. Each of Purchaser and
Xxxxxx is a corporation organized, validly
existing and in good standing under the laws
of the State of Ohio.
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(ii) AUTHORIZATION OF TRANSACTION. Each of
Purchaser and Xxxxxx has full power and
authority (including full corporate power and
authority) to execute and deliver this
Agreement and to perform its obligations
hereunder. This Agreement constitutes the
valid and legally binding obligation of
Purchaser and Xxxxxx, enforceable against
each in accordance with its terms and
conditions. Assuming the truth and
correctness of the Seller's statements in
Section 4(aa) of this Agreement, neither
Purchaser nor Xxxxxx need give any notice to,
make any filing with, or obtain any
authorization, consent, or approval of any
government or governmental agency in order to
consummate the transactions contemplated by
this Agreement.
(iii) NONCONTRAVENTION. Neither the execution and
the delivery of this Agreement by Purchaser
and Xxxxxx, nor the consummation by them of
the transactions contemplated hereby, will
(A) violate any constitution, statute,
regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other
restriction of any government, governmental
agency or court to which Purchaser or Xxxxxx
is subject or any provision of its charter or
bylaws or (B) conflict with, result in a
breach of, constitute a default under, result
in the acceleration of, create in any party
the right to accelerate, terminate, modify,
or cancel, or require any notice under any
material agreement, contract, lease, license,
instrument, or other arrangement to which
Xxxxxx or Purchaser is a party or by which it
is bound or to which any of its assets is
subject.
(iv) CAPITALIZATION. Xxxxxx'x authorized equity
securities consist of Forty-Five Million
(45,000,000) shares of common stock, no par
value per share, and One Hundred Thousand
(100,000) shares of undesignated preferred
stock, no par value per share. As of March
31, 1999, 11,072,445 shares of common stock
were issued and outstanding and no shares of
undesignated preferred stock were issued and
outstanding. The Xxxxxx Shares to be received
by the Seller in connection with the
transactions contemplated hereby
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will be duly authorized, validly issued, fully paid
and non-assessable shares of common stock free and
clear of any and all Encumbrances other than
restrictions on transfer imposed by federal and state
securities laws and regulations.
(v) SEC REPORTS. Xxxxxx has timely filed with the
Securities and Exchange Commission ("SEC") all
materials and documents required to be filed by it
under the Securities Exchange Act of 0000 (xxx
"Xxxxxxxx Xxx"). All the materials and documents
filed with the SEC by Xxxxxx since July 2, 1997,
including its initial Registration Statement on Form
S-1, are hereinafter referred to as the "Xxxxxx SEC
Reports." Section 3(b)(v) of the Disclosure Schedule
lists all the Xxxxxx SEC Reports filed on or prior to
the date of this Agreement. The Xxxxxx SEC Reports,
copies of which have been delivered to the Seller,
are true and correct in all material respects,
including the financial statements and other
financial information contained therein, and do not
omit to state any material fact necessary to make the
statements in such Xxxxxx SEC Reports, in light of
the circumstances in which they were made, not
misleading. The financial statements included in the
Xxxxxx SEC Reports fairly present in all material
respects the financial condition and the results of
operations, changes in stockholders' equity and cash
flow of Xxxxxx and its subsidiaries as at the
respective dates of and for the periods referred to
in such financial statements, all in accordance with
GAAP. Since December 31, 1998, there has been no
Xxxxxx Material Adverse Change.
(vi) BROKERS' FEES. Neither Purchaser nor Xxxxxx has any
Liability or obligation to pay any fees or
commissions to any broker, finder, or agent with
respect to the transactions contemplated by this
Agreement for which any Shareholder or Seller could
become liable or obligated.
4. REPRESENTATIONS AND WARRANTIES CONCERNING HCC. The Seller and the
Shareholders, jointly and severally, represent and warrant to Xxxxxx that the
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statements contained in this Section 4 are correct and complete as of the date
of this Agreement except as set forth in the Disclosure Schedule.
(a) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. HCC is a
corporation organized, validly existing and in good standing under the laws of
the jurisdiction of its incorporation. HCC is duly authorized to conduct
business and is in good standing under the laws of each jurisdiction set forth
in Section 4(a) of the Disclosure Schedule and the failure to so qualify in any
other jurisdiction will not result in an HCC Material Adverse Change. Section
4(a) of the Disclosure Schedule lists the directors and officers of HCC. The
Seller has delivered to Xxxxxx correct and complete copies of the charter and
bylaws of HCC (as amended to date). HCC is not in default under or in violation
of any provision of its charter or bylaws.
(b) CAPITALIZATION. The authorized capital stock of HCC consists of One
Hundred (100) HCC Shares, of which One Hundred (100) HCC Shares are issued and
outstanding. All of the issued and outstanding HCC Shares have been duly
authorized, are validly issued, fully paid and nonassessable, and are held of
record and beneficially by the Sellers. Except as set forth in Section 4(b) of
the Disclosure Schedule, there are no outstanding or authorized options,
warrants, purchase rights, subscription rights, conversion rights, exchange
rights, or other contracts or commitments that could require HCC to issue, sell,
or otherwise cause to become outstanding any of its capital stock. There are no
outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to HCC. HCC is not a party to any
voting trusts, proxies, or other agreements or understandings with respect to
the voting of the capital stock of HCC.
(c) NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement by HCC, nor the consummation by it of the transactions contemplated
hereby, will (i) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which HCC is subject or any
provision of the charter or bylaws of HCC or (ii) except as set forth in Section
4(c) of the Disclosure Schedule, conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice
under any material agreement, contract, lease, license instrument to which HCC
is a party or by which it is bound or to which any of its assets is subject; or
(iii) result in the imposition of any Security Interest upon any of its assets.
HCC does not need to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency in
order for it to consummate the transactions contemplated by this Agreement.
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(d) BROKERS' FEES. HCC has no Liability or obligation to pay any fees
or commissions to any broker, finder, or agent (other than Vector Securities
International, Inc.) with respect to the transactions contemplated by this
Agreement.
(e) TITLE TO ASSETS. HCC has good and valid title to, or a valid
leasehold or license interest in, the properties and assets used by it, or shown
on the Most Recent Balance Sheet or acquired after the date thereof, free and
clear (as to owned assets) of all Security Interests and other Encumbrances,
excepting only (i) properties and assets disposed of in the Ordinary Course of
Business since the date of the Most Recent Balance Sheet and (ii) certain other
properties and assets, not involving in the aggregate more than Twenty Five
Thousand Dollars ($25,000.00), disposed of other than in the Ordinary Course of
Business.
(f) CONDITION OF ASSETS. Each item of tangible personal property,
including, without limitation, Equipment, included in the Seller's Assets and
having a net book value in excess of $5,000, is in reasonable operating
condition and in reasonable state of repair, ordinary wear and tear excepted.
Section 4(f) of the Disclosure Schedules sets forth all quipment with a net book
value in excess of $5,000 and shall be delivered at Closing.
(g) SUBSIDIARIES. HCC has no direct or indirect equity or ownership
interest in any other business.
(h) FINANCIAL STATEMENTS. Attached hereto as Section 4(h) are (i) the
unaudited balance sheet and statements of income and retained earnings for HCC
as of and for the fiscal years ended December 31, 1997 and (ii) the draft
unaudited balance sheet and statements of income and retained earnings and cash
flow as of and for the fiscal year ended December 31, 1998 (collectively the
"FINANCIAL STATEMENTS"). All Financial Statements have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby (except for the absence of any notes thereto), present fairly in
all material respects the financial condition of HCC as of such dates and the
results of operations of HCC for such periods and are consistent with the books
and records of HCC. The aforementioned Financial Statements which are as of, and
for the year ended, December 31, 1998 shall be collectively referred to as the
"Most Recent Financial Statements". "Most Recent Fiscal Year End" shall refer to
December 31, 1998 and "Most Recent Balance Sheet" shall refer to the unaudited
balance sheet of the Seller as of December 31, 1998.
(i) LEGAL COMPLIANCE. HCC is in compliance with all applicable laws
(including rules, regulations, codes, plans, injunctions, judgments, orders,
decrees, rulings, and charges thereunder) of federal, state, local, and foreign
governments (and all agencies thereof), except where such failure to comply
would
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not, individually or in the aggregate, have a material adverse effect on the
business, assets, liabilities, income, financial condition, operations or
results of operations of HCC (an "HCC Material Adverse Effect"); and, to the
Knowledge of the Seller and Shareholders, no action, suit, proceeding, hearing
or investigation, and no written charge, complaint, claim, demand, or notice has
been filed or commenced against him or her or HCC alleging any such failure to
comply.
(j) TAX MATTERS.
(i) Except as set forth on Section 4(j) of the
Disclosure Schedule, HCC has filed all Tax
Returns that it was required to file, giving
effect to any and all extensions obtained.
All such Tax Returns were correct and
complete in all respects. All Taxes owed by
HCC (whether or not shown on any Tax Return)
have been paid. Except as set forth on
Section 4(j) of the Disclosure Schedule, HCC
is not currently the beneficiary of any
extension of time within which to file any
Tax Return. To the knowledge of the Seller
and the Shareholders, no claim has ever been
made by an authority in a jurisdiction where
HCC does not file Tax Returns that it is or
may be subject to taxation by that
jurisdiction. There are no Security
Interests on any of the assets of HCC that
arose in connection with any failure (or
alleged failure) to pay any Tax.
(ii) HCC has withheld and paid all Taxes required
to have been withheld and paid in connection
with amounts paid or owing to any employee,
independent contractor, creditor,
stockholder, or other third party.
(iii) Neither the Seller nor any Shareholder
expects any authority to assess any
additional Taxes for any period for which
Tax Returns have been filed. There is no
dispute or claim concerning any Tax
Liability of HCC either (A) claimed or
raised by any authority in writing or (B) as
to which any of the Shareholders or the
Seller has Knowledge based upon personal
contact with any agent of such authority.
