ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT has been entered into as of September 6,
2002 by and among SFBC New Drug Services, Inc., a Florida corporation
("Purchaser"), SFBC International, Inc., a Delaware corporation and sole
stockholder of Purchaser ("Parent"), New Drug Services, Inc., a Delaware
corporation ("Seller") and solely for purposes of Seller's representations and
warranties contained in Article VI herein, the additional covenants contained in
Article IX herein, and the miscellaneous provisions contained in Article XIII
herein, each of ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Mr. ▇▇▇▇▇ ▇▇▇▇▇ and
▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ constituting all of the stockholders of Seller
(individually, a "Stockholder" or collectively, the "Stockholders").
ARTICLE I.
RECITALS
Seller engages in the business of providing clinical drug development
and biostatistical and other data management and consulting services to the
pharmaceutical and biotechnology industries, (the "Business").
Purchaser desires to purchase the Business and substantially all of the
assets of Seller and Seller desires to sell the Business and such assets to
Purchaser, in each case upon the terms and subject to the conditions set forth
in this Agreement.
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In consideration of the foregoing and of the respective
representations, warranties, covenants, and agreements herein contained, and
intending to be legally bound, the parties hereto agree as follows:
ARTICLE II.
DEFINITIONS
As used in this Agreement, the following terms have the meanings
indicated below:
"Accounts Receivable" means all accounts (including cash accounts) and
notes receivable (including sums due from officers), of Seller.
"Acquired Assets" means Assigned Contracts, Equipment and Machinery,
Files and Records, Intangible Assets, Intellectual Property, Licenses and
Permits (to the extent transferable by Seller), Prepaid Assets, Warranties and
all other assets of Seller as of the Closing Date (including all such items
shown or reflected in the July 31, 2002 Balance Sheet of Seller, with additions
thereto, net of dispositions in the ordinary course, since the Balance Sheet
date), of every kind, nature, character, and description, whether real, personal
or mixed, whether accrued, contingent or other, and wherever situated, and
whether or not reflected in any financial statement of Seller.
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
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in settlement, liabilities, obligations, Taxes, liens, losses, expenses, and
fees, including court costs and attorneys' fees and expenses.
"Affiliate" means a person or entity which controls, is controlled by,
or is under common control with Seller or Purchaser, as the case may be, either
directly or indirectly through intermediaries.
"Assigned Contracts" means all customer and sponsor agreements and
related work orders, including but not limited to those specified on Schedule
6.22, and those Purchase Orders, and Other Contracts specifically designated as
Assigned Contracts on Schedule 6.22.
"Assumed Liabilities" has the meaning specified in Section 3.02.
"Audited Financials" has the meaning specified in Section 4.02.
"Average Excess Level 1 Profits" has the meaning specified in Section
4.03(a).
"Average Excess Level 2 Profits" has the meaning specified in Section
4.03(b).
"Business" has the meaning specified in the Recitals hereto.
"Business Day" means any day other than Saturday, Sunday, and any other
day on which there is no trading on the floor of the New York Stock Exchange.
"Cash Payment" has the meaning specified in Section 4.01.
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"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended.
"Charlotte" means SFBC Charlotte, Inc.
"Claim" means under Article XII any and all damages, losses,
obligations, liabilities, claims, encumbrances, penalties, costs, and expenses
arising from or related to the matters described in each of Section 12.01 and
Section 12.02, respectively.
"Closing" has the meaning specified in Article V.
"Closing Date" has the meaning specified in Article V.
"Closing Date Balance Sheet" has the meaning specified in Section 6.06.
"Closing Date Financial Statements" has the meaning specified in
Section 6.06.
"COBRA" means Title X of the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended.
"Code" means the Internal Revenue Code of 1986, as amended.
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"Computer Software" means all computer source codes, programs, data
files, and other software (including both applications software and operating
software), including all machine readable code, printed listings of code,
documentation, and related property and information relating to the Business,
including licenses and other rights to use Computer Software of third parties.
"Common Stock" means shares of common stock of Parent, Purchaser or
Sellers, as the case may be.
"Counsel for Seller" means Klehr, Harrison, ▇▇▇▇▇▇, Branzberg
& ▇▇▇▇▇▇ LLP.
"Counsel for Parent and Purchaser" means ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLP.
"Customer" means any person, firm, corporation, partnership,
association or other entity to which the Company or sold or provided goods or
services during the 12-month period prior to the time at which any determination
is required to be made as to whether any such person, firm, corporation,
partnership, association or other entity is a Customer, or who or which was
approached by or who or which has approached an employee of the Company for the
purpose of soliciting business from the Company or the third party, as the case
may be.
"▇▇. ▇▇▇▇▇" means ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Pharm.D., a Stockholder.
"Dr. Orlando" means ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, a Stockholder.
"▇▇. ▇▇▇▇▇" means ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Ph.D., a Stockholder.
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"Earn-Out" has the meaning specified in Section 4.03.
"Earn-Out 1" has the meaning specified in Section 4.03(a).
"Earn-Out 2" has the meaning specified in Section 4.03(b).
"Earn-Out Period" has the meaning specified in Section 4.03.
"EBIDTA" means earnings before interest, depreciation and taxes the
combined net income of Seller and Purchaser for the fiscal year ended December
31, 2002, determined in accordance with GAAP as in effect at the end of such
period, (A) plus, without duplication and to the extent reflected as a charge in
the statement of net income for such period, the sum of (i) total income tax
expense, (ii) interest expense, amortization or write-off of debt discount and
debt issuance costs and commissions, discounts and other fees and charges
associated with loans and letters of credit, (iii) depreciation and amortization
expense, (iv) amortization of intangibles (including, but not limited to,
goodwill) and organization costs, and (v) any extraordinary or unusual loss to
the extent covered by insurance; and (B) minus any extraordinary or unusual gain
(including, whether or not otherwise includable as a separate item in the
statement of net income for such period, gains on the sales of assets outside of
the ordinary course of business).
"Employee Plans" has the meaning specified in Section 6.17(c).
"Environmental Claims" means all accusations, allegations,
investigations, warnings, notice letters, notices of violations, Liens, orders,
claims, demands, suits or administrative or judicial actions for any injunctive
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relief, fines, penalties, or any damage, including without limitation personal
injury, property damage (including any depreciation of property values), lost
use of property, natural resource damages, or environmental response costs
arising out of Environmental Conditions or under Environmental Requirements.
"Environmental Conditions" means the state of the environment,
including natural resources (e.g., flora and fauna), soil, surface water, ground
water, any present or potential drinking water supply, subsurface strata or
ambient air, relating to or arising out of the use, handling, storage,
treatment, recycling, generation, transportation, spilling, leaking, pumping,
pouring, injecting, emptying, discharging, emitting, escaping, leaching,
dumping, disposal, release, or threatened release of Hazardous Materials,
whether or not yet discovered which suffices to result could or does result in
Environmental Claims. With respect to Environmental Claims by third parties,
Environmental Conditions also include the exposure of persons to Hazardous
Materials at the work place or the exposure of persons or property to Hazardous
Materials migrating or otherwise emanating from, to, or located at, under, or on
the Real Property and/or Leased Real Property.
"Environmenal Requirements" means all present and future laws,
rules, regulations, ordinances, codes, policies, guidance documents, approvals,
plans, authorizations, and enforceable licenses and permits issued by all duly
authorized government agencies, departments, commissions, boards, bureaus, or
instrumentalities of the United States, all states and political subdivisions
thereof, and all judicial, administrative, and regulatory decrees, judgments,
and orders relating to human health, pollution, or protection of the environment
(including ambient air, surface water, ground water, land surface, or surface
strata), including (a) laws relating to emissions, discharges, releases, or
threatened releases of Hazardous Materials, and (b) laws relating to the
identification, generation, manufacture, processing, distribution, use,
treatment, storage, disposal, recovery, transport, or other handling of
Hazardous Materials, (c) CERCLA, the Toxic Substances Control Act, as amended;
the Hazardous Materials Transportation Act, as amended, RCRA, the Clean Water
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Act, as amended, the Safe Drinking Water Act, as amended, the Clean Air Act, as
amended, the Atomic Energy Act of 1954, as amended, and the Occupational Safety
and Health Act, as amended.
"Equipment and Machinery" means (a) all personal property owned by
Seller, including without limitation the equipment, machinery, furniture,
fixtures and improvements, computer hardware, tooling, spare parts, supplies,
and vehicles owned or leased by Seller (including all leases of such property),
(b) any rights of Seller to warranties applicable to the foregoing (to the
extent assignable), and licenses received from manufacturers and sellers of any
such item, and (c) any related claims, credits, and rights of recovery with
respect thereto.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the regulations promulgated thereunder.
"Escrow" has the meaning specified in Section 4.01(b).
"Escrow Agent" means Section 4.01.
"Escrow Payment" has the meaning specified in Section 4.01(b).
"Excess Level 1 Profits" has the meaning specified in Section 4.03(a).
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"Excess Level 2 Profits" has the meaning specified in Section 4.03(b).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Obligations" has the meaning specified in Section 3.03.
"FDA" means the United States Department of Health and Human Services
Food and Drug Administration.
"Files and Records" means all files and records of Seller relating to
the Business, whether in hard copy or magnetic or other format including
customer and supplier lists and records; equipment maintenance records;
equipment warranty information; plant plans, specifications and drawings; sales
and advertising material; computer software; technical and research analyses;
engineering, sales, marketing and other studies, data and plans; bid
information; quality assurance records; and records relating to those employees
of Seller who may become employed by Purchaser following the Closing.
"Financial Statements" means (a) unaudited balance sheets and
statements of income, changes in stockholders equity, and cash flow as of and
for the fiscal year ended December 31, 2001 of Seller; (b) unaudited balance
sheets and statements of income, changes in stockholders equity, and cash flow
as of and for the seven months ended July 31, 2002; and (c) the unaudited
balance sheet and income statement as of the day before the Closing.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
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"Governmental Entity" means any federal, state, local or foreign court,
commission, governmental body, regulatory or administrative agency, authority or
tribunal.
"Hazardous Materials" means (a) any substance that is defined as a
"hazardous substance", "hazardous waste", "hazardous material", pollutant, or
contaminant under any Environmental Requirements, including CERCLA, ▇▇▇▇, RCRA,
and any analogous state or local law; (b) petroleum (including crude oil and any
fraction thereof); and (iii) any natural or synthetic gas (whether in liquid or
gaseous state).
"Intangible Assets" means all intangible personal property rights of
Seller, including all rights on the part of Seller to proceeds of any insurance
policies and all claims on the part of Seller for recoupment, reimbursement, and
coverage under any insurance policies for events that arise prior to the Closing
Date; all rights of Seller in and to all telephone, facsimile, and email (if
any) numbers and telephone and other directory listings utilized in connection
with the Business; and all industry, vendor and other certifications and
endorsements utilized in connection with the Business.
"Indemnified Party" has the meaning specified in Section 12.03(a).
"Indemnifying Party" has the meaning specified in Section 12.03(a).
"Intellectual Property" means all United States and foreign patents and
patent applications (whether utility, design, or plant product), registered and
unregistered trademarks, service marks, trade names, logos, brands, business
identifiers, private labels, trade dress (including all goodwill and reputation
symbolized by any of the foregoing), rights of publicity, processes, industrial
designs, inventions, registered and unregistered copyrights and copyright
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applications, product formulas, know-how, trade secrets, uniform resource
locators or Internet addresses, and Computer Software, and all rights with
respect to the foregoing that the Seller has, and all other proprietary rights
that Seller owns, licenses, or possesses the right to use with respect to the
Acquired Assets or in the conduct of the Business.
"Leased Real Property" has the meaning specified in Section 6.12.
"Legal Provisions" has the meaning specified in Section 6.15.
"Level 1 Earn-Out" has the meaning specified in Section 4.03(a).
"Level 2 Earn-Out" has the meaning specified in Section 4.03(b).
"Licenses and Permits" means all governmental licenses, permits,
franchises, authorizations, and approvals that are held by Seller and relate to
the conduct of the Business, including those described in Schedule 6.19.
"Lien(s)" means any mortgage, pledge, security interest, encumbrance,
lien (statutory or other), option, easement, right-of-way, charge, or
conditional sale agreement.
"Material Adverse Effect" means any event, change or occurrence which,
individually or together with any other event, change, or occurrence, insofar as
can reasonably be foreseen, could result in a material adverse effect on Seller,
Parent or Purchaser, as the case may be, or material adverse change in the
business, properties, assets, financial condition, results of operations,
management or future prospects of Seller, Parent or Purchaser, as the case may
be, since December 31, 2001.
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"Material Contracts" means all contracts and other arrangements,
whether oral or written, to which Seller is a party as to which the breach,
non-performance, failure to renew, or cancellation could have a Material Adverse
Effect on the Business.
