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AGREEMENT AND PLAN OF MERGER
dated as of June 25, 1997
by and among
XXXXXX-FIELD HEALTH PRODUCTS, INC.,
LABAC ACQUISITION CORP.
LABAC SYSTEMS, INC.,
XXXXXXX X. XXXX,
and
XXXXXXX X. XXXX
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TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to which it is
attached but is inserted for convenience only.
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ARTICLE I
THE MERGER
1.01 The Merger..................................................... 1
1.02 Closing........................................................ 2
1.03 Effective Time................................................. 2
1.04 Articles of Incorporation and Bylaws of the
Surviving Corporation...................................... 2
1.05 Directors and Officers of the Surviving
Corporation................................................ 2
1.06 Effects of the Merger.......................................... 3
1.07 Further Assurances............................................. 3
ARTICLE II
CONVERSION OF SHARES
2.01 Conversion of Capital Stock.................................... 3
2.02 Exchange of Certificates....................................... 4
ARTICLE III
CLOSING DELIVERIES
3.01 Deliveries at Closing.......................................... 4
ARTICLE IV
POST-CLOSING PAYMENTS
4.01 Balance Sheet Adjustment....................................... 5
4.02 Accounts Receivable Payment.................................... 7
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE
COMPANY AND THE SHAREHOLDERS
5.01 Corporate Existence and Qualification.......................... 9
5.02 Authority...................................................... 9
5.03 Capital Stock.................................................. 10
5.04 No Conflicts................................................... 10
5.05 Governmental Approvals and Filings............................. 11
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5.06 Books and Records.............................................. 11
5.07 Financial Statements........................................... 11
5.08 Absence of Changes............................................. 12
5.09 No Undisclosed Liabilities..................................... 14
5.10 Taxes.......................................................... 14
5.11 Legal Proceedings.............................................. 15
5.12 Compliance With Laws and Orders................................ 15
5.13 Benefit Plans; ERISA........................................... 15
5.14 Real Property.................................................. 18
5.15 Tangible Personal Property; Investment Assets.................. 20
5.16 Intellectual Property Rights................................... 20
5.17 Contracts...................................................... 21
5.18 Licenses....................................................... 22
5.19 Warranty Claims................................................ 23
5.20 Product Liability Claims....................................... 23
5.21 Insurance...................................................... 23
5.22 Affiliate Transactions......................................... 24
5.23 Employees; Labor Relations..................................... 24
5.24 Environmental Matters.......................................... 25
5.25 Substantial Customers and Suppliers............................ 26
5.26 Bank and Brokerage Accounts; Investment Assets................. 26
5.27 No Powers of Attorney.......................................... 27
5.28 Inventory; Tools, Molds and Dies............................... 27
5.29 Assembly Lines and Manufacturing Equipment;
Instruction Materials...................................... 27
5.30 Race Car Assets................................................ 28
5.31 Nature of Purchase; Accredited Investor........................ 28
5.32 Brokers........................................................ 28
5.33 Disclosure..................................................... 28
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
6.01 Organization................................................... 29
6.02 Authority...................................................... 29
6.03 No Conflicts................................................... 29
6.04 Governmental Approvals and Filings............................. 30
6.05 Legal Proceedings.............................................. 30
6.06 SEC Reports and Financial Statements; No Adverse
change..................................................... 30
6.07 Capital Stock.................................................. 31
6.08 Brokers........................................................ 31
6.09 Line of Business or Use of Assets.............................. 31
ARTICLE VII
COVENANTS OF THE COMPANY AND THE SHAREHOLDERS
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7.01 Regulatory and Other Approvals................................. 32
7.02 Investigation by Parent........................................ 32
7.03 No Solicitations............................................... 32
7.04 Conduct of Business............................................ 33
7.05 Financial Statements and Reports; Filings...................... 33
7.06 Employee Matters............................................... 34
7.07 Certain Restrictions........................................... 34
7.08 Books and Records, etc.; Removal of Property................... 36
7.09 Fulfillment of Conditions...................................... 36
7.10 Line of Credit................................................. 36
ARTICLE VIII
COVENANTS OF PARENT AND MERGER SUB
8.01 Regulatory and Other Approvals................................. 36
8.02 Fulfillment of Conditions...................................... 37
8.03 Product Liability Insurance.................................... 37
8.04 Listing of Stock............................................... 37
8.05 Access to Records.............................................. 37
ARTICLE IX
CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER SUB
9.01 Representations and Warranties................................. 38
9.02 Performance.................................................... 38
9.03 Officers' Certificates......................................... 38
9.04 Orders and Laws................................................ 39
9.05 Regulatory Consents and Approvals.............................. 39
9.06 Third Party Consents........................................... 39
9.07 Proceedings.................................................... 39
9.09 Environmental Site Assessment.................................. 40
9.10 Escrow Agreement............................................... 40
9.11 Consulting Agreement........................................... 40
9.12 Non-Competition Agreement...................................... 40
9.13 Lease Agreement................................................ 40
9.14 Opinion of Counsel............................................. 40
9.15 Line of Credit................................................. 40
ARTICLE X
CONDITIONS TO OBLIGATIONS OF THE COMPANY
AND THE SHAREHOLDERS
10.01 Representations and Warranties................................ 41
10.02 Performance................................................... 41
10.03 Officers' Certificates........................................ 41
10.04 Orders and Laws............................................... 41
10.05 Regulatory Consents and Approvals............................. 41
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10.06 Third Party Consents.......................................... 42
10.07 Proceedings................................................... 42
10.08 Registration Statement........................................ 42
10.09 Consulting Agreement.......................................... 42
10.10 Lease Agreement............................................... 42
10.11 Opinion of Counsel............................................ 42
10.12 Norwest Bank Credit Arrangements.............................. 42
ARTICLE XI
SURVIVAL AND INDEMNIFICATION
11.01 Survival of Representations and Warranties.................... 43
11.02 Indemnification............................................... 43
ARTICLE XII
TERMINATION
12.01 Termination................................................... 48
12.02 Effect of Termination......................................... 49
ARTICLE XIII
DEFINITIONS
13.01 Definitions................................................... 49
ARTICLE XIV
MISCELLANEOUS
14.01 Notices....................................................... 60
14.02 Entire Agreement.............................................. 61
14.03 Expenses...................................................... 61
14.04 Public Announcements.......................................... 61
14.05 Confidentiality............................................... 62
14.06 Waiver........................................................ 62
14.07 Amendment..................................................... 62
14.08 No Third Party Beneficiary.................................... 62
14.09 No Assignment; Binding Effect................................. 63
14.10 Headings...................................................... 63
14.11 Invalid Provisions............................................ 63
14.12 Governing Law................................................. 63
14.13 Counterparts.................................................. 63
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EXHIBITS
EXHIBIT A -- Escrow Agreement
EXHIBIT B -- Officer's Certificate of the Company
EXHIBIT C -- Secretary's Certificate of the Company
EXHIBIT D -- Shareholders' Certificate
EXHIBIT E -- Consulting Agreement
EXHIBIT F -- Non-Competition Agreement
EXHIBIT G -- Lease Agreement
EXHIBIT H -- Opinion of Counsel to the Shareholders
EXHIBIT I-1 -- Officer's Certificate of Parent
EXHIBIT I-2 -- Officer's Certificate of Merger Sub
EXHIBIT J-1 -- Secretary's Certificate of Parent
EXHIBIT J-2 -- Secretary's Certificate of Merger Sub
EXHIBIT K -- Opinion of Counsel to Parent and Merger Sub
ANNEXES
ANNEX I -- Race Car Assets
ANNEX II -- Shareholders
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated as of June 25, 1997, is
made and entered into by and among Xxxxxx-Field Health Products, Inc., a
Delaware corporation ("Parent"), LaBac Acquisition Corp., a Delaware corporation
and a wholly-owned subsidiary of Parent ("Merger Sub"), LaBac Systems, Inc., a
Colorado corporation (the "Company"), and Xxxxxxx X. Xxxx and Xxxxxxx X. Xxxx
(collectively, the "Shareholders" and each individually, a "Shareholder").
Capitalized terms not otherwise defined herein have the meanings set forth in
Section 13.01.
W I T N E S S E T H:
WHEREAS, the Boards of Directors of Parent, Merger Sub and the
Company have each determined that it is advisable and in the best interests of
their respective stockholders to consummate, and have approved, the business
combination transaction provided for herein in which Merger Sub would merge with
and into the Company and the Company would become a wholly-owned subsidiary of
Parent (the "Merger");
WHEREAS, the Shareholders collectively own all of the issued and
outstanding capital stock of the Company and have approved this Agreement and
the Merger; and
WHEREAS, simultaneously herewith, Parent and the Shareholders are
entering into a registration rights agreement (the "Registration Rights
Agreement") pursuant to which on or prior to the date of the Merger, Parent will
file a registration statement on Form S-3 (the "Registration Statement")
registering under the Securities Act the shares of common stock, par value $.025
per share, of Parent ("Parent Common Stock") to be issued to the Shareholders
pursuant to this Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained and for other good and valuable
consideration, the receipt whereof is hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
THE MERGER
1.01 The Merger. Upon the terms and subject to the conditions of
this Agreement, at the Effective Time (as defined in Section 1.03), Merger Sub
shall be merged with and into the Company in accordance with the Colorado
Business Corporation Act (the "CBCA") and the General Corporation Law of the
State of
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Delaware (the "DGCL"), whereupon the separate existence of Merger Sub shall
cease and the Company shall continue as the surviving corporation (the
"Surviving Corporation"). Merger Sub and the Company are sometimes referred to
herein as the "Constituent Corporations". As a result of the Merger, the
outstanding shares of capital stock of the Constituent Corporations shall be
converted or cancelled in the manner provided in Article II.
1.02 Closing. Unless this Agreement shall have been terminated and
the transactions herein contemplated shall have been abandoned pursuant to
Section 12.01, and subject to the satisfaction or waiver (where applicable) of
the conditions set forth in Articles IX and X, the closing of the Merger (the
"Closing") will take place at the offices of Holland & Xxxx LLP, 000 Xxxxxxxxxxx
Xxxxxx, Xxxxxx, Xxxxxxxx 00000, at 10:00 a.m., local time, on June 25, 1997,
unless another date, time or place is agreed to in writing by the parties hereto
(the "Closing Date"). At the Closing there shall be delivered to Parent, Merger
Sub and the Company the certificates and other documents and instruments
required to be delivered under Article III.
1.03 Effective Time. At the Closing, certificates of merger (the
"Certificates of Merger") shall be duly prepared and executed by the Surviving
Corporation and Merger Sub and thereafter delivered to the Secretary of State of
the State of Colorado and the Secretary of State of the State of Delaware for
filing, as provided in Section 0-000-000 of the CCC and Section 252 of the DGCL,
as soon as practicable on the Closing Date. The Merger shall become effective at
the later of the time of the filing of the applicable Certificate of Merger with
the Secretary of State of the State of Colorado and the time of the filing of
the applicable Certificate of Merger with the Secretary of State of the State of
Delaware (the date and time of such later filing being referred to herein as the
"Effective Time").
1.04 Articles of Incorporation and Bylaws of the Surviving
Corporation. At the Effective Time, (i) the Articles of Incorporation of the
Company as in effect immediately prior to the Effective Time shall be the
Articles of Incorporation of the Surviving Corporation until thereafter amended
as provided by law and such Articles of Incorporation, and (ii) the Bylaws of
the Company as in effect immediately prior to the Effective Time shall be the
Bylaws of the Surviving Corporation until thereafter amended as provided by law,
the Articles of Incorporation of the Surviving Corporation and such Bylaws.
1.05 Directors and Officers of the Surviving Corporation. The
directors of Merger Sub and the officers of Merger Sub immediately prior to the
Effective Time shall, from and after the Effective Time, be the directors and
officers, respectively, of the Surviving Corporation until their successors
shall have been duly elected or appointed and qualified or until
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their earlier death, resignation or removal in accordance with the Surviving
Corporation's Articles of Incorporation and Bylaws.
1.06 Effects of the Merger. Subject to the foregoing, the effects of
the Merger shall be as provided in the applicable provisions of the CCC.
1.07 Further Assurances. Each party hereto will, either prior to or
after the Effective Time, execute such further documents, instruments, deeds,
bills of sale, assignments and assurances and take such further actions as may
reasonably be requested by one or more of the others to consummate the Merger,
to vest the Surviving Corporation with full title to all assets, properties,
rights, approvals, immunities and franchises of either of the Constituent
Corporations or to effect the other purposes of this Agreement.
ARTICLE II
CONVERSION OF SHARES
2.01 Conversion of Capital Stock. At the Effective Time, by virtue
of the Merger and without any action on the part of the holder thereof:
(a) Capital Stock of Merger Sub. Each issued and outstanding share
of the common stock, par value $.01 per share, of Merger Sub ("Merger Sub Common
Stock") shall be converted into and become one fully paid and nonassessable
share of common stock, no par value, of the Surviving Corporation ("Surviving
Corporation Common Stock"). Each certificate representing outstanding shares of
Merger Sub Common Stock shall at the Effective Time represent an equal number of
shares of Surviving Corporation Common Stock.
(b) Cancellation of Treasury Stock. All shares of common stock, no
par value, of the Company ("Company Common Stock") that are owned by the Company
as treasury stock shall be canceled and retired and shall cease to exist and no
stock of Parent or other consideration shall be delivered in exchange therefor.
(c) Conversion of Company Common Stock. All of the issued and
outstanding shares of Company Common Stock (other than shares to be canceled in
accordance with Section 2.01(b)) shall be converted into the right to receive in
the aggregate a number of shares of Parent Common Stock equal to the quotient of
(x) $9,200,000 less (A) the book value of the assets relating to the Company's
race car business, as set forth on Annex I hereto (the "Race Car Assets"), and
(B) the amount, if any, by which $2,676,000 exceeds the Estimated Net Book
Value, and (y) the Per Share Closing Price.
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2.02 Exchange of Certificates. At the Effective Time, each
Shareholder shall be entitled to receive a certificate or certificates
representing such Shareholder's pro rata share of the Parent Common Stock issued
pursuant to Section 2.01(c), as set forth in Annex II hereto, reduced, in the
case of each Shareholder, by such Shareholder's pro rata share of the Escrow
Shares (as defined below), to be deposited in escrow as set forth below. At the
Effective Time, certificates representing ten percent (10%) of the total number
of shares of Parent Common Stock issued to each Shareholder pursuant to Section
2.01 (the "Escrow Shares") shall be delivered to Xxxxxx X. Xxxxxx, as escrow
agent (the "Escrow Agent") under an Escrow Agreement to be entered into on the
Closing Date by the Shareholders, Parent and the Escrow Agent substantially in
the form of Exhibit A hereto (the "Escrow Agreement").
ARTICLE III
CLOSING DELIVERIES
3.01 Deliveries at Closing.
(a) At the Closing, the Company and the Shareholders shall deliver
to Parent:
(i) certified copies of the Company's Articles of
Incorporation, Bylaws and all corporate resolutions of the Company and the
Shareholders with respect to the execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated
hereby;
(ii) certificates representing all outstanding shares of
capital stock of the Company;
(iii) the Receivables Certificate, as described in Section
4.02(a); and
(iii) such other items as are specified herein.
(b) At the Closing, each of Parent and Merger Sub shall deliver:
(i) to the Company and the Shareholders, certified copies of
their respective charter documents, Bylaws and corporate resolutions with
respect to the execution, delivery and performance of the Agreement and
the consummation of the transactions contemplated hereby; and
(ii) to each Shareholder, a certificate in the name of such
Shareholder representing the number of shares of Parent Common Stock to
which such Shareholder is entitled pursuant to Section 2.02 and Annex II
hereto;
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(iii) to the Escrow Agent, a certificate or certificates
representing the Escrow Shares; and
(iv) such other items as are specified herein.
ARTICLE IV
POST-CLOSING PAYMENTS
4.01 Balance Sheet Adjustment (a) At least ten (10) days prior to
the Closing Date, the Company shall deliver to Parent (i) a preliminary
unaudited balance sheet of the Company (the "Pre-Closing Balance Sheet") which
shall (A) be dated as of a date not more than thirty (30) days prior to the
Closing Date, (B) be prepared in accordance with the Books and Records of the
Company and (C) present fairly the financial position of the Company as of the
date indicated in accordance with GAAP and (ii) a certificate of the Company
(the "Pre-Closing Certificate"), setting forth thereon the Company's good faith
estimate of the Net Book Value of the Company as of the Closing Date (the
"Estimated Net Book Value"), which shall be derived from and supported by the
Pre-Closing Balance Sheet.
(b) On or about the Closing Date, representatives of the
Shareholders and their independent public accountants ("Shareholders'
Accountants"), observed by Parent and/or Parent's independent public accountants
("Parent's Accountants"), shall conduct a physical count of the inventory of the
Company and shall expeditiously perform such other procedures with respect to
the Company as are necessary and appropriate to prepare and audit a balance
sheet of the Company as of the Closing Date (the "Closing Date Balance Sheet")
and the unaudited related statement of operations and cash flows for the period
commencing January 1, 1997 and ending on the Closing Date (together with the
Closing Date Balance Sheet, the "Closing Date Financials"). Parent and Merger
Sub shall provide the Shareholders and their independent public accountants with
full access at all reasonable times to the Company's books, records, premises
and other materials and the Company's workpapers and shall furnish the
Shareholders with such information and assistance as the Shareholders may
reasonably request in connection with the preparation of an audit of the Closing
Date Financials. The Closing Date Financials shall (i) be accompanied by the
unqualified report of Shareholders' Accountants with respect to the Closing Date
Balance Sheet and a review report with respect to the other Closing Date
Financials, (ii) be prepared in accordance with the Books and Records of the
Company, and (iii) present fairly the financial position of the Company as of
the Closing Date and the results of the Company's operations for the applicable
period in accordance with GAAP applied consistently with those accounting
policies and practices used in the preparation of the Financial Statements.