Section 4(j) of the Disclosure Schedule
lists all federal, state, local, and foreign
income Tax Returns filed by HCC for taxable
periods ended on or after December 31, 1994,
indicates those Tax Returns that, to the
knowledge of
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the Seller and the Shareholders, have been
audited, and indicates those Tax Returns
that, to the knowledge of the Seller and the
Shareholders, currently are the subject of
audit. The Seller has delivered to Xxxxxx
correct and complete copies of all
examination reports received by Seller, and
statements of deficiencies assessed against
or agreed to by HCC, since December 31,
1994.
(iv) HCC has not, since December 31, 1994, waived
any statute of limitations in respect of
Taxes or agreed to any extension of time
with respect to a Tax assessment or
deficiency.
(k) REAL PROPERTY.
(i) HCC owns no real property.
(ii) Section 4(k)(ii) of the Disclosure Schedule
lists all real property leased or subleased
to HCC (as well as the related lease or
sublease). The Seller has delivered to
Xxxxxx correct and complete copies of the
leases and subleases listed in Section
4(k)(ii) of the Disclosure Schedule (as
amended to date). With respect to each lease
and sublease listed in Section 4(k)(ii) of
the Disclosure Schedule:
(A) to the Knowledge of the Shareholders,
the lease or sublease is in full force and effect and will
continue to be in full force and effect on identical terms
following the consummation of the transactions contemplated
hereby;
(B) to the Knowledge of the Shareholders, no
party to the lease or sublease is in material breach or
material default or has repudiated such lease or sublease, and
to the knowledge of the Shareholders, no event has occurred
which, with notice or lapse of time, would constitute a
material breach or material default or permit termination,
modification, or acceleration thereunder;
(C) HCC has not assigned, transferred,
conveyed, mortgaged, deeded in trust, or encumbered any
interest in the leasehold or subleasehold;
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(D) all facilities leased or subleased
thereunder are supplied with utilities and other services and,
to the Knowledge of Seller and the Shareholders, have all
licenses and permits that are material for the operation of
HCC's business as presently conducted thereat and as presently
proposed to be conducted thereat; and
(E) to the Knowledge of the Shareholders,
the owner of each facility leased or subleased to HCC has good
and marketable title to the parcel of real property free and
clear of any Security Interest other than Security Interests
that do not materially impair HCC's use of such facility.
(l) INTELLECTUAL PROPERTY.
(i) HCC owns or has the right to use pursuant to
ownership, license, sublicense, agreement,
or permission all Intellectual Property that
is material to the operation of Seller's
Business as presently conducted and as
presently proposed to be conducted. Except
as set forth on Section 4(l) of the
Disclosure Schedule, each such material item
of Intellectual Property will be owned or
available for use by the Purchaser on
identical terms and conditions immediately
subsequent to the Closing hereunder.
(ii) Except as set forth in Section 4(l) of the
Disclosure Schedule, neither the
Shareholders nor the Seller has, within the
last 3 years, received any written charge,
complaint, claim, demand, or notice alleging
any interference, infringement,
misappropriation, or violation by HCC of the
Intellectual Property rights of any third
party (including any claim that HCC must
license or refrain from using any
Intellectual Property rights of any third
party). To the Knowledge of Shareholders and
HCC, no third party has interfered with,
infringed upon, misappropriated, or
otherwise come into conflict with any
Intellectual Property rights of any of HCC.
(iii) There is no copyright, copyright
registration, copyright mask, work,
copyright application or derivative works
from any copyright whether
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published or unpublished which is material
to the operation of Seller's Business.
(iv) Section 4(l)(iv) of the Disclosure Schedule
identifies each patent or registration which
has been issued to HCC with respect to any
of its Intellectual Property, identifies
each pending patent application or
application for registration which HCC has
made with respect to any of its Intellectual
Property, and identifies each license,
agreement, or other permission (other than
routine permissions granted in the Ordinary
Course of Business) which HCC has granted to
any third party with respect to any of its
Intellectual Property (together with any
exceptions). The Seller has delivered to
Xxxxxx correct and complete copies of all
such patents, registrations, applications,
licenses, agreements, and permissions (as
amended to date) and have made available to
Xxxxxx correct and complete copies of all
other written documentation evidencing
ownership and prosecution (if applicable) of
each such item. Section 4(l)(iv) of the
Disclosure Schedule also identifies each
trade name or unregistered trademark used by
HCC in connection with Seller's Business.
With respect to each item of Intellectual
Property required to be identified in
Section 4(l)(iv) of the Disclosure Schedule:
(i) HCC has all right, title, and interest
in and to the item, free and clear of any Security
Interest, license, or other restriction; provided,
however, that Purchaser acknowledges the following:
(1) by definition, no one can ever be said to have
the perpetual right to ownership or use of a
trademark, since any rights thereto derive from the
continued use thereof; (2) any representations herein
regarding Seller's ownership and/or use of any
Intellectual Property apply solely to use and/or
ownership within the United States, and (3) any
representations herein regarding Seller's ownership
and/or use of any trademark relate solely to its
ownership and/or use in connection with the conduct
of Seller's Business.
(ii) the item is not subject to any
outstanding injunction, judgment, order, decree,
ruling, or charge;
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(iii) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand
against HCC is pending or, to the Knowledge of HCC,
threatened which challenges the legality, validity,
enforceability, use, or ownership of the item; and
(iv) HCC has not agreed to indemnify any
Person for or against any interference, infringement,
misappropriation, or other conflict with respect to the item.
(v) Section 4(l)(v) of the Disclosure Schedule
identifies each item of Intellectual
Property that any third party owns and that
HCC uses pursuant to license, sublicense,
agreement, or permission (except for routine
permissions obtained by HCC in the Ordinary
Course of Business). The Seller has
delivered to Xxxxxx correct and complete
copies of all such licenses, sublicenses,
agreements, and permissions (as amended to
date). With respect to each item of
Intellectual Property required to be
identified in Section 4(m)(v) of the
Disclosure Schedule:
(i) to the Knowledge of the Shareholders,
(1) the license, sublicense, agreement, or permission
covering the item is in full force and effect and (2)
if assigned to Purchaser under this Agreement, will
continue to be in full force and effect on identical
terms following the consummation of the transactions
contemplated hereby (including the assignments and
assumptions referred to in Section 2 above);
(ii) to the Knowledge of the Shareholders,
(1) no party to the license, sublicense, agreement,
or permission is in material breach or material
default or has repudiated such license, sublicense,
agreement or permission, and (2) no event has
occurred which with notice or lapse of time would
constitute a material breach or material default or
permit termination, modification, or acceleration
thereunder;
(iii) to the Knowledge of the Seller and the
Shareholders, the underlying item of Intellectual
Property is not subject to any outstanding
injunction, judgment, order, decree, ruling, or
charge;
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(iv) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is
pending against HCC or, to the Knowledge of any of
the Shareholders and HCC, is threatened which
challenges the legality, validity, or enforceability
of the underlying item of Intellectual Property; and
(v) HCC has not granted any sublicense or
similar right with respect to the license,
sublicense, agreement, or permission.
(vi) To the Knowledge of the Shareholders and
HCC, HCC will not interfere with, infringe
upon, misappropriate, or otherwise come into
conflict with, any Intellectual Property
rights of third parties as a result of the
continued operation of its businesses as
presently conducted and as presently
proposed to be conducted.
(vii) To the Knowledge of the Seller and the
Shareholders, the technology of HCC is "Year
2000 Compliant" in that it correctly
performs all date-related operations (A)
without human intervention, other than
original data entry of any date, (B) without
regard to whether any date involved in the
operation occurs in the twentieth or
twenty-first centuries and (C) without
regard to the system date at the time the
calculation is performed. Without limiting
the foregoing, Year 2000 Compliant means
that technology (1) accepts as input (by key
entry or otherwise) fully specified dates
(four-digit year, month and day of month),
(2) if two-digit year specifications are
accepted as input, correctly translates such
dates without human intervention into fully
specified dates in a manner that
unambiguously preserves the user's intent in
light of the application context, (3)
performs all date-related arithmetic and
logical operations correctly (for example,
January 2, 2000 is greater than December 31,
1999; January 2, 2000 minus December 31,
1999 equals two days), (4) sorts
date-related information in correct
chronological order, (5) otherwise correctly
processes (updates, maintains, reports)
dates, and (6) stores internal, date-related
information (including all interim
date-related results) in a manner that is
unambiguous (in the context of software
processing)
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as to century and permits all of the
foregoing to occur correctly without human
intervention.
(m) CONTRACTS. Section 4(m) of the Disclosure Schedule lists the
following contracts and other agreements to which HCC is a party:
(i) any agreement (or group of related
agreements) for the lease of personal
property (other than capitalized lease
obligations) to or from any Person which
obligates the lessee to make lease payments
in excess of Twenty Five Thousand Dollars
($25,000) per annum;
(ii) any agreements or contracts with customers,
any agreement (or group of related
agreements) for the purchase or sale of raw
materials, commodities, supplies, products,
or other personal property, or for the
furnishing or receipt of services, the
performance of which extends over a period
of more than one year, or which obligates
either party to pay consideration in excess
of Twenty Five Thousand Dollars ($25,000);
(iii) any agreement creating or amending a
partnership or joint venture;
(iv) any agreement (or group of related
agreements) under which HCC has created,
incurred, assumed, or guaranteed any
indebtedness for borrowed money, or any
capitalized lease obligation, in excess of
Twenty Five Thousand Dollars ($25,000);
(v) any agreement imposing upon HCC
confidentiality or noncompetition
obligations other than standard provisions
in contracts with HCC's customers;
(vi) any agreement with any of the Shareholders
and their Affiliates;
(vii) any profit sharing, stock option, stock
purchase, phantom stock, stock appreciation,
deferred compensation, severance, or other
material plan or arrangement for the benefit
of its current or former directors,
officers, and employees;
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(viii) any collective bargaining agreement;
(ix) any agreement for the employment of any
individual on a full-time, part-time,
consulting, or other basis obligating HCC to
pay annual compensation in excess of Twenty
Five Thousand Dollars ($25,000) or providing
severance benefits in excess of Twenty Five
Thousand Dollars ($25,000);
(x) any agreement under which it has advanced or
loaned any amount to any of its directors,
officers, and employees outside the Ordinary
Course of Business; or
(xi) any other agreement (or group of related
agreements) the performance of which
obligates either party to pay consideration
in excess of Twenty Five Thousand Dollars
($25,000).