"▇▇. ▇▇▇▇▇" means Mr.▇▇▇▇▇ ▇▇▇▇▇, a Stockholder.
"New Profit Measure" has the meaning specified in Section 4.04.
"Other Contracts" means all leases for Equipment and Machinery or other
personal property (whether Seller is lessor or lessee), indentures, loan
agreements, security agreements, partnership and/or joint venture agreements,
license agreements, service contracts, employment and consulting agreements,
suretyship contracts, reimbursement agreements, distribution agreements, and all
other contracts, commitments and agreements to which Seller is a party.
"Person" means any individual, corporation, partnership, joint venture,
association, limited liability company, limited liability partnership,
joint-stock company, trust, unincorporated organization, other entity, or any
governmental agency, officer, department, commission, board, bureau, or
instrumentality thereof.
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"Permitted Liens" means:
(a) Liens on Acquired Assets arising by operation of law and
securing the payment of Taxes which are not yet due and payable and are
reflected on the Closing Date Balance Sheet;
(b) easements, rights-of-way, reservations of rights,
conditions or covenants, zoning, building or similar restrictions or other
restrictions or encumbrances that do not, individually or in the aggregate
materially interfere with the use of the affected property in the operation of
the Business as conducted or as proposed to be conducted by Seller;
(c) the rights under the Real Property Leases and leases of
personal property by Seller as lessee which are part of the Acquired Assets; and
(d) mechanics', carriers', workers', repairers', and similar
non-consensual Liens arising by operation of law and relating to obligations
which are incurred in the ordinary course of business and which secure only
Assumed Liabilities which are not yet due and payable on the Closing Date.
"Personnel" means the officers, employees and/or agents of Parent,
Purchaser or Seller as the case may be.
"Policies" and "Policy" have the meanings specified in Section 6.21.
"Prepaid Expenses" means any rents, Taxes or other expenses related to
the Business or the Acquired Assets that were paid in the ordinary course by
Seller prior to the Closing Date with respect to a period that includes a date
on or after the Closing Date, determined with respect to each expense by
multiplying the amount of the expense by a fraction, the numerator of which is
the number of days in such period occurring on or after the Closing Date and the
denominator of which is the number of days in such period.
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"Purchase Orders" means all of Seller's outstanding purchase orders,
contracts, or other commitments to suppliers of goods and services for
materials, supplies, services, or other items used in the Business.
"Purchase Price" has the meaning specified in Section 4.01.
"Purchaser" has the meaning specified in the first paragraph hereof.
"RCRA" means the Resource Conservation and Recovery Act, as amended.
"Real Property Leases" has the meaning specified in Section 6.12.
"▇▇▇▇" means the Superfund Amendments and Reauthorization Act of 1986,
as amended.
"SEC" means the United States Securities and Exchange Commission.
"SEC Documents" means any registration statement, report or other
document filed with the SEC by Parent.
"Securities Act" means the Securities Act of 1933, as amended.
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"Seller" has the meaning specified in the first paragraph hereof.
"Seller's Knowledge" means the knowledge of the Seller or any of the
Stockholders.
"Stockholder" or "Stockholders" has the meaning specified in the first
paragraph hereof.
"Taxes" means all federal, state, local, or foreign taxes (including
excise taxes, occupancy taxes, employment taxes, unemployment taxes, ad valorem
taxes, custom duties, transfer taxes, and fees), levies, imposts, fees,
impositions, assessments, or other governmental charges of any nature imposed
upon a Person including all taxes or governmental charges imposed upon any of
the personal properties, real properties, tangible or intangible assets, income,
receipts, payrolls, transactions, stock transfers, capital stock, net worth or
franchises of a Person (including all sales, use, withholding or other taxes
which a Person is required to collect and/or pay over to any government), and
all related additions to tax, penalties or interest thereon.
"Tax Returns" means any return, report, information return, or other
document (including any related or supporting information) filed or required to
be filed with any governmental agency, department, commission, board, bureau, or
instrumentality in connection with the determination, assessment, collection, or
administration of any Taxes.
"Warranties" means all rights benefitting Seller under any warranty,
express or implied related to the Acquired Assets.
"Year 1" has the meaning specified in Section 4.03.
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"Year 2" has the meaning specified in Section 4.03.
"Year 3" has the meaning specified in Section 4.03.
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ARTICLE III.
PURCHASE OF ACQUIRED ASSETS,
ASSUMPTION OF ASSUMED LIABILITIES
Section 3.01. Purchase of Assets. Subject to the terms and
conditions herein set forth, on the Closing Date, Seller shall sell, convey,
transfer, assign, and deliver to Purchaser, and Purchaser shall purchase,
acquire, and accept from Seller all of the right, title, and interest of Seller
in and to the Acquired Assets. The sales, conveyances, transfers, assignments,
and deliveries by Seller of the Acquired Assets, as herein provided, shall be
effected on the Closing Date, free and clear of all Liens, other than any
Permitted Liens, by appropriate deeds, bills of sale, endorsements, assignments,
and other instruments of transfer and conveyance reasonably satisfactory in form
and substance to Purchaser.
Section 3.02. Assumption of Operating Liabilities. At the
Closing, Purchaser shall assume and shall, subject to all rights of offset,
defenses, causes of action, counterclaims and claims of any nature against third
parties that may be available to Seller in respect of the Assumed Liabilities,
agree to satisfy and discharge, as the same shall become due, (a) all of
Seller's obligations under the contracts, agreements, commitments and leases of
Seller which are specifically identified in Schedule 3.02, and are assigned to
Purchaser at Closing, if and to the extent assignable; (b) all of Seller's
obligations under all Licenses and Permits which are specifically identified in
Schedule 3.02 and are transferred to Purchaser at Closing, if and to the extent
transferable; (c) all obligations relating to Environmental Conditions or
arising under Environmental Requirements, except to the extent that they are
subject to a Claim on or before September 30, 2005 under Article XII hereof; and
(d) any and all other obligations of Seller related to the Business reflected on
the Financial Statements. (collectively, the "Assumed Liabilities").
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Section 3.03. Excluded Obligations. Purchaser is not assuming,
and Seller shall remain fully responsible for, all past, present and future
indebtedness, liabilities, obligations, contracts and commitments of Seller and
any predecessors in interest of the Business, known or unknown, fixed or
contingent, whether arising out of or resulting from the Business or the assets
thereof, or otherwise, that are not Assumed Liabilities (the "Excluded
Obligations"). Without limiting the foregoing, the Excluded Obligations shall
include, but not limited to, any and all liabilities arising from or related to:
(a) the negligent acts or omissions of Seller and its
employees and agents, whether in tort or otherwise;
(b) product liability or similar claims for injury to any
Person or property with respect to services rendered or products purchased or
sold, by Seller prior to Closing;
(c) any liability of Seller for Taxes arising prior to Closing
subject to the terms of Section 6.06 hereof;
(d) any suits, actions, or claims alleging infringement by
Seller, prior to Closing, of patents, trademarks, trade names or other
intellectual property rights held by others;
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(e) any Environmental Condition existing at Closing, except to
the extent (i) such condition has been exacerbated after Closing or (ii)
Purchaser, its agents, employees, or representatives have not exercised due care
or caution with respect to such conditions;
(f) any warranty, obligation or other liability contingent or
otherwise with respect to services provided by Seller prior to the Closing;
(g) any liability for commitments made by Seller relating to
the employment, relocation or termination (including, but not limited to,
severance pay) of any employee, officer or director of Seller;
(h) any liability or obligation of Seller in respect of the
Employee Benefit Plans (including any fees, costs or similar expenses thereto),
employee handbooks, company policy manuals, employment contracts or policies
concerning fringe benefits;
(i) any other suits, actions or claims against Seller;
(j) any liability or obligation relating to any asset which is
not an Acquired Asset; and
(k) any inter-company liabilities including liabilities
between Seller and its subsidiaries, if any.
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All Excluded Obligations shall remain the sole responsibility of
Seller, and Seller agrees to pay, perform, discharge such Excluded Obligatons,
and indemnify, in accordance with Article XII hereof, Parent and Purchaser from
and against such Excluded Obligatons.
Section 3.04. Subsequent Documentation. At any time, and from
time to time after the Closing Date until the third anniversary date thereof,
Seller shall, upon the reasonable request of Parent or Purchaser, and Parent or
Purchaser shall, upon the reasonable request of Seller, promptly execute,
acknowledge, and deliver, or cause to be executed, acknowledged, and delivered,
such further instruments and other documents, and perform or cause to be
performed such further acts, as may be reasonably required to evidence or
effectuate the sale, conveyance, transfer, assignment, and delivery hereunder of
the Acquired Assets, the assumption by Purchaser of the Assumed Liabilities, the
performance by the parties of any of their other respective obligations under
this Agreement, and to carry out the purposes and intent of this Agreement.
Section 3.05. Assignment of Contracts. To the extent that the
assignment of all or any portion of any of the Assigned Contracts shall require
the consent of any other party thereto, the execution of this Agreement shall
not constitute an agreement to assign the same if an attempted assignment would
constitute a breach thereof. Upon the request of Parent or Purchaser, after the
Closing, Seller shall use its best efforts to obtain the consent of each such
other party to the assignment thereof to Purchaser; provided, that no material
modification of any such Assigned Contract shall be made without Purchaser's
prior written consent.
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ARTICLE IV.
PURCHASE PRICE
Section 4.01. Purchase Price. Purchaser shall purchase the
Acquired Assets in exchange for up to $18,500,000 consisting of:
(a) $8,000,000 in cash payable at the Closing by wire transfer
of immediately available funds to an account designated by Seller (the "Cash
Payment");
(b) $2,500,000 in Common Stock of Parent, which Common Stock
shall be held in escrow (the "Escrow") with Wachovia Bank, National Association
(the "Escrow Agent"), and released from escrow upon the satisfaction of certain
conditions described in Section 4.02 below (the "Escrow Payment"). The number of
shares of Parent's Common Stock shall be based upon the average closing price of
Parent's Common Stock on the Nasdaq Stock Market for the 20 trading days prior
to, but not including the Closing Date; and
(c) up $8,000,000 in contingent Earn-Out payments further described in
Section 4.03 below.
In addition, Purchaser shall assume the Assumed Liabilities of Seller.
The Cash Payment, the Common Stock, the Contingent Earn-Out and the Assumed
Liabilities are collectively referred to as the "Purchase Price."
(d) To the extent that the Closing Date Balance Sheet reflects
that the Acquired Assets do not exceed the Assumed Liabilities by at least
$1,625,000, and Parent and Purchaser elect to waive the requirements of Section
8.01 (m), the cash portion of the Purchase Price shall be reduced on a
dollar-for-dollar basis.
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Section 4.02. Escrow Payment.
--------------
(a) EBIDTA shall be determined upon receipt of a combined
audited income statement of Seller for the current fiscal year beginning on
January 1, 2002 and ending on the date of the Closing without giving effect to
the transactions contemplated by this Agreement and of Purchaser beginning on
the date of the Closing and ending on December 31, 2002 (the "Audited
Financials"). Purchaser shall maintain separate books and records for the
operations of Purchaser for the fiscal year ending December 31, 2002 for
purposes of calculating EBITDA and shall not combine the results of operations
of Charlotte during 2002. Seller's Financial Statements shall be audited by
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, LLP. Seller shall have the right to consult with Parent's
management and review the calculation of EBITDA. If Seller disagrees with the
calculation or any calculation of an Earn-Out under Section 4.03, it may
communicate its disagreement with ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, LLP whose determination, made
prior to the date Parent files any report with the SEC, shall be conclusive. If
EBITDA is:
(i) $1,625,000 or more, the entire Escrow shall be
released to Seller;
(ii) between $1,125,000 and $1,624,999, 50% of the
Escrow shall be released to Seller and the balance of Parent's Common Stock
shall be cancelled; and
(iii) less than $1,125,000, no Escrow Payment shall
be due and all shares of Parent's Common Stock under Section 4.01(b) shall be
cancelled.
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To the extent that shares of Parent's Common Stock are not released to Seller,
the value (determined as of the Closing Date using the price referred to in
Section 4.01(b) times the number of shares cancelled) shall be added to Earn-Out
2 described in Section 4.03(b).
(b) Once earned, Parent's Common Stock shall be released from
Escrow and delivered upon the later of (i) six months following the Closing
Date, or (ii) five business days following receipt of the Audited Financials. At
Closing, Parent and Seller shall enter into a Registration Rights Agreement in
the form attached hereto as Exhibit A (the "Registration Rights Agreement") and
a Lock-Up Agreement in the form attached hereto as Exhibit B (the "Lock-Up
Agreement").