Parent's Accountants may participate in and observe the preparation of the
Closing Date Financials. The Shareholders and Shareholders' Accountants shall
make all of their work papers
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and other relevant documents in connection with the preparation of the Closing
Date Financials available to Parent and Parent's Accountants, and shall make the
persons in charge of the preparation of the Closing Date Financials available
for reasonable inquiry by Parent and Parent's Accountants. Not later than
forty-five (45) days following the Closing Date, the Shareholders shall deliver
to Parent (i) the Closing Date Financials and (ii) a certificate of the
Shareholders (the "Closing Date Certificate"), which shall set forth the Net
Book Value of the Company as of the Closing Date (the "Closing Date Net Book
Value") as determined from and supported by the Closing Date Balance Sheet.
(c) Parent shall notify the Shareholders in writing within twenty (20)
days following receipt of the Closing Date Balance Sheet if it does not agree
with the Closing Date Net Book Value set forth thereon, in which case the
Shareholders and Shareholders' Accountants on the one hand, and Parent and
Parent's Accountants on the other, will use good faith efforts during the
ten-day period following the date such written notice was received by the
Shareholders to resolve any differences they may have as to the Closing Date Net
Book Value. Such written notice will identify with reasonable specificity the
calculations with which Parent disagrees or other bases for such disagreement.
If the Shareholders and Parent cannot reach agreement during such ten-day
period, their disagreements shall be promptly submitted to an independent,
nationally-recognized public accounting firm jointly selected by Shareholders'
Accountants and Parent's Accountants (the "Independent Accountant"), which shall
conduct such additional review as is necessary to resolve the specific
disagreements referred to it and, based thereon, shall determine the Closing
Date Net Book Value. The review of the Independent Accountant will be restricted
as to scope to address only those matters as to which the Shareholders and
Parent have not reached agreement pursuant to the preceding sentence. The
Independent Accountant's determination of the Closing Date Net Book Value, which
shall be completed as promptly as practicable but in no event later than thirty
(30) days following its selection, shall be confirmed by the Independent
Accountant in writing to, and shall be final and binding on, each of the
Shareholders and Parent for purposes of this Section 4.01.
(d) (i) In the event the Closing Date Net Book Value determined in
accordance with subparagraph (b) or (c) of this Section 4.01, as the case may be
(the "Final Net Book Value"), is less than the $2,676,000, then (A) to the
extent that the Final Net Book Value is less than the Estimated Net Book Value,
Parent shall, promptly following the date of determination of the Final Net Book
Value (the "Determination Date"), deliver to the Escrow Agent the Balance Sheet
Adjustment Certificate referred to in the Escrow Agreement, setting forth in the
appropriate place thereon the difference between (x) the Estimated Net Book
Value (which for purposes of this calculation shall in no event be deemed
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greater than the $2,676,000) and (y) the Final Net Book Value (such difference
being herein referred to as the "Deficiency Amount"), and (B) to the extent that
the Final Net Book Value exceeds the Estimated Net Book Value (the amount by
which the Final Net Book Value exceeds the Estimated Net Book Value being herein
referred to as the "Surplus Amount"), Parent shall, promptly following the
Determination Date, deliver to the Shareholders (pro rata in accordance with the
relative proportion of Parent Common Stock issued to them at the Closing, as set
forth on Annex II hereto) certificates representing a number of whole shares
(ignoring fractions) of Parent Common Stock, equal to the quotient of (x) the
Surplus Amount and (y) the Per Share Price, as defined in the Escrow Agreement.
The valuation of any shares returned to Parent from the Escrow Shares because of
a Deficiency Amount shall be valued at the Per Share Price, as defined in the
Escrow Agreement. To the extent the Escrow Shares are insufficient to pay the
Deficiency Amount, the Shareholders shall, within five (5) days following the
Determination Date, pay to Parent the amount of such insufficiency by wire
transfer of immediately available funds to Parent's account listed in Section
14.01 or, at the election of each Shareholder as to himself, by a return of
Parent Common Stock issued to such Shareholder at the Closing, which shall be
deemed to have a value per share equal to the closing sales price of a share of
Parent Common Stock (as reported on the New York Stock Exchange, Inc. Composite
Tape) as of the Determination Date (or if such day is not a Trading Day, on the
immediately preceding Trading Day).
(ii) In the event (A) the Final Net Book Value is equal to or
greater than $2,676,000 and (B) the Estimated Net Book Value is less than
$2,676,000, Parent shall, promptly following the Determination Date, deliver to
the Shareholders (pro rata in accordance with the relative proportion of Parent
Common Stock issued to them at the Closing, as set forth on Annex II hereto)
certificates representing a number of whole shares (ignoring fractions) of
Parent Common Stock equal to the quotient of (x) the amount by which $2,676,000
exceeds the Estimated Net Book Value and (y) the Per Share Price, as defined in
the Escrow Agreement.
(e) The fees and expenses of the Independent Accountant shall be
prorated between the Shareholders, on the one hand, and Parent, on the other, in
proportion to the amounts in dispute resolved against each of them.
4.02 Accounts Receivable Payment (a) On the Closing Date, the
Shareholders shall deliver to Parent a certificate (the "Receivables
Certificate"), setting forth in detail (i) the face value of the Accounts
Receivable of the Company as of the close of business on the day prior to the
Closing Date (the "Closing Date Accounts Receivable") and (ii) the amount of any
bad debt reserves with respect to the Closing Date Accounts Receivable. The face
value of the Closing Date Accounts Receivable less (x)
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any amounts of such bad debt reserves and (y) the amount, if any, by which the
Final Net Book Value exceeds $2,676,000, is herein referred to as the "Net
Receivables Amount".
(b) Parent and the Company shall, on and after the Closing Date, use
commercially reasonable efforts to collect the Closing Date Accounts Receivable.
In exercising such efforts, Parent shall have no obligation to use greater
efforts than those used by Parent in the collection of accounts receivable in
the ordinary course of Parent's business. Without limiting the foregoing, Parent
shall have no obligation of any sort to pursue collection through any form of
litigation, arbitration or any other dispute mechanism. Parent shall consider in
good faith, but shall have no obligation to comply with, a request by the
Shareholders that Parent withhold shipments to an obligor of an unpaid Closing
Date Accounts Receivable as part of the efforts to collect such Closing Date
Accounts Receivable. If the terms of any Closing Date Accounts Receivable have
been renegotiated after the Closing, such Closing Date Accounts Receivable shall
be deemed fully paid at the total face amount thereof as it existed prior to the
renegotiation. If Closing Date Accounts Receivable and accounts receivable
arising after the Closing are owed by the same Person, Parent and Merger Sub
shall credit any payments by that Person in the order of age of the invoices for
those Closing Date Accounts Receivable and later accounts receivable, with the
oldest invoices being credited first.
(c) Not later than the fifth Business Day following the 270th day
after the Closing Date, Parent shall provide the Shareholders with a written
notice (the "Receivables Notice") describing in reasonable detail all
uncollected Closing Date Accounts Receivable, if any, and the total face amount
thereof. To the extent that total collections in respect of Closing Date
Accounts Receivable are less than the Net Receivables Amount (the difference
between the Net Receivables Amount and the amount so collected being herein
referred to as the "Receivables Deficiency"), then within three (3) Business
Days following its delivery of the Receivables Notice, Parent shall sell, and
the Shareholders shall purchase, those uncollected Closing Date Accounts
Receivable specified by Parent having a total face value equal to the
Receivables Deficiency, for an aggregate purchase price equal to the Receivables
Deficiency, by wire transfer of immediately available funds to Parent's account
listed in Section 14.01. After such uncollected Closing Date Accounts Receivable
are purchased by the Shareholders, Parent will continue to make the same efforts
to collect such Closing Date Accounts Receivable as are required of it by
paragraph (b) above, and any payments received thereon by Parent will be
remitted within five (5) Business Days to the Shareholders after deducting any
expenses incurred in connection with such collection.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE
COMPANY AND THE SHAREHOLDERS
Each of the Company and the Shareholders, jointly and severally,
represents and warrants as of the date hereof to Parent and Merger Sub as
follows:
5.01 Corporate Existence and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the Laws
of the State of Colorado and has full corporate power and authority carry on its
business as it is now being conducted and to own, lease and operate its
properties and assets. The Company is duly qualified, licensed or admitted to do
business and is in good standing in those jurisdictions specified in Section
5.01 of the Disclosure Schedule, which are the only jurisdictions in which the
ownership, use or leasing of its Assets and Properties, or the conduct or nature
of its business, makes such qualification, licensing or admission necessary,
except for those jurisdictions in which the adverse effects of all such failures
by the Company to be qualified, licensed or admitted and in good standing can in
the aggregate be eliminated without material cost or expense by the Company, as
the case may be, becoming qualified or admitted and in good standing. The name
of each director and officer of the Company on the date hereof, and the position
with the Company held by each, are listed in Section 5.01 of the Disclosure
Schedule. The Company has prior to the execution of this Agreement delivered to
Parent true and complete copies of the articles of incorporation and by-laws or
other comparable corporate charter documents of the Company as in effect on the
date hereof.
5.02 Authority. (a) The Company has full corporate power and
authority to execute and deliver this Agreement and the Operative Agreements to
which it is a party, to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery by the Company of this Agreement and the Operative Agreements to which
it is a party, and the performance by the Company of its obligations hereunder
and thereunder, have been duly and validly authorized by the Board of Directors
of the Company and by the Shareholders, no other corporate action on the part of
the Company or the Shareholders being necessary. This Agreement has been duly
and validly executed and delivered by the Company and constitutes, and upon the
execution and delivery by the Company of the Operative Agreements to which it is
a party, such Operative Agreements will constitute, legal, valid and binding
obligations of the Company enforceable against the Company in accordance with
their terms.
(b) This Agreement has been duly and validly executed and
delivered by the Company and each Shareholder and
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constitutes, and upon the execution and delivery by each Shareholder of the
Operative Agreements to which such Shareholder is a party, such Operative
Agreements will constitute, legal, valid and binding obligations of such
Shareholder enforceable against such Shareholder in accordance with their terms.
5.03 Capital Stock. (a) The authorized capital stock of the Company
consists solely of 100,000 shares of Company Common Stock. 54,406 shares of
Company Common Stock are issued and outstanding, no shares are held in treasury
and no shares are reserved for future issuance. All of the issued and
outstanding shares of Company Common Stock are duly authorized, validly issued,
fully paid and nonassessable. Except pursuant to this Agreement, there are no
outstanding subscriptions, options, warrants, rights (including "phantom" stock
rights), preemptive rights or other contracts, commitments, understandings or
arrangements, including any right of conversion or exchange under any
outstanding security, instrument or agreement (together, "Options"), obligating
the Company to issue or sell any shares of capital stock of the Company or to
grant, extend or enter into any Option with respect thereto.
(b) The Company does not have any Subsidiaries nor does it own,
directly or indirectly, any capital stock of or other equity interest in any
other Person.
(c) Except as disclosed in Section 5.03 of the Disclosure Schedule,
there are no outstanding contractual obligations of the Company to repurchase,
redeem or otherwise acquire any shares of Company Common Stock or to provide
funds to, or make any investment (in the form of a loan, capital contribution or
otherwise) in, any other Person.
(d) Set forth on Annex II hereto is the number of shares of Company
Common Stock held by each Shareholder on the date hereof. All such shares are,
and will be on the Closing Date, owned by such Shareholder, beneficially and of
record, free and clear of all Liens and are not, and will not be on the Closing
Date, subject to any voting arrangements or proxies.
5.04 No Conflicts. The execution and delivery by the Company and
each Shareholder of this Agreement does not, and the execution and delivery by
the Company and such Shareholder of the Operative Agreements to which the
Company or such Shareholder is a party, the performance by the Company and such
Shareholder of their obligations under this Agreement and such Operative
Agreements and the consummation of the transactions contemplated hereby and
thereby, will not:
(a) conflict with or result in a violation or breach of any of the
terms, conditions or provisions of the articles of incorporation or by-laws (or
other comparable corporate charter documents) of the Company;
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(b) subject to obtaining the consents, approvals and actions, making
the filings and giving the notices disclosed in Section 5.04 of the Disclosure
Schedule, conflict with or result in a violation or breach of any term or
provision of any Law or Order applicable to either Shareholder, the Company or
any of its Assets and Properties; or
(c) except as disclosed in Section 5.04 of the Disclosure Schedule,
(i) conflict with or result in a violation or breach of, (ii) constitute (with
or without notice or lapse of time or both) a default under, (iii) require the
Company or such Shareholder to obtain any consent, approval or action of, make
any filing with or give any notice to any Person as a result or under the terms
of, or (iv) result in the creation or imposition of any Lien upon the Company or
such Shareholder or any of their respective Assets and Properties under, any
Contract or License to which the Company or such Shareholder is a party or by
which any of their respective Assets and Properties is bound.
5.05 Governmental Approvals and Filings. Except as disclosed in
Section 5.05 of the Disclosure Schedule, and except for the filing of the
applicable Certificate of Merger with the Secretary of State of the State of
Colorado and the Secretary of State of the State of Delaware, no consent,
approval or action of, filing with or notice to any Governmental or Regulatory
Authority on the part of the Company or either Shareholder is required in
connection with the execution, delivery and performance of this Agreement or the
Operative Agreements or the consummation of the transactions contemplated hereby
or thereby.
5.06 Books and Records. The minute books and other similar records
of the Company as made available to Parent prior to the execution of this
Agreement contain a true and complete record, in all material respects, of all
action taken at all meetings and by all written consents in lieu of meetings of
the shareholders, the board of directors and committees of the board of
directors of the Company. The stock transfer ledgers and other similar records
of the Company as made available to Parent prior to the execution of this
Agreement accurately reflect all record transfers prior to the execution of this
Agreement in the capital stock of the Company. Except as set forth in Section
5.06 of the Disclosure Schedule, the Company does not have any of its Books and
Records recorded, stored, maintained, operated or otherwise wholly or partly
dependent upon or held by any means (including any electronic, mechanical or
photographic process, whether computerized or not) which (including all means of
access thereto and therefrom) are not under the exclusive ownership and direct
control of the Company.
5.07 Financial Statements. Prior to the execution of this Agreement,
the Company has delivered to Parent true and complete copies of the 1996 Base
Balance Sheet and the related unaudited statements of operations and cash flows
for the fiscal
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year then ended. Except as set forth in the notes thereto or as disclosed in
Section 5.07 of the Disclosure Schedule, the Financial Statements (i) were
prepared in accordance with GAAP, (ii) fairly present the financial condition
and results of operations of the Company as of the respective dates thereof and
for the respective periods covered thereby, and (iii) were compiled from the
Books and Records of the Company regularly maintained by management and used to
prepare the financial statements of the Company in accordance with the
principles stated therein. The Company has maintained its Books and Records in a
manner sufficient to permit the preparation of financial statements in
accordance with GAAP.