The Seller has delivered to Xxxxxx a correct and complete copy of each
written agreement listed in Section 4(m) of the Disclosure Schedule (as amended
to date) and a written summary setting forth the material terms and conditions
of each oral agreement referred to in Section 4(m) of the Disclosure Schedule.
With respect to each such agreement: (A) to the Knowledge of the Seller, the
agreement is in full force and effect; (B) to the Knowledge of the Seller, the
agreement (if assigned to the Purchaser) will continue to be in full force and
effect on identical terms following the consummation of the transactions
contemplated hereby; (C) to the Knowledge of the Seller, no party is in material
breach or material default, and no event has occurred which with notice or lapse
of time would constitute a material breach or material default, or permit
termination, modification, or acceleration, under the agreement; and (D) to the
Knowledge of the Seller, no party has repudiated any provision of the agreement.
Except as listed on Section 4(m) of the Disclosure Schedule, HCC is not a party
to any contract or agreement, relating to provision by HCC of services to any
federal, state or local government, governmental agency or other governmental
authority.
(n) NOTES AND ACCOUNTS RECEIVABLE. All notes and all accounts
receivable of HCC are reflected properly on their books and records, are valid
receivables and, to the Knowledge of the Seller, (i) are subject to no setoffs
or counterclaims, (ii) are current and collectible, and (iii) will be collected
in accordance with their terms at their recorded amounts, subject only to a
reserve for bad debts in accordance with the past custom and practice of HCC.
Section 4(n) of the Disclosure Schedule lists (or will be updated to list, as
the case may be) all accounts payable and
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accrued expenses of the Seller as of five (5) business days prior to the date
hereof and prior to the Closing Date.
(o) POWERS OF ATTORNEY. There are no outstanding powers of attorney
executed on behalf of HCC.
(p) INSURANCE. Section 4(p) of the Disclosure Schedule sets forth the
following information with respect to each insurance policy (including policies
providing property, casualty, liability, and workers' compensation coverage and
bond and surety arrangements) to which HCC is a party, a named insured, or
otherwise the beneficiary of coverage:
(i) the name of the insurer and the name of the policyholder;
(ii) the type of policy; and
(iii) the policy number.
With respect to each such insurance policy: (A) to the Knowledge of the
Shareholders, the policy is in full force and effect; (B) to the Knowledge of
the Shareholders, neither HCC nor any other party to the policy is in material
breach or material default (including with respect to the payment of premiums or
the giving of notices), and, to the Knowledge of the Shareholders, no event has
occurred which, with notice or the lapse of time, would constitute such a
material breach or material default, or permit termination, modification, or
acceleration, under the policy; and (C) to the Knowledge of the Shareholders, no
party to the policy has repudiated any provision thereof. HCC is covered by
insurance in scope and amount reasonable for the businesses in which it is
engaged.
(q) LITIGATION. Section 4(q) of the Disclosure Schedule sets forth each
instance in which HCC (i) is subject to any outstanding injunction, judgment,
order, decree, ruling, or charge of any court or other such tribunal or (ii) is
a party or, to the Knowledge of the Seller, Shareholders and the directors and
officers (and employees with responsibility for litigation matters) of HCC, is
threatened to be made a party to any action, suit, proceeding, hearing, or
investigation of, in, or before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or before any
arbitrator. None of the actions, suits, proceedings, hearings, and
investigations set forth in Section 4(q) of the Disclosure Schedule would
reasonably be expected, if adversely determined, to result in any HCC Material
Adverse Change. Neither HCC nor the Shareholders is aware of any fact or
circumstances that would reasonably be expected to give rise to any action,
suit, proceeding, hearing, or investigation against HCC.
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(r) EMPLOYEE BENEFITS.
(i) Section 4(r) of the Disclosure Schedule
lists each Employee Benefit Plan that HCC
maintains or to which HCC contributes or has
any obligation to contribute.
(A) To the Knowledge of the Seller and the
Shareholders, each such Employee Benefit Plan (and each
related trust, insurance contract, or fund) complies in form
and in operation in all material respects with the applicable
requirements of ERISA, the Code, and other applicable laws.
(B) All required reports and descriptions
(including Form 5500 Annual Reports, summary annual reports,
PBGC-1's, and summary plan descriptions) have been timely
filed and distributed appropriately with respect to each such
Employee Benefit Plan. The requirements of COBRA have been met
with respect to each Employee Welfare Benefit Plan which is a
group health plan.
(C) All contributions (including all
employer contributions and employee salary reduction
contributions) which are due have been paid to each such
Employee Benefit Plan which is an Employee Pension Benefit
Plan and all contributions for any period ending on or before
the Closing Date which are not yet due will be paid to each
such Employee Pension Benefit Plan or accrued in accordance
with the past custom and practice of HCC. All premiums or
other payments for all periods ending on or before the Closing
Date have been or will be paid with respect to each such
Employee Benefit Plan which is an Employee Welfare Benefit
Plan.
(D) Each such Employee Benefit Plan which is
an Employee Pension Benefit Plan meets the requirements of a
"qualified plan" under Code Section 401(a), has received,
within the last two years, a favorable determination letter
from the Internal Revenue Service that it is a "qualified
plan," and Seller and the Shareholders are not aware of any
facts or circumstances that could result in the revocation of
such determination letter.
(E) The market value of assets under each
such Employee Benefit Plan which is an Employee Pension
Benefit Plan (other than any Multiemployer Plan) equals or
exceeds the present
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value of all vested and nonvested Liabilities thereunder
determined in accordance with PBGC methods, factors, and
assumptions applicable to an Employee Pension Benefit Plan
terminating on the date for determination.
(F) The Sellers have delivered to Xxxxxx
correct and complete copies of the plan documents and summary
plan descriptions, the most recent determination letter
received from the Internal Revenue Service, the most recent
Form 5500 Annual Report, and all related trust agreements,
insurance contracts, and other funding agreements which
implement each such Employee Benefit Plan.
(ii) With respect to each Employee Benefit Plan
that any of HCC and any ERISA Affiliate
maintains or ever has maintained or to which
any of them contributes, ever has
contributed, or ever has been required to
contribute:
(A) Except as otherwise disclosed on Section
4(r) of the Disclosure Schedule, no such Employee Benefit Plan
which is an Employee Pension Benefit Plan (other than any
Multiemployer Plan) has been completely or partially
terminated or been the subject of a Reportable Event as to
which notices would be required to be filed with the PBGC. No
proceeding by the PBGC to terminate any such Employee Pension
Benefit Plan (other than any Multiemployer Plan) has been
instituted or, to the Knowledge of the Shareholders and the
Seller, threatened.
(B) There have been no Prohibited
Transactions with respect to any such Employee Benefit Plan.
No Fiduciary has any Liability for breach of fiduciary duty or
any other failure to act or comply in connection with the
administration or investment of the assets of any such
Employee Benefit Plan. No action, suit, proceeding, hearing,
or investigation with respect to the administration or the
investment of the assets of any such Employee Benefit Plan
(other than routine claims for benefits) is pending or, to the
Knowledge of the Seller and the Shareholders, threatened. None
of the Shareholders or Seller has any Knowledge of any Basis
for any such action, suit, proceeding, hearing, or
investigation.
(C) HCC has not incurred, and none of the
Shareholders nor Seller has any reason to expect that HCC will
incur,
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any Liability to the PBGC (other than PBGC premium payments)
or otherwise under Title IV of ERISA (including any withdrawal
liability as defined in ERISA Section 4201) or under the Code
with respect to any such Employee Benefit Plan which is an
Employee Pension Benefit Plan.
(iii) None of HCC and the other members of the
Controlled Group, if any, that includes HCC
contributes to, ever has contributed to, or
ever has been required to contribute to any
Multiemployer Plan or has any Liability
(including withdrawal liability as defined
in ERISA Section 4201) under any
Multiemployer Plan.
(iv) HCC does not maintain or ever has maintained
and does not contribute, ever has
contributed, or ever has been required to
contribute to any Employee Welfare Benefit
Plan providing medical, health, or life
insurance or other welfare-type benefits for
current or future retired or terminated
employees, their spouses, or their
dependents (other than in accordance with
COBRA).
(s) GUARANTIES. HCC is not a guarantor of, or, to the Knowledge of the
Seller and the Shareholders, liable as a surety for, any Liability or obligation
(including indebtedness) of any other Person.
(t) ENVIRONMENTAL, HEALTH, AND SAFETY MATTERS.
Except as disclosed in Section 4(t) of the Disclosure Schedule:
(i) Hazardous Materials have not at any time
been generated, used, treated or stored by
HCC in violation in any material respect of
any applicable Environmental Law, or in any
way which will hereafter require material
remedial action under any applicable
Environmental law, and HCC has not received
any notice of any such violation with
respect to Hazardous Materials;
(ii) To the Knowledge of the Seller, there has
been no spill, discharge, leak, emission,
injection, escape, dumping or release of any
kind onto any property
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owned or leased by HCC, or into the
environment surrounding any such property,
of Hazardous materials, other than releases
permissible under applicable Law or
allowable under applicable permits;
(iii) HCC, its operations and any property owned
by it are in compliance in all material
respects with (i) all applicable
Environmental Laws, and (ii) the
requirements of any permits issued under
such laws; and
(iv) there are no pending or threatened claims
against HCC or any property owned or, to its
Knowledge, leased by it relating to
Hazardous Materials or environmental
matters.
None of the circumstances, conditions or occurrences disclosed in
Section 4(t) of the Disclosure Schedule or reflected in the Financial Statements
involves or will result in any material liability on the part of HCC.
(u) CERTAIN BUSINESS RELATIONSHIPS WITH HCC. Except as
contemplated or permitted by this Agreement, disclosed in Section 4(u) of the
Disclosure Statement or reflected in the Financial Statements, none of the
Shareholders is involved in any business arrangement or relationship with HCC
(other than that of director, officer, employee, etc.) and none of the
Shareholders own any material asset, tangible or intangible, which is used in
the business of HCC.