Section 4.03. Contingent Earn-Out. As further described below,
Seller shall have the opportunity to earn additional consideration (the
"Earn-Out") over a 36-month period (the "Earn-Out Period"). The Earn-Out Period
shall be divided into three 12 month periods ending September 30, 2003, 2004,
and 2005 ("Year 1", "Year 2", and "Year 3" respectively). Seller's Earn-Out (if
any) in any given year during the Earn-Out Period shall vary depending upon
excess profit realized by Seller under Earn-Out 1 or Earn-Out 2 as described
below. In no event shall the contingent Earn-Out payable to Seller during the
Earn-Out Period exceed $8,000,000 in the aggregate (plus the value of any of
Parent's Common Stock cancelled under Section 4.02). Any amount due under this
Section 4.03 shall be paid 10 days after Parent files a Form 10-Q (or 10-QSB)
with the SEC for the nine months ending September 30, commencing with 2003, but
no later than November 30 of each of 2003, 2004 and 2005. It is understood that
during Year 1 or Year 2, Parent expects to cause Purchaser to merge with
Charlotte or combine Seller's operations with Charlotte which shall have an
impact on the Earn-Outs. Prior to the Closing, Seller will be permitted to
23
complete a due diligence review of the operations and financial condition of
Charlotte and will be permitted to review and refine the contingent earnout
following such review. ▇▇. ▇▇▇▇▇ shall be the chief executive officer and a
director of Purchaser and Charlotte following the Closing with all of the powers
provided in each corporation's bylaws.
(a) Earn-Out 1: Subject to Section 4.03 above, Seller shall be
entitled to an Earn-Out of up to $4,000,000 calculated as follows: [*]
[*]
[*]
[*]
[*]
[*]
[*]
[*]
[*]
[*]
[*]
[*]
(b) Earn-Out 2: Subject to Section 4.02 above, Seller shall be
entitled to an additional Earn-Out of up to $4,000,000 (plus the amount in value
of any of Parent's Common Stock cancelled under Section 4.02(a)) calculated as
follows: [*]
[*]
[*]
[*]
[*]
[*]
[*]
[*]
[*]
[*]
[*]
[*]
[*]
[*]
* Confidential portions omitted and filed separately with the Commission
pursuant to a Request For Confidential Treatment.
24
[*]
[*]
[*]
[*]
[*]
[*]
[*]
[*]
[*]
[*]
The first 50% of any Level 2 Earn-Out earned under this Section 4.03
shall be payable in cash. Subject to Section 4.03 above, the remaining 50% shall
be payable in cash or Parent's Common Stock, at Parent's option, provided if
Parent elects to use shares of Parent's Common Stock it shall use commercially
reasonable efforts to register them for resale (subject to the terms and
conditions of the Registration Rights Agreement) as soon as practicable
following delivery to Seller. If any portion of the Level 2 Earn-Out is paid in
Parent's Common Stock, the number of shares shall be dependent upon the average
closing price of the Parent's Common Stock on the Nasdaq Stock Market (or other
principal trading market) for the 20 trading days prior to, but not including
the date of the Earn-Out payment.
Section 4.04. New Profit Measure. New Profit Measure shall
mean, for each 12-month period beginning October 1, 2002, Purchaser's and
Charlotte's combined net income before taxes calculated in accordance with GAAP,
consistently applied, and without any expenses imposed by Parent (as distinct
from odinary and necessary business expenses of Purchaser) other than those
mutually agreed to in advance by Seller, Parent and Purchaser and less [*]
[*]
* Confidential portions omitted and filed separately with the Commission
pursuant to a Request For Confidential Treatment.
25
[*]
[*]
[*]
[*]
[*]
[*]
[*]
Section 4.05. Negative Covenants of Parent and Purchaser.
Parent and Purchaser will, in a manner that is mutually acceptable to Parent,
Purchaser and Seller: (a) not take any action or fail to take any action which
interferes, in the ordinary course of business, with Seller's ability to earn
the Earn-Out; (b) agree to retain at least 50% of Purchaser's net after-tax
income as working capital of Purchaser through the Earn-Out Period; and (c)
provide for direct payments of the Earn-Out to the Stockholders following the
liquidation of Seller.
Section 4.06 Allocation of Purchase Price. The portion of the
Purchase Price paid in exchange for the Acquired Assets pursuant to Section
4.01, together with the allocable portion of the Assumed Liabilities and any
other relevant items, shall be allocated among the Acquired Assets in accordance
with this Section 4.06 (such allocations, the "Purchase Price Allocations"). As
promptly as practicable after the Closing Date, Purchaser shall prepare or cause
to be prepared, and shall submit to Seller, a draft version of the Purchase
Price Allocations, which (i) shall be prepared in accordance with the principles
of Schedule 4.06, but with respect to any particular asset described on Schedule
4.06, only to the extent that the allocation specified on Schedule 4.06 is
reasonable and (ii) shall be determined in accordance with Section 1060 of the
Code and the applicable Treasury regulations thereunder. Purchaser and Seller
shall report the Tax consequences of the transactions contemplated by this
Agreement in a manner consistent with the Purchase Price Allocations, as
determined pursuant to this Section 4.06, and shall not take any action or
position that is inconsistent therewith. In the event a dispute arises between
Purchaser and Seller with respect to the determination of the Purchaser Price
* Confidential portions omitted and filed separately with the Commission
pursuant to a Request For Confidential Treatment.
26
Allocations, such dispute shall be resolved by ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ in the manner
provided to resolve any disputes with respect to the calculation of EBITDA or
Earn-Outs in Section 4.02(a). Purchaser and Seller shall mutually prepare and
file in accordance with applicable Treasury regulations and in accordance with
the Purchase Price Allocations, Internal Revenue Service Form 8594 and any forms
or documents required to be filed with respect to such matters with state or
local taxing authorities with respect to the acquisition by Purchaser of the
Acquired Assets.
Section 4.07. Fair Consideration. The parties acknowledge and
agree that the consideration provided for in this Article IV represents fair
consideration and reasonable equivalent value for the sale and transfer of the
Acquired Assets and the transactions, covenants, and agreements set forth in
this Agreement, which consideration was agreed upon as the result of arm's
length good-faith negotiations between the parties and their respective
representatives.
ARTICLE V.
CLOSING
The closing of the transactions contemplated by this Agreement (the
"Closing") shall take place at the offices of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLP, 1555 Palm
Beach ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ at 10:00 a.m.,
on September 6, 2002, or at such other place and time, or on such other date, as
may be mutually agreed to by the parties (the "Closing Date"). At the Closing,
(i) Seller shall deliver to Purchaser the various certificates, instruments, and
27
documents referred to in Section 8.01 below; (ii) Parent and Purchaser shall
deliver to Seller the various certificates, instruments, and documents referred
to in Section 8.02 below; (iii) Seller execute, acknowledge (if appropriate),
and deliver to Purchaser (A) assignments (including Intellectual Property
transfer documents if applicable) and (B) such other instruments of sale
transfer, conveyance, and assignment as Purchaser and its counsel may reasonably
request; (iv) Seller shall wire transfer to Purchaser all of Seller's existing
cash balances (including money market funds and other equivalents); and (v)
Parent and Purchaser shall deliver to Seller, the Purchase Price in the forms
contemplated by Section 4.02.
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES
OF SELLER AND STOCKHOLDERS
As a material inducement to Purchaser and Parent to enter into this
Agreement and to consummate the transactions contemplated hereby, Seller and
each of the Stockholders, jointly and severally, hereby represent and warrant to
Purchaser and Parent that the statements contained in this Article VI are true,
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date.
Section 6.01. Organization. Seller is a corporation duly
organized, validly existing, and in good standing under the laws of the state of
its incorporation and has all requisite corporate power and authority to own and
lease its properties and assets and to conduct its business as now conducted.
Seller has no subsidiaries and does not own any interest in any corporation,
partnership, joint venture, limited liability company association, trust or
other entity.
28
Section 6.02. Qualifications to Do Business. Schedule 6.02
sets forth each jurisdiction in which Seller is qualified to do business as a
foreign corporation. Neither the nature of the business carried on by Seller,
nor the properties owned or leased by Seller, requires Seller to be qualified to
do business as a foreign corporation in any other jurisdiction, except in any
case where a failure to so qualify would not have a Material Adverse Effect on
Seller.
Section 6.03. Capitalization; Authorization and Validity of
Agreement. The authorized capital stock of Seller consists of 2,000 shares, par
value $0.001, consisting of 1,000 shares of Common Stock of which approximately
102.5 shares are issued and outstanding, and 1,000 shares of class B non-voting
common stock of which no shares are issued or outstanding. All of the issued and
outstanding shares of Seller's Common Stock have been duly authorized, are
validly issued, fully paid, and nonassessable. There are no: outstanding or
authorized options, warrants, purchase rights, subscription rights, conversion
rights, exchange rights, or other contracts or commitments that could require
Seller to issue, sell, or otherwise cause to become outstanding any of its
capital stock; outstanding or authorized stock appreciation, phantom stock,
profit participation, or similar rights with respect to Seller, or voting
trusts, proxies, or other agreements or understandings with respect to the
voting of the capital stock of Seller. Seller has all requisite corporate power
and authority to enter into this Agreement and to carry out its obligations
hereunder. The board of directors of Seller and Stockholders have approved the
execuction and delivery of this Agreement and the transactions contemplated by
this Agreement including the sale of the Acquired Assets in accordance with
Delaware law and Seller's certificate of incorporation and bylaws, and no other
corporate proceedings on the part of Seller are necessary to authorize the
execution, delivery, and performance, and the resolutions approving such sale
are irrevocable. This Agreement has been duly executed and delivered by Seller
and constitutes its valid and binding obligation, enforceable against Seller in
accordance with its terms.
29
Section 6.04. No Conflict or Violation. The execution,
delivery, and performance of this Agreement by Seller does not and shall not:
(a) violate or conflict with any provision of Seller's certificate of
incorporation, bylaws, or other governing document of Seller (b) violate any
provision of law or any order, judgment, or decree of any court or other
governmental or regulatory authority applicable to Seller or the Business; (c)
violate or result in a breach of or constitute a default under any contract,
lease, loan agreement, mortgage, security agreement, indenture, or other
agreement or instrument to which Seller is a party or by which it is bound or to
which any of its properties or assets is subject which would prevent Seller from
transferring any of the Acquired Assets in the manner and as contemplated by and
in accordance with the terms and provisions of this Agreement or which would
have a Material Adverse Effect on on the Business; or (d) result in the
imposition of any Liens or restrictions on the Business or any of the Acquired
Assets
Section 6.05. Consents and Approvals. Except as set forth on
Schedule 6.05, to Seller's Knowledge no authorization, consent or approval of,
notice to, or filing with, any public body or governmental authority or any
other person is necessary or required in connection with the execution and
delivery by Seller of this Agreement or the performance by Seller and of its
obligations hereunder.
30
Section 6.06. Financial Statements. Seller has delivered the
Financial Statements to the Parent and the Purchaser. On the Closing Date,
Seller shall deliver to Purchaser the unaudited balance sheet of Seller as of
the day prior to the Closing Date (the "Closing Date Balance Sheet"), and an
unaudited statement of operations from August 1, 2002 through the day prior to
the Closing Date of Seller (collectively, the "Closing Date Financial
Statements"), each certified by the Chief Executive Officer and the Chief
Financial Officer of Seller in substantially the same form as the certification
required by Section 906 of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 and the rules of the
SEC thereunder. The Financial Statements and the Closing Date Financial
Statements are or will be complete and correct in all material respects and
fairly present the financial condition of Seller as of the dates thereof and the
results of its operations for the fiscal years and periods ended on such dates.
The Financial Statements and Closing Date Financial Statements shall have been
prepared in accordance with GAAP consistently applied.
Section 6.07. Absence of Certain Changes or Events. Since
December 31, 2001, Seller has operated its Business in the ordinary course
consistent with past practice and since such date there has not been any event
which could be reasonably foreseen to have a Material Adverse Effect on Seller.