5.08 Absence of Changes. Except for the execution and delivery of
this Agreement and the transactions to take place pursuant hereto on or prior to
the Closing Date, since December 31, 1996 there has not been any material
adverse change, or any event or development which, individually or together with
other such events, could reasonably be expected to result in a material adverse
change, in the Business or Condition of the Company. Without limiting the
foregoing, except as disclosed in Section 5.08 of the Disclosure Schedule and
except for the transfer by the Company of any Race Car Assets, there has not
occurred between December 31, 1996 and the date hereof:
(i) any declaration, setting aside or payment of any dividend or
other distribution in respect of the capital stock of the Company, or any
direct or indirect redemption, purchase or other acquisition by the
Company of any such capital stock of or any Option with respect to the
Company;
(ii) any authorization, issuance, sale or other disposition by the
Company of any shares of capital stock of or Option with respect to the
Company, or any modification or amendment of any right of any holder of
any outstanding shares of capital stock of or Option with respect to the
Company;
(iii) (x) any increase in the salary, wages or other compensation of
any officer or consultant of the Company whose annual salary is, or after
giving effect to such change would be, $20,000, or more; (y) any
establishment or modification of (A) targets, goals, pools or similar
provisions in respect of any fiscal year under any Benefit Plan,
employment-related Contract or other employee compensation arrangement or
(B) salary ranges, increase guidelines or similar provisions in respect of
any Benefit Plan, employment-related Contract or other employee
compensation arrangement; or (z) any adoption, entering into or becoming
bound by any Benefit Plan, employment-related Contract or collective
bargaining agreement, or amendment, modification or termination (partial
or complete) of any Benefit Plan, employment-related Contract or
collective
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bargaining agreement, except to the extent required by applicable Law and,
in the event compliance with legal requirements presented options, only to
the extent the option which the Company reasonably believed to be the
least costly was chosen;
(iv) (A) incurrences by the Company of Indebtedness in an aggregate
principal amount exceeding $50,000 (net of any amounts discharged during
such period), or (B) any voluntary purchase, cancellation, prepayment or
complete or partial discharge in advance of a scheduled payment date with
respect to, or waiver of any right of the Company under, any Indebtedness
of or owing to the Company;
(v) any physical damage, destruction or other casualty loss (whether
or not covered by insurance) affecting any of the plant, real or personal
property or equipment of the Company in an aggregate amount exceeding
$50,000;
(vi) except for any increases in allowances for bad debt and
demonstration products provided to salespersons, any material change in
(x) any pricing, investment, accounting, financial reporting, inventory,
credit, allowance or Tax practice or policy of the Company or (y) any
method of calculating any bad debt, contingency or other reserve of the
Company for accounting, financial reporting or Tax purposes or any change
in the fiscal year of the Company;
(vii) capital expenditures or commitments for additions to property,
plant or equipment of the Company constituting capital assets in an
aggregate amount exceeding $50,000;
(viii) except for any increases in allowances for bad debt and
demonstration products provided to salespersons, any write-off or
write-down of or any determination to write off or write down any of the
Assets and Properties of the Company in an aggregate amount exceeding
$50,000;
(ix) any acquisition or disposition of, or incurrence of a Lien
(other than a Permitted Lien) on, any Assets and Properties of the
Company, other than in the ordinary course of business consistent with
past practice;
(x) any entering into, amendment, modification, termination (partial
or complete) or granting of a waiver under or giving any consent with
respect to (A) any Contract which is required (or had it been in effect on
the date hereof would have been required) to be disclosed in the
Disclosure Schedule pursuant to Section 5.19(a) or (B) any material
License held by the Company;
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(xi) any (x) amendment of the certificate or articles of
incorporation or by-laws (or other comparable corporate charter documents)
of the Company, (y) recapitalization, reorganization, liquidation or
dissolution of the Company or (z) merger or other business combination
involving the Company and any other Person;
(xii) any commencement or termination by the Company of any line of
business;
(xiii) any transaction by the Company with either Shareholder or any
Affiliate of such Shareholder (A) outside the ordinary course of business
consistent with past practice or (B) other than on an arm's-length basis,
other than pursuant to any Contract disclosed pursuant to Section
5.19(a)(vii) of the Disclosure Schedule;
(xiv) any material adverse change in net sales, costs of goods sold
or collection of Accounts Receivable;
(xv) any entering into of a Contract to do or engage in any of the
foregoing after the date hereof; or
(xvi) any other material transaction involving or material
development affecting the Company outside the ordinary course of business
consistent with past practice.
5.09 No Undisclosed Liabilities. Except as reflected or reserved
against in the 1996 Base Balance Sheet or as disclosed in Section 5.09 of the
Disclosure Schedule or any other Section of the Disclosure Schedule, to the
Knowledge of the Shareholders, there are no Liabilities against, relating to or
affecting the Company or any of its Assets and Properties, other than
Liabilities (i) incurred in the ordinary course of business consistent with past
practice or (ii) which, individually or in the aggregate, are not material to
the Business or Condition of the Company.
5.10 Taxes. Except as set forth on Section 5.10 of the Disclosure
Schedule, no claim for any Tax due from or assessed against the Company is being
contested by the Company, no Tax Returns or reports of the Company have been
audited by any tax authority, and the Company has not received any notice of
assessment or other adjustment from any tax authority. There are no pending Tax
examinations of or Tax claims, including, but not limited to, withholding claims
asserted against the Company or any of its Assets and Properties, there are no
Tax liens on any of the Assets and Properties of the Company, there are no
agreements, waivers, or other arrangements providing an extension of time with
respect to the assessment of any Tax against the Company, nor are there any Tax
proceedings now pending or, to the Knowledge of the Shareholders, threatened
against the Company. There is no basis for any additional assessment of any
Taxes
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against the Company. The Company has made all deposits required by law to be
made with respect to employees' withholding and other employment Taxes,
including without limitation the portion of such deposits relating to Taxes
imposed upon it. In connection with any audit of the Tax Returns of the Company,
no issue has been raised by any Tax officials which, by the application of
similar principles, reasonably can be expected to result in a deficiency for any
other year not so examined.
5.11 Legal Proceedings. Except as disclosed in Section 5.11 of the
Disclosure Schedule (with paragraph references corresponding to those set forth
below):
(a) there are no Actions or Proceedings existing or, to the
Knowledge of the Shareholders, threatened against, relating to or
affecting the Shareholders or the Company or any of its Assets and
Properties which (i) could reasonably be expected to result in the
issuance of an Order restraining, enjoining or otherwise prohibiting or
making illegal the consummation of any of the transactions contemplated by
this Agreement or any of the Operative Agreements or otherwise result in a
material diminution of the benefits contemplated by this Agreement or any
of the Operative Agreements to Parent or Merger Sub, or (ii) if determined
adversely to either the Shareholders or the Company, could reasonably be
expected to result in (x) any injunction or other equitable relief against
the Company that would interfere in any material respect with its business
or operations or (y) Losses by the Company, individually or in the
aggregate with Losses in respect of other such Actions or Proceedings,
exceeding $50,000;
(b) To the Knowledge of the Shareholders, there are no facts or
circumstances that could reasonably be expected to give rise to any Action
or Proceeding that would be required to be disclosed pursuant to clause
(a) above; and
(c) there are no Orders outstanding against the Company.
5.12 Compliance With Laws and Orders. Except as disclosed in Section
5.12 of the Disclosure Schedule, neither the Shareholders nor the Company has at
any time within the last five (5) years been, or has received any notice that it
is or has at any time within the last five (5) years been, in violation of or in
default under, in any material respect, any Law or Order applicable to the
Company or any of its Assets and Properties.
5.13 Benefit Plans; ERISA.
(a) Section 5.13(a) of the Disclosure Schedule (i) contains a true
and complete list and description of each of the Benefit Plans, (ii) identifies
each of the Benefit Plans that is
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a Qualified Plan, (iii) identifies each Benefit Plan which at any time during
the five-year period preceding the date of this Agreement was a Defined Benefit
Plan contributed to by an ERISA Affiliate, or any predecessor thereof. The
Company has not scheduled or agreed upon future increases of benefit levels (or
creations of new benefits) with respect to any Benefit Plan, and no such
increases or creation of benefits have been proposed, made the subject of
representations to employees or requested or demanded by employees under
circumstances which make it reasonable to expect that such increases will be
granted. Except as disclosed in Section 5.13(a) of the Disclosure Schedule, no
loan is outstanding between the Company and any employee.
(b) The Company does not maintain nor is it obligated to provide
benefits under any life, medical or health plan (other than as an incidental
benefit under a Qualified Plan) which provides benefits to retirees or other
terminated employees other than benefit continuation rights under the
Consolidated Omnibus Budget Reconciliation of 1985, as amended.
(c) Except as set forth in Section 5.13(c) of the Disclosure
Schedule, each Benefit Plan covers only employees who are employed by the
Company (or former employees or beneficiaries with respect to service with the
Company), so that the transactions contemplated by this Agreement will require
no spin-off of assets and liabilities or other division or transfer of rights
with respect to any such plan.
(d) Neither the Company, any ERISA Affiliate nor any other
corporation or organization controlled by or under common control with any of
the foregoing within the meaning of Section 4001 of ERISA has at any time
contributed to any "multiemployer plan", as that term is defined in Section 4001
of ERISA.
(e) To the Knowledge of the Shareholders, each of the Benefit Plans
is, and its administration is and has been since inception, in all material
respects in compliance with, and the Company has not received any claim or
notice that any such Benefit Plan is not in compliance with, all applicable Laws
and Orders and prohibited transactions exemptions, including the requirements of
ERISA, the Code, the Age Discrimination in Employment Act, the Equal Pay Act and
Title VII of the Civil Rights Act of 1964. To the Knowledge of the Shareholders,
each Qualified Plan is qualified under Section 401(a) of the Code, and, if
applicable, complies with the requirements of Section 401(k) of the Code. To the
Knowledge of the Shareholders, each Benefit Plan which is intended to provide
for the deferral of income, the reduction of salary or other compensation or to
afford other Tax benefits complies with the requirements of the applicable
provisions of the Code or other Laws required in order to provide such Tax
benefits.
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(f) The Company is not in default in performing any of its
contractual obligations under any of the Benefit Plans or any related trust
agreement or insurance contract. All contributions and other payments required
to be made by the Shareholders or the Company to any Benefit Plan with respect
to any period ending before or at or including the Closing Date have been made
or reserves adequate for such contributions or other payments have been or will
be set aside therefor and have been or will be reflected in financial statements
in accordance with GAAP. There are no material outstanding liabilities of any
Benefit Plan other than liabilities for benefits to be paid to participants in
such Benefit Plan and their beneficiaries in accordance with the terms of such
Benefit Plan.
(g) No event has occurred, and there exists no condition or set of
circumstances in connection with any Benefit Plan, under which the Company,
directly or indirectly (through any indemnification agreement or otherwise),
could reasonably be expected to be subject to any risk of material liability
under Section 409 of ERISA, Section 502(i) of ERISA, Title IV of ERISA or
Section 4975 of the Code.
(h) No transaction contemplated by this Agreement will result in
liability to the PBGC under Section 302(c)(ii), 4062, 4063, 4064 or 4069 of
ERISA, or otherwise, with respect to the Company or any corporation or
organization controlling, controlled by or under common control with the Company
within the meaning of Section 4001 of ERISA, and no event or condition exists or
has existed which could reasonably be expected to result in any such liability
with respect to the Company or any such corporation or organization. No
"reportable event" within the meaning of Section 4043 of ERISA has occurred with
respect to any Defined Benefit Plan. No termination re-establishment or spin-off
re-establishment transaction has occurred with respect to any Subject Defined
Benefit Plan. No Subject Defined Benefit Plan has incurred any accumulated
funding deficiency whether or not waived. No filing has been made and no
proceeding has been commenced for the complete or partial termination of, or
withdrawal from, any Benefit Plan which is a Pension Benefit Plan.
(i) No benefit under any Benefit Plan, including, without
limitation, any severance or parachute payment plan or agreement, will be
established or become accelerated, vested, funded or payable by reason of any
transaction contemplated under this Agreement.
(j) To the Knowledge of the Shareholders, there are no pending or
threatened claims by or on behalf of any Benefit Plan, by any Person covered
thereby, or otherwise, which allege violations of Law which could reasonably be
expected to result in liability on the part of Parent, Merger Sub, the Company
or any
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fiduciary of any such Benefit Plan, nor is there any basis for such a claim.
(k) No employer securities, employer real property or other employer
property is included in the assets of any Benefit Plan.
(l) The fair market value of the assets of each Subject Defined
Benefit Plan, as determined as of the last day of the plan year of such plan
which coincides with or first precedes the date of this Agreement, was not less
than the present value of the projected benefit obligations under such plan at
such date as established on the basis of the actuarial assumptions applicable
under such Subject Defined Benefit Plan at said date and, to the Knowledge of
the Shareholders, there have been no material changes in such values since said
date.
(m) Complete and correct copies of the following documents have been
furnished or made available to Parent prior to the execution of this Agreement:
(i) the current Benefit Plans and any predecessor plans referred to
therein, any related trust agreements, and service provider agreements,
insurance contracts or agreements with investment managers, including
without limitation, all amendments thereto;
(ii) current summary Plan descriptions of each Benefit Plan subject
to ERISA, and any similar current descriptions of all other Benefit Plans;
(iii) the most recent Form 5500 and Schedules thereto for each
Benefit Plan subject to ERISA reporting requirements;
(iv) the most recent determination of the IRS with respect to the
qualified status of each Qualified Plan;
(v) the most recent accountings with respect to any Benefit Plan
funded through a trust; and
(vi) the most recent actuarial report of the qualified actuary of
any Subject Defined Benefit Plan or any other Benefit Plan with respect to
which actuarial valuations are conducted.
5.14 Real Property. (a) Section 5.14(a) of the Disclosure Schedule
contains a true and correct list of (i) each parcel of real property owned by
the Company, (ii) each parcel of real property leased by the Company (as lessor
or lessee) and (iii) all Liens (other than Permitted Liens) relating to or
affecting any parcel of real property referred to in clause (i).
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(b) Except as disclosed in Section 5.14(a) of the Disclosure
Schedule, the Company has good and marketable fee simple title to each parcel of
real property owned by it, free and clear of all Liens other than Permitted
Liens. Except for the real property leased to others referred to in clause (ii)
of paragraph (a) above, the Company is in possession of each parcel of real
property owned by it, together with all buildings, structures, facilities,
fixtures and other improvements thereon. The Company has adequate rights of
ingress and egress with respect to the real property listed in Section 5.14(a)
of the Disclosure Schedule and all buildings, structures, facilities, fixtures
and other improvements thereon. None of such real property, buildings,
structures, facilities, fixtures or other improvements, or the use thereof,
contravenes or violates any building, zoning, administrative, occupational
safety and health or other applicable Law in any material respect (whether or
not permitted on the basis of prior nonconforming use, waiver or variance).
(c) The Company has a valid and subsisting leasehold estate in and
the right to quiet enjoyment of the real properties leased by it for the full
term of the lease thereof. Each lease referred to in clause (ii) of paragraph
(a) above is a legal, valid and binding agreement, enforceable in accordance
with its terms, of the Company and of each other Person that is a party thereto,
and except as set forth in Section 5.14(c) of the Disclosure Schedule, there is
no, and the Company has not received notice of any, default (or any condition or
event which, after notice or lapse of time or both, would constitute a default)
thereunder. The Company does not owe any brokerage commissions with respect to
any such leased space.
(d) The Company has delivered to Parent prior to the execution of
this Agreement true and complete copies of (i) all deeds, leases, mortgages,
deeds of trust, certificates of occupancy, title insurance policies, title
reports, surveys and similar documents, and all amendments thereof, with respect
to the real property owned by the Company, and (ii) all leases (including any
amendments and renewal letters) and, to the extent reasonably available, all
other documents referred to in clause (i) of this paragraph (d) with respect to
the real property leased by the Company.
(e) Except as disclosed in Section 5.14(e) of the Disclosure
Schedule, no tenant or other party in possession of any of the real properties
owned by the Company has any right to purchase, or holds any right of first
refusal to purchase, such properties.
(f) Except as disclosed in Section 5.14(f) of the Disclosure
Schedule, the improvements on the real property identified in Section 5.14(a) of
the Disclosure Schedule are in good operating condition and in a state of good
maintenance and
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repair, ordinary wear and tear excepted, are adequate and suitable for the
purposes for which they are presently being used and, to the Knowledge of the
Shareholders, there are no condemnation or appropriation proceedings pending or
threatened against any of such real property or the improvements thereon.
5.15 Tangible Personal Property; Investment Assets. (a) The Company
is in possession of and has good title to, or has valid leasehold interests in
or valid rights under Contract to use, all tangible personal property used in or
reasonably necessary for the conduct of its business, including all tangible
personal property reflected on the 1996 Base Balance Sheet and tangible personal
property acquired since the date of the 1996 Base Balance Sheet other than
property disposed of since such date in the ordinary course of business
consistent with past practice. All such tangible personal property is free and
clear of all Liens, other than Permitted Liens and Liens disclosed in Section
5.15(a) of the Disclosure Schedule, and is in good working order and condition,
ordinary wear and tear excepted, and its use complies in all material respects
with all applicable Laws.
(b) Section 5.15(b) of the Disclosure Schedule describes each
Investment Asset owned by the Company. Except as disclosed in Section 5.15(b) of
the Disclosure Schedule, all such Investment Assets are owned by the Company
free and clear of all Liens other than Permitted Liens.
5.16 Intellectual Property Rights. The Company has interests in or
uses only the Intellectual Property disclosed in Section 5.16 of the Disclosure
Schedule, each of which the Company has all right, title and interest in or a
valid and binding rights under Contract to use. No other Intellectual Property
is used or necessary in the conduct of the business of the Company. Except as
disclosed in Section 5.16 of the Disclosure Schedule, (i) the Company has the
exclusive right to use the Intellectual Property disclosed in Section 5.16 of
the Disclosure Schedule, (ii) all registrations with and applications to
Governmental or Regulatory Authorities in respect of such Intellectual Property
are valid and in full force and effect and are not subject to the payment of any
Taxes or maintenance fees or the taking of any other actions by the Company to
maintain their validity or effectiveness, (iii) there are no restrictions on the
direct or indirect transfer of any Contract, or any interest therein, held by
the Company in respect of such Intellectual Property, (iv) the Company has
delivered to Parent, prior to the execution of this Agreement, documentation
with respect to any invention, process, design, computer program or other
know-how or trade secret included in such Intellectual Property, which
documentation is accurate in all material respects and reasonably sufficient in
detail and content to identify and explain such invention, process, design,
computer program or other know-how or trade secret, (v) the Company has
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taken reasonable security measures to protect the secrecy, confidentiality and
value of its trade secrets, (vi) the Company is not, nor has it received any
notice that it is, in material default (or with the giving of notice or lapse of
time or both, would be in material default) under any Contract to use such
Intellectual Property and (vii) to the Knowledge of the Shareholders, no such
Intellectual Property is being infringed by any other Person. Neither the
Shareholders nor the Company has received any notice that the Company is
infringing any Intellectual Property of any other Person, no claim is pending
or, to the Knowledge of the Shareholders, has been made to such effect that has
not been resolved and, to the Knowledge of the Shareholders, the Company is not
infringing any Intellectual Property of any other Person.