(v) EVENTS SUBSEQUENT TO MOST RECENT FISCAL YEAR END. Except
as set forth in Section 4(v) of the Disclosure Schedule, since December 31,
1998, there has not been any HCC Material Adverse Change. Without limiting the
generality of the foregoing, since that date, except as set forth in Section
4(v) of the Disclosure Schedule:
(i) HCC has not sold, leased, transferred, or
assigned any of its assets, tangible or
intangible, involving in the aggregate more
than Twenty Five Thousand Dollars
($25,000.00) other than for a fair
consideration in the
Ordinary Course of Business;
(ii) HCC has not entered into any agreement,
contract, lease, or license (or series of
related agreements, contracts, leases, and
licenses) which either (A) obligates HCC to
pay, or entitles HCC to receive,
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more than Twenty Five Thousand Dollars
($25,000), or (B) was outside the Ordinary
Course of Business;
(iii) no party (including HCC) has accelerated,
terminated, modified, or canceled any
agreement, contract, lease, or license (or
series of related agreements, contracts,
leases, and licenses) which obligates HCC to
pay, or entitles HCC to receive, more than
Twenty Five Thousand Dollars ($25,000) to
which HCC is a party or by which it is
bound;
(iv) HCC has not imposed or permitted to be
imposed any Security Interest or Encumbrance
upon any of its assets, tangible or
intangible;
(v) HCC has not made any capital expenditure (or
series of related capital expenditures)
either involving more than Twenty Five
Thousand Dollars ($25,000) or outside the
Ordinary Course of Business;
(vi) HCC has not made any capital investment in,
any loan to, or any acquisition of the
securities or assets of, any other Person
(or series of related capital investments,
loans, and acquisitions) either involving
more than Twenty Five Thousand Dollars
($25,000) or outside the Ordinary Course of
Business;
(vii) HCC has not issued any shares of stock,
bond, or other debt security or created,
incurred, assumed, or guaranteed any
indebtedness for borrowed money or
capitalized lease obligation either
involving more than Twenty Five Thousand
Dollars ($25,000) singly or Twenty Five
Thousand Dollars ($25,000) in the aggregate;
(viii) HCC has not delayed or postponed the payment
of accounts payable and other Liabilities
outside the Ordinary Course of Business;
(ix) HCC has not canceled, compromised, waived,
or released any right or claim (or series of
related rights and claims) which either
involved more than Twenty
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Five Thousand Dollars ($25,000) or was
outside the Ordinary Course of Business;
(x) HCC has not granted any license or
sublicense of any rights under or with
respect to any Intellectual Property;
(xi) there has been no change made or authorized
in the charter or bylaws of HCC;
(xii) HCC has not declared, set aside, or paid any
dividend or made any distribution with
respect to its capital stock (whether in
cash or in kind) or redeemed, purchased, or
otherwise acquired any of its capital stock;
(xiii) HCC has not experienced any damage,
destruction, or loss (whether or not covered
by insurance) to its tangible property in
excess of Twenty Five Thousand Dollars
($25,000);
(xiv) HCC has not made or accepted any loan (that
will remain outstanding on the Closing Date)
to or from any of its directors, officers,
and employees outside the Ordinary Course of
Business;
(xv) HCC has not entered into any employment
contract or collective bargaining agreement,
written or oral, or materially changed or
modified the terms of any existing such
contract or agreement;
(xvi) HCC has not granted any increase in the base
compensation of any of its directors,
officers, and employees outside the Ordinary
Course of Business;
(xvii) HCC has not adopted, amended, modified, or
terminated any bonus, profit-sharing,
incentive, severance, or other plan,
contract, or commitment for the benefit of
any of its directors, officers, and
employees (or taken any such action with
respect to any other Employee Benefit Plan);
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(xviii) HCC has not made or pledged to make any
charitable or other capital contribution
outside the Ordinary Course of Business; and
(xix) HCC has not become legally bound to do any
of the foregoing.
(w) UNDISCLOSED LIABILITIES. To the Knowledge of Seller and
the Shareholders, HCC has no Liability that individually or in the aggregate is
material to the results of operations or the financial or other condition of HCC
except for (i) Liabilities reflected or reserved against on the Most Recent
Balance Sheet or described on Section 4(w) of the Disclosure Schedule or in the
notes (if any) to the Most Recent Financial Statements; (ii) Liabilities which
have arisen after the Most Recent Fiscal Year End in the Ordinary Course of
Business; or (iii) liabilities under its various contractual obligations.
(x) GOVERNMENTAL LICENSES, PERMITS AND RELATED APPROVALS.
Except as set forth on Section 4(x) of the Disclosure Schedule, Seller has all
licenses, permits, consent, approvals, authorizations, qualifications and orders
of governments, governmental agencies, or other governmental authorities
required for the conduct of the Seller's Business as presently conducted.
(y) DISCLOSURE. The representations and warranties contained
in this Section 4 do not contain any untrue statement of a material fact.
(z) INVESTMENT. Each Shareholder receiving, directly or
indirectly, Xxxxxx Shares (A) understands that the Xxxxxx Shares have not been,
and will not be, registered under the Securities Act, or under any state
securities laws, other than subsequent to the Closing pursuant to the terms and
conditions set forth in the Registration Rights Agreement by and among Xxxxxx,
Shareholders, and Seller to be executed and delivered at Closing in the form of
Section 8(b)(vi) hereto (the "Registration Rights Agreement"), and are being
offered and sold in reliance upon federal and state exemptions for transactions
not involving any public offering, (B) is acquiring Xxxxxx Shares solely for his
or her own account for investment purposes, and not with a view to the
distribution thereof, (C) is a sophisticated investor with knowledge and
experience in business and financial matters, (D) has received certain
information concerning Xxxxxx and has had the opportunity to obtain additional
information as desired in order to evaluate the merits and the risks inherent in
holding Xxxxxx Shares, and (E) is able to bear the economic risk and lack of
liquidity inherent in holding Xxxxxx Shares.
(aa) Neither HCC nor the "ultimate parent entity" (as
defined in 16 CFR Section 801.1(a)(3)) of HCC is a "person (as defined in 16 CFR
Section 801.1(a)(1)) which
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has annual net sales or total assets (calculated in accordance with 16 CFR
Section 801.11) of $10,000,000 or more.
5. PRE-CLOSING COVENANTS. The Parties agree as follows with respect to
the period between the execution of this Agreement and the Closing.
(a) GENERAL. Each of the Parties will use his, her or its
commercially reasonable best efforts to facilitate all things necessary, proper,
or advisable in order to consummate and make effective the transactions
contemplated by this Agreement (including satisfaction, but not waiver, of the
closing conditions set forth in Section 8 below).
(b) NOTICES AND CONSENTS. The Shareholders will cause HCC to
give any notices to third parties, and to use its commercially reasonable best
efforts to obtain any third party consents, that Xxxxxx reasonably may request
and which are referred to in Section 4(c) above. Each of the Parties will (and
the Shareholders will cause HCC to) give any notices, make any filings, and use
its commercially reasonable best efforts to obtain any authorizations, consents,
and approvals of governments and governmental agencies which relate to it and
are referred to in Section 3(a)(i), Section 3(b)(ii), and Section 4(c) above.
(c) BULK SALES COMPLIANCE. The Parties agree to waive
compliance with any applicable bulk sales statutes (including without
limitation, tax statutes, rules or regulations) with respect to the sale of
assets hereunder or otherwise applicable to the transactions contemplated
hereby.
(d) OPERATION OF BUSINESS. The Shareholders will not cause or
permit HCC to engage in any practice, take any action, or enter into any
transaction (in each case, which is material) outside the Ordinary Course of
Business without prior notification to and the consent of Xxxxxx (which consent
shall not be unreasonably withheld or delayed). Without limiting the generality
of the foregoing, the Sellers will not cause or permit HCC to (i) declare, set
aside, or pay any dividend or make any distribution with respect to its capital
stock or redeem, purchase, or otherwise acquire any of its capital stock , or
(ii) otherwise engage in any practice, take any action, or enter into any
transaction of the sort described in Section 4(v) above (OTHER THAN Section 4(v)
(ii), (iii), (xii), (xiii) and (xv)) or (iii) enter into any collective
bargaining agreement, written or oral, or materially modify the terms of any
existing collective bargaining or employment agreement.
(e) PRESERVATION OF BUSINESS. The Shareholders shall use their
commercially reasonable best efforts to cause HCC to keep its business and
properties substantially intact, including its present operations, physical
facilities,
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working conditions and relationships with lessors, licensors, suppliers,
customers and employees.
(f) FULL ACCESS. The Shareholders will permit, and the
Shareholders will cause HCC to permit, representatives of Xxxxxx to have
reasonable access at reasonable times and upon reasonable notice, and in a
manner so as not to interfere with the normal business operations of HCC, to all
premises, properties, personnel, books, records (including Tax records),
contracts, and documents of HCC.
(g) NOTICE OF DEVELOPMENTS. The Shareholders will give prompt
written notice to Xxxxxx of any material adverse, or other, development, of
which they become aware, causing any of the representations and warranties in
Section 4 above to no longer be accurate. Each Party will give prompt written
notice to the others of any material adverse, or other, development, of which
he, she or it becomes aware, causing any of his, her or its own representations
and warranties in Section 3 above to no longer be accurate.
(h) EXCLUSIVITY. Until the earlier to occur of (i) the Closing
or (ii) the termination of this Agreement pursuant to Xxxxxxx 00 xxxxx, xxxx of
the Shareholders will (and the Shareholders will not cause or permit HCC or any
of the Shareholders' agents or representatives to) (i) solicit, initiate, or
encourage the submission of any proposal or offer from any Person relating to
the acquisition of any capital stock or other voting securities, or any
substantial portion of the assets, of HCC (including any acquisition structured
as a merger, consolidation or share exchange) or (ii) participate in any
discussions or negotiations regarding, 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 any of the foregoing. None of the
Shareholders will vote their HCC Shares in favor of any such acquisition
structured as a merger, consolidation or share exchange. The Seller and
Shareholders will notify Xxxxxx promptly if any Person makes any proposal,
offer, inquiry, or contact, of which they become aware, with respect to any of
the foregoing. If any of the Shareholders or HCC violate the covenants set forth
in this Section 5(h), or if, after this Agreement has been executed, the
Shareholders and HCC are obligated to consummate the transactions contemplated
and the Shareholders and HCC fail to do so, in either event, HCC and the
Shareholders shall: (i) pay Xxxxxx, as liquidated damages, an amount equal to
Three Percent (3%) of the Purchase Price, which shall include the Earnout
Amount; and (ii) reimburse Xxxxxx for all out-of-pocket expenses (including
attorneys' and accountants' fees) Xxxxxx incurs in connection with the
transaction contemplated hereby. The foregoing liquidated damages provision
shall not apply if (i) the transaction with Xxxxxx is consummated, or (ii) if
the transaction is not consummated due to a breach of this Agreement by Xxxxxx.