Without limiting the generality of the foregoing, since December 31, 2001:
(a) Seller has not sold, leased, transferred, or
assigned any of its assets, tangible or intangible, other than for a fair
consideration;
(b) except as otherwise disclosed in this Agreement
or the Financial Statements, Seller has not entered into any agreement,
contract, lease, or license (or series of related agreements, contracts, leases,
and licenses) involving (i) more than $10,000, or (ii) a term of more than one
year;
31
(c) no party (including Seller) has accelerated,
terminated, modified, or cancelled any agreement, contract, lease or license (or
series of related agreements, contracts, leases, and licenses) to which Seller
is a party or by which it is bound involving (i) more than $10,000; or (ii) a
term of more than one year;
(d) Seller has not imposed any Lien other than a
Permitted Lien upon any of its assets, tangible or intangible;
(e) Seller has not made any capital expenditure (or
series of related capital expenditures) involving more than $10,000;
(f) Seller has have not made any capital investment
in, any loan to, or any acquisition of the securities or assets of, any other
Person (or series of related capital investments, loans, and acquisitions)
either involving more than $10,000;
(g) Seller has not issued any note, debenture, bond,
or other debt security or created, incurred, assumed, or guaranteed any
indebtedness for borrowed money or capitalized lease obligation either involving
more than $10,000 singly or $25,000 in the aggregate;
(viii) Seller has not delayed or postponed the
payment of accounts payable and other liabilities;
32
(h) Seller has not cancelled, compromised, waived, or
released any right or claim (or series of related rights and claims) involving
more than $10,000;
(i) Seller has not granted any license or sublicense
of any rights under or with respect to any Intellectual Property;
(j) Other than as set forth in Schedule 6.07, Seller
has not declared, set aside, or paid any dividend or made any distribution in
cash or in kind or redeemed, purchased, or otherwise acquired any shares of
Common Stock;
(k) Seller has not experienced any material damage,
destruction, or loss (whether or not covered by insurance) to its property;
(l) Seller has not made any loan to, or entered into
any other transaction with, any of its employees involving more than $10,000 in
the aggregate;
(m) Seller has not entered into any employment
contract, written or oral, or modified the terms of any existing such contract
or agreement involving more than $10,000 in the aggregate or entered into any
collective bargaining agreement;
(n) Seller has not granted any increase in the base
compensation of any of its directors or officers or any of its family members;
33
(o) Other than with respect to cash bonus payments
(i) in the aggregate amount of $325,000 to be made to ▇▇. ▇▇▇▇▇, ▇▇. ▇▇▇▇▇, ▇▇.
▇▇▇▇▇ and ▇▇. ▇▇▇▇▇▇▇ prior to Closing and (ii) in the aggregate amount of
$100,000 to be made to certain of Seller's other employees prior to Closing,
Seller has not granted, adopted, amended, modified, or terminated any bonus,
profit-sharing, incentive, severance, or other plan, contract, or commitment for
the benefit of any of its directors or officers, or family members (or taken any
such action with respect to any other Employee Benefit Plan);
(p) Seller has not made any other material change in
employment terms for any of its directors and officers;
(q) Seller has not made or pledged to make any
charitable or other capital contribution in excess of $10,000;
(r) there has not been any other material occurrence,
event, incident, action, failure to act, or transaction outside the ordinary
course of its Business involving Seller;
(s) Seller has not terminated or amended any
insurance policies nor has any insurance company done so with regard to a policy
paid for by Seller; and
(t) Seller has not committed to do any of the
foregoing.
Section 6.08. Tax Matters. Seller has timely filed all Tax
Returns required to have been filed with any federal, state, local, or foreign
taxing authority and has paid all Taxes shown to be due and payable on the Tax
Returns. Seller has set up reserves or accruals on the Closing Date Financial
Statements which are adequate for the payment of all Taxes for all periods
through the Closing Date. No taxing authority has asserted any claim against
Seller for the assessment of any additional tax liability or initiated any
action or proceeding which could result in such an assertion. Seller has made
34
all withholding of Taxes required to be made under all applicable federal,
state, local, and foreign laws and regulations with respect to compensation paid
to employees, and the amounts withheld have been properly paid over to the
appropriate authorities. With respect to each of Seller's tax returns that has
been examined or audited by a taxing authority, which returns are identified on
Schedule 6.08, all deficiencies asserted as a result of such examinations or
audits have been fully paid, adequately provided for or are being contested in
good faith, except where the failure to be fully paid, adequately provided for
or contested would not have a Material Adverse Effect. There are no outstanding
agreements or waivers extending the statutory period of limitation applicable to
any federal, state, local or foreign tax return for any period. Seller shall be
responsible for the filing of all Tax Returns and the payment of all Taxes due
through the Closing Date.
Section 6.09. Accounts Receivable. Seller has provided to
Parent and Purchaser a complete and accurate schedule including an aging
schedule for all of Seller's Accounts Receivable as of five business days prior
to the date hereof. All of Seller's Accounts Receivable arose from bona fide
transactions in the ordinary course of the Business, have not been discounted,
and no counterclaim or right of set-off has been asserted with respct thereto.
Section 6.10. Absence of Undisclosed Liabilities. Seller has
no material indebtedness, liability or obligation of any nature, whether
contingent, accured, aboslute, unasserted or otherwise, other than liabilities
or obligations reflected in the Closing Date Financial Statements.
Section 6. 11. Real Property. Seller does not own any real
property.
35
Section 6.12. Leased Real Property. Schedule 6.12 sets forth a
list of all real property in which Seller has a leasehold interest (each a "Real
Property Lease" and collectively the "Real Property Leases" and the property
covered by those Real Property Leases being referred to herein as the "Leased
Real Property"). Seller has made true and complete copies of all Real Property
Leases available to Purchaser. Seller is not in material breach of or material
default under any Real Property Lease and no party to any Real Property Lease
has given Seller written notice of or made a claim with respect to any breach or
default thereunder. None of the Leased Real Property is subject to any sublease
or grant to any Person of any right to the use, occupancy, or enjoyment of the
property or any portion thereof. The Leased Real Property is not subject to any
Liens (other than the lien, if any, of current property taxes and assessments
not in default). To Sellers Knowledge, the Leased Real Property is not subject
to any use restrictions, exceptions, reservations, or limitations which in any
material respect interfere with or impair the present and continued use thereof
in the ordinary course of the Business. There are no pending or, to the Seller's
Knowledge, threatened condemnation proceedings relating to any of the Leased
Real Property. Purchaser is assuming the Real Property Leases at the premises
known as ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇, although Seller has
not obtained a written consent to assignment of such Real Property Lease
executed by the lessor.
Section 6.13. Equipment and Machinery.
(a) Schedule 6.13(a) sets forth a list of, or otherwise
describes, all material Equipment and Machinery held for or used in the
Business. Seller has good title, free and clear of all Liens to the Equipment
and Machinery listed that it owns, except for any Equipment and Machinery which
has been sold or disposed of in the ordinary course of business since the
Closing Date Financial Statements. Seller holds good and transferable leasehold
36
interests in all Equipment and Machinery leased by it, in each case under valid
and enforceable leases which are listed on Schedule 6.13(a), although Seller has
not obtained a written consent to assignments of such Equipment and Machinery
executed by each such lessor.
(b) The Equipment and Machinery are in good operating
condition and repair, ordinary wear and tear excepted, are sufficient for the
operation of the Business as presently conducted, and are in conformity in all
material respects with all applicable laws, ordinances, orders, regulations, and
other requirements (including applicable zoning, environmental, motor vehicle
safety, occupational safety and health laws and regulations) relating thereto
currently in effect.
Section 6.14. Intellectual Property.
(a) Schedule 6.14 is a correct and complete list of all (i)
Intellectual Property material to the Business, including the status of all
patents, patent applications and registered Intellectual Property (ii) trade,
corporate and ficticious names used by Seller, (iii) Computer Software and
databases created or used by Seller (other than massmarketed software with a
license fee of less than $5,000), (iv) material unregistered trademarks and
copyrights owned or presently used by Seller and the Business and (v) licenses
and other rights granted by Seller or by any third party to Seller, and each
case with respect to Intellecual Property.
(b) Seller owns all right, title and interest in and to, or
has a valid and enforceable license to use, all Intellectual Property necessary
for the operation of the Business as currently conducted and as currently
proposed to be conducted free and clear of any Liens or adverse claims.
37
(c) No claim by any third party contesting the validly,
enforeability, and ownership, or use of any of the Intellectual Property owned
or used by Seller or claiming that the activities of Seller in connection with
the Intellectual Property constitues unfair competition has been made, is
currently outstanding or is threated and there are no grounds for the same.
(d) Seller is not a party to any agreement or understanding
with respect to any Intellectual Property.
(e) Neither Seller nor any of its officers or employees are
parties to any agreement restricting the ability of Seller, such officers and/or
such employees from engaging in any business or competing with any third
parties.
(f) The loss or expiration of any individual Intellecutal
Property right or related group of Intellectual Property rights owned or used by
Seller would not have a Material Adverse Effect on the Business, and no such
loss or expiration is pending or reasonably foreseeable, or to Seller's
Knowledge, threatened.
(g) Seller has not received any written notice of, nor is
Seller aware of any facts that indicate any likelihood of any infrigement or
misappropriation by, or conflict with, and any third party with respect to the
Intellectual Property owned or used by Seller.
38
(h) Seller has not infringed, misappropriated or otherwise
conflicted with any intellectual property of any third party, and Seller is not
aware of any infringement, misappropriation or conflict which will occur as a
result of the continued operation of the Business as currently conducted or as
currently proposed to be conducted.
(i) All Intellectual Property owned or used by Seller in
connection with the operation of the Business shall be properly assigned or
licensed to Purchaser coincident with or immediately following the Closing.
(j) Except as disclosed in Schedule 6.14, no person other than
Seller owns or has any proprietary, financial or other interest, direct or
indirect, in whole or in part, in any Intellectual Property that is owned by or
licensed to Seller.
(k) Except as disclosed on Schedule 6.14, Seller is not
required to pay any royalty, license fee or similar compensation with respect to
the Intellectual Property that is owned or licensed to Seller in connection with
the current or prior conduct of the Business.
Section 6.15. Compliance with Laws. Seller is in material
compliance with all statutes, laws, ordinances, rules, regulations, judgments,
orders and decrees (including, but not limited to those applicable to the
Business as presently conducted by Seller) of any Governmental Entity applicable
to it, its properties, assets or its Business or operations, including those of
the FDA, and of any federal, state or local environmental Governmental Entity
(collectively, "Legal Provisions"). Seller has obtained all approvals,
authorizations, certificates, licenses, permits, easements, variances,
exceptions, consents, approvals, orders and rights from and has made all filings
and submitted all notices to all Governmental Entities, including all
39
authorizations from the FDA and under Environmental Requirements (collectively,
"Permits"), necessary for it to own, lease or operate its properties and assets
and to carry on the Business and operations as presently conducted except as
would not have a Material Adverse Effect. There has occurred no default under,
or violation of, any such Permit which would cause a Material Adverse Effect. To
Seller's Knowledge, (i) no action, demand, inquiry or investigation by any
Governmental Entity and no suit, action or proceeding by any other Person, in
each case with respect to Seller or any of the Acquired Assets under any Legal
Provisions are pending or threatened; (ii) since July 1, 1999, Seller has not
used the services of any Person debarred under the provisions of the Generic
Drug Enforcement Act of 1992, 21 U.S.C. Section 335 a (a) or (b); (iii) since
July 1, 1999, neither Seller nor any of its officers or employees, their agents
or affiliates has been convicted of any crime or engaged in any conduct for
which debarment is mandated by 21 U.S.C. Section 335 a (a) or authorized by 21
U.S. Section 335 a (b); (iv) neither Seller nor its officers, employees, or
agents have made an untrue statement of material fact or fraudulent statement to
the FDA or failed to disclose a material fact required to be disclosed to the
FDA or committed an act, made a statement, or failed to make a statement that
could reasonably be expected to provide a basis for the FDA to invoke its policy
respecting "Fraud, Untrue Statements of Material Facts, Bribery, and Illegal
Gratuities," set forth in 56 Fed. Regulation 46191 (September 10, 1991); (v)
Seller has made available to Parent and Purchaser copies of any and all notices
of inspectional observations (FD 483's), establishment inspection reports,
warning letters and any other documents it has received from the FDA within the
last three years that claim or assert lack of compliance with the FDA regulatory
requirements by Seller; (vi) Seller has not received any written notice that the
FDA (or the United States Department of Justice) has commenced or threatened to
40
initiate any action against Seller, any action to enjoin Seller from conducting
its Business at any facility owned or used by Seller or for any material civil
penalty, injunction, seizure or criminal action; (vii) as to each drug
investigated by Seller and its officers, employees, agents and affiliates,
Seller provides its test sponsors, where required, with the certification
described in 21 U.S.C. Section 335a (k) (l) and such certification was in each
case true and accurate when made; (viii) all clinical trials Seller has
conducted or has had conducted for it by third parties, comply in all material
respects with the requirements of Good Clinical Practice, Informed Consent, and
all requirements relating to protection of human subjects, found in 21 C.F.R.
Sections 50, 54 and 56 and that all nonclinical laboratory testing complies with
the requirements of 21 C.F.R. Section 58.