5.17 Contracts. (a) Section 5.17(a) of the Disclosure Schedule (with
paragraph references corresponding to those set forth below) contains a true and
complete list of each of the following Contracts or other arrangements (true and
complete copies or, if none, reasonably complete and accurate written
descriptions of which, together with all amendments and supplements thereto and
all waivers of any terms thereof, have been delivered to Parent prior to the
execution of this Agreement), to which the Company is a party or by which any of
its Assets and Properties is bound:
(i) (A) all Contracts (excluding Benefit Plans) providing for a
commitment of employment or consultation services for a specified or
unspecified term or otherwise relating to employment or the termination of
employment, the name, length of employment, position, rate of compensation
and benefits of each Person party to such a Contract and the expiration
date of each such Contract; and (B) any written or unwritten
representations, commitments, promises, communications or courses of
conduct (excluding Benefit Plans and any such Contracts referred to in
clause (A)) involving an obligation of the Company to make payments in any
year, other than with respect to salary or incentive compensation payments
in the ordinary course of business, to any employee or former employee;
(ii) all Contracts with any Person containing any provision or
covenant prohibiting or limiting the ability of the Company to engage in
any business activity or compete with any Person or prohibiting or
limiting the ability of any Person to compete with the Company;
(iii) all partnership, joint venture, shareholders' or other similar
Contracts with any Person;
(iv) all Contracts relating to Indebtedness of the Company in excess
of $50,000;
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(v) all Contracts with distributors, dealers, manufacturer's
representatives, sales agencies or franchisees;
(vi) all Contracts relating to (A) the future disposition or
acquisition of any Assets and Properties other than dispositions or
acquisitions in the ordinary course of business consistent with past
practice and (B) any merger or other business combination;
(vii) all Contracts between or among the Company, on the one hand,
and either Shareholder, or any Affiliate of such Shareholder, on the other
hand;
(viii) all collective bargaining or similar labor Contracts;
(ix) all Contracts that (A) limit or contain restrictions on the
ability of the Company to declare or pay dividends on, to make any other
distribution in respect of or to issue or purchase, redeem or otherwise
acquire its capital stock, to incur Indebtedness, to incur or suffer to
exist any Lien, to purchase or sell any Assets and Properties, to change
the lines of business in which it participates or engages or to engage in
any business combination or (B) require the Company to maintain specified
financial ratios or levels of net worth or other indicia of financial
condition; and
(x) all other Contracts (other than Benefit Plans, leases listed in
Section 5.13 of the Disclosure Schedule and insurance policies listed in
Section 5.21 of the Disclosure Schedule) that (A) involve the payment or
potential payment, pursuant to the terms of any such Contract, by or to
the Company of more than $50,000 annually and (B) cannot be terminated
within thirty (30) days after giving notice of termination without
resulting in any material cost or penalty to the Company.
(b) Each Contract required to be disclosed in Section 5.17(a) of the
Disclosure Schedule is in full force and effect and constitutes a legal, valid
and binding agreement, enforceable in accordance with its terms, of each party
thereto; and except as disclosed in Section 5.17(b) of the Disclosure Schedule,
neither the Company, any Shareholder nor, to the Knowledge of the Shareholders,
any other party to such Contract is, or has received notice that it is, in
violation or breach of or default under any such Contract (or with notice or
lapse of time or both, would be in violation or breach of or default under any
such Contract) in any material respect.
5.18 Licenses. Section 5.18 of the Disclosure Schedule contains a
true and complete list of all material
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Licenses used or held for use in the business or operations of the Company (and
all pending applications for any such Licenses), setting forth the grantor, the
grantee, the function and the expiration and renewal date of each. Prior to the
execution of this Agreement, the Company has delivered to Parent true and
complete copies of all such Licenses. Except as disclosed in Section 5.18 of the
Disclosure Schedule:
(i) the Company owns or validly holds all Licenses that are
material, individually or in the aggregate, to its business or operations;
(ii) each License listed in Section 5.18 of the Disclosure Schedule
is valid, binding and in full force and effect;
(iii) the Company is not, nor has it received any notice that it is,
in default (or with the giving of notice or lapse of time or both, would
be in default) under any such License in any material respect.
5.19 Warranty Claims. Except as set forth in Section 5.22 of the
Disclosure Schedule, there are no existing claims against the Company arising
out of or relating to any products manufactured or sold by it under any
warranties, whether express or implied.
5.20 Product Liability Claims. Except as set forth in Section 5.20
of the Disclosure Schedule, there are, and during the past five (5) years there
have been, no product liability claims with respect to any products now or
previously manufactured and/or sold by the Company.
5.21 Insurance. (a) Section 5.21 of the Disclosure Schedule contains
a true and complete list (including the names and addresses of the insurers, the
names of the Persons to whom such policies have been issued, the expiration
dates thereof, the annual premiums and payment terms thereof, whether it is a
"claims made" or an "occurrence" policy and a brief description of the interests
insured thereby) of all liability, property, workers' compensation, and other
insurance policies currently in effect that insure the business, operations or
employees of the Company or affect or relate to the ownership, use or operation
of any of the Assets and Properties of the Company and that (i) have been issued
to the Company or (ii) have been issued to any Person (other than the Company)
for the benefit of the Company. The insurance coverage provided by any of the
policies described in clause (i) above will not terminate or lapse by reason of
the transactions contemplated by this Agreement. Each policy listed in Section
5.21 of the Disclosure Schedule is valid and binding and in full force and
effect, no premiums due thereunder have not been paid and neither the Company
nor the Person to whom such policy has been issued has received any notice of
cancellation or
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termination in respect of any such policy or is in default thereunder. The
insurance policies listed in Section 5.21 of the Disclosure Schedule are placed
with financially sound and reputable insurers. Neither the Company nor the
Person to whom such policy has been issued has received notice that any insurer
under any policy referred to in this Section is denying liability with respect
to a claim thereunder or defending under a reservation of rights clause.
(b) The Company has complied in all material respects with and
maintains in full force and effect all applicable employment insurance required
by law.
5.22 Affiliate Transactions. Except as disclosed in Section
5.17(a)(vii) or Section 5.22(a) of the Disclosure Schedule, (i) there are no
intercompany Liabilities between the Company, on the one hand, and any
Shareholder, or any Affiliate of any Shareholder, on the other, (ii) neither
such Shareholder nor such Affiliate provides or causes to be provided any
assets, services or facilities to the Company and (iii) the Company does not
provide or cause to be provided any assets, services or facilities to such
Shareholder or any such Affiliate. Except as disclosed in Section 5.22(c) of the
Disclosure Schedule, since December 31, 1996, all settlements of intercompany
Liabilities between the Company, on the one hand, and any Shareholder or any
such Affiliate, on the other, have been made, and all allocations of
intercompany expenses have been applied, in the ordinary course of business
consistent with past practice.
5.23 Employees; Labor Relations. (a) Section 5.23(a) of the
Disclosure Schedule contains a correct and complete list of the name of each
officer and employee of the Company at the date hereof, together with each such
person's position or function, length of service, annual base salary or wages
and any incentive or bonus arrangement or benefits with respect to such person
in effect on such date, including those on lay-off (as well as the reason for
their absence) but other than those receiving benefits under workers'
compensation legislation.
(b) Except as disclosed in Section 5.23(b) of the Disclosure
Schedule, (i) no employee of the Company is presently a member of a collective
bargaining unit or represented by a similar employee association and, to the
Knowledge of the Shareholders, there are no threatened or contemplated attempts
to organize for collective bargaining purposes any of the employees of the
Company and (ii) no unfair labor practice, complaint, grievance or arbitration
against the Company is pending or has been brought during the last five (5)
years against the Company. Since June 1, 1992, there has been no work stoppage,
strike or other concerted action by employees of the Company. During that
period, the Company has complied in all material respects with all applicable
Laws relating to the employment of labor,
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including, without limitation those relating to wages, hours and collective
bargaining.
5.24 Environmental Matters. The Company has obtained all material
Licenses which are required under applicable Environmental Laws in connection
with the conduct of its business or operations. Each of such Licenses is in full
force and effect and the Company is in compliance in all material respects with
the terms and conditions of all such Licenses and with any applicable
Environmental Law. In addition, except as set forth in Section 5.27 of the
Disclosure Schedule (with paragraph references corresponding to those set forth
below):
(a) No Order has been issued, no Environmental Claim has been filed,
no penalty has been assessed and no investigation or review is pending or, to
the Knowledge of the Shareholders, threatened by any Governmental or Regulatory
Authority with respect to any alleged failure by the Company to have any License
required under applicable Environmental Laws in connection with the conduct of
the business or operations of the Company or with respect to any generation,
treatment, storage, recycling, transportation or Release of any Hazardous
Material, and to the Knowledge of the Shareholders, there are no facts or
circumstances in existence which could reasonably be expected to form the basis
for any such Order, Environmental Claim, penalty or investigation.
(b) The Company does not own, operate or lease a treatment, storage
or disposal facility; and, without limiting the foregoing, the Company is not
subject to a material liability by reason of any of the following, whether past
or present, at, on or under any site or facility now or previously owned,
operated or leased by the Company: (i) the presence of polychlorinated biphenyl,
(ii) the presence of asbestos or asbestos-containing material, (iii) the
presence of underground storage tanks or surface impoundments for Hazardous
Materials, active or abandoned, and (iv) any Release of Hazardous Material in a
quantity reportable under, or in violation of, any Environmental Law.
(c) The Company has not transported for disposal or arranged for the
transportation for disposal of any Hazardous Material to any location that is
(i) listed on the NPL under CERCLA, (ii) listed for possible inclusion on the
NPL by the Environmental Protection Agency in CERCLIS or on any similar state or
local list or (iii) the subject of enforcement actions by federal, state or
local Governmental or Regulatory Authorities that may lead to Environmental
Claims against the Company.
(d) No written notification of a Release of a Hazardous Material has
been filed by or on behalf of the Company and no site or facility now or
previously owned, operated or leased by the Company is listed or proposed for
listing on the
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NPL, CERCLIS or any similar state or local list of sites requiring investigation
or clean-up.
(e) No Liens have arisen under or pursuant to any Environmental Law
on any site or facility owned, operated or leased by the Company and no federal,
state or local Governmental or Regulatory Authority action has been taken or, to
the Knowledge of the Shareholders, is in process that could subject any such
site or facility to such Liens, and the Company would not be required to place
any notice or restriction relating to the presence of Hazardous Materials at any
such site or facility in any deed to the real property on which such site or
facility is located.
(f) There have been no environmental investigations, studies,
audits, tests, reviews or other analyses conducted by, or that are in the
possession of, the Company in relation to any site or facility now or previously
owned, operated or leased by the Company which have not been delivered to Parent
prior to the execution of this Agreement.
5.25 Substantial Customers and Suppliers. Section 5.25(a) of the
Disclosure Schedule lists the twenty (20)] largest customers of the Company, on
the basis of revenues for goods sold or services provided for the most
recently-completed fiscal year. Section 5.28(b) of the Disclosure Schedule lists
the twenty (20) largest suppliers of the Company, on the basis of cost of goods
or services purchased for the most recently completed fiscal year. Except as
disclosed in Section 5.25(c) of the Disclosure Schedule, no such customer or
supplier has ceased or materially reduced its purchases from, use of the
services of, or sales or provision of services to the Company since December 31,
1996, or to the Knowledge of the Shareholders, has threatened to cease or
materially reduce such purchases, use, sales or provision of services after the
date hereof. Except as disclosed in Section 5.25(d) of the Disclosure Schedule,
to the Knowledge of the Shareholders, no such customer or supplier is threatened
with bankruptcy or insolvency.
5.26 Bank and Brokerage Accounts; Investment Assets. Section 5.26 of
the Disclosure Schedule sets forth (a) a true and complete list of the names and
locations of all banks, trust companies, securities brokers and other financial
institutions at which the Company has an account or safe deposit box or
maintains a banking, custodial, trading or other similar relationship; (b) a
true and complete list and description of each such account, box and
relationship, indicating in each case the account number and the names of the
officers, employees, agents or other similar representatives of the Company
having signatory power with respect thereto; and (c) a list of each Investment
Asset, the name of the record and beneficial owner thereof, the location of the
certificates, if any, therefor, the maturity date, if any,
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and any stock or bond powers or other authority for transfer granted with
respect thereto.
5.27 No Powers of Attorney. Except as set forth in Section 5.27 of
the Disclosure Schedule, the Company does not have any powers of attorney or
comparable delegations of authority outstanding.
5.28 Inventory; Tools, Molds and Dies. (a) All inventory of the
Company reflected on the 1996 Base Balance Sheet and all such inventory acquired
since December 31, 1996 consists of a quality and quantity usable and salable in
the ordinary course of business consistent with past practice, subject to (i)
specific write-offs that have been taken, (ii) the fact that demonstration
products are often sold at reduced costs and (iii) normal and customary
allowances in the industry for spoilage, damage and outdated items. All items
included in such inventory are the property of the Company, free and clear of
any Lien other than Permitted Liens, have not been pledged as collateral, are
not held by the Company on consignment from others and conform in all material
respects to all standards applicable to such inventory or its use or sale
imposed by Governmental or Regulatory Authorities.
(b) The Company is in possession of and has good and valid title to
such tools, molds and dies. Such tools, molds and dies are free and clear of all
Liens, are in good working order and condition and are all the tools, molds and
dies required to conduct the business or operations of the Company in the same
manner conducted by it immediately prior to the Closing Date.
5.29 Assembly Lines and Manufacturing Equipment; Instruction
Materials. (a) The Company is in possession of and has good and valid title to,
or holds under valid and subsisting leases, each of the assembly/production
lines described in Section 5.29 of the Disclosure Schedule (the "Assembly
Lines") and all other machinery used in connection with the assembly and
manufacture of products distributed by it, including but not limited to the
items listed in Section 5.29 of the Disclosure Schedule (the "Manufacturing
Equipment"). The Assembly Lines and Manufacturing Equipment owned by the Company
are free and clear of all Liens, other than Permitted Liens. The Assembly Lines
and Manufacturing Equipment are in good working order and condition, and are all
the equipment used by the Company in the assembly of products distributed by
them.
(b) Except as disclosed in Section 5.29 of the Disclosure Schedule,
the Instruction Materials are true and correct in all material respects and are
all the instructions used by the Company in the assembly and manufacture of
products distributed by it.
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5.30 Race Car Assets. The information set forth on Annex I hereto
accurately reflects the aggregate book value of the Race Car Assets, which are
the only assets owned by the Company relating to the race car business.
5.31 Nature of Purchase; Accredited Investor. (a) Each Shareholder
is acquiring the shares of Parent Common Stock issued pursuant to this Agreement
for his own account for investment, not as a nominee or agent, and not with a
view to the resale or distribution of such shares or any part thereof, and each
Shareholder has no present intention of selling, granting any participation in,
or otherwise distributing the same. Each Shareholder acknowledges that the
issuance of the Parent Common Stock pursuant to this Agreement will not be
registered under the Securities Act or any state securities or blue sky law, on
the grounds that the offering and sale of the Parent Common Stock contemplated
by this Agreement are exempt from registration pursuant to exceptions available
under such laws, and that Parent's reliance upon such exemptions is predicated
upon the Shareholders' representations set forth in this Agreement. Each
Shareholder acknowledges and understands that such shares must be held for an
indefinite period of time unless they are subsequently registered under the
Securities Act and/or applicable state securities or blue sky laws or an
exemption from such registration is available.
(b) Each Shareholder is an "accredited investor" within the meaning
of Regulation D promulgated under the Securities Act.
5.32 Brokers. Except for the matter set forth on Section 5.32 of the
Disclosure Schedule (as to which matter any fees, commissions and expenses are
the sole responsibility of the Shareholders), all negotiations relative to this
Agreement and the transactions contemplated hereby have been carried out by the
Company and the Shareholders directly with Parent without the intervention of
any Person on behalf of the Company or the Shareholders in such manner as to
give rise to any valid claim by any Person against Parent or Merger Sub for a
finder's fee, brokerage commission or similar payment.
5.33 Disclosure. No representation or warranty contained in this
Agreement, and no statement contained in the Disclosure Schedule or in any
certificate, list or other writing furnished to Parent pursuant to any provision
of this Agreement (including without limitation the Financial Statements),
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements herein or therein, in the light
of the circumstances under which they were made, not misleading.
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Each of Parent and Merger Sub hereby jointly and severally
represents and warrants as of the date hereof to the Company and the
Shareholders as follows:
6.01 Organization. Each of Parent and Merger Sub is a corporation
duly incorporated, validly existing and in good standing under the Laws of the
State of Delaware. Each of Parent and Merger Sub has full corporate power and
authority to execute and deliver this Agreement and the Operative Agreements to
which it is a party, to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. Parent directly
owns all of the capital stock of Merger Sub.
6.02 Authority. The execution and delivery by each of Parent and
Merger Sub of this Agreement and the Operative Agreements to which it is a
party, and the performance by each of Parent and Merger Sub of its obligations
hereunder and thereunder, have been duly and validly authorized by the Board of
Directors of Parent and Merger Sub, no other corporate action on the part of
Parent or Merger Sub or their stockholders being necessary. This Agreement has
been duly and validly executed and delivered by Parent and Merger Sub and
constitutes, and upon the execution and delivery by each of Parent and Merger
Sub of the Operative Agreements to which it is a party, such Operative
Agreements will constitute, legal, valid and binding obligations of Parent and
Merger Sub enforceable against Parent and Merger Sub in accordance with their
terms.