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(i) AUDIT. Seller shall permit Purchaser's outside,
independent auditors to conduct an audit of the Most Recent Financial
Statements. Seller and Purchaser shall each pay fifty percent (50%) of the cost
of such audit which shall include any fees and expenses of Wiss & Company, LLP
which relate to services performed by such firm in connection with such audit.
(j) CONFIDENTIALITY. Purchaser and Xxxxxx will treat and hold
as such all of the confidential and proprietary information which it has
received and may receive relating to HCC, refrain from using any of such
confidential and proprietary information except in connection with this
Agreement and, in the event of the termination of this Agreement, will deliver
promptly to HCC or destroy, at the request of HCC, all copies of such
information which are in its possession. In the event that Purchaser or Xxxxxx
is requested or required (by oral question or request for information or
documents in any legal proceeding, interrogatory, subpoena, civil investigative
demand, or similar process) to disclose any of such confidential or proprietary
information, Purchaser will notify HCC promptly of the request or requirement so
that HCC may seek an appropriate protective order or waive compliance with the
provisions of this Section 5(j). If, in the absence of a protective order or the
receipt of a waiver hereunder, Purchaser or Xxxxxx is compelled to disclose such
information, Purchaser or Xxxxxx may disclose the such information to the
tribunal; PROVIDED, HOWEVER, that each of Purchaser and Xxxxxx shall use its
commercially reasonable best efforts (at the sole cost and expense of HCC) to
obtain, at the reasonable request of HCC, an order or other assurance that
confidential treatment will be accorded to such portion of the information
required to be disclosed as HCC shall designate.
6. POST-CLOSING COVENANTS. The Parties agree as follows with respect to
the period following the Closing.
(a) GENERAL. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this Agreement,
each of the Parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other Party
reasonably may request, all at the sole cost and expense of the requesting Party
(unless the requesting Party is entitled to indemnification therefor under
Section 11 below). The Sellers acknowledge and agree that, from and after the
Closing, Xxxxxx will be entitled to possession of all documents, books, records
(including Tax records), agreements, and financial data of any sort that are
included within the Seller's Assets.
(b) LITIGATION SUPPORT. In the event and for so long as any
Party actively is contesting or defending against any third party action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand in
connection with (i) any transaction contemplated under this Agreement or (ii)
any fact, situation,
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circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing Date
involving HCC, each of the other Parties will cooperate, in all reasonable
respects, with him, her or it and his, her or its counsel in the contest or
defense, make available their personnel, and provide such testimony and access
to their books and records as shall be reasonably necessary in connection with
the contest or defense, all at the sole cost and expense of the contesting or
defending Party (unless the contesting or defending Party is entitled to
indemnification therefor under Section 11 below).
(c) INSURANCE. If Xxxxxxxx X. Xxxxxx'x employment is
terminated for any reason before the fifth anniversary of the Closing Date, then
Xxxxxx and Purchaser agree, at Xxxxxxxx Xxxxxx'x option, to either (i) cancel
the key man life insurance policy under which it has paid premiums or (ii)
transfer such policy to Xxxxxxxx Xxxxxx with no further obligation on the part
of Xxxxxx or Purchaser to make any premium payments.
(d) CONFIDENTIALITY. Each of the Seller and Shareholders will
treat and hold as such all of the confidential and proprietary information which
it has received and may receive relating to Xxxxxx, refrain from using any of
the confidential and proprietary information (other than confidential and
proprietary information that solely relates to the Shareholders personally)
except in connection with this Agreement or the business of HCC or Xxxxxx and
will deliver promptly to Xxxxxx or destroy, at the request of Xxxxxx, all copies
of such information which are in his or her possession. In the event that any of
the Shareholders or Seller is requested or required (by oral question or request
for information or documents in any legal proceeding, interrogatory, subpoena,
civil investigative demand, or similar process) to disclose any confidential and
proprietary information, that Shareholder or Seller will notify Xxxxxx promptly
of the request or requirement so that Xxxxxx may seek an appropriate protective
order or waive compliance with the provisions of this Section 6(d). If, in the
absence of a protective order or the receipt of a waiver hereunder, any
Shareholder or Seller is compelled to disclose such Confidential Information,
the Shareholder or Seller may disclose the confidential information to the
tribunal; PROVIDED, HOWEVER, that the disclosing Shareholder or Seller shall use
his or her commercially reasonable best efforts (at the sole cost and expense of
the Purchaser) to obtain, at the reasonable request of Xxxxxx, an order or other
assurance that confidential treatment will be accorded to such portion of the
Confidential Information required to be disclosed as Xxxxxx shall designate.
(e) Tax Distribution. Seller shall provide to Xxxxxx a
statement setting forth the amount necessary to pay the Shareholders' respective
taxes created by the income from HCC which taxes are related to Seller's
operations for the period of January 1, 1999 to the Closing Date (such amount
shall not include any tax obligations related to the sale of Seller's Assets).
Following receipt of such
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statement, Xxxxxx shall, within fifteen (15) business days, deliver to Seller
the amount set forth in such statement.
(f) PAYMENT OF TAXES AND FEES. The Sellers shall pay or
reserve for payment when due out of the Purchase Price (a) any documentary,
stamp, sales, excise, transfer or other Taxes payable in respect of the sale of
the assets of HCC; provided, however, that the foregoing shall not apply to
taxes in respect of or based upon income or gain earned, realized or recognized
by any party, which shall in each case be the responsibility of the party upon
whom such taxes are imposed by applicable law. The Seller shall cause to be
prepared and filed any and all returns and other filings relating to any such
Taxes referred to in the first clause of the preceding sentence.
(g) ACCESS TO RECORDS. For a period of six (6) years after the
Closing Date, Seller and its representatives shall have reasonable access to,
and the right to make copies of, all of the books and records transferred to
Purchaser hereunder to the extent that such access may reasonably be required by
Seller or any Shareholder in connection with matters relating to or affected by
the operations of the business of Seller prior to the Closing Date. Such access
shall be afforded by Purchaser upon receipt of reasonable advance notice and
during normal business hours. Seller shall be solely responsible for any costs
or expenses incurred by it pursuant to this Section 6(g). If Purchaser shall
desire to dispose of any of such books and records prior to the expiration of
such six year period, Purchaser shall, prior to such disposition, give Seller a
reasonable opportunity, at Seller's expense, to segregate and remove such books
and records as Seller may select.
(h) ASSIGNABILITY. To the extent that any lease, contract,
license, agreement, sales or purchase order, commitment, or right included in
Seller's Assets (each an "Interest") is not capable of being sold, assigned,
transferred or conveyed without the approval, consent or waiver of the issuer
thereof or the other party or parties thereto, or any other person or entity
(including a governmental authority) (or would be breached in the event of an
assignment, transfer, etc. without such approval, consent or waiver) (a) this
Agreement shall not constitute an assignment or conveyance thereof absent such
approval, consent or waiver and (b) Seller and each Shareholder shall use such
person's commercially reasonable efforts, both prior and subsequent to the
Closing Date, to obtain all necessary approvals, consents or waivers necessary
to convey to Buyer each such Interest. To the extent any of the approvals,
consents or waivers referred to in this Section 6(h) have not been obtained as
of the Closing and to the extent Purchaser and Seller waived obtaining such
consents as a condition to Closing as set forth in Section 8(a)(x), the Seller
and each Shareholder shall, during the remaining term of such Interest, exercise
commercially reasonable efforts to cooperate with Purchaser, at its request, in
any reasonable and lawful arrangements designed to provide the benefits of such
Interest to Purchaser. In the
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event, and to the extent that any such approval, consent or waiver is obtained
subsequent to the Closing Date in connection with an Assumed Contract, such
Assumed Contract will be deemed, as of the date on which such approval, consent
or waiver is obtained, to have been assigned to and assumed by the Purchaser in
the same manner, and to the same extent, as all other Assumed Contracts that
were so assigned and assumed on the Closing Date.
7. THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Xxxxxxx, Muething &
Xxxxxxx, XXX, 0000 Provident tower, Xxx Xxxx Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxx
00000, commencing at 9:00 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 will take at the Closing itself) or
such other date as Xxxxxx and the Seller may mutually determine (the "Closing
Date")
8. CONDITIONS TO OBLIGATION TO CLOSE.
(a) CONDITIONS TO OBLIGATION OF XXXXXX. The obligation of
Xxxxxx to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth
in Section 3(a) and Section 4 above shall be
true and correct in all material respects
(other than representations and warranties
having materiality qualifiers, which shall
be true and correct in all respects) at and
as of the Closing Date;
(ii) the Seller shall have performed and complied
with all of its covenants hereunder in all
material respects through the Closing;
(iii) no action, suit, or proceeding shall be
pending or threatened before any court or
quasi-judicial or administrative agency of
any federal, state, local, or foreign
jurisdiction or before any arbitrator
wherein an unfavorable injunction, judgment,
order, decree, ruling, or charge would (A)
prevent consummation of any of the
transactions contemplated by this Agreement
or (B) cause any of the transactions
contemplated by this Agreement to be
rescinded following consummation (and no
such injunction,
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judgment, order, decree, ruling, or charge
shall be in effect);
(iv) the Seller shall have delivered to Xxxxxx a
certificate to the effect that each of the
conditions specified above in Section
8(a)(i)-(iii) is satisfied in all respects;
(v) Xxxxxx shall have received a letter from its
insurance company that the lives of Xx.
Xxxxxxxx X. Xxxxxx and Xx. Xxxxxxx X. Xxxxxx
are insurable on a term policy basis at
standard rates for five Million Dollars
($5,000,000), and that Xx. Xxxxxxxx X.