Section 6.16. Litigation. (a) There are no orders, decrees,
rulings, charges, claims, actions, suits, proceedings, arbitrations, or
investigations outstanding, pending or, to Seller's Knowledge, threatened
against Seller, or the Acquired Assets before or by any court or governmental
body; (b) there are no unsatisfied judgments against Seller, the Acquired
Assets, or Seller's activities; (c) Seller is not a party or, to Seller's
Knowledge not threatened to be made a party to any action, suit, proceeding,
hearing or investigation of, in or before any arbitrator.
Section 6.17. Employee Benefit Plans.
(a) Welfare Benefit Plans. Except as set forth on Schedule
6.17, since July 31, 1999 Seller has not maintained or administered within the
three-year period before the Closing Date any "employee welfare benefit plan"
(as defined in ERISA Section 3): (i) to which Seller contributes or is (or since
July 31, 1999 had been) obligated to contribute, or (ii) under which Seller has
(or since July 31, 1999 had) any liability, with respect to Seller's current or
former employees or any individuals providing services to Seller (collectively,
the "Welfare Benefit Plans" and individually a "Welfare Benefit Plan").
41
(b) Pension Benefit Plans. Except as set forth on Schedule
6.17, Seller and its Affiliates have not maintained or administered since July
31, 1999 any "employee pension benefit plan" (as defined in ERISA Section 3):
(i) to which Seller contributes or is (or since July 31, 1999 had been) legally
obligated to contribute, or (ii) under which Seller has (or since July 31, 1999
had) any liability with respect to Seller's current or former employees or
independent contractors (collectively, the "Pension Benefit Plans" and
individually a "Pension Benefit Plan").
(c) Employee Plans. Schedule 6.17(c) contains a list of each
employee benefit plan, program, arrangement, agreement, policy, or commitment
whether insured or uninsured, funded or unfunded, that is not a Welfare Benefit
Plan or a Pension Benefit Plan, relating to deferred compensation, bonuses, or
compensation in addition to regular pay or wages, stock options, employee stock
purchases, severance, unemployment, flexible benefits, disability, vacation,
sickness, leave of absence, fringe benefits, employee awards, educational
assistance or reimbursement, equity participation (including but not limited to
stock appreciation and phantom stock plans), restricted stock, employee
discounts, excess benefits, rabbi secular or vesting trust, child or dependent
care, long-term and nursing home care, and profit sharing: (i) which is
sponsored, maintained, or administered by Seller or any Affiliate; (ii) to which
Seller contributes, or is legally obligated to contribute, or (iii) under which
Seller has any liability with respect to Seller's current or former employees or
any individuals providing services to Seller or any Affiliate (collectively, the
"Employee Plans" and individually an "Employee Plan").
(d) Liabilities. There are no liabilities of Seller or any
Affiliate, contingent or otherwise, accrued or unaccrued, asserted or
unasserted, with respect to any Employee Plan.
42
(e) Litigation. There is no action, lawsuit, claim for
benefits, proceeding, investigation, audit, or arbitration pending or, to
Seller's Knowledge, threatened as of the Closing Date, involving any Employee
Plan.
(f) Funding Instruments. All trust agreements, custodial
agreements, investment management agreements, insurance or annuity contracts (or
any other funding instruments) and any other contract or agreement relating to
any Employee Plan are legally valid and binding and in full force and effect.
(g) Affiliated Service Group. Seller is not a member of an
affiliated service group within the meaning of Code Section 414(m).
(h) Leased Employees. Seller does not have any leased
employees within the meaning of Code Section 414(n).
(i) Code Section 414(o) Employees. Neither Seller nor any
Affiliate has any employees or individuals providing services to Seller.
Section 6.18. Environmental Compliance.
(a) The Leased Real Property and all operations and activities
conducted thereon by Seller (including the Business) are, and at all times
during possession thereof by Seller, have been, and to Seller's Knowledge at all
times prior to Seller's possession thereof were, in material compliance with all
applicable Environmental Requirement, except as would not result in a Material
Adverse Effect;
43
(b) No Hazardous Material has ever been generated,
manufactured, refined, used, transported, treated, stored, handled, disposed,
transferred, produced, or processed by Seller at or on the Leased Real Property,
except as permitted under applicable law or would not result in a Material
Adverse Effect;
(c) To Seller's Knowledge, there are no existing or potential
Environmental Claims relating to the Leased Real Property; and to Seller's
Knowledge has not received any notification or knowledge of alleged, actual, or
potential responsibility under Environmental Requirements for any disposal,
release, or threatened release at any location of any Hazardous Material
generated at or transported from the Leased Real Property by or on behalf of
Seller which would not result in a Material Adverse Effect.
(d) To Seller's Knowledge, no underground storage tank or
other underground storage receptacle (or associated equipment or piping) for
Hazardous Materials is currently located on the Leased Real Property, and there
have been no releases of any Hazardous Materials from any such underground
storage tank or related piping at any time prior to the Closing; and there have
been no releases (i.e., any past or present releasing, spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, disposing, or dumping) of Hazardous Materials at, on, to, or from the
Leased Real Property.
(e) To Seller's Knowledge, there are no PCBs or friable
asbestos located at or on the Leased Real Property.
44
(f) To Seller's Knowledge, no lien or other encumbrance has
been imposed on the Leased Real Property by any federal, state, local or foreign
governmental agency or authority due to either the presence of any Hazardous
Material on or off the Leased Real Property or a violation of any Environmental
Requirement.
(g) Seller has not received any notices issued pursuant to the
citizen's suit provision of any Environmental Requirement relating to the Leased
Real Property or any facility or operations thereon.
(h) Seller has not received any request for information,
notice, demand, letter, administrative inquiry, or formal or informal complaint,
or claim with respect to any Environmental Conditions or violation of any
Environmental Requirement relating to the Leased Real Property or any facility
or operations thereon.
Section 6.19. Licenses and Permits. Seller has obtained all
material Licenses and Permits necessary for the conduct of the Business and all
such Licenses and Permits are in full force and effect. The Licenses and Permits
are described in Schedule 6.19. The consummation of the transactions
contemplated hereby shall not interrupt or give any governmental authority or
body the right to terminate or interrupt the continuation of any of the Licenses
and Permits or the conduct of the Business. Seller is in compliance with all
material terms, conditions, and requirements of all Licenses and Permits, and no
proceeding is pending or, to Seller's Knowledge, threatened relating to the
revocation or limitation of any of the Licenses or Permits.
45
Section 6.20. Personnel, Labor.
(a) Seller has disclosed to Parent and Purchaser in writing
the (i) names, titles (if any), and current annual rate of compensation
(including bonuses due or required by any agreement or understanding) as of the
Closing Date of all Personnel not subject to a collective bargaining agreement
earning in excess of $10,000 per annum, (ii) the approximate number of Seller's
employees, (iii) a description of any informal understanding concerning
employees' rights to continue to receive compensation during any period during
which such employes are not performing any services for Seller; and (iii) all
collective bargaining agreements and relationships to which Seller is a party,
identifying the parties thereto, the expiration dates and the status thereof.
There will be no bonuses, profit sharing, incentives, commission or other
compensation of any kind, including severance benefits, and accrued vacation
time or pay, due to or expected by present or former employees of Seller which
have not been fully paid prior to such date or are expected to be paid by Seller
within 15 days of such date.
(b) (i) Seller is not a party with respect to the Business to
a union agreement or collective bargaining agreement and no attempt to organize
any employees of Seller has been made, proposed or threatened; (ii) there is no
formal labor dispute, formal labor grievance, labor arbitration proceeding,
general slowdown or stoppage, or charge of unfair labor practice pending before
a court, regulatory body or arbitration tribunal, or threatened against or
affecting the Acquired Assets or Business, and no event to Seller's Knowledge
has occurred which would constitute reasonable grounds for such a strike,
dispute, greivance, proceeding or charge; (iii) no union representation question
exists with respect to any employees of Seller; (iv) there are no charges or
complaints of discrimination or sexual harrassment pending before any federal,
state, local or foreign agency or tribunal against Seller in connection with the
Business; (v) Seller does not presently employ, and at no time durnig the past
year did it employ, any illegal alien; (vi) Seller is in material compliance
with all federal, state, and local laws respecting employment and employment
46
practices, terms, and conditions of employment and wages and hours, and is not
engaged in any unfair labor practice; (vii) Seller has complied in all material
respects with the Americans with Disabilities Act of 1990, and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand or notice
has been filed or commenced against Seller, to Seller's Knowledge, alleging any
failure to so comply; and (viii) no private agreement restricts Seller from
relocating, closing, or terminating any of its operations or facilities.
Section 6.21. Insurance. Schedule 6.21 lists all policies of
title, liability, fire, casualty, business interruption, workers' compensation,
and other forms of insurance collectively "Policies" and individually a
"Policy") insuring the properties, assets, or operations of Seller, setting
forth the carrier, policy number, expiration dates, premiums, description of
type of coverage, and coverage amounts. Seller has made copies of all such
policies available to Purchaser. Each of the Policies is in the amount and
insures against the risks customarily carried by a Person engaged in the
Business, is in full force and effect, and Seller is not in default under any
provisions of any Policy nor has Seller received notice of cancellation of any
Policy. There is no claim by Seller pending under any Policy as to which
coverage has been questioned, denied, or disputed by the underwriters of any
Policy, and Seller knows of no basis for denial of any claim under any such
policy. Seller has not received any written notice from or on behalf of any
insurance carrier issuing any Policy that insurance rates therefor shall
hereafter be substantially increased (except to the extent that insurance rates
may be increased for all similarly situated risks) or that there shall hereafter
be a cancellation or an increase in a deductible (or an increase in premiums in
order to maintain an existing deductible) or non-renewal of any Policy. The
Policies are sufficient in all material respects for compliance by Seller with
all requirements of law and with the requirements of all Assigned Contracts.
47
Section 6.22. Contracts and Commitments. Schedule 6.22 lists,
with respect to the Business, as of the date of this Agreement (and excluding
this Agreement itself) all:
(a) employment, consulting, bonus, profit-sharing, percentage
compensation, deferred compensation, pension, welfare, retirement, stock
purchase or stock option plans and agreements and commitments with the directors
or Personnel of Seller, excluding agreements and commitments terminable by
Seller on not more than 30 days notice without liability or penalty, and plans
disclosed in Schedule 6.17(c);
(b) notes, mortgages, contracts, agreements, and commitments
for the repayment or borrowing of money by Seller in excess of $10,000 in any
one case, or for a line of credit including borrowings by Seller in the form of
guarantees of, indemnification for, or agreements to acquire any obligations of
others, and all security or pledge agreements related thereto;
(c) contracts, agreements, and commitments relating to any
joint venture, partnership, strategic alliance, or sharing of profits or losses
with any Person;
(d) contracts, agreements, and commitments containing
covenants purporting to limit the freedom of Seller or any Personnel to compete
in any business or in any geographic area;
(e) contracts, agreements, and commitments requiring payments
or distributions to any Stockholder, director, or Personnel of Seller, or any
relative or affiliate of any such Person;
48
(f) material contracts, agreements, licenses and commitments
relating to Computer Software;
(g) contracts, agreements, and commitments not disclosed on
any other Schedule to this Agreement and which involve or may involve the
payment or receipt by Seller (whether in payment of a debt, as a result of a
guarantee or indemnification, for goods or services, or otherwise) of more than
$10,000 per year or $50,000 over the initial term thereof, or are otherwise
material to the Business; and
(h) contracts, agreements and commitments not made in the
ordinary course of business; and identifies whether those contracts, agreements
and commitments are Assigned Contracts.
(i) Seller has made true and complete copies of all the
foregoing plans, notes, mortgages, contracts, agreements, and commitments
available to Purchaser.
There are no material transactions relating to the Business presently
pending or planned or initiated or completed since the Closing Date Financial
Statements between Seller and any Stockholder, Affiliate, director, or Personnel
of Seller, or any relative or Affiliate of any such Person, including any
contract, agreement, or other arrangement (i) providing for the furnishing of
material services by Seller, (ii) providing for the rental of material real or
personal property by Seller, or (iii) otherwise requiring payments from Seller
in excess of $10,000 (other than for services as officers or directors of
Seller) to any such Person or corporation, partnership, trust, or other entity
in which any such Person has a substantial interest as a stockholder, officer,
director, trustee, or partner.
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All of the plans, notes, mortgages, contracts, agreements, and
commitments identified in Schedule 6.22 are in full force and effect. Neither
Seller nor any other party thereto has breached any material provision of, or is
in material default under, the terms of, nor does any condition exist which,
with notice or lapse of time, or both, would cause Seller or any other party to
be in default under, any contract, agreement, or commitment.