6.03 No Conflicts. The execution and delivery by each of Parent and
Merger Sub of this Agreement do not, and the execution and delivery of the
Operative Agreements to which it is a party, the performance by each of Parent
and Merger Sub of its obligations under this Agreement and such Operative
Agreements and the consummation of the transactions contemplated hereby and
thereby will not:
(a) conflict with or result in a violation or breach of any of the
terms, conditions or provisions of the certificate of incorporation or by-laws
(or other comparable corporate charter document) of Parent or Merger Sub;
(b) subject to obtaining the consents, approvals and actions, making
the filings and giving the notices disclosed in Schedule 6.04 hereto, conflict
with or result in a violation or breach of any term or provision of any Law or
Order applicable to Parent or Merger Sub or any of their respective Assets and
Properties; or
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(c) except as disclosed in Schedule 6.03 hereto, (i) conflict with
or result in a violation or breach of, (ii) constitute (with or without notice
or lapse of time or both) a default under, (iii) require Parent or Merger Sub to
obtain any consent, approval or action of, make any filing with or give any
notice to any Person as a result or under the terms of, or (iv) result in the
creation or imposition of any Lien upon Parent or Merger Sub or any of their
respective Assets and Properties under, any Contract or License to which Parent
or Merger Sub is a party or by which any of their respective Assets and
Properties are bound.
6.04 Governmental Approvals and Filings. Except as disclosed in
Schedule 6.04 hereto, and except for the filing of the applicable Certificate of
Merger with the Secretary of State of the State of Colorado and the Secretary of
State of the State of Delaware, no consent, approval or action of, filing with
or notice to any Governmental or Regulatory Authority on the part of Parent or
Merger Sub is required in connection with the execution, delivery and
performance of this Agreement or the Operative Agreements or the consummation of
the transactions contemplated hereby or thereby.
6.05 Legal Proceedings. There are no Actions or Proceedings pending
or, to the knowledge of Parent, threatened against, relating to or affecting
Parent or any of their respective Assets and Properties which could reasonably
be expected to result in the issuance of an Order restraining, enjoining or
otherwise prohibiting or making illegal the consummation of any of the
transactions contemplated by this Agreement or any of the Operative Agreements.
6.06 SEC Reports and Financial Statements; No Adverse change. Parent
delivered to the Company and the Shareholders prior to the execution of this
Agreement a true and complete copy of each form, report, schedule, registration
statement, definitive proxy statement and other document (together with all
amendments thereof and supplements thereto) filed by Parent or any of its
subsidiaries with the Securities and Exchange Commission (the "SEC") since
January 1, 1997 (as such documents have since the time of their filing been
amended or supplemented, the "Parent SEC Reports"), which are all the documents
(other than preliminary material) that Parent and its subsidiaries were required
to file with the SEC since such date. As of their respective dates, the Parent
SEC Reports (i) complied as to form in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
(ii) did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The audited consolidated financial statements and unaudited
interim consolidated financial statements (including, in each case, the
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notes, if any, thereto) included in the Parent SEC Reports (the "Parent
Financial Statements") complied as to form in all material respects with the
published rules and regulations of the SEC with respect thereto, were prepared
in accordance with GAAP (except as may be indicated therein or in the notes
thereto and except with respect to unaudited statements as permitted by Form
10-Q of the SEC) and fairly present (subject, in the case of the unaudited
interim financial statements, to normal, recurring year-end audit adjustments)
the consolidated financial position of Parent and its consolidated subsidiaries
as at the respective dates thereof and the consolidated results of their
operations and cash flows for the respective periods then ended. Except as
disclosed in the Parent SEC Reports filed prior to the date of this Agreement,
since March 31, 1997 there has not been any change, event or development having,
or that could be reasonably expected to have, individually or in the aggregate,
a material adverse effect on Parent and its subsidiaries taken as a whole.
6.07 Capital Stock. The Parent Common Stock issuable in connection
with this Agreement is voting stock, has been duly authorized by Parent and
reserved for issuance pursuant to this Agreement and, when issued in exchange
for the Company Common Stock in accordance with the terms hereof, will be
validly issued, fully paid and non-assessable. All shares of Parent Common Stock
issued in connection with this Agreement will be free of preemptive or similar
rights.
6.08 Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by Parent directly with
the Company and the Shareholders without the intervention of any Person on
behalf of Parent in such manner as to give rise to any valid claim by any Person
against the Company or the Shareholders for a finder's fee, brokerage commission
or similar payment.
6.09 Line of Business or Use of Assets. It is the present
intention of Parent to continue at least one significant historic business line
of the Company, or to use at least a significant portion of the Company's
historic business assets in a business, in each case within the meaning of Reg.
Sec. 1.368- 1(d) of the Code.
ARTICLE VII
COVENANTS OF THE COMPANY AND THE SHAREHOLDERS
The Company and the Shareholders covenant and agree with Parent and
Merger Sub that, at all times from and after the date hereof until the Closing
and, with respect to any covenant or agreement by its terms to be performed in
whole or in part after the Closing, for the period specified therein or, if no
period is specified therein, indefinitely, the Company and the
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Shareholders will comply with all covenants and provisions of this Article VII,
except to the extent Parent may otherwise consent in writing.
7.01 Regulatory and Other Approvals. The Shareholders and the
Company will, as promptly as practicable, (a) take all commercially reasonable
steps necessary or desirable to obtain all consents, approvals or actions of,
make all filings with and give all notices to Governmental or Regulatory
Authorities or any other Person required of the Shareholders or the Company to
consummate the transactions contemplated hereby and by the Operative Agreements,
including without limitation those described in Sections 5.04 and 5.05 of the
Disclosure Schedule, (b) provide such other information and communications to
such Governmental or Regulatory Authorities or other Persons as Parent or such
Governmental or Regulatory Authorities or other Persons may reasonably request
in connection therewith and (c) cooperate with Parent in connection with the
performance of its obligations under Sections 8.01 and 8.02. The Shareholders
will provide prompt notification to Parent when any such consent, approval,
action, filing or notice referred to in clause (a) above is obtained, taken,
made or given, as applicable, and will advise Parent of any communications (and,
unless precluded by Law, provide copies of any such communications that are in
writing) with any Governmental or Regulatory Authority or other Person regarding
any of the transactions contemplated by this Agreement or any of the Operative
Agreements.
7.02 Investigation by Parent. The Shareholders and the Company will
(a) provide Parent and its officers, directors, employees, agents, counsel,
accountants, financial advisors, consultants and other representatives with full
access, upon reasonable prior notice and during normal business hours, to all
officers, employees, agents and accountants of the Company and its Assets and
Properties and Books and Records, excluding Books and Records which are covered
by the attorney-client privilege (the Shareholders and the Company shall inform
Parent when any Book and Record is excluded because of that privileged status),
and (b) furnish Parent and such other Persons with all such information and data
(including without limitation copies of Contracts, Licenses, Benefit Plans and
other Books and Records) concerning the business and operations of the Company
as Parent or any of such other Persons reasonably may request in connection with
such investigation. Notwithstanding the foregoing, in connection with any such
investigation, Parent and its representatives will not contact any employees,
officers or consultants of the Company, other than the Shareholders, unless the
Shareholders consent thereto in advance, which consent shall not be unreasonably
withheld or delayed.
7.03 No Solicitations. (a) Neither the Company nor the Shareholders
will take, nor will they permit or authorize or permit any investment banker,
financial advisor, attorney,
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accountant or other Person retained by or acting for or on behalf of the Company
or the Shareholders, to take, directly or indirectly, any action to solicit,
encourage, receive, negotiate, assist or otherwise facilitate (including by
furnishing confidential information with respect to the Company or permitting
access to the Assets and Properties and Books and Records of the Company) or
accept or enter into any Contract with respect to any offer or inquiry from any
Person concerning the direct or indirect acquisition of the Company or any
shares of capital stock of the Company by any Person other than Parent and its
Affiliates. If the Company or the Shareholders (or any such Person acting for or
on their behalf) receive from any Person any offer, inquiry or informational
request referred to above, the Company or the Shareholders, as the case maybe,
will promptly advise such Person, by written notice, of the terms of this
Section 7.03.
(b) Neither Shareholder shall, directly or indirectly, (i) grant any
proxies or enter into any voting trust or other agreement or arrangement with
respect to the voting of any shares of Company Common Stock owned by such
Shareholder or (ii) sell, assign, transfer, encumber or otherwise dispose of, or
enter into any contract, option or other arrangement or understanding with
respect to the direct or indirect sale, assignment, transfer, encumbrance or
other disposition of, any shares of Company Common Stock owned by such
Shareholder.
7.04 Conduct of Business. The Company and the Shareholders will
conduct the business of the Company only in the ordinary course consistent with
past practice.
7.05 Financial Statements and Reports; Filings. (a) Not later than
forty-five (45) days following the Closing Date, Parent shall have received from
the Shareholders such financial statements of the Company as are sufficient to
enable Parent to comply with its obligation to file a Current Report of Form 8-K
with the SEC (if required) and any other SEC filing related to the transactions
hereunder. Such financial statements shall include but not be limited to (i) the
Closing Date Financials, (ii) the Financial Statements, accompanied by a review
report of independent auditors of recognized standing, (iii) unaudited interim
financial statements for each of the fiscal quarters in the fiscal period
January 1, 1996 through December 31, 1996, and (iv) unaudited interim financial
statements for each of the fiscal quarters in the fiscal period January 1, 1997
through the Closing Date. The cost of providing the financial statements
required by this Section 7.05 shall be shared equally between Parent and the
Shareholders.
(b) As promptly as practicable, the Company will deliver to Parent
true and complete copies of such other financial statements, reports and
analyses as may be prepared or
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received by it relating to the business or operations of the Company.
(c) As promptly as practicable, the Company will deliver copies of
all License applications and other filings made by the Company after the date
hereof and before the Closing Date with any Governmental or Regulatory Authority
(other than routine, recurring filings made in the ordinary course of business
consistent with past practice).
7.06 Employee Matters. Except as may be required by Law, the Company
will refrain from voluntarily either directly or indirectly:
(a) making any representation or promise, oral or written, to any
officer, employee or consultant of the Company concerning any Benefit Plan,
except for statements as to the rights or accrued benefits of any officer,
employee or consultant under the terms of any Benefit Plan;
(b) making any increase in the salary, wages or other compensation
of any officer, employee or consultant of the Company;
(c) adopting, entering into or becoming bound by any Benefit Plan,
employment-related Contract or collective bargaining agreement, or amending,
modifying or terminating (partially or completely) any such Benefit Plan,
employment-related Contract or collective bargaining agreement, except to the
extent required by applicable Law and, in the event compliance with legal
requirements presents options, only to the extent that the option which the
Company reasonably believes to be the least costly is chosen; or
(d) establishing or modifying any (i) targets, goals, pools or
similar provisions in respect of any fiscal year under any Benefit Plan or any
employment-related Contract or other employee compensation arrangement or (ii)
salary ranges, increase guidelines or similar provisions in respect of any
Benefit Plan or any employment-related Contract or other employee compensation
arrangement.
7.07 Certain Restrictions. The Company will refrain from:
(a) amending its articles of incorporation or by-laws (or other
comparable corporate charter documents) or taking any action with respect to any
such amendment or any recapitalization, reorganization, liquidation or
dissolution of any the corporation;
(b) authorizing, issuing, selling or otherwise disposing of any
shares of capital stock of or any Option with
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respect to the Company, or modifying or amending any right of any holder of
outstanding shares of capital stock of or Option with respect to the Company;
(c) declaring, setting aside or paying any dividend or other
distribution in respect of the capital stock of the Company, or directly or
indirectly redeeming, purchasing or otherwise acquiring any capital stock of or
any Option with respect to the Company;
(d) acquiring or disposing of, or voluntarily incurring any Lien
(other than a Permitted Lien) on, any Assets and Properties, other than in the
ordinary course of business consistent with past practice and other than
dispositions of Race Car Assets having a net book value in the aggregate of
$125,000 or less;
(e) entering into, amending, modifying, terminating (partially or
completely), granting any waiver under or giving any consent with respect to any
Contract or any material License;
(f) intentionally violating, breaching or defaulting under in any
material respect, or intentionally taking or failing to take any action that
(with or without notice or lapse of time or both) would constitute a material
violation or breach of, or default under, any term or provision of any material
License held or used by the Company or any material Contract to which the
Company is a party or by which any of its Assets and Properties are bound,
except for any such violation, breach or default disclosed in Section 5.04 of
the Disclosure Schedule;
(g) (i) voluntarily incurring Indebtedness in an aggregate principal
amount exceeding $50,000 (net of any amounts of Indebtedness discharged during
such period), or (ii) voluntarily purchasing, canceling, prepaying or otherwise
providing for a complete or partial discharge in advance of a scheduled payment
date with respect to, or waiving any right of the Company under, any
Indebtedness of or owing to the Company;
(h) engaging in any transaction with any officer, director or
Affiliate of the Company, either outside the ordinary course of business
consistent with past practice or other than on an arm's-length basis;
(i) making capital expenditures or commitments for additions to
property, plant or equipment constituting capital assets in an aggregate amount
exceeding $50,000; or
(j) entering into any Contract to do or engage in any of the
foregoing.
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The foregoing restrictions shall not apply to any transfer by the
Company of any Race Car Assets.
7.08 Books and Records, etc.; Removal of Property. On the Closing
Date, the Shareholders will deliver or make available to Parent at the offices
of the Company all of the Books and Records, and if at any time after the
Closing either Shareholder discovers in his possession or under his control any
other Books and Records, such Shareholder will forthwith deliver such Books and
Records to Parent.
7.09 Fulfillment of Conditions. The Company and the Shareholders
will execute and deliver at the Closing each Operative Agreement that the
Shareholders and the Company are required hereby to execute and deliver as a
condition to the Closing, will take all commercially reasonable steps necessary
or desirable and proceed diligently and in good faith to satisfy each other
condition to the obligations of Parent and Merger Sub contained in this
Agreement and will not intentionally take or fail to take any action that could
reasonably be expected to result in the nonfulfillment of any such condition.
7.10 Line of Credit. The Shareholders will continue from the date
hereof to maintain the line of credit described in Section 9.15 (or a
replacement line of credit providing the same ability to fund the indebtedness
referenced in Section 9.15) until no amounts are owed under the indebtedness
referenced in Section 9.15.
ARTICLE VIII
COVENANTS OF PARENT AND MERGER SUB
Parent and Merger Sub covenant and agree with the Company and the
Shareholders that, at all times from and after the date hereof until the
Closing, in the case of Sections 8.01 and 8.02 and, with respect to any covenant
or agreement by its terms to be performed in whole or in part after the Closing,
for the period specified therein, or, if no period is specified therein,
indefinitely, Parent and Merger Sub will comply with all covenants and
provisions of this Article VIII, except to the extent the Company and the
Shareholders may otherwise consent in writing.
8.01 Regulatory and Other Approvals. Parent and Merger Sub will, as
promptly as practicable, (a) take all commercially reasonable steps necessary or
desirable to obtain all consents, approvals or actions of, make all filings with
and give all notices to Governmental or Regulatory Authorities or any other
Person required of Parent or Merger Sub to consummate the transactions
contemplated hereby and by the Operative Agreements, including without
limitation those described in Schedules 6.03
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and 6.04 hereto, (b) provide such other information and communications to such
Governmental or Regulatory Authorities or other Persons as the Company or the
Shareholders or such Governmental or Regulatory Authorities or other Persons may
reasonably request in connection therewith and (c) cooperate with the Company
and the Shareholders in connection with the performance of their obligations
under Sections 7.01 and 7.02. Parent will provide prompt notification to the
Company when any such consent, approval, action, filing or notice referred to in
clause (a) above is obtained, taken, made or given, as applicable, and will
advise the Company of any communications (and, unless precluded by Law, provide
copies of any such communications that are in writing) with any Governmental or
Regulatory Authority or other Person regarding any of the transactions
contemplated by this Agreement or any of the Operative Agreements.
8.02 Fulfillment of Conditions. Each of Parent and Merger Sub will
execute and deliver at the Closing each Operative Agreement that it is required
hereby to execute and deliver as a condition to the Closing, will take all
commercially reasonable steps necessary or desirable and proceed diligently and
in good faith to satisfy each other condition to the obligations of the Company
and the Shareholders contained in this Agreement and will not take or fail to
take any action that could reasonably be expected to result in the
nonfulfillment of any such condition.
8.03 Product Liability Insurance. At and after the Closing, Parent
shall purchase product liability insurance for the Company upon terms and
conditions to be mutually agreed upon by Parent and the Shareholders; provided,
however, that Parent shall not be required to purchase any such insurance for
the Company having terms that are more favorable to the Company than Parent's
current product liability insurance policies.
8.04 Listing of Stock. Parent shall cause all shares of Parent
Common Stock issued to the Shareholders or furnished to the Escrow Agent to be
listed on the national securities exchange on which the Parent Common Stock is
traded.