Xxxxxx and Xx. Xxxxxxx X. Xxxxxx shall have
cooperated with Xxxxxx in applying for such
insurance coverages;
(vi) Xxxxxx'x bank creditors shall have given
their written consent to the transaction
contemplated by this Agreement;
(vii) Xx. Xxxxxxxx X. Xxxxxx, Xx. Xxxxxxx X.
Xxxxxx, and Xx. Xxxx Xxxxxx shall have
entered into Employment Agreements
substantially in the forms attached as
Exhibit 8(a)(vii) hereto (the "Employment
Agreements");
(viii) The Shareholders shall have each entered
into a Non-Competition and Non-Disclosure
Agreement substantially in the forms
attached hereto as Exhibit 8(a)(viii) hereto
(the "Non-Compete Agreements");
(ix) Xxxxxx or its designated assignee, Xxxxxxxx
X. Xxxxxx, M.D., and Health Care
Communications, Ltd., a Canadian corporation
("HCC Canada") shall have entered into a
purchase agreement, similar to this
Agreement, reasonably acceptable to Xxxxxx
and HCC Canada pursuant to which HCC Canada
would sell substantially all its assets to
the Purchaser and Purchaser would acquire
obligations of HCC Canada like those being
assumed hereunder (the "Canadian Purchase
Agreement") at a purchase price of Twenty
Thousand Dollars ($20,000), and such
acquisition shall be closed simultaneously
with the Closing;
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(x) The Parties shall have received all consents
to assignment of the Assumed Contracts;
(xi) no material adverse change in the business,
assets, liabilities, income, financial
condition, operations or results of
operations of HCC ("HCC Material Adverse
Change") shall have occurred; provided,
however, if a HCC Material Adverse Change
shall have occurred, Xxxxxx and the Seller
shall negotiate in good faith with respect
to a reasonable adjustment of the Purchase
Price (but no party shall be obligated to so
negotiate beyond the Expiration Date). If
agreement is not reached with respect to
such an adjustment, Xxxxxx may terminate
this Agreement for failure of a condition
precedent subject to the terms and
conditions of Section 13 hereof;
(xii) the Parties and HCC shall have received all
authorizations, consents, and approvals of
governments and governmental agencies
referred to in Section 3(a)(i), Section
3(b)(ii), and Section 4(c) above;
(xiii) Xxxxxx shall have received from counsel to
the Seller an opinion in form and substance
reasonably acceptable to Xxxxxx, addressed
to Xxxxxx, and dated as of the Closing Date;
(xiv) each of the Shareholders and Seller shall
have executed and delivered an escrow
agreement, reasonably acceptable to Seller
and Xxxxxx, substantially in the form
annexed hereto as Exhibit 8(a)(xiv)and
modified appropriately to take account of
the terms of this Agreement (the "Escrow
Agreement");
(xv) all other certificates, opinions,
certificates, instruments, and other
documents required to effect the
transactions contemplated hereby will be
reasonably satisfactory in form and
substance to Xxxxxx;
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(xvi) the majority of the employees of Seller
agree to become employees of Purchaser at
substantially similar salaries.
(xvii) Seller shall have delivered Disclosure
Schedule 4(f) listing all Equipment with a
net book value in excess of $5,000;
(xviii) Seller shall have delivered final compiled
Financial Statements for the year ending
December 31, 1998, which are substantially
similar to the draft Financial Statements
provided on Disclosure Schedule 4(h).
Xxxxxx may waive any condition specified in this Section 8(a) if it executes a
writing so stating at or prior to the Closing.
(b) CONDITIONS TO OBLIGATION OF THE SELLER. The obligation of
the Seller and Shareholders to consummate the transactions to be performed by
them in connection with the Closing is subject to satisfaction of the following
conditions:
(i) the representations and warranties set forth
in Section 3(b) above shall be true and
correct in all material respects (other than
representations and warranties having
materiality qualifiers, which shall be true
and correct in all respects) at and as of
the Closing Date;
(ii) each of the Purchaser and Xxxxxx shall have
performed and complied with all of its
covenants hereunder in all material respects
through the Closing;
(iii) no action, suit, or proceeding shall be
pending or threatened before any court or
quasi-judicial or administrative agency of
any federal, state, local, or foreign
jurisdiction or before any arbitrator
wherein an unfavorable injunction, judgment,
order, decree, ruling, or charge would (A)
prevent consummation of any of the
transactions contemplated by this Agreement
or (B) cause any of the transactions
contemplated by this Agreement to be
rescinded following consummation (and no
such injunction,
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judgment, order, decree, ruling, or charge
shall be in effect);
(iv) Xxxxxx shall have delivered to the Seller a
certificate to the effect that each of the
conditions specified above in Section
8(b)(i)-(iii) is satisfied in all respects;
(v) Xx. Xxxxxxxx X. Xxxxxx, Xx. Xxxxxxx X.
Xxxxxx and Xx. Xxxx Xxxxxx shall have
entered into the Employment Agreements;
(vi) Xxxxxx shall have executed and delivered the
Registration Rights Agreement substantially
in the form of Exhibit 8(b)(vi) hereto;
(vii) no material adverse change in the business,
assets, liabilities, income or financial
condition of Xxxxxx ("Xxxxxx Material
Adverse Change") shall have occurred since
December 31, 1998 provided, however, that if
a Xxxxxx Material Adverse Change shall have
occurred, the Seller and Xxxxxx shall
negotiate in good faith with respect to a
reasonable adjustment to the Purchase Price
(but no party shall be obligated to so
negotiate beyond the Expiration Date). If
agreement is not reached with respect to
such an adjustment, the Seller may terminate
this Agreement for failure of a condition
precedent, subject, to the terms and
conditions of Section 13 hereof;
(viii) The Parties shall have received all consents
to assignment of the Assumed Contracts;
(ix) the Parties and HCC shall have received all
authorizations, consents, and approvals of
governments and governmental agencies
referred to in Section 3(a)(i), Section
3(b)(ii), and Section 4(c) above;
(x) the Seller shall have received from counsel
to Xxxxxx an opinion, reasonably acceptable
to Seller, addressed to the Shareholders and
the Seller, and dated as of the Closing
Date;
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(xi) Xxxxxx, Purchaser and The Fifth Third Bank
shall have executed and delivered the Escrow
Agreement; and
(xii) all other certificates, instruments, and
other documents required to effect the
transactions contemplated hereby will be
reasonably satisfactory in form and
substance to the Seller.
(xiii) Xxxxxx, Xxxxxxxx X. Xxxxxx, M.D., and HCC
Canada shall have entered into the Canadian
Purchase Agreement, and such acquisition
shall be closed simultaneously with the
Closing.
The Seller may waive any condition specified in this Section 8(b) if it
executes a writing so stating at or prior to the Closing.
9. OBLIGATIONS OF SELLER AT CLOSING. At Closing:
(a) DOCUMENTS RELATING TO TITLE OF ASSETS. Seller shall
execute, acknowledge, deliver and cause to be executed, acknowledged and
delivered to Purchaser the following, in form and substance reasonably
satisfactory to Purchaser:
(i) Deeds, bills of sales, vehicle titles and
assignments in form and substance
satisfactory to Purchaser and sufficient to
convey to Purchaser good and valid title to
all Seller's Assets free and clear of all
Encumbrances.
(ii) An assignment to Purchaser and assumption by
Purchaser of all of Seller's rights and
interests in, to and under each Lease of
real and personal property and Contracts
constituting an Assumed Liability.
(iii) A trademark assignment agreement.
(b) POSSESSION. Seller shall deliver to Purchaser full
possession and control of the Assets.
(c) THIRD PARTY CONSENTS. Seller shall exercise commercially
reasonable best efforts to obtain and deliver to Purchaser any consents,
approvals,
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waivers and authorizations of third parties which are necessary in the
reasonable opinion of Purchaser for the consummation of this Agreement, as well
as those necessary for the assignment of the Leases and Contracts included in
the Assumed Liabilities.
(d) CHANGE OF NAME. Seller shall deliver evidence satisfactory
to Purchaser that Seller is changing the name of HCC to a name not confusingly
similar to HCC.
(e) ADDITIONALLY REQUESTED DOCUMENTS; POST CLOSING ASSISTANCE.
At the reasonable request of Purchaser at the Closing Date and at any time or
from time to time thereafter, Seller shall cooperate with Purchaser to put
Purchaser in actual possession and operating control of the Assets, execute and
deliver such further instruments of sale, conveyance, transfer and assignment,
as Purchaser may reasonably request in order to effectively sell, convey,
transfer and assign the Seller's Assets to Purchaser, to execute and deliver
such further instruments and to take such other actions as Purchaser may
reasonably request to release Purchaser from all obligation and liability with
regard to any obligation or liability retained by Seller.
10. OBLIGATIONS OF PURCHASER AT CLOSING. At Closing:
(a) PURCHASE PRICE. Purchaser shall deliver to Seller cash and
Xxxxxx Shares in the aggregate amount of the Purchase Price specified herein and
shall deliver to the Escrow Agent the balance of the Purchase Price as specified
herein.
(b) CORPORATE GOOD STANDING AND CERTIFIED BOARD RESOLUTIONS.
Purchaser shall deliver to Seller a certificate of Good Standing from the
Secretary of the State of Ohio and a certified copy of the resolutions of the
Board of Directors of the Purchaser approving this Agreement and consummation of
the transactions intended hereby.
11. REMEDIES FOR BREACHES OF THIS AGREEMENT.
(a) SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND COVENANTS.
All of the representations and warranties of the Parties contained in this
Agreement (including the representations and warranties of the Shareholders and
Seller contained in Section 3(a) and Section 4), shall survive the Closing and
continue in full force and effect for a period of two (2) years following the
Closing Date; provided, however, that the representations and warranties
contained in Section 4(j), Section 4(t) and Section 4(aa) shall continue in full
force and effect until the expiration of the relevant statute of limitations.
All covenants and agreements shall survive in accordance with their terms or, if
no term is stated, indefinitely.
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(b) INDEMNIFICATION PROVISIONS FOR BENEFIT OF XXXXXX.