Section 6.23. Customers and Suppliers. Seller has disclosed to
Parent and Purchaser in writing (a) all of Seller's customers whose purchases
exceeded five percent of Seller's total revenue during its last full fiscal year
and the seven months ended July 31, 2002, showing the dollar volume of sales to
each such customer for such fiscal year and period, and (b) the Seller's 10
largest suppliers by dollar volume and the dollar volume of purchases or leases
by Seller from each such supplier for such fiscal year and period. Seller has
received no notice, whether written or oral, indicating that any of these
customers or suppliers intend to cease doing business with Seller, or to
materially alter the amount of business it has previously done or its presently
doing with Seller.
Section 6.24. Absence of Certain Business Practices. Within
the three years immediately preceding the date of this Agreement, neither Seller
nor any Personnel, or any other Person acting on behalf of Seller has given or
agreed to give, directly or indirectly, any gift or similar benefit to any
customer, supplier, governmental employee, or other Person who is or may be in a
position to help or hinder the Business (or assist Seller in connection with any
actual or proposed transaction relating to the Business or the Acquired Assets),
which might subject Seller to any damage or penalty in any civil, criminal, or
governmental litigation or proceeding.
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Section 6.25. Severance Arrangements. Seller has not entered
into any severance or similar arrangement in respect of any present or former
Personnel that shall result in any obligation (absolute or contingent) of
Purchaser or Parent to make any payment to any present or former Personnel
following termination of employment, including the termination of employment
effected by the transactions contemplated by this Agreement. The consummation of
the transactions contemplated by this Agreement will not trigger any severance
or similar arrangement of Seller payable by Purchaser or Parent after the
Closing.
Section 6.26. Stockholders. The issued and outstanding shares
of Seller are owned of record and beneficially by the Stockholders set forth on
Schedule 6.26, and no other Person has any equity interest in, or right,
contingent or other, to acquire any equity interest in Seller.
Section 6.27. Investment Representations and Restrictions on
Transfer.
(a) Seller has been advised, and understands that the issuance
by Parent of the shares of Parent's Common Stock pursuant to Section 4.01(b)
above has not been registered under the Securities Act or the securities laws of
any state, in reliance upon Section 4(2) thereunder and Rule 506 thereunder and
applicable state securities laws, on the grounds that no distribution or public
offering of those securities is to be effected, and that in this connection,
Parent and Purchaser are relying in part on the representations of Seller set
forth in this Section 6.27;
(b) Except as contemplated by this Agreement, Seller is
acquiring the Parent's Common Stock, for investment purposes, for its own
account and not, vith a view to, or for sale in connection with, any
distribution thereof in violation of federal or state securities laws;
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(c) Seller, by reason of its business and financial
experience, has the capacity to protect its own interests in connection with the
transactions contemplated hereunder, including its investment in Parent's Common
Stock;
(d) Seller is aware of Parent's business affairs and financial
condition including the information referred to in Section 7.07 and has acquired
sufficient information about Parent including the information referred to in
Rule 502 under the Securities Act to reach an informed and knowledgeable
decision to acquire Parent's Common Stock;
(e) Seller understands that any resale or other transfer by
Seller of Parent's Common Stock will be subject to restrictions under the
Securities Act and applicable state securities laws, and that the certificates
representing the Common Stock shall bear legends evidencing such restriction on
transfer. The legends shall be substantially in the following form:
"The shares represented by this certificate have been acquired
for investment and have not been registered under the
Securities Act of 1933, as amended or the securities laws of
any state. The shares may not be transferred by sale,
assignment, pledge or otherwise unless (i) a registration
statement for the shares under the Securities Act and other
applicable securities laws is in effect or (ii) the
corporation has received an opinion of counsel, which opinion
is reasonably satisfactory to the corporation, to the effect
that such registration is not required under the Securities
Act and other applicable securities laws."
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"The shares reprepresented by this certificate are subject to
the terms and conditions contained in a Lock-up Agreement by
and among Company, New Drug Services, Inc. and other parties
dated September 6, 2002, a copy of which may be examined at
the offices of the Company, and in an Escrow Agreement by and
among the Company, Wachovia Bank, National Association and
other parties dated as of September 6, 2002, a copy of which
may be examined at the offices of the Company."
(f) As a condition of the Closing, the Seller and each
Stockholder shall execute an acknowledgement in the form attached as Exhibit C.
Section 6.28. Related Party Transactions. No officer,
supervisory employee or Stockholder, or their respective spouses or children,
(i) owns, directly or indirectly, on an individual or joint basis, any material
interest in, or serves as an officer or director of, any customer, competitor,
or a supplier of Seller or any organization which has a material contract or
arrangement with Seller, or (ii) has any contract or agreement with Seller, and
all such agreements are on arms-length terms. Schedule 6.28 describes any
transaction which would have to be disclosed under Item 404 of Regulation S-K
under the Securities Act, as amended.
Section 6.29. No Other Agreements to Sell Acquired Assets.
Seller has no obligation, absolute or contingent, to any other Person to sell
any of the Acquired Assets or any of the securities of Seller, or to effect any
merger, consolidation, or other reorganization of Seller, or to enter into any
agreement with respect thereto.
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Section 6.30. Broker's and Finder's Fees. No broker, finder,
or Person is entitled to any commission or finder's fee in connection with this
Agreement or the transactions contemplated by this Agreement, and neither Parent
nor Purchaser shall have any liability or obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated under this Agreement for which Seller could become liable or
obligated.
Section 6.31. All Material Information. Seller has not
withheld from Purchaser or Parent any material facts relating to the Acquired
Assets, the Business, the operations of Seller, or the financial or other
condition (including the health of those persons referred to in the last clause
of this sentence) of Seller or any of its personnel including the Stockholders.
No representation or warranty made herein by Seller and no statement contained
in any schedule, certificate or other instrument furnished or to be furnished to
Purchaser or Parent by Seller in connection with the transactions contemplated
by this Agreement contains or shall contain an untrue statement of a material
fact or omits to state any material fact necessary in order to make any
representation, warranty, or other statement of Seller not misleading. There is
no fact known to Seller which has specific applcation to the Business or, so far
as Seller could reasonably expect may have a Material Advserse Effect on the
Business, which has not been set forth in this Agreement or the Schedules
hereto.
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Section 6.32. Condition of Equipment. Except as otherwise
specifically provided in this Article VI, the Acquired Assets are sold hereby on
an "as is" and "where is" basis as of Closing.
55
ARTICLE VII.
REPRESENTATIONS AND WARRANTIES
OF PARENT AND PURCHASER
As a material inducement to Seller to enter into this Agreement and to
consumate the transactions contemplated hereby, Parent and Purchaser, jointly
and severally, represent and warrant to Seller that the statements contained in
this Section are correct and complete as of the date of this Agreement and will
be correct and complete as of the Closing Date.
Section 7.01. Organization. Parent and Purchaser are
corporations duly organized, validly existing and in good standing under the
laws of the jurisdiction of their respective incorporation, and each has all
requisite power and authority to own and lease their respective properties and
assets and to conduct their respective businesses as now conducted. Purchaser
was organized under Florida law on August 30, 2002 and has not engaged in any
business transactions or incurred any liabilities except for the liabilities
contained in this Agreement.
Section 7.02. Qualifications to Do Business. Schedule 7.02
sets forth each jurisdiction in which Parent and Purchaser are qualified to do
business as a foreign corporation. Neither the nature of the business carried on
by Parent or Purchaser, nor the properties owned or leased by either of them,
require them to be qualified to do business as a foreign corporation in any
other jurisdiction, except in any case where a failure to so qualify would not
have a Material Adverse Effect on Purchaser or Parent.
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Section 7.03. Capitalization; Authorization and Validity of
Agreement. The authorized capital stock of Parent consists of 20,000,000 shares
Common Stock of which 7,165,156 shares are issued and outstanding (including
shares held in treasury) as of September 3, 2002, and 5,000,000 shares of
preferred stock of which no shares are issued or outstanding. The authorized
capital of the Purchaser consists of 1,000 shares of Common Stock, no par value,
all of which are issued and outstanding. Parent is the sole shareholder of
Purchaser. All of the issued and outstanding shares of Parent and Purchaser's
Common Stock have been duly authorized, and the Parent's Common Stock to be
delivered subject to Section 4.02, are validly issued, fully paid, and
nonassessable. Except as disclosed in Parent's SEC Documents or this Agreement,
as of September 6, 2002, there are no: outstanding or authorized options,
warrants, purchase rights, subscription rights, conversion rights, exchange
rights, or other contracts or commitments that could require Parent or Purchaser
to issue, sell, or otherwise cause to become outstanding any of their capital
stock; outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to Parent or Purchaser, or voting
trusts, proxies, or other agreements or understandings with respect to the
voting of the capital stock of Parent or Purchaser. Each of Parent and Purchaser
has all requisite corporate power and authority to enter into this Agreement and
to carry out their respective obligations hereunder. The board of directors of
each of Parent and Purchaser have approved the execuction and delivery of this
Agreement and the transactions contemplated by this Agreement including the
purchase of the Acquired Assets by Purchaser in accordance with Florida law and
Purchaser's charter and bylaws, and no other corporate proceedings on the part
of Parent or Purchaser are necessary to authorize the execution, delivery, and
performance, and the resolutions approving such purchase are irrevocable. This
Agreement has been duly executed and delivered by each of Parent and Purchaser
and constitutes their valid and binding obligations, enforceable against each of
them in accordance with its terms.
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Section 7.04. No Conflict or Violation. The execution,
delivery, and performance of this Agreement by Parent and Purchaser does not and
shall not: (a) violate or conflict with any provision of their respective
charter, bylaws, or other governing document of either of them (b) violate any
provision of law (including any law pertaining to the issuance of securities) or
any order, judgment, or decree of any court or other governmental or regulatory
authority applicable to Parent or Purchaser; (c) violate or result in a breach
of or constitute a default under any contract, lease, loan agreement, mortgage,
security agreement, indenture, or other agreement or instrument to which either
of them is a party or by which either of them is bound or to which any of their
properties or assets is subject which would prevent Purchaser from acquiring the
Acquired Assets in the manner and as contemplated by and in accordance with the
terms and provisions of this Agreement.
Section 7.05. Consents and Approvals. No authorization,
consent or approval of, notice to, or filing with, any public body or
governmental authority or any other person is necessary or required in
connection with the execution and delivery by Parent or Purchaser of this
Agreement or the performance by either of them and of their respective
obligations hereunder.
Section 7.06. Absence of Undisclosed Liabilities. Since June
30, 2002, neither Parent nor Purchaser has incurred any liabilities or
obligations (whether absolute, accrued, contingent or otherwise) of any nature,
except: (i) liabilities, obligations or contingencies which were incurred after
June 30, 2002 and were incurred in the ordinary course of business and
consistent with past practices; (ii) liabilities, obligations or contingencies
which (1) would not, in the aggregate, have a Material Adverse Effect on Parent
or Purchaser, or (2) have been discharged or paid in full prior to the date
hereof; and (iii) liabilities and obligations which are of a nature not required
to be reflected in the financial statements of Parent or Purchaser prepared in
accordance with GAAP consistently applied and which were incurred in the
ordinary course of business.
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Section 7.07. Filings with the SEC. Parent has made all
filings with the SEC that it has been required to make under the Securities Act
and the Exchange Act. All documents required to be filed as exhibits to the SEC
Documents have been so filed, and all material contracts so filed as exhibits
are in full force and effect, except those which have expired in accordance with
their terms, and neither the Parent nor any of its subsidiaries is in material
default. Each of Parent's SEC Documents has complied in all material respects
with the Securities Act and the Exchange Act in effect as of their respective
dates. None of Parent's SEC Documents, as of their respective dates, contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading.
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ARTICLE VIII.
CONDITIONS TO CLOSING AND
ACTIONS FOLLOWING CLOSING
Section 8.01. Conditions to Parent's and Purchaser's
Obligations. The obligations of Parent and Purchaser under this Agreement,
including, without limitation, the obligation to consummate and effect the
purchase of the Acquired Assets, shall be subject to satisfaction of the
following conditions, unless waived by Parent and Purchaser:
(a) Seller shall have performed in all material respects all
agreements, and satisfied in all material respects all conditions on its part to
be performed or satisfied hereunder at or prior to the Closing Date.
(b) All representations and warranties of Seller and the
Stockholders herein shall have been true and correct in all material respects
when made, shall have continued to have been true and correct in all material
respects at all times subsequent thereto, and shall be true and correct in all
material respects on and as of the Closing Date as though made on, as of and
with reference to such date.
(c) All consents, approvals, certificates and authorizations
required to be obtained by Seller in connection with the sale of the Acquired
Assets, including without limitation, all approvals by and clearances from all
governmental authorities, lenders, and other third parties, shall have been
obtained and as of the Closing Date, no legislation, rule or regulation shall
have been enacted or deemed applicable to the transactions contemplated by this
Agreement which would materially interfere with or restrict the use and
operation of the Business after the Closing or materially detract from the value
of the Acquired Assets.