8.05 Access to Records. Each Shareholder shall have access, upon
reasonable prior notice and during normal business hours, to the Books and
Records of the Company, excluding Books and Records which are covered by the
attorney-client privilege (Parent shall inform the Shareholders and the Company
when any Book and Record is excluded because of that privileged status), for
purposes of (a) considering, defending and resolving any disputes or claims
relating to the operations of the Company on or prior to the Closing, including
without limitation any Tax matter, (b) considering, prosecuting, defending or
resolving any disputes or claims under this Agreement, (c) preparation of Tax
Returns of any Shareholder or any Affiliate of a Shareholder, or (d) other
reasonable and necessary purposes related to the
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operations of the Company prior to the Closing or related to the Knowledge of
any of the Shareholders regarding the same. For a period of five years after the
Closing, Parent will cause the Company to give reasonable advance notice to each
Shareholder of the planned destruction of any documents in such party's
possession relating to any of the foregoing, and the Shareholders so notified
shall be given the opportunity, at their sole expense, to take possession of
such records (subject to whatever reasonable confidentiality restrictions that
the Company may impose as a condition to providing such Books and Records to a
Shareholder).
ARTICLE IX
CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER SUB
The obligations of Parent and Merger Sub hereunder to consummate the
Merger are subject to the fulfillment, at or before the Closing, of each of the
following conditions (all or any of which may be waived in whole or in part by
Parent in its sole discretion):
9.01 Representations and Warranties. Each of the representations and
warranties made by the Company and the Shareholders in this Agreement and any
Operative Agreement (other than those made as of a specified date earlier than
the date of this Agreement) shall be true and correct in all material respects
on and as of the Closing Date as though such representation or warranty was made
on and as of the Closing Date, and any representation or warranty made as of a
specified date earlier than the Closing Date shall have been true and correct in
all material respects on and as of such earlier date.
9.02 Performance. The Company and the Shareholders shall have
performed and complied with, in all material respects, each agreement, covenant
and obligation required by this Agreement to be so performed or complied with by
the Company or the Shareholders, as the case may be, at or before the Closing.
9.03 Officers' Certificates. (a) The Company shall have delivered to
Parent a certificate, dated the Closing Date and executed in the name and on
behalf of the Company, by the President of the Company, substantially in the
form and to the effect of Exhibit B hereto, and a certificate, dated the Closing
Date and executed by the Secretary of the Company, substantially in the form and
to the effect of Exhibit C hereto.
(b) The Shareholders shall have delivered to Parent a certificate,
date the Closing Date, substantially in the form and to the effect of Exhibit D
hereto.
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9.04 Orders and Laws. There shall not be in effect on the Closing
Date any Order or Law restraining, enjoining or otherwise prohibiting or making
illegal the consummation of any of the transactions contemplated by this
Agreement or any of the Operative Agreements or which could reasonably be
expected to otherwise result in a material diminution of the benefits of the
transactions contemplated by this Agreement or any of the Operative Agreements
to Parent or Merger Sub, and there shall not be pending or threatened on the
Closing Date any Action or Proceeding in, before or by any Governmental or
Regulatory Authority which could reasonably be expected to result in the
issuance of any such Order or the enactment, promulgation or deemed
applicability to Parent, Merger Sub, the Company, the Shareholders or the
transactions contemplated by this Agreement or any of the Operative Agreements
of any such Law.
9.05 Regulatory Consents and Approvals. All consents, approvals and
actions of, filings with and notices to any Governmental or Regulatory Authority
necessary to permit Parent, Merger Sub, the Company and the Shareholders to
perform their obligations under this Agreement and the Operative Agreements and
to consummate the transactions contemplated hereby and thereby (a) shall have
been duly obtained, made or given, (b) shall be in form and substance reasonably
satisfactory to Parent, (c) shall not be subject to the satisfaction of any
condition that has not been satisfied or waived and (d) shall be in full force
and effect.
9.06 Third Party Consents. The consents (or in lieu thereof waivers)
listed in Section 9.06 of the Disclosure Schedule and all other consents (or in
lieu thereof waivers) to the performance by Parent, Merger Sub, the Company and
the Shareholders of their obligations under this Agreement and the Operative
Agreements or to the consummation of the transactions contemplated hereby and
thereby as are required under any Contract to which Parent, Merger Sub, the
Company or either Shareholder is a party or by which any of their respective
Assets and Properties are bound (a) shall have been obtained, (b) shall be in
form and substance reasonably satisfactory to Parent, (c) shall not be subject
to the satisfaction of any condition that has not been satisfied or waived and
(d) shall be in full force and effect, except (other than in the case of the
consents listed in Section 9.06 of the Disclosure Schedule) where the failure to
obtain any such consent (or in lieu thereof waiver) could not reasonably be
expected, individually or in the aggregate with other such failures, to
materially adversely affect Parent, Merger Sub or the Business or Condition of
the Company or otherwise result in a material diminution of the benefits of the
transactions contemplated by this Agreement and the Operative Agreements to
Parent or Merger Sub.
9.07 Proceedings. All proceedings to be taken on the part of the
Company and the Shareholders in connection with the
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transactions contemplated by this Agreement and all documents incident thereto
shall be reasonably satisfactory in form and substance to Parent, and Parent
shall have received copies of all such documents and other evidences as Parent
may reasonably request in order to establish the consummation of such
transactions and the taking of all proceedings in connection therewith.
9.08 Estimated Net Book Value. The Estimated Net Book Value shall be
equal to or greater than $2,100,000.
9.09 Environmental Site Assessment. Parent shall have received a
Phase I Environmental Site Assessment (the "Environmental Audit") for the
property located at 0000 Xxxxx Xxxxxxx Xxxxxx, Xxxxxxxx, Xxxxxxxx 00000, from an
independent environmental engineering firm selected by Parent, in form and
substance satisfactory to Parent.
9.10 Escrow Agreement. The Shareholders shall have entered into the
Escrow Agreement with Parent and the Escrow Agent.
9.11 Consulting Agreement. An entity controlled by one or more of
the Shareholders (the "Peek Entity") shall have entered into a Consulting
Agreement with Parent, substantially in the form and to the effect of Exhibit E
hereto (the "Consulting Agreement").
9.12 Non-Competition Agreement. Each Shareholder shall have entered
into a Non-Competition Agreement, substantially in the form and to the effect of
Exhibit F hereto (the "Non-Competition Agreement").
9.13 Lease Agreement. Peek Brothers Investments, LLC shall have
entered into a Lease Agreement to rent the Lakewood Property, substantially in
the form and to the effect of Exhibit G hereto (the "Lease Agreement").
9.14 Opinion of Counsel. Parent shall have received the opinion of
Holland & Xxxx LLP, counsel to the Company and the Shareholders, dated the
Closing Date, substantially in the form and to the effect of Exhibit H hereto.
9.15 Line of Credit. The Shareholders shall have entered into such
arrangements as to satisfy Parent that a line of credit has been established to
fund any payments that may come due under the indebtedness of the Company
related to the property located at 0000 Xxxxx Xxxxxxx Xxxxxx, Xxxxxxxx, Xxxxxxxx
00000, in favor of the Money Store Commercial Mortgage, Inc. and/or the Denver
Urban Economic Development Corporation.
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ARTICLE X
CONDITIONS TO OBLIGATIONS OF THE COMPANY
AND THE SHAREHOLDERS
The obligations of the Company and the Shareholders to consummate
the Merger are subject to the fulfillment, at or before the Closing, of each of
the following conditions (all or any of which may be waived in whole or in part
by the Company or the Shareholders in their sole discretion):
10.01 Representations and Warranties. Each of the representations
and warranties made by Parent and Merger Sub in this Agreement and any Operative
Agreement shall be true and correct in all material respects on and as of the
Closing Date as though such representation or warranty was made on and as of the
Closing Date.
10.02 Performance. Parent and Merger Sub shall have performed and
complied with, in all material respects, each agreement, covenant and obligation
required by this Agreement to be so performed or complied with by Parent and
Merger Sub at or before the Closing.
10.03 Officers' Certificates. Each of Parent and Merger Sub shall
have delivered to the Company a certificate, dated the Closing Date and executed
in the name and on behalf of Parent and Merger Sub, respectively, by its Vice
President, substantially in the form and to the effect of Exhibit I-1 and
Exhibit I-2 hereto, and a certificate, dated the Closing Date and executed by
the Secretary of Parent and Merger Sub, respectively, substantially in the form
and to the effect of Exhibit J-1 and Exhibit J-2 hereto.
10.04 Orders and Laws. There shall not be in effect on the Closing
Date any Order or Law restraining, enjoining or otherwise prohibiting or making
illegal the consummation of any of the transactions contemplated by this
Agreement or any of the Operative Agreements or which could reasonably be
expected to otherwise result in a material diminution of the benefits of the
transactions contemplated by this Agreement or any of the Operative Agreements
to the Shareholders, and there shall not be pending or threatened on the Closing
Date any Action or Proceeding in, before or by any Governmental or Regulatory
Authority which could reasonably be expected to result in the issuance of any
such Order or the enactment, promulgation or deemed applicability to Parent,
Merger Sub, the Company, the Shareholders or the transactions contemplated by
this Agreement or any of the Operative Agreements of any such Law.
10.05 Regulatory Consents and Approvals. All consents, approvals
and actions of, filings with and notices to any Governmental or Regulatory
Authority necessary to permit Parent,
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Merger Sub, the Company and the Shareholders to perform their obligations under
this Agreement and the Operative Agreements and to consummate the transactions
contemplated hereby and thereby (a) shall have been duly obtained, made or
given, (b) shall be in form and substance reasonably satisfactory to the
Shareholders, (c) shall not be subject to the satisfaction of any condition that
has not been satisfied or waived and (d) shall be in full force and effect.
10.06 Third Party Consents. All consents (or in lieu thereof
waivers) to the performance by the Company and the Shareholders of their
obligations hereunder and to the consummation of the transactions contemplated
hereby as are required under the Contracts listed in Section 10.06 of the
Disclosure Schedule (a) shall have been obtained, (b) shall be in form and
substance reasonably satisfactory to the Company and the Shareholders, (c) shall
not be subject to the satisfaction of any condition that has not been satisfied
or waived and (d) shall be in full force and effect.
10.07 Proceedings. All proceedings to be taken on the part of Parent
and Merger Sub in connection with the transactions contemplated by this
Agreement and all documents incident thereto shall be reasonably satisfactory in
form and substance to the Company and the Shareholders, and the Company and the
Shareholders shall have received copies of all such documents and other
evidences as the Company and the Shareholders may reasonably request in order to
establish the consummation of such transactions and the taking of all
proceedings in connection therewith.
10.08 Registration Statement. The Registration Statement shall have
been declared effective by the SEC.
10.09 Consulting Agreement. Parent shall have entered into the
Consulting Agreement with the Peek Entity.
10.10 Lease Agreement. Parent shall have entered into the Lease
Agreement with Peek Brothers Investments, LLC.
10.11 Opinion of Counsel. The Shareholders shall have received the
opinion of Milbank, Tweed, Xxxxxx & XxXxxx, special counsel to Parent and Merger
Sub, dated the Closing Date, substantially in the form and to the effect of
Exhibit K hereto.
10.12 Norwest Bank Credit Arrangements. The Shareholders and any of
their Affiliates shall have been fully released from all their obligations in
connection with the credit arrangements between the Company and Norwest Bank,
Highlands Ranch, Colorado.
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ARTICLE XI
SURVIVAL AND INDEMNIFICATION
11.01 Survival of Representations and Warranties. Notwithstanding
any right of Parent (whether or not exercised) to investigate the affairs of the
Company or any right of any party (whether or not exercised) to investigate the
accuracy of the representations and warranties of the other party contained in
this Agreement, the Shareholders and Parent have the right to rely fully upon
the representations, warranties, covenants and agreements of the other contained
in this Agreement. The representations, warranties, covenants and agreements
contained in this Agreement and the statements contained in the Disclosure
Schedule or in any certificate, list or other writing furnished pursuant to any
provision of this Agreement, will survive the Closing (a) indefinitely with
respect to (i) the representations and warranties contained in Section 5.02,
5.03, 5.34, 5.35, 6.02, and 6.07 and (ii) the covenants and agreements contained
in Section 1.07, Article IV, and Section 14.03, (b) until sixty (60) days after
the expiration of all applicable statutes of limitation (including all periods
of extension, whether automatic or permissive) with respect to the matters
covered by the representations and warranties contained in Section 5.10 and with
respect to any covenant or agreement to be performed following the Closing, or
(c) until June 25, 1998 in the case of all other representations and warranties
and any covenant or agreement to be performed in whole or in part on or prior to
the Closing; provided that any representation, warranty, covenant or agreement
that would otherwise terminate in accordance with clause (b) or (c) above will
continue to survive with respect to a specific claim if an Indemnity Notice
shall have been timely given under Section 11.02 on or prior to such termination
date, until the specific claim for indemnification has been satisfied or
otherwise resolved as provided in Section 11.02.
11.02 Indemnification.
(a) Each Shareholder shall jointly and severally indemnify the
Parent Indemnified Parties in respect of, and hold each of them harmless from
and against, any and all Losses suffered, incurred or sustained by any of them
or to which any of them becomes subject, resulting from, arising out of or
relating to (i) any breach of representation or warranty or nonfulfillment of or
failure to perform any covenant or agreement on the part of any Shareholder or
the Company contained in this Agreement, (ii) any claim against the Company or
any of its directors, officers, employees or agents based on any deficiency or
noncompliance with the filing or payment of, or the failure to properly file or
pay, any Tax arising or accruing prior to the Closing Date or Tax Return related
thereto, including, but not limited to, the disallowance of any income tax
deduction relating to advertising and promotional expenses attributable to the
race car activities
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of the Company, (iii) any Action or Proceeding existing or, to the Knowledge of
the Shareholders, threatened prior to the Closing Date against, relating to or
affecting the Company or any of its Assets and Properties or (iv) any Liability
of the Company or claims against the Company in connection with the Race Car
Assets.
(b) Parent shall indemnify the Shareholder Indemnified Parties in
respect of, and hold each of them harmless from and against, any and all Losses
suffered, incurred or sustained by any of them or to which any of them becomes
subject, resulting from, arising out of or relating to any breach of
representation or warranty or nonfulfillment of or failure to perform any
covenant or agreement on the part of Parent or Merger Sub contained in this
Agreement.
(c) (i) No amounts of indemnity shall be payable in the case of
claims by a Parent Indemnified Party in respect of Losses arising from breaches
of representations or warranties of the Company or the Shareholders in excess of
fifteen percent (15%) of the product of (x) the aggregate number of shares of
Parent Common Stock received by the Shareholders pursuant to this Agreement
(taking into account any adjustments made pursuant to Section 4.01) and (y) the
Per Share Closing Price.
(ii) No Indemnifying Party shall be obligated to indemnify and
hold harmless any Indemnified Party under this Section 11.02 unless the
Indemnified Party makes a specific written claim for indemnification within the
applicable survival period specified in Section 11.01. The parties acknowledge
that there are no time limitations imposed by this Article XI upon the ability
to assert a claim for indemnification with respect to matters covered by clauses
(ii), (iii) or (iv) of Section 11.02(a).
(iii) All indemnification obligations of each Shareholder
arising under Section 11.02(a) in respect of Losses arising from breaches of
representations and warranties may be satisfied by payment in cash or by
delivery of shares of Parent Common Stock (or in any other form acceptable to
Parent). The value of any share of Parent Common Stock for this purpose shall be
equal to the arithmetic average of the closing sales price of a share of Parent
Common Stock on each of the five (5) Trading Days ending on and including the
sixth Trading Day prior to the last Trading Day before the date on which such
shares are delivered, as reported on the New York Stock Exchange or, if such
security is not listed or admitted to trading on the New York Stock Exchange, as
reported on the principal national securities exchange on which such security is
listed or admitted to trading or, if such security is not listed or admitted to
trading on any national securities exchange, as reported on the Nasdaq National
Market, or, if such security is not listed or admitted to trading on the Nasdaq
National Market, as reported on the Nasdaq SmallCap
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Market, or if such security is not listed or admitted to trading on any national
securities exchange or the Nasdaq National Market or the Nasdaq SmallCap Market,
the average of the high bid and low asked prices of such security in the
over-the-counter market as reported by the National Association of Securities
Dealers, Inc. Automated Quotations System or such other system then in use or,
if such security is not quoted by any such organization, the average of the
closing bid and asked prices of such security furnished by a New York Stock
Exchange member firm selected by the Company. If such security is not quoted by
any such organization and no such New York Stock Exchange member firm is able to
provide such prices, the value of such security shall be the Fair Market Value
thereof.