(i) In the event any of the Shareholders or
Seller breaches any of his or her
representations, warranties, and covenants
contained herein (other than the
representations and warranties in Section
3(a) above and the covenants in Sections 12
and 5(h)), and, if there is an applicable
survival period pursuant to Section 11(a)
above, provided that Xxxxxx makes a written
claim for indemnification against the
Shareholder or Seller within such survival
period, then the Shareholders and the Seller
agree on a joint and several basis to
indemnify Xxxxxx from and against the
entirety of any Adverse Consequences Xxxxxx
may suffer through and after the date of the
claim for indemnification (including any
Adverse Consequences Xxxxxx may suffer after
the end of any applicable survival period)
resulting from, arising out of or caused by
the breach (including, in the case of the
representation contained in Section 4(aa),
all per diem penalties assessed under 15
U.S.C.Section 18a(g)(1)).
(ii) In the event any Shareholder breaches any of
his or her representations and warranties in
Section 3(a) above, and, if there is an
applicable survival period pursuant to
Section 11(a) above, provided that Xxxxxx
makes a written claim for indemnification
against such Shareholder within such
survival period, then such Shareholder
individually (and not jointly and severally)
agrees to indemnify Xxxxxx from and against
the entirety of any Adverse Consequences
Xxxxxx may suffer through and after the date
of the claim for indemnification (including
any Adverse Consequences Xxxxxx may suffer
after the end of any applicable survival
period) resulting from, arising out of, in
connection with or caused by the breach.
(iii) The maximum aggregate liability of the
Shareholders and Seller combined for
indemnification under Section 11(b)(i) and
Section 11(b)(ii) shall be limited to the
Purchase Price plus the Earnout Amount paid
to the Seller (or to the Escrow Agent under
Section 11(b)(v)) plus any additional
Earnout Amount paid to
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the Seller (or to the Escrow Agent under
Section 11(b)(v)) (the "Maximum
Indemnification Obligation"). The maximum
aggregate liability of each of the
Shareholders for indemnification under
Section 11(b)(i) and Section 11(b)(ii) shall
be limited as follows: Xxxxxxxx X. Xxxxxx,
M.D. - 70% of the Maximum Indemnification
Obligation; Xxxxxxx X. Xxxxxx - 20% of the
Maximum Indemnification Obligation, Xxxx
Xxxxxx - 10% of the Maximum Indemnification
Obligation.
(iv) In no event shall the Shareholders or Seller
be obligated to indemnify Xxxxxx under
Section 11(b)(i) or Section 11(b)(ii) unless
and until the aggregate Adverse Consequences
for which Xxxxxx would otherwise be entitled
to indemnification under either Section
11(b)(i) or Section 11(b)(ii) or both
exceeds Seventy-Five Thousand Dollars
($75,000.00) (the "Basket"). After the
aggregate Adverse Consequences for which
Xxxxxx would otherwise be entitled to
indemnification under either Section
11(b)(i) or Section 11(b)(ii) or both
exceeds the amount of the Basket, Xxxxxx
shall be entitled to indemnification for all
such Adverse Consequences, but only to the
extent that they exceed $10,000 (such latter
figure being the "deductible"). Such
deductible shall be applicable to the
Shareholders in accordance with the
percentages in Section 11(b)(iii) or as may
be otherwise agreed by the Shareholders.
(v) Xxxxxx may satisfy Shareholders' or Seller's
indemnification obligations by recourse to
the escrow fund held by The Fifth Third
Bank, as escrow agent, pursuant to the
Escrow Agreement; provided, however that
recourse to the escrow fund shall not
constitute Xxxxxx'x sole remedy or source
for satisfaction of indemnification claims
under this Agreement. Notwithstanding the
foregoing, the parties hereto acknowledge
and agree that, in the event and to the
extent that any given claim or claims being
asserted could be satisfied out of the
assets being held under the Escrow
Agreement, no party shall have the right to
satisfy, or attempt to satisfy, such claim
with assets of the Shareholders or the
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Seller other than such escrowed assets. In
the event, and to the extent, that any given
claim or claims being asserted in good faith
by the Purchaser could not be satisfied out
of the assets being held under the Escrow
Agreement, Purchaser may seek recourse by
depositing earned, but not yet paid, Earnout
Amounts with the Escrow Agent under the
Escrow Agreement.
(c) INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE SELLER AND
SHAREHOLDERS. In the event Xxxxxx or Purchaser breaches any of its
representations, warranties, and covenants contained herein, and, if there is an
applicable survival period pursuant to Section 11(a) above, provided that any of
the Shareholders or Seller makes a written claim for indemnification against
Xxxxxx or Purchaser within such survival period, then Xxxxxx and Purchaser
agree, jointly and severally, to indemnify each of the Shareholders and Seller
from and against the entirety of any Adverse Consequences the Shareholders or
Seller may suffer through and after the date of the claim for indemnification
(including any Adverse Consequences the Shareholders or Seller may suffer after
the end of any applicable survival period) resulting from, arising out of, in
connection with, or caused by such breach.
(d) MATTERS INVOLVING THIRD PARTIES.
(i) If any third party shall notify any Party
(the "INDEMNIFIED PARTY") with respect to
any matter (a "THIRD PARTY CLAIM") which may
give rise to a claim for indemnification
against any other Party (the "INDEMNIFYING
PARTY") under this Section 11, then the
Indemnified Party shall promptly notify each
Indemnifying Party thereof in writing;
PROVIDED, HOWEVER, that no delay on the part
of the Indemnified Party in notifying any
Indemnifying Party shall relieve the
Indemnifying Party from any obligation
hereunder unless (and then solely to the
extent) the Indemnifying Party thereby is
prejudiced.
(ii) Any Indemnifying Party will have the right
to defend the Indemnified Party against the
Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified
Party so long as (A) the Indemnifying Party
notifies the Indemnified Party in writing
within 15 days after the Indemnified Party
has given notice of the Third Party Claim
that the Indemnifying Party will indemnify
the Indemnified Party from and
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against the entirety of any Adverse
Consequences the Indemnified Party may
suffer resulting from, arising out of,
relating to, in the nature of, or caused by
the Third Party Claim, (B) the Indemnifying
Party provides the Indemnified Party with
evidence reasonably acceptable to the
Indemnified Party that the Indemnifying
Party will have the financial resources to
defend against the Third Party Claim and
fulfill its indemnification obligations
hereunder, (C) the Third Party Claim
involves only money damages and does not
seek an injunction or other equitable
relief, (D) settlement of, or an adverse
judgment with respect to, the Third Party
Claim is not, in the good faith judgment of
the Indemnified Party, likely to establish a
precedential custom or practice materially
adverse to the continuing business interests
of the Indemnified Party, and (E) the
Indemnifying Party conducts the defense of
the Third Party Claim actively and
diligently.
(iii) So long as the Indemnifying Party is
conducting the defense of the Third Party
Claim in accordance with Section 11(d)(ii)
above, (A) the Indemnified Party may retain
separate co-counsel at its sole cost and
expense and participate in the defense of
the Third Party Claim, (B) the Indemnified
Party will not consent to the entry of any
judgment or enter into any settlement with
respect to the Third Party Claim without the
prior written consent of the Indemnifying
Party (not to be withheld unreasonably), and
(C) the Indemnifying Party will not consent
to the entry of any judgment or enter into
any settlement with respect to the Third
Party Claim without the prior written
consent of the Indemnified Party (not to be
withheld unreasonably).
(iv) In the event any of the conditions in
Section 11(d)(ii) above is or becomes
unsatisfied, however, (A) the Indemnified
Party may defend against, and consent to the
entry of any judgment or enter into any
settlement with respect to, the Third Party
Claim in any manner it reasonably may deem
appropriate (and the Indemnified Party need
not consult with unless the
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Indemnifying Party shall have elected to
participate in accordance with Section
11(d)(v) below, or obtain any consent from,
any Indemnifying Party in connection
therewith), and (B) the Indemnifying Parties
will remain responsible for any Adverse
Consequences for which it may be liable
under Section 11 hereof.
(v) With respect to any Third Party Claim the
defense and/or settlement of which is being
conducted by the Indemnified Party, the
Indemnifying Party shall have the right, at
its expense, to fully participate in (but
not control) such defense and/or settlement
with counsel of its own choosing.
(e) DETERMINATION OF ADVERSE CONSEQUENCES. The Parties shall
take into account the time cost of money (using the Applicable Federal Rate as
the discount rate) in determining Adverse Consequences for purposes of this
Section 11. All indemnification payments under this Section 11 shall be deemed
adjustments to the Purchase Price.
(f) OTHER INDEMNIFICATION PROVISIONS. This Section 11 shall,
except for any liquidated damages provided for under Section Section 5(h), 12
and 13(b) and except for any equitable relief which a court may grant in its
discretion under Section 14(o), be the exclusive remedy for any breach of this
Agreement.
12. NON-COMPETITION COVENANT.
(a) BASIC COVENANT. The Seller agrees that for a period of
four years from and after the Closing Date (the "Non-Compete Term") it shall
not, directly or indirectly, as an officer, director, employee, consultant,
principal, partner, member, shareholder or otherwise: (i) engage in the business
of a contract research organization (within the meaning of 21 CFR Part 312.3),
providing clinical research and drug development services to pharmaceutical and
biotechnology companies (the "Business"), or engage in the business of providing
medical education and communications services including organizational and
meeting management services and publishing and editorial services related to
medical education to pharmaceutical companies or medical associations ("HCC
Business"), in any state of the United States of America or in any other
jurisdiction or country outside the United States of America: (x) in which HCC
or any of its subsidiaries or affiliates conducted business or had operations
immediately prior to consummation of the transactions contemplated by this
Agreement; or (y) in which HCC or Xxxxxx, at any time during the Non-Competition
Term, engages in the Business; or (ii) solicit or accept orders
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that relate specifically to the Business from any customer or active potential
customer of HCC existing on the Closing Date.