60
(d) Seller shall have obtained written consents to the
assignment to Purchaser of each Real Property Lease and the Assigned Contracts
with respect to which a consent is required in connection with the consummation
of the transactions contemplated by this Agreement.
(e) There shall not have occurred since December 31, 2001 any
event which could reasonably be foreseen to have a Material Adverse Effect on
Seller, the Acquired Assets or the Business.
(f) Purchaser shall have entered into employment agreements
with each of ▇▇. ▇▇▇▇▇, ▇▇. ▇▇▇▇▇, ▇▇. ▇▇▇▇▇ and ▇▇. ▇▇▇▇▇▇▇ (which shall
include, among other things, a covenant not to compete with Purchaser, Parent or
any affliate of Parent, and confidentiality agreements).
(g) Prior to the Closing, Seller shall deliver to Purchaser
and Parent, in form and substance reasonably satisfactory to each of them, all
consents required under the Assigned Contracts, all consents required under the
leases for Equipment and Machinery and Leased Real Property, and appropriate
documents reasonably requested by Purchaser to effect or evidence the sale,
conveyance, assignment and transfer to Purchaser of the Acquired Assets as
contemplated hereby and necessary to place Purchaser in full possession and
enjoyment of all Acquired Assets as contemplated hereby, including the
following:
(1) A ▇▇▇▇ of sale, reasonable for transactions of
this type, which shall contain such covenants and warranties of title as are
consistent with Seller's representations and such other instruments of
assignment or transfer as shall be necessary or reasonably desirable to vest in
Purchaser all of Seller's right, title and interest in and to all Acquired
Assets.
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(2) Copies of Seller's bylaws and resolutions adopted
by the board of directors and Stockholders of Seller authorizing, the execution
and delivery of and performance of Seller's obligations under, this Agreement,
certified by the Secretary of Seller.
(3) A certified copy of Seller's charter including
amendments, if any, together with a certificate of good standing for Seller
issued by the Secretary of State of Delaware and dated as close as practicable
to the Closing Date, accompanied by a "bring-down" certificate dated the Closing
Date by the Secretary or Assistant Secretary of Seller.
(4) A certified copy of Seller's certificate of
qualification to do business in the Commonwealth of Pennslyvania issued by the
Secretary of State of Commonwealth of Pennslyvania and dated as close as
practicable to the Closing Date, accompanied by a "bring-down" certificate dated
the Closing Date by the Secretary or Assistant Secretary of Seller.
(5) A certificate of the President of Seller and the
Stockholders, certifying and warranting that (i) the representations, warranties
and agreements of Seller contained in this Agreement are true and accurate in
all material respects as of the Closing Date, and (ii) that Seller has satisfied
and performed all of its obligations hereunder, accompanied by a "bring-down"
certificate dated the Closing Date by the Secretary or Assistant Secretary of
Seller and the Stockholders.
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(6) Letter of acknowledgement from Seller and each of
the Stockholders that they acknowledge and agree to Section 4.03(b) concerning
the contemplated Earn-Outs (if any) to be paid to certain of the Stockholders
pursuant to this Agreement.
(7) Evidence of any authorization, consent, approval
or filing with any private, public body or governmental or quasi-governmental
authority or any other Person necessary in connection with this Agreement.
(8) Such other documents as Purchaser or Parent shall
reasonably request.
(h) Seller shall have entered into an escrow agreement with
Parent and the Escrow Agent in form and substance substantially in the form
attached as Exhibit D.
(i) Seller shall deliver an opinion of Seller's counsel in
form and subtance satisfactory to Parent and Purchaser and their counsel and
substantially in the form attached as Exhibit E.
(j) Seller and each of the Stockholders shall have entered
into a Lock-up Agreement in the form attached as Exhibit B.
(k) Seller shall have entered into a Registration Rights
Agreement in the form attached as Exhibit A.
(l) ▇▇. ▇▇▇▇▇ shall have entered into a Stock Option Agreement
in the form atttached as Exhibit F.
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(m) As of the Closing Date, all Acquired Assets shall exceed
Assumed Liabilities of Seller by at least $1,625,000.
(n) Such other documents as the Parent or Purchaser shall
reasonably request.
Section 8.02. Conditions to Seller's Obligations. The
obligations of Seller under this Agreement, including, without limitation, the
obligation to consummate and effect the sale of the Acquired Assets shall be
subject to satisfaction of the following conditions, unless waived by Seller:
(a) Parent and Purchaser shall have performed in all material
respects all agreements, and satisfied in all material respects all conditions
on its part to be performed or satisfied hereunder at or prior to the Closing
Date.
(b) All of the representations and warranties of Parent and
Purchaser herein shall have been true and correct in all material respects when
made, shall have continued to have been true and correct in all material
respects at all times subsequent thereto, and shall be true and correct in all
material respects on and as of the Closing Date as though made on, as of, and
with reference to such date.
(c) At the Closing, Parent and Purchaser (as appropriate) will
deliver to Seller, in form and substance reasonably satisfactory to Seller and
consistent with this Agreement:
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(1) Copies of the bylaws and amendments, if any, and
resolutions of the board of directors of each of Parent and Purchaser
authorizing the execution and delivery of, and performance of their obligations
under this Agreement, certified by their respective Secretary or an Assistant
Secretary, accompanied by a "bring-down" certificate dated the Closing Date by
the Secretary or Assistant Secretary of Parent and Purchaser.
(2) A certified copy of Purchaser's articles of
incorporation and amendents, if any, together with a certificate of good
standing issued by the Secretary of State of the jurisdiction of its
incorporation and dated as close as practicable to the Closing Date accompanied
by a "bring-down" certificate dated the Closing Date by the Secretary or
Assistant Secretary of Purchaser.
(3) A certified copy of Parent's certificate of
incorporation and amendments, if any, together with a certificate of good
standing issued by the Secretary of State of the jurisdiction of its
incorporation and dated as close as practicable to the Closing Date accompanied
by a "bring-down" certificate dated the Closing Date by the Secretary or
Assistant Secretary of Parent.
(4) Certificate of an officer of each of Parent and
Purchaser certifying and warranting that their respective representations,
warranties and agreements contained in this Agreement are true and accurate in
all material respects as of the Closing Date and that each has satisfied and
performed all of their respective obligations hereunder.
(5) Delivery of the Purchase Price described in
Section 4.01 (a) and (b) coincident with the Closing subject to Sections 4.02
and 4.03 above.
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(6) Purchaser shall have entered into employment
agreements as described in Section 8.01(h).
(7) Parent shall have entered into stock option
agreements with each of the individuals named on Schedule 8.01(o) in the form
attached as Exhibit F.
(8) Such other documents as Seller shall reasonably
request.
(d) Parent and Purchaser shall have entered into the Escrow
Agreement.
(e) Parent shall have entered into the Registration Rights
Agreement.
(f) Parent and Purchaser shall have delivered an opinion of
their counsel in the form attached as Exhibit G.
Section 8.03. Conditions to the Purchaser's, Parent's and
Seller's Obligations. The obligations of Parent, Purchaser and Seller to
consumate and effect the sale of the Acquired Assets pursuant to this Agreement
shall be subject to no injunction or restraining order having been granted
restraining or prohibiting the consummation of the transactions contemplated by
this Agreement, and no action, suit or other proceeding instituted by any
federal, state, or local governmental authority seeking such an injunction or
order shall be pending or threatened.
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Section 8.04. Transfer of Common Stock. Following the Closing,
Parent shall transfer the Parent's Common Stock to Seller's transferees pursuant
to Section 4.02 above, subject to compliance with the federal and applicable
state securities laws, and subject to delivery of documents containing the
following representations to Parent:
(a) Each transferee has been advised and understands that the
transfer of the shares of Parent's Common Stock has not been registered under
the Securities Act or the securities laws of any state, in reliance upon what is
commonly referred to as Section 4 (1 1/2) of the Securities Act on the grounds
that no distribution or public offering of those securities is to be effected
except as set forth under this Agreement, and that in this connection Parent
will be relying in part on the representations of the transferees set forth in
this Section 8.04;
(b) The transferees acknowledge to Parent, that each of them
are acquiring the Parent's Common Stock, for investment purposes, for their own
account and not, with a view to, or for sale in connection with, any
distribution thereof in violation of federal or state securities laws;
(c) The transferees have, by reason of their business and
financial experience, the capacity to protect their own interests in connection
with the transactions contemplated hereunder, including their investment in
Parent's Common Stock;
(d) The transferees are aware of Parent's business affairs and
financial condition and have acquired sufficient information about Parent to
reach an informed and knowledgeable decision to acquire Parent's Common Stock;
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(e) Each transferee understands that any resale or other
transfer by any of them of the Parent's Common Stock will be subject to
restrictions under the applicable state securities laws.
The transferees shall execute an acknowledgement that the shares of Parent's
Common Stock shall be subject to Seller's obligation to indemnify Parent and
Purchaser under Article XII hereof.
ARTICLE IX.
ADDITIONAL COVENANTS
If the Closing occurs hereunder, then from and after the Closing Date,
Seller and each of the Stockholders hereby agree to be bound by the following
covenants:
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9.01. Covenant Not to Compete.
(a) Seller and the Stockholders each hereby covenants and
agrees that for the period commencing with the Closing Date and ending five
years from such date, Seller and each of the Stockholders shall not, within any
geographic area in which Seller has done business (the "Area") directly or
indirectly own, manage, operate, finance, join, control, or participate in the
ownership, management, operation, finance or control of, or be connected with,
in any manner, any entity, business enterprise or operation engaged in (i)
designing, providing, marketing, selling, licensing or performing research and
development of services relating to any part of the Business, or (ii) performing
any services for any Customer (including Endo Pharmaceuticals Holdings Inc.) or
any Affiliate of any Customer (including Endo Pharmaceuticals Holdings Inc.).
(b) In addition to the restrictions imposed by Section 9.02,
Seller and Stockholders hereby covenant and agree that for the period commencing
with the Closing Date and ending five years from such date, they shall not
directly or indirectly (as defined in Subsection 9.01(e) below), within the
Area: (i) solicit business from any Person which was a Customer of Seller at or
any time prior to the date hereof, including actively sought prospective
customers, for the purposes of providing products or services customarily
offered by or relating to the Business; (ii) induce or attempt to induce or
influence any employee of Parent or Purchaser to terminate his or her employment
with Parent or Purchaser; (iii) engage in any business which is in competition
with any business of Purchaser which is involved in the Business or in which
Seller now engages or at this time contemplates becoming involved in including,
without limitation, any related product lines of the Business.
(c) Seller and Stockholders shall not, and shall not permit
any of its subsidiaries or affiliates, to own, manage, operate, join, control or
participate in the ownership, management, operation or control of or be
connected in any manner with, directly or indirectly, any business conducted
under the name New Drug Services, any similar name or any derivatives thereof
without the prior written consent of Parent and ▇▇▇▇▇▇▇▇▇.
▇▇
(▇) Seller and Stockholders shall, and Seller shall cause its
subsidiaries and Affiliates, to hold in confidence and refrain from disclosing,
publishing or making use of all knowledge and information of a confidential
nature relating to the Business prior to the Closing Date, except knowledge and
information which (i) is or becomes generally available to the public other than
as a result of a disclosure prohibited hereby, or (ii) is required to be
disclosed by law.
(e) For the purposes of this Agreement, the words "directly or
indirectly" as used in Section 9.01 herein shall include, but not be limited to,
(i) acting as an agent, officer, director, representative, consultant,
independent contractor, or employee of any entity or enterprise, and (ii)
participating in any such competing entity or enterprise as an owner, partner,
limited partner, member, joint venturer, material creditor or stockholder
(except as a stockholder holding less than five percent interest in a
corporation whose shares are traded on a national securities exchange or in the
over-the-counter market unless Seller or any Stockholder controls such
corporation, either alone or with others).
(f) Seller and Stockholders acknowledge that their expertise
in the Business is of a special, unique, unusual, extraordinary and intellectual
character, which gives said expertise a peculiar value, and that a breach by
Seller or Stockholders of the provisions of this Agreement cannot reasonably or
adequately be compensated in damages in an action at law; and such a breach of
any of the provisions contained in this Agreement will cause Purchaser
irreparable injury and damage. Seller and Stockholders further acknowledge that
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each possesses unique skills, knowledge and ability and that competition by any
of them, in violation of this Agreement or any other breach of the provisions of
this Agreement would be extremely detrimental to Purchaser. By reason thereof,
Seller and Stockholders agree that Parent and Purchaser shall be entitled, in
addition to any other remedies they may have under this Agreement or otherwise,
to preliminary and permanent injunctive and other equitable relief to prevent a
breach or curtail any breach or threatened breach of this Agreement by Seller
and/or any Stockholder without having to post a bond or other security;
provided, however, that no specification in this Agreement of a specific legal
or equitable remedy shall be construed as a waiver or prohibition against the
pursuing of other legal or equitable remedies in the event of such a breach.