(d) In the event any claim or demand in respect of which an
Indemnified Party might seek indemnity under this Section 11.02 is asserted
against or sought to be collected from such Indemnified Party by a Person other
than a party hereto or any of its Affiliates (a "Third Party Claim"), then such
Indemnified Party shall give written notice to the latter of such Third Party
Claim, provided that the failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its obligations
under this Section 11.02, except to the extent that the Indemnifying Party is
actually prejudiced by such failure to give notice. In case any such action is
brought against an Indemnified Party, the Indemnifying Party shall be entitled
to participate in and to assume the defense thereof, with counsel reasonably
satisfactory to such Indemnified Party; provided that in order to assume the
defense of such action the Indemnifying Party must first deliver to the
Indemnified Party a notice of its election so to assume the defense thereof and
expressly agree in such notice that as between the Indemnifying Party and the
Indemnified Party, solely the Indemnifying Party shall be obligated to satisfy
and discharge any Liability or Loss resulting from such Third Party Claim,
subject to the limitations of Section 11.02(c)(i); and provided further that the
Indemnifying Party shall only be entitled to assume the defense of such action
if, after giving effect to the provisions of Section 11.02(c)(i), the
Indemnifying Party would be liable for a majority of the Loss arising out of
such action. After such notice is received by the Indemnified Party, the
Indemnifying Party shall not be liable to such Indemnified Party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense of such Third Party Claim; provided that the Indemnified Party may
participate in such defense at the Indemnified Party's expense. If the
Indemnifying Party is not entitled to, or elects not to, assume the defense of a
Third Party Claim, it will not be obligated to pay the fees and expenses of more
than one counsel for the Indemnified Parties with respect to such claim, unless
the Indemnified Parties shall have been advised by counsel that representation
of any such Indemnified Parties by the same counsel would be inappropriate under
applicable standards of
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professional conduct due to actual or potential differing interests between
them, in which case such Indemnified Parties shall have the right to select
separate counsel the fees and expenses of which shall be paid by the
Indemnifying Party. The Indemnifying Party will not consent to the entry of any
judgment or enter into any settlement which does not include a provision whereby
the plaintiff or claimant in the matter releases the Indemnified Party from all
liability with respect thereto, without the written consent of the Indemnified
Party, which consent will not be unreasonably withheld or delayed. No
Indemnifying Party shall be subject to any liability for any settlement made
without its consent, which consent shall not be unreasonably withheld or
delayed.
(e) In the event of any claim or demand, including Third Party
Claims, in respect of which an Indemnified Party might seek indemnity under this
Section 11.02, the Indemnified Party shall deliver an Indemnity Notice with
reasonable promptness to the Indemnifying Party. The failure by any Indemnified
Party to give the Indemnity Notice shall not impair such party's rights
hereunder except to the extent that an Indemnifying Party demonstrates that it
has been irreparably prejudiced thereby. The Indemnifying Party will notify the
Indemnified Party within the thirty (30) day period following its receipt of
such Indemnity Notice (the "Dispute Period") as to whether the Indemnifying
Party disputes its liability to the Indemnified Party hereunder. If the
Indemnifying Party notifies the Indemnified Party that it does not dispute the
claim described in such Indemnity Notice, or fails to notify the Indemnified
Party within the Dispute Period whether the Indemnifying Party disputes the
claim described in such Indemnity Notice, the Loss specified in the Indemnity
Notice will be conclusively deemed a liability of the Indemnifying Party under
this Section 11.02 and the Indemnifying Party shall pay the amount of such Loss,
when it has been finally determined, to the Indemnified Party on demand, subject
to the limitations set forth in this Section 11.02. If the Indemnifying Party
has timely disputed its liability with respect to such claim, the Indemnifying
Party and the Indemnified Party will proceed in good faith to negotiate a
resolution of such dispute, and if not resolved through negotiations within
sixty (60) days following the Indemnified Party's receipt of a written notice
from the Indemnifying Party disputing such claim, such dispute shall be finally
settled by arbitration in accordance with paragraph (f) of this Section 11.02.
(f) Any dispute submitted to arbitration pursuant to this Section
11.02 shall be finally and conclusively settled by the decision of a board of
arbitration consisting of three (3) members (hereinafter sometimes called the
"Board of Arbitration") selected as hereinafter provided. Each of the
Indemnified Party and the Indemnifying Party shall select one (1) member and the
third member shall be selected by mutual agreement of the other members, or if
the other members fail to reach agreement on a third member within twenty (20)
days after their selection, such
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third member shall thereafter be selected by the American Arbitration
Association upon application made to it for a third member possessing expertise
or experience appropriate to the dispute jointly by the Indemnified Party and
the Indemnifying Party. The Board of Arbitration shall meet in New York, New
York or such other place as a majority of the members of the Board of
Arbitration determines more appropriate, and shall reach and render a decision
in writing (concurred in by a majority of the members of the Board of
Arbitration) with respect to the amount, if any, which the Indemnifying Party is
required to pay to the Indemnified Party in respect of a claim filed by the
Indemnified Party. In connection with rendering its decisions, the Board of
Arbitration shall adopt and follow such rules and procedures as a majority of
the members of the Board of Arbitration deems necessary or appropriate. It is
the intent of the parties hereto that, barring extraordinary circumstances,
decisions of the Board of Arbitration shall be rendered no more than thirty (30)
days following commencement of proceedings with respect thereto. The Board of
Arbitration shall cause its written decision to be delivered to the Indemnified
Party and the Indemnifying Party. Any decision made by the Board of Arbitration
(either prior to or after the expiration of such thirty (30) calendar day
period) shall be final, binding and conclusive on the Indemnified Party and the
Indemnifying Party and entitled to be enforced to the fullest extent permitted
by law and entered in any court of competent jurisdiction. Each party to any
arbitration shall bear its own expense in relation thereto, including but not
limited to such party's attorneys' fees, if any, and the expenses and fees of
the Board of Arbitration shall be divided between the Indemnifying Party and the
Indemnified Party in the same proportion as the portion of the related claim
determined by the Board of Arbitration to be payable to the Indemnified Party
bears to the portion of such claim determined not to be so payable.
(g) The Parent Indemnified Parties' right to indemnity contained in
this Agreement shall not be limited to the property held in escrow under the
Escrow Agreement.
(h) Each Indemnified Party shall have a duty to take all
commercially reasonable steps to mitigate any Losses that such Indemnified Party
may suffer as a result of or arising out of or relating to any breach of a
representation or warranty or non-fulfillment of or failure to perform any
covenant or agreement contained in this Agreement.
(i) If any insurance policy maintained by an Indemnified Party
provides coverage against any Loss for which the Indemnified Party may assert a
claim for indemnification under this Article XI, the Indemnified Party shall use
all commercially reasonable efforts to recover any insurance proceeds to which
it is entitled under the terms of that policy in respect of the Loss, and the
amount of indemnification payable under this Article XI shall not include the
amount of any insurance proceeds actually recovered by the Indemnified Party
with respect to such Loss. If insurance proceeds are received after
indemnification
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payments for the Loss have been made under this Article XI, the Indemnified
Party shall remit the amount thereof to the Indemnifying Party (such payment to
be made utilizing the same form of consideration used by the Indemnifying Party
in making the indemnification payment).
(j) Following the Closing, the indemnification provisions of this
Article XI shall be the sole and exclusive remedy of each Shareholder, Parent,
the Company and the other Indemnified Parties for any breach of any
representation or warranty or non-fulfillment of or failure to perform any
covenant or agreement on the part of another party contained in this Agreement;
provided, however, that the indemnification provisions are in addition to, and
not in derogation of, any statutory or common law remedy which a party may have
for fraud.
ARTICLE XII
TERMINATION
12.01 Termination. This Agreement may be terminated, and the
transactions contemplated hereby may be abandoned:
(a) at any time before the Closing, by mutual written agreement of
the Shareholders and Parent; or
(b) By either the Shareholders, on the one hand, or Parent, on the
other, upon notification to the non-terminating party by the terminating party:
(i) at any time after August 29, 1997 if the Merger shall not
have been consummated on or prior to such date and such failure to
consummate the Merger is not caused by a breach of this Agreement by the
terminating party;
(ii) at any time before the Closing, if there has been a material
breach of any representation, warranty, covenant or agreement on the part
of the non-terminating party set forth in this Agreement, which breach is
not curable or, if curable, has not been cured within thirty (30) days
following receipt by the non-terminating party of notice of such breach
from the terminating party; or
(iii) if any court of competent jurisdiction or other competent
Governmental or Regulatory Authority shall have issued an order making
illegal or otherwise restricting, preventing or prohibiting the Merger and
such order shall have become final and nonappealable.
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12.02 Effect of Termination. If this Agreement is validly terminated
pursuant to Section 12.01, this Agreement will forthwith become null and void,
and there will be no liability or obligation on the part of the Company, the
Shareholders, Parent or Merger Sub (or any of their respective officers,
directors, employees, agents or other representatives or Affiliates), except as
provided in the next succeeding sentence and except that Section 14.05 and the
provision with respect to expenses in Section 14.03 will continue to apply
following any such termination. Notwithstanding any other provision in this
Agreement to the contrary, upon termination of this Agreement pursuant to
Section 12.01(b), the Company and the Shareholders will remain liable to Parent
for any breach of this Agreement by the Company or the Shareholders existing at
the time of such termination, and Parent will remain liable to the Company and
the Shareholders for any breach of this Agreement by Parent or Merger Sub
existing at the time of such termination, and the Company, the Shareholders or
Parent may seek such remedies, including damages and reasonable fees of
attorneys, against the other with respect to any such breach as are provided in
this Agreement or as are otherwise available at Law or in equity.
ARTICLE XIII
DEFINITIONS
13.01 Definitions. (a) Defined Terms. As used in this Agreement, the
following defined terms have the meanings indicated below:
"Accounts Receivable" means all trade accounts receivable and all
notes, bonds and other evidences of Indebtedness of and rights to receive
payments arising out of sales occurring in the conduct of the business of the
Company.
"Actions or Proceedings" means any action, suit, proceeding,
arbitration or Governmental or Regulatory Authority investigation or audit.
"Affiliate" means any Person that directly, or indirectly through
one of more intermediaries, controls or is controlled by or is under common
control with the Person specified, and which respect to any Shareholder, any
spouse of such Shareholder. For purposes of this definition, control of a Person
means the power, direct or indirect, to direct or cause the direction of the
management and policies of such Person whether by Contract or otherwise and, in
any event and without limitation of the previous sentence, any Person owning
more than fifty percent (50%) of the voting securities of another Person shall
be deemed to control that Person.
"Agreement" means this Agreement and Plan of Merger and the
Exhibits, the Annexes, the Disclosure Schedule and the Schedules hereto and the
certificates delivered in accordance
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with Sections 9.03 and 10.03, as the same shall be amended from time to time.
"Assembly Lines" has the meaning ascribed to it in Section 5.29.
"Assets and Properties" of any Person means all assets and
properties of every kind, nature, character and description (whether real,
personal or mixed, whether tangible or intangible, whether absolute, accrued,
contingent, fixed or otherwise and wherever situated), including the goodwill
related thereto, operated, owned or leased by such Person, including without
limitation cash, cash equivalents, Investment Assets, accounts and notes
receivable, chattel paper, documents, instruments, general intangibles, real
estate, equipment, inventory, goods and Intellectual Property.
"Benefit Plan" means any Plan established by the Company, or any
predecessor or Affiliate of the Company, existing at the Closing Date or prior
thereto, to which the Company contributes or has contributed, or under which any
employee, former employee or director of the Company or any beneficiary thereof
is covered, is eligible for coverage or has benefit rights.
"Board of Arbitration" has the meaning ascribed to it in Section
11.02(f).
"Books and Records" means all files, data, reports, lists,
documents, instruments, papers, books and records relating to the Business or
Condition of the Company, including without limitation financial statements, Tax
Returns and related work papers and letters from accountants, budgets, pricing
guidelines, ledgers, journals, deeds, title policies, minute books, stock
certificates and books, stock transfer ledgers, Contracts, Licenses, customer
and supplier lists, computer files and programs, retrieval programs, operating
data and plans and environmental studies and plans.
"Business or Condition of the Company" means the business, condition
(financial or otherwise), results of operations, Assets and Properties and
prospects of the Company.
"Business Day" means a day other than Saturday, Sunday or any day on
which banks located in the State of New York or the State of Colorado are
authorized or obligated to close.
"CBCA" has the meaning ascribed to it in Section 1.01.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, and the rules and
regulations promulgated thereunder.
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"CERCLIS" means the Comprehensive Environmental Response and
Liability Information System, as provided for by 40 C.F.R. Section 300.5.
"Closing" has the meaning ascribed to it in Section 1.02.
"Closing Date" has the meaning ascribed to it in Section 1.02.
"Closing Date Accounts Receivable" has the meaning ascribed to it in
Section 4.02(a).
"Closing Date Balance Sheet" has the meaning ascribed to it in
Section 4.01(b).
"Closing Date Certificate" has the meaning ascribed to it in Section
4.01(b).
"Closing Date Financials" has the meaning ascribed to it in Section
4.01(b).
"Closing Date Net Book Value" has the meaning ascribed to it in
Section 4.01(b).
"Code" means the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
"Company" has the meaning ascribed to it in the forepart of this
Agreement.
"Company Common Stock" has the meaning ascribed to it in Section
2.01(b).
"Consulting Agreement " has the meaning ascribed to it in Section
9.11.
"Constituent Corporations" has the meaning ascribed to it in Section
1.01.
"Contract" means any agreement, Customer Order, lease, license,
evidence of Indebtedness, mortgage, indenture, security agreement or other
contract (whether written or oral).
"Customer Orders" means all unfulfilled sales orders with respect to
products sold by the Company.
"Deficiency Amount" has the meaning ascribed to it in Section
4.01(d).
"Defined Benefit Plan" means each Benefit Plan which is subject to
Part 3 of Title I of ERISA, Section 412 of the Code or Title IV of ERISA.
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"Determination Date" has the meaning ascribed to in Section 4.01(d).
"DGCL" has the meaning ascribed to it in Section 1.01.
"Disclosure Schedule" means the record delivered to Parent by the
Company and the Shareholders herewith and dated as of the date hereof,
containing all lists, descriptions, exceptions and other information and
materials as are required to be included therein by the Company and the
Shareholders pursuant to this Agreement.
"Dispute Period" has the meaning ascribed to it in Section 11.02(e).
"Effective Time" has the meaning ascribed to it in
Section 1.03.
"Environmental Audit" has the meaning ascribed to it in Section
9.09.
"Environmental Claim" means, with respect to any Person, any written
or oral notice, claim, demand or other communication (collectively, a "claim")
by any other Person alleging or asserting such Person's liability for
investigatory costs, cleanup costs, Governmental or Regulatory Authority
response costs, damages to natural resources or other property, personal
injuries, fines or penalties arising out of, based on or resulting from (a) the
presence, or Release into the environment, of any Hazardous Material at any
location, whether or not owned by such Person, or (b) to the Person's knowledge,
circumstances forming the basis of any violation, or alleged violation, of any
Environmental Law. The term "Environmental Claim" shall include, without
limitation, any claim by any Governmental or Regulatory Authority for
enforcement, cleanup, removal, response, remedial or other actions or damages
pursuant to any applicable Environmental Law, and any claim by any third party
seeking damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from the presence of Hazardous Materials or arising
from alleged injury or threat of injury to health, safety or the environment.
"Environmental Law" means any Law or Order relating to the
regulation or protection of human health, safety or the environment or to
Releases or threatened Releases of pollutants, contaminants, deleterious
substances, Hazardous Materials or wastes into the environment (including,
without limitation, ambient air, soil, surface water, ground water, wetlands,
land or subsurface strata), or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, Hazardous Materials or wastes.
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"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, and the rules and regulations promulgated thereunder.
"ERISA Affiliate" means any Person who is in the same controlled
group of corporations or who is under common control with the Company.
"Escrow Agent" and "Escrow Agreement" have the meanings ascribed to
them in Section 2.02.
"Escrow Shares" has the meaning ascribed to it in Section 2.02.
"Estimated Net Book Value" has the meaning ascribed to it in Section
4.01(a).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder.
"Fair Market Value" means, for purposes of Section 11.02(c)(iii),
the fair market value of a share of Parent Common Stock as determined in good
faith by the an independent appraiser mutually selected by Parent and the
Shareholders, whose determination shall be conclusive.
"Final Net Book Value" has the meaning ascribed to it in Section
4.01(d).
"Financial Statements" means the financial statements of the Company
delivered to Parent pursuant to Section 5.07.
"GAAP" means generally accepted accounting principles, consistently
applied throughout the specified period and in the immediately prior comparable
period.
"Governmental or Regulatory Authority" means any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality of
the United States, any foreign country or any domestic or foreign state, county,
city or other political subdivision.
"Hazardous Material" means (A) any petroleum or petroleum products,
flammable explosives, radioactive materials, asbestos in any form that is or
could become friable, urea formaldehyde foam insulation and transformers or
other equipment that contain dielectric fluid containing levels of
polychlorinated biphenyls (PCBs); (B) any chemicals or other materials or
substances which are now or hereafter become defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous materials,
"liquid industrial wastes," "toxic substances," "toxic pollutants" or words of
similar import under any Environmental Law; and (C) any other chemical or other
hazardous material, waste or substance, exposure to which is now or hereafter
prohibited, limited or
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regulated by any Governmental or Regulatory Authority under any Environmental
Law.
"Indebtedness" of any Person means all obligations of such Person
(i) for borrowed money, (ii) evidenced by notes, bonds, debentures or similar
instruments, (iii) for the deferred purchase price of goods or services (other
than trade payables or accruals incurred in the ordinary course of business),
(iv) under capital leases and (v) in the nature of guarantees of the obligations
described in clauses (i) through (iv) above of any other Person.
"Indemnified Party" means any Person claiming indemnification under
any provision of Section 11.02, including without limitation a Person asserting
a claim pursuant to Section 11.02(d).
"Indemnifying Party" means any Person against whom a claim for
indemnification is being asserted under any provision of Section 11.02,
including without limitation a Person against whom a claim is asserted pursuant
to Section 11.02(d).
"Indemnity Notice" means written notification pursuant to Section
11.02(e) of a claim for indemnity under Section 11.02 by an Indemnified Party,
specifying the nature of and basis for such claim, together with the amount or,
if not then reasonably determinable, the estimated amount, determined in good
faith, of the Loss arising from such claim.