(b) REMEDIES FOR BREACH OF NON-COMPETITION COVENANT. The
Seller hereby agrees and acknowledges that the restrictions contained in the
Non-Compete Covenant are reasonable and necessary to protect the legitimate
interests of Xxxxxx and its Affiliates and that Xxxxxx would not enter into this
Agreement without such Non-Compete Covenant. Should Seller breach its
obligations set forth in Section 12(a), then Xxxxxx shall deliver notice of such
breach to Seller and Seller shall have thirty (30) days to cure such breach or
such longer time may be as reasonably necessary to cure such breach provided
Seller is diligently pursuing such cure and does not exceed sixty (60) days. The
Parties agree that if the Seller breaches its Non-Compete Covenant that
continuing and irreparable harm will be caused to Xxxxxx thereby and that Xxxxxx
shall, in the event Seller shall not have cured such breach as provided above,
be entitled to liquidated damages as set forth below in Section 12(c) below.
This liquidated damages provision shall only apply if the liquidated damages
provision of the Non-Competition and Non-Disclosure Agreements of the
Shareholders is not applicable. The Parties hereby instruct any court that may
find any provision of this Non-Compete Covenant to be unenforceable because it
is over broad or in violation of public policy to modify this Non-Compete
Covenant to the minimum extent needed to permit enforcement thereof.
(c) LIQUIDATED DAMAGES. Should the Seller violate the
restrictions set forth in Section 12(a) in either of the first two years
following the Closing Date (and Seller shall fail to cure in accordance with
Section 12(b) above) Seller shall pay Xxxxxx liquidated damages in the amount of
Ten Million Dollars ($10,000.00). Should the Seller violate the restrictions set
forth in Section 12(a) in either the third or fourth year following the Closing
Date (and Seller shall fail to cure in accordance with Section 12(b) above),
Seller shall pay Xxxxxx liquidated damages in the amount of Six Million Dollars
($6,000,000.00). Notwithstanding any of the foregoing, in no event shall the
maximum aggregate amount of damages recoverable by Xxxxxx and/or Purchaser under
this Section 12 for any and all breaches hereof exceed the sum of $10,000,000.
13. TERMINATION.
(a) TERMINATION OF AGREEMENT. This Agreement may only be
terminated as provided below:
(i) Xxxxxx and the Seller may terminate this
Agreement by mutual written consent at any
time prior to the Closing;
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(ii) Xxxxxx may terminate this Agreement by
giving written notice to the Seller at any
time prior to the Closing (A) in the event
any of the Shareholders or Seller has
breached any material representation,
warranty, or covenant contained in this
Agreement in any material respect, Xxxxxx
has notified the Shareholders or Seller of
the breach, and the breach has continued
without cure for a period of 30 days after
the notice of breach or (B) if the Closing
shall not have occurred on or before July
20, 1999 (the "Expiration Date"), by reason
of the failure of any condition precedent
under Section 8(a) hereof (unless the
failure results primarily from Xxxxxx or
Purchaser itself breaching any
representation, warranty, or covenant
contained in this Agreement); and
(iii) the Seller may terminate this Agreement by
giving written notice to Xxxxxx at any time
prior to the Closing (A) in the event Xxxxxx
or Purchaser has breached any material
representation, warranty, or covenant
contained in this Agreement in any material
respect, any of the Shareholders or Seller
has notified Xxxxxx or Purchaser of the
breach, and the breach has continued without
cure for a period of 30 days after the
notice of breach or (B) if the Closing shall
not have occurred on or before the
Expiration Date, by reason of the failure of
any condition precedent under Section 8(b)
hereof (unless the failure results primarily
from any of the Shareholders or Seller
themselves breaching any representation,
warranty, or covenant contained in this
Agreement).
(b) EFFECT OF TERMINATION. If any Party terminates this
Agreement pursuant to Section 13(a) above, all rights and obligations of the
Parties hereunder shall terminate without any Liability of any Party to any
other Party (except for any Liability of any Party relating to any present or
previous breach). If after this Agreement has been executed, Xxxxxx is obligated
to consummate the transactions contemplated hereby and Xxxxxx fails to do so in
accordance with the terms hereof, Xxxxxx shall pay Seller, as liquidated
damages, an amount equal to Three Percent (3%) of the Purchase Price, including
Earnout Amount.
14. MISCELLANEOUS.
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(a)[INTENTIONALLY OMITTED]
(b) PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party shall
issue any press release or make any other public announcement relating to the
subject matter of this Agreement prior to Closing without the prior written
approval of Xxxxxx and the Seller (which approval shall not be unreasonably
withheld or delayed); PROVIDED, HOWEVER, that any Party may make any public
disclosure if it, in good faith, believes is required by applicable law or any
listing or trading agreement concerning its publicly-traded securities (in which
case the disclosing Party will use its reasonable best efforts to advise the
other Parties prior to making the disclosure). Notwithstanding the foregoing,
the Parties agree that any Party may issue a mutually agreeable press release or
other public announcement upon (i) the execution of this Agreement, (ii) the
Closing, and (iii) the reasonable request of the other Parties.
(c) NO THIRD-PARTY BENEFICIARIES. This Agreement shall not
confer any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
(d) ENTIRE AGREEMENT. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the Parties and
supersedes any prior or contemporaneous understandings, agreements, or
representations by or among the Parties, written or oral, to the extent they
relate or related in any way to the subject matter hereof.
(e) SUCCESSION AND ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of his, her or its rights, interests, or obligations hereunder without the
prior written approval of Xxxxxx and the Seller; provided, however, that Xxxxxx
may (i) assign any or all of its rights and interests hereunder to one or more
of its Affiliates and (ii) designate one or more of its Affiliates to perform
its obligations hereunder (in any or all of which cases Xxxxxx nonetheless shall
remain responsible for the performance of all of its obligations hereunder).
(f) COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(g) HEADINGS. The section headings contained in this Agreement
are inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
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(h) NOTICES. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to the Seller
Or to Xxxxxxxx X. Xxxxxx, MD: Xxxxxxxx X. Xxxxxx, M.D.
0 Xxxxx Xxxx
Xxxxxxxxx, Xxx Xxxx 00000
With a Required Copy to: Xxxxxxx Xxxxxx & Green, P.C.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxxxx., Esq.
If to Xxxx Xxxxxx: 000 Xxxx 00xx Xxxxxx
Xxxxxxxxx #0X
Xxx Xxxx, Xxx Xxxx 00000
If to Xxxx Xxxxxx 000 Xxxx 00xx Xxxxxx
Xxxxxxxxx #00X
Xxx Xxxx, Xxx Xxxx 00000
With a Required Copy
In each case to: Xxxxxxx Xxxxxx & Green, P.C.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxxxx., Esq.
IF TO XXXXXX: XXXXXX INTERNATIONAL INC.
000 Xxxx Xxxxxx
000 Xxxxx Xxxxx
Xxxxxxxxxx, Xxxx 00000
Attention: Xxxx X. Xxxxxx, Esq.
Secretary & General Counsel
With a Required Copy to: XXXXXXX, XXXXXXXX & KLEKAMP, P.L.L.
------------------------ One East Fourth Street
0000 Xxxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
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Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, ordinary mail or electronic mail), but no such notice, request,
demand, claim, or other communication shall be deemed to have been duly given
unless and until it actually is received by the intended recipient and such
notice shall be effective upon such actual receipt. Any Party may change the
address to which notices, requests, demands, claims, and other communications
hereunder are to be delivered by giving the other Parties notice in the manner
herein set forth.
(i) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal substantive laws of the State of Ohio
without giving effect to any choice or conflict of law provision or rule
(whether of the State of Ohio or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Ohio.
(j) AMENDMENTS AND WAIVERS. No amendment of any provision of
this Agreement shall be valid unless the same shall be in writing and signed by
Xxxxxx, the Seller and the Shareholders. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights or remedies arising by virtue of any prior or
subsequent such occurrence.
(k) SEVERABILITY. Any term or provision of this Agreement that
is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction.
(l) EXPENSES. Each of the Parties will bear his, her or its
own costs and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated hereby.
(m) CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without
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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 relative levels of specificity) that 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.
(n) INCORPORATION OF EXHIBITS, ANNEXES, AND SCHEDULES. The
Exhibits, Annexes, and Schedules identified in this Agreement are incorporated
herein by reference and made a part hereof.
(o) SPECIFIC PERFORMANCE. 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 in addition to any other remedy to
which they may be entitled, at law or in equity.
(p) XXXXXX GUARANTEE. Xxxxxx hereby unconditionally and
irrevocably guarantees the payment and performance of Purchaser's obligations
under this Agreement, so that, in the event that Purchaser fails to make any of
such payments or render any such performance, Xxxxxx shall make such payments or
render such performance without Seller or Shareholders having first to pursue or
exhaust any remedies against the Purchaser.
Rest of Page Left Intentionally Blank
-------------------------------------
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
K.A.U., INC., a subsidiary of
Xxxxxx International Inc.
By: /s/ XXXXXXX X. XXXXXXXXXX
-----------------------------------------
Name: Xxxxxxx X. Xxxxxxxxxx
Title: Vice President
Xxxxxx International Inc.
By: /s/ XXXXXXX X. XXXXXXXXXX
-----------------------------------------
Name: Xxxxxxx X. Xxxxxxxxxx
Title: Executive Director
SHAREHOLDERS
By:_________________________________________
Xxxxxxxx X. Xxxxxx, M.D.
By:_________________________________________
Xxxxxxx X. Xxxxxx
By:_________________________________________
Xxxx Xxxxxx
SELLER
By:_________________________________________
Name:
Title:
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
K.A.U., INC., a subsidiary of
Xxxxxx International Inc.
By:_________________________________________
Name:
Title:
Xxxxxx International Inc.
By:_________________________________________
Name:
Title:
SHAREHOLDERS
By: /s/ XXXXXXXX X. XXXXXX, M.D.
-----------------------------------------
Xxxxxxxx X. Xxxxxx, M.D.
By: /s/ XXXXXXX X. XXXXXX
-----------------------------------------
Xxxxxxx X. Xxxxxx
By: /s/ XXXX XXXXXX
-----------------------------------------
Xxxx Xxxxxx
HEALTH CARE COMMUNICATIONS, INC.
By: /s/ XXXXXXXX X XXXXXX M.D.
-----------------------------------------
Name: Xxxxxxxx X Xxxxxx M.D.
Title: President