"Independent Accountant" has the meaning ascribed to it in Section
4.01(c).
"Instruction Materials" means all designs, products, drawings,
plans, blueprints, bills of material, flowsheets, specifications, plan sheets,
formulas, parts lists, instruction manuals, FDA Form 510K product filings and
registrations and device master records relating to or used in the business and
operation of the Company.
"Intellectual Property" means all patents and patent rights,
trademarks and trademark rights, trade names and trade name rights, service
marks and service xxxx rights, service names and service name rights, brand
names, inventions, trade secrets, processes, formulae, copyrights and copyright
rights, trade dress, business and product names, logos, slogans, trade secrets,
industrial models, processes, designs, methodologies, computer programs
(including all source codes) and related documentation, technical information,
manufacturing, engineering and technical drawings, know-how and all pending
applications for and registrations of patents, trademarks, service marks and
copyrights.
"Investment Assets" means all debentures, notes and other evidences
of Indebtedness, stocks, securities (including rights to purchase and securities
convertible into or
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exchangeable for other securities), interests in joint ventures and general and
limited partnerships, mortgage loans and other investment or portfolio assets
owned of record or beneficially by the Company (other than trade receivables
generated in the ordinary course of business of the Company).
"IRS" means the United States Internal Revenue Service.
"Knowledge of the Shareholders" "Known to the Shareholders" or "to
the Shareholders' Knowledge" means the knowledge of Xxxxxxx X. Xxxx or Xxxxxxx
X. Xxxx.
"Lakewood Property" means the property leased by the Company under
the Lease Agreement.
"Laws" means all statutes, codes, ordinances, decrees, rules,
regulations, municipal by-laws, judicial or arbitral or administrative or
ministerial or departmental or regulatory judgments, orders, decisions, rulings
or awards, policies, voluntary restraints, guidelines, or any provisions of the
foregoing, including general principles of common and civil law and equity,
binding on or affecting the Person referred to in the context in which such word
is used; and "Law" means any one of them.
"Lease Agreement" has the meaning ascribed to it in Section 9.13.
"Liabilities" means all Indebtedness, obligations and other
liabilities of a Person (whether absolute, accrued, contingent, fixed or
otherwise, or whether due or to become due).
"Licenses" means all licenses, permits, certificates of authority,
authorizations, approvals, registrations, franchises and similar consents
granted or issued by any Governmental or Regulatory Authority.
"Liens" means any mortgage, hypothecation, pledge, assessment,
security interest, movable security, lease, lien, adverse claim, levy, defect of
title, charge or other encumbrance of any kind, or any conditional sale
Contract, title retention Contract or other Contract to give any of the
foregoing and any other rights of third parties relating to the property,
including rights of set-off, voting trusts and other encumbrances of any kind.
"Loss" means any and all damages, fines, fees, penalties,
deficiencies, losses and expenses (including without limitation interest, court
costs, reasonable fees of attorneys, accountants and other experts or other
reasonable expenses of litigation or other proceedings or of any claim, default
or assessment).
"Manufacturing Equipment" has the meaning ascribed to it in Section
5.29.
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"Merger" has the meaning ascribed to it in the forepart of this
Agreement.
"Merger Sub" has the meaning ascribed to it in the forepart of this
Agreement.
"Merger Sub Common Stock" has the meaning ascribed to it in Section
2.01(a).
"Net Book Value of the Company" means the total assets of the
Company (net of allowances for doubtful accounts and accumulated depreciation)
minus (i) the book value of the Race Car Assets as set forth on Annex I hereto,
if included in the total assets, and (ii) the Liabilities of the Company as
shown on the applicable balance sheet of the Company calculated in accordance
with GAAP.
"Net Receivables Amount" has the meaning ascribed to it in Section
4.02(a).
"1996 Base Balance Sheet" means the balance sheet of the Company
dated December 31, 1996, prepared by the Company in accordance with the Books
and Records and in accordance with GAAP consistently applied.
"Non-Competition Agreement" has the meaning ascribed to it in
Section 9.12.
"NPL" means the National Priorities List under CERCLA.
"Operative Agreements" means the Escrow Agreement, the Registration
Rights Agreement, the Consulting Agreement, the Non-Competition Agreements, the
Lease Agreement, the Royalty Agreement and any other support or other agreements
to be entered into in connection with this Agreement.
"Option" has the meaning ascribed to it in Section 5.03.
"Order" means any writ, judgment, decree, injunction or similar
order of any Governmental or Regulatory Authority (in each such case whether
preliminary or final).
"Parent" has the meaning ascribed to it in the forepart of this
Agreement.
"Parent's Accountants" has the meaning ascribed to it in Section
4.01(b).
"Parent Common Stock" has the meaning ascribed to it in the forepart
of this Agreement.
"Parent Financial Statements" has the meaning ascribed to it in
Section 6.06.
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"Parent Indemnified Parties" means Parent, Merger Sub and their
respective officers, directors, employees, agents and Affiliates.
"Parent SEC Reports" has the meaning ascribed to it in Section 6.06.
"PBGC" means the Pension Benefit Guaranty Corporation
established under ERISA.
"Peek Entity" has the meaning ascribed to it in Section 9.11.
"Pension Benefit Plan" means each Benefit Plan which is a pension
benefit plan within the meaning of Section 3(2) of ERISA.
"Permitted Lien" means (i) any Lien for Taxes not yet due or
delinquent or being contested in good faith by appropriate proceedings for which
adequate reserves have been established in accordance with GAAP, (ii) any
statutory Lien arising in the ordinary course of business by operation of Law
with respect to a Liability that is not yet due or delinquent, and (iii) any
minor imperfection of title or similar Lien which individually or in the
aggregate with other such Liens does not materially impair the value of the
property subject to such Lien or the use of such property in the conduct of the
business of the Company.
"Per Share Closing Price" means $11.77.
"Person" means any natural person, corporation, general partnership,
limited partnership, proprietorship, other business organization, trust, union,
association or Governmental or Regulatory Authority.
"Plan" means any bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase, stock option,
stock ownership, stock appreciation rights, phantom stock, leave of absence,
layoff, vacation, day or dependent care, legal services, cafeteria, life,
health, accident, disability, workmen's compensation or other insurance,
severance, separation or other employee benefit plan, practice, policy or
arrangement of any kind, whether written or oral, including, but not limited to,
any "employee benefit plan" within the meaning of Section 3(3) of ERISA.
"Pre-Closing Balance Sheet" has the meaning ascribed to it in
Section 4.01(a).
"Pre-Closing Certificate" has the meaning ascribed to it in Section
4.01(a).
"Qualified Plan" means each Benefit Plan which is intended to
qualify under Section 401 of the Code.
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"Race Car Assets" has the meaning ascribed to it in Section 2.01(c).
"Receivables Certificate" has the meaning ascribed to it in Section
4.02(a).
"Receivables Deficiency" has the meaning ascribed to it in Section
4.02(c).
"Receivables Notice" has the meaning ascribed to it in Section
4.02(c).
"Registration Rights Agreement" has the meaning ascribed to it in
the forepart of this Agreement.
"Registration Statement" has the meaning ascribed to it in the
forepart of this Agreement.
"Release" means any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the indoor or outdoor environment, including, without limitation, the movement
of Hazardous Materials through ambient air, soil, surface water, ground water,
wetlands, land or subsurface strata.
"Resolution Period" means the period ending thirty (30) days
following receipt by an Indemnified Party of a written notice from an
Indemnifying Party stating that it disputes all or any portion of a claim set
forth in a Claim Notice or an Indemnity Notice.
"SEC" has the meaning ascribed to it in Section 6.06.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations thereunder.
"Shareholders" has the meaning ascribed to it in the forepart of
this Agreement.
"Shareholder Indemnified Parties" means each Shareholder and his
agents and Affiliates.
"Shareholders' Accountants" has the meaning ascribed to it in
Section 4.01(b).
"Subject Defined Benefit Plan" means each Defined Benefit Plan
listed and described in Section 5.13(a) of the Disclosure Schedule.
"Subsidiary" means any Person in which the Company, directly or
indirectly through Subsidiaries or otherwise, beneficially owns more than fifty
percent (50%) of either the equity interests in, or the voting control of, such
Person.
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"Surplus Amount" has the meaning ascribed to it in Section 4.01(d).
"Surviving Corporation" has the meaning ascribed to it in Section
1.01.
"Surviving Corporation Common Stock" has the meaning ascribed to it
in Section 2.01(a).
"Taxes" means any Federal, state, county, local or foreign income,
profits, gross receipts, franchise, sales, use, occupancy, excise, gains, value
added, withholding, employment, payroll, social security, general property,
personal property, intangible property and all other taxes of any nature, fees,
levies, duties, assessments, reassessments, deficiencies or charges imposed by
any Governmental or Regulatory Authority, and includes any interest and
penalties (civil or criminal) on or additions to any such taxes and any
reasonable expenses incurred in connection with the determination, settlement or
litigation of any Tax Liability.
"Tax Returns" means a report, return or other information (including
any amendments) required to be supplied to a Governmental or Regulatory
Authority with respect to Taxes.
"Third Party Claim" has the meaning ascribed to it in Section
11.02(d).
"Trading Day" means any day on which securities are traded on the
New York Stock Exchange.
(b) Construction of Certain Terms and Phrases. Unless the context of
this Agreement otherwise requires, (i) words of any gender include each other
gender; (ii) words using the singular or plural number also include the plural
or singular number, respectively; (iii) the terms "hereof," "herein," "hereby"
and derivative or similar words refer to this entire Agreement; (iv) the terms
"Article" or "Section" refer to the specified Article or Section of this
Agreement; and (v) the phrases "ordinary course of business" and "ordinary
course of business consistent with past practice" refer to the business and
practice of the Company. Whenever this Agreement refers to a number of days,
such number shall refer to calendar days unless Business Days are specified. All
accounting terms used herein and not expressly defined herein shall have the
meanings given to them under GAAP.
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ARTICLE XIV
MISCELLANEOUS
14.01 Notices. All notices, requests and other communications
hereunder must be in writing and will be deemed to have been duly given only if
delivered personally or by facsimile transmission or mailed (by postage prepaid
registered or certified), return receipt requested, to the parties at the
following addresses or facsimile numbers:
If to Parent or Merger Sub, to:
Xxxxxx-Field Health Products, Inc.
000 Xxxxx Xxxxx Xxxx
Xxxxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxxx X. Xxxxxxx, Esq.
with a copy to:
Milbank, Tweed, Xxxxxx & XxXxxx
0 Xxxxx Xxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxx X. Xxxxx, Esq.
Parent Wire Transfer Instructions
Bank: The Chase Manhattan Bank
00 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
ABA No.:
Beneficiary: Xxxxxx-Field, Inc.
If to either the Company or the Shareholders, to:
Xxxxxxx X. Xxxx
000 X. Xxxxxxx Xxxx
Xxxxxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
and
Xxxxxxx X. Xxxx
0000 Xxxxxxxxx Xxxx
Xxxxxxx, Xxxxxxxx 00000
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with a copy to:
Xxxxxxx & Xxxx, XXX
Xxxxx 0000
000 Xxxxxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxx X. Xxxx, Esq.
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided in this Section, be deemed given upon receipt if received on a Business
Day and on the next Business Day if received on a day that is not a Business
Day, and (iii) if delivered by mail in the manner described above to the address
as provided in this Section, be deemed given upon receipt (in each case
regardless of whether such notice, request or other communication is received by
any other Person to whom a copy of such notice, request or other communication
is to be delivered pursuant to this Section). Any party from time to time may
change its address, facsimile number or other information for the purpose of
notices to that party by giving notice specifying such change to the other party
hereto.
14.02 Entire Agreement. This Agreement and the Operative Agreements
supersede all prior discussions and agreements between the parties with respect
to the subject matter hereof and thereof, including without limitation that
certain letter of intent between the parties dated May 20, 1997, and that
certain letter agreement with respect to confidentiality between the parties
dated May 20, 1997, and contain the sole and entire agreement between the
parties hereto with respect to the subject matter hereof and thereof.
14.03 Expenses. Except as provided in the next succeeding sentence
and except as otherwise expressly provided elsewhere in this Agreement
(including without limitation as provided in Section 11.02), whether or not the
transactions contemplated hereby are consummated, each party will pay its own
costs and expenses incurred in connection with the negotiation, execution and
closing of this Agreement and the Operative Agreements and the transactions
contemplated hereby. The costs of the Environmental Audit and legal fees and
expenses of the Company and the Shareholders will be shared equally between
Parent and the Shareholders; provided, however, in no event shall the
Shareholders be required to contribute in excess of $2,500 for the costs of the
Environmental Audit.
14.04 Public Announcements. Without the prior written consent of the
other parties hereto, neither party hereto will, and will cause their respective
representatives not to, make any release to the press or other public disclosure
at any time prior
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to the Closing with respect to any of the transactions contemplated by this
Agreement, except for such public disclosure as may be necessary, in the written
opinion of counsel, for the party proposing to make the disclosure not to be in
violation of or default under any applicable Law or Order, and then only upon
prior notice and review of such disclosure by the other party.
14.05 Confidentiality. Each party hereto will hold, and will use its
reasonable efforts to cause its respective Affiliates, directors, employees,
agents and representatives to hold, in strict confidence from any Person (other
than any such Affiliate or representative), unless (i) compelled to disclose by
judicial or administrative process (including without limitation in connection
with obtaining the necessary approvals of this Agreement and the transactions
contemplated hereby of Governmental or Regulatory Authorities) or by other
requirements of Law or (ii) disclosed in an Action or Proceeding brought by a
party hereto in pursuit of its rights or in the exercise of its remedies
hereunder, all documents and information concerning the other party or any of
its Affiliates furnished to it by the other party or such other party's
representatives in connection with this Agreement or the transactions
contemplated hereby, except to the extent that such documents or information can
be shown to have been (a) previously known by the party receiving such documents
or information, (b) in the public domain (either prior to or after the
furnishing of such documents or information hereunder) through no fault of such
receiving party or (c) later acquired by the receiving party from another source
if the receiving party is not aware that such source is under an obligation to
another party hereto to keep such documents and information confidential;
provided that following the Closing the foregoing restrictions will not apply to
Parent's use of documents and information concerning the Company furnished by or
on behalf of the Shareholders or the Company hereunder.
14.06 Waiver. Any term or condition of this Agreement may be waived
at any time by the party that is entitled to the benefit thereof, but no such
waiver shall be effective unless set forth in a written instrument duly executed
by or on behalf of the party waiving such term or condition. No waiver by any
party of any term or condition of this Agreement, in any one or more instances,
shall be deemed to be or construed as a waiver of the same or any other term or
condition of this Agreement on any future occasion. All remedies, either under
this Agreement or by Law or otherwise afforded, will be cumulative and not
alternative.
14.07 Amendment. This Agreement may be amended, supplemented or
modified only by a written instrument duly executed by or on behalf of each
party hereto.
14.08 No Third Party Beneficiary. The terms and pro-visions of this
Agreement are intended solely for the benefit of
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each party hereto and their respective successors or permitted assigns, and it
is not the intention of the parties to confer third-party beneficiary rights
upon any other Person other than any Person entitled to indemnity under Section
11.02.
14.09 No Assignment; Binding Effect. Neither this Agreement nor any
right, interest or obligation hereunder may be assigned by any party hereto
without the prior written consent of the other party hereto and any attempt to
do so will be void, except (a) for assignments and transfers by operation of Law
and (b) that Parent may assign any or all of its rights, interests and
obligations hereunder to a directly wholly-owned subsidiary, provided that any
such subsidiary agrees in writing to be bound by all of the terms, conditions
and provisions contained herein, but no such assignment shall relieve Parent of
its obligations hereunder. Subject to the preceding sentence, this Agreement is
binding upon, inures to the benefit of and is enforceable by the parties hereto
and their respective successors and assigns.
14.10 Headings. The headings used in this Agreement have been
inserted for convenience of reference only and do not define or limit the
provisions hereof.
14.11 Invalid Provisions. If any provision of this Agreement is held
to be illegal, invalid or unenforceable under any present or future Law, and if
the rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, and (c)
the remaining provisions of this Agreement will remain in full force and effect
and will not be affected by the illegal, invalid or unenforceable provision or
by its severance herefrom.
14.12 Governing Law. This Agreement shall be governed by and
construed in accordance with the Laws of the State of New York, except to the
extent the CCC or DGCL is mandatorily applicable.
14.13 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
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IN WITNESS WHEREOF, each party hereto has signed this Agreement, or
caused this Agreement to be signed by its officer thereunto duly authorized, as
of the date first above written.
LABAC SYSTEMS, INC.
By:__________________________
Name:
Title:
XXXXXX-FIELD HEALTH PRODUCTS, INC.
By:_____________________________
Name:
Title:
LABAC ACQUISITION CORP.
By:_____________________________
Name:
-----------------------------
Xxxxxxx X. Xxxx
-----------------------------
Xxxxxxx X. Xxxx
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ANNEX I
RACE CAR ASSETS
Asset Book Value
----- ----------
72
ANNEX II
Percentage of
Shares of Parent
Number of Shares Common Stock to be
of Company Common Received in the
Shareholder Stock Owned Merger
----------- ----------------- -------------------
Xxxxxxx X. Xxxx 27,203 50%
Xxxxxxx X. Xxxx 27,203 50%