(g) Nothing contained herein shall bar the Stockholders from
performing duties for Purchaser under their employment agreements executed in
connection with this Agreement.
9.02. Nondisclosure. If this Agreement and the transactions
provided for herein shall be terminated or abandoned for any reason whatsoever,
each party shall return to the other parties any and all proprietary,
confidential and secret information and data furnished to such party in
connection herewith and hold in confidence its knowledge of any and all such
proprietary, confidential and secret information or data and not disclose or
publish the same directly or indirectly (a) without the prior written consent of
such other party or (b) until the same has been theretofore publicly disclosed
by such other party or otherwise ceased to be secret or confidential as
evidenced by general public knowledge; provided, however, that each party shall
have the right to disclose such information, without consent but with prior
notice to the other party to the extent that (i) such party is required by law
to do so, or (ii) such disclosure is required in connection with litigation
pertinent to such information. The foregoing provisions are intended to
supplement and not supercede any existing confidentiality agreement between the
parties.
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9.03. Cooperation in Third-Party Litigation.
(a) After the Closing, Seller and Stockholders shall provide
such cooperation as Parent and Purchaser or their counsel may reasonably request
in connection with: (i) any proceedings related to the Business; (ii) Seller's
conduct of the Business prior to the Closing which are hereafter pending or
threatened and to which Purchaser is a party; or (iii) any proceedings for which
Parent and Purchaser is entitled to indemnification from Seller (or the
Stockholders) under Section 12.01. Such cooperation shall include, but not be
limited to, making employees of Seller or Stockholders available upon the
reasonable request and at the expense of Purchaser or its counsel to consult
with and assist Parent and Purchaser and their counsel in connection with any
such proceedings and to prepare for and testify in any such proceedings,
including depositions, trials and arbitration proceedings.
(b) Parent and Purchaser agree that after the Closing, they
shall provide such cooperation as Seller, Stockholders or their counsel may
reasonably request in connection with: (i) any proceedings relating to the
Business which are hereafter pending or threatened and to which Seller is a
party; and (ii) any proceedings for which Seller or any Stockholder is entitled
to indemnification from Parent and Purchaser under Section 12.02 hereof. Such
cooperation shall include, but not be limited to, making employees of Parent and
Purchaser available upon the reasonable request and at the expense of Seller,
Stockholders or their counsel to consult with and assist Seller, Stockholders
and their counsel regarding any such proceedings and to prepare for and testify
in connection with any such proceedings, including depositions, trials and
arbitration proceedings.
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(c) The provisions of this Section 9.03 are not intended to
conflict with, and shall not override the other provisions of this Agreement.
9.04. Discharge of Business Obligations. From and after the
Closing Date, Seller shall pay and discharge when due all obligations and
liabilities of Seller incurred prior to the Closing Date (except for the Assumed
Liabilities), and in furtherance of the foregoing shall discharge on a timely
basis all such liabilities or obligations to employees, trade creditors,
suppliers and customers.
9.05 Employment Matters. Purchaser shall promptly reemploy all
of Seller's employees of the Business as of the Closing Date on substantially
the same terms such employees were employed by Seller, including their salary,
accrued vacation and sick time and benefits. Except with respect to the
Stockholders as otherwise provide herein, any employment offered by Purchaser
that is accepted by any such employee is "at will" and may be terminated by
Purchaser or by such employee at any time for any reason (subject to any written
commitments to the contrary made by Purchaser or an employee and any applicable
laws) and on such terms and conditions as determined by Purchaser.
ARTICLE X.
TAXES
Section 10.01. Taxes. Seller shall pay all Taxes and all
recording and filing fees that may be imposed by reason of the sale, transfer,
assignment, or delivery by Seller of the Acquired Assets. Seller shall be
responsible for the preparation and filing of all required Tax Returns and shall
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be liable for the payment of any and all Taxes relating to all periods through
the Closing Date (including all Taxes resulting from the sale and transfer by
Seller of Acquired Assets hereunder).
Section 10.02. Cooperation on Tax Matters. Seller shall
furnish or cause to be furnished to Purchaser and Parent, as promptly as
practicable, whether before or after the Closing Date, such information and
assistance relating to the Business as is reasonably necessary for the
preparation and filing by Purchaser or Parent of any Tax Return, claim for
refund, or other required or optional filings relating to tax matters, for the
preparation by Purchaser or Parent for, and proof of facts during, any tax
audit, for the preparation by Purchaser or Parent for any tax protest, for the
prosecution or defense by Purchaser or Parent of any suit or other proceeding
relating to tax matters, or for the answer by Purchaser or Parent to any
governmental or regulatory inquiry relating to tax matters.
Purchaser shall retain possession of all Files and Records
transferred to Purchaser hereunder and coming into existence after the Closing
Date which relate to the Business before the Closing Date, for a period not to
exceed seven years (or as required by law) from the Closing Date. In addition,
from and after the Closing Date, upon reasonable notice and during normal
business hours, Purchaser shall provide access to Seller and its attorneys,
accountants, and other representatives, at Seller's expense, to such Files and
Records as Seller may reasonably deem necessary to properly prepare for, file,
prove, answer, prosecute, and/or defend any such return, filing, audit, protest,
claim, suit, inquiry, or other proceeding.
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ARTICLE XI.
SURVIVAL
All of the representations and warranties of Seller and the
Stockholders contained in this Agreement shall survive the Closing (even if
Parent or Purchaser knew or had reason to know of any misrepresentation or
breach of warranty at the time of Closing) and continue in full force and effect
for a period of 18 months after Closing, and forever with respect to Taxes,
(subject to any applicable statutes of limitations).
ARTICLE XII.
INDEMNIFICATION
Section 12.01. Indemnification by Seller and Stockholders.
(a) In the event Seller breaches (or in the event any third
party alleges facts that, if true, would mean Seller has breached) any of its
representations, warranties, and covenants contained in the Agreement, and,
provided that Purchaser or Parent makes a written claim for indemnification
against Seller pursuant to Section 12.03 below, then Seller agrees to indemnify
Parent and Purchaser from and against the entirety of any Adverse Consequences
Parent or Purchaser may suffer through and after the date of the claim for
indemnification resulting from, arising out of, relating to, in the nature of,
or caused by the breach (or the alleged breach).
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(b) In the event any Stockholder breaches (or in the event any
third party alleges facts that, if true, would mean any of the Stockholders has
breached) any of his representations, warranties, and covenants contained in
this Agreement, and, Purchaser or Parent makes a written claim for
indemnification against Seller pursuant to Section 12.03 below, then the
Stockholders agree, jointly and severally, to indemnify Purchaser and Parent
from and against any Adverse Consequences Parent or Purchaser may suffer through
and after the date of the claim for indemnification resulting from, arising out
of, relating to, in the nature of, or caused by the breach (or the alleged
breach).
(c) Seller and each of the Stockholders agree to, jointly and
severally, indemnify Purchaser and Parent from and against any Adverse
Consequences either Parent or Purchaser may suffer resulting from, arising out
of, relating to, in the nature of, or caused by: (i) any liability of Seller
which is not an Assumed Liability (including any liability of Seller that
becomes a liability of Purchaser under any bulk transfer law of any
jurisdiction, under any common law doctrine of de facto merger or successor
liability, under Environmental Requirements, representatives or employees do not
exacerbate and as to which they exercise due care and caution under the
circumstances or otherwise by operation of law); or (ii) any liability of any of
Seller for unpaid Taxes with respect to any Tax year or portion thereof ending
on or before the Closing Date (or for any Tax year beginning before and ending
after the Closing Date to the extent allocable to the portion of such period
beginning before and ending on the Closing Date).
Section 12.02. Indemnification by Parent or Purchaser. Parent
and Purchaser each agrees to indemnify each of the Stockholders and Seller from
and against the entirety of any Adverse Consequences the Stockholders and Seller
may suffer resulting from, arising out of, relating to, in the nature of, or
caused by (a) any inaccuracy or misrepresentation in or breach of any of the
representations, warranties, covenants or agreements made by Parent or Purchaser
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in this Agreement or in any document, certificate or affidavit delivered by
Parent or Purchaser pursuant to the provisions of this Agreement; or (b) any of
the Assumed Liabilities or any other claim relating to or arising out of the
Business or the Acquired Assets on or after Closing, or which existed
pre-Closing and to which Purchaser, its agents, representatives or employees
exacerbated or to which they failed to exercise due care and caution with
respect thereto under the circumstances.
Section 12.03. Procedure.
(a) Promptly (and in any event within 5 days after the service
of any citation or summons) after acquiring knowledge of any Claim for which one
of the parties hereto (the "Indemnified Party") may seek indemnification against
another party (the "Indemnifying Party") pursuant to this Article XII, the
Indemnified Party shall give written notice thereof to the Indemnifying Party.
Failure to provide notice shall not relieve the Indemnifying Party of its
obligations under this Article XII, except to the extent that the Indemnifying
Party demonstrates actual damage caused by that failure. The Indemnifying Party
shall have the right to assume the defense of any Claim with counsel reasonably
acceptable to the Indemnified Party upon delivery of notice to that effect to
the Indemnified Party. If the Indemnifying Party, after written notice from the
Indemnified Party, fails to take timely action to defend the action resulting
from the Claim, the Indemnified Party shall have the right to defend the action
resulting from the Claim by counsel of its own choosing, but at the cost and
expense of the Indemnifying Party. The Indemnified Party shall have the right to
settle or compromise any Claim against it, and, as the case may be, recover from
the Indemnifying Party any amount paid in settlement or compromise thereof, if
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it has given written notice thereof to the Indemnifying Party and the
Indemnifying Party has failed to take timely action to defend the same;
otherwise, Indemnified Party shall have no right to settle or compromise any
Claim. The Indemnifying Party shall have the right to settle or compromise any
claim against the Indemnified Party without the consent of the Indemnified Party
provided that the terms of the settlement or compromise provide for the
unconditional release of the Indemnified Party and require the payment of
monetary damages only.
(b) Upon its receipt of any amount paid by the Indemnifying
Party pursuant to this Article XII, the Indemnified Party shall deliver to the
Indemnifying Party such documents as it may reasonably request assigning to the
Indemnifying Party any and all rights, to the extent indemnified, that the
Indemnified Party may have against third parties with respect to the Claim for
which indemnification is being received.
Section 12.04. Limitations on Indemnification. Notwithstanding
anything to the contrary contained herein, no Indemnified Party shall be
entitled to receive an indemnification payment with respect to any Claim or
Claims specified in this Article XII unless the Claim, or the aggregate amount
of all Claims made by the Indemnified Party hereunder, equals or exceeds
$100,000 (whereupon all of such Claim or Claims back to the first dollar will be
recoverable) and further, no Indemnified Party shall be entitled to receive an
indemnification payment with respect to any Claim or Claims specified in this
Article XII to the extent that the aggregate amount of such indemnification
payment with respect to such Claim or Claims exceeds the total amount of the
Purchase Price paid by Purchaser including any future Earn-Out payments.
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ARTICLE XIII.
MISCELLANEOUS
Section 13.01. Public Announcements. No party shall make any
press release or public announcement concerning this transaction prior to the
Closing Date, except as expressly permitted by the other party, except that
Parent may make any press release or public announcement if and to the extent
required by any securities law or stock exchange requirement or other applicable
law or legal compulsion, provided that Parent shall provide Seller with notice
as promptly as practicable of the circumstances that it believes creates a duty
to make such disclosure and an opportunity to review such disclosure and comment
thereon.
Section 13.02. Expenses. Each of the parties hereto shall pay
its own expenses in connection with this Agreement and the transactions
contemplated hereby including without limitation, any legal and accounting fees,
whether or not the transactions contemplated hereby are consummated provided
that Seller shall pay its transaction related expenses from its own account
immediately prior to Closing.
Section 13.03. Notices and Addresses. All notices, offers,
acceptance and any other acts under this Agreement (except payment) shall be in
writing, and shall be sufficiently given if delivered to the addressees in
person, by Federal Express or similar receipted delivery, by facsimile delivery
or, if mailed, postage prepaid, by certified mail, return receipt requested, as
follows:
If to Parent and Purchaser: SFBC International, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Chief Executive Officer
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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with a copy to: ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLP
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Facsimile (▇▇▇) ▇▇▇-▇▇▇▇
Seller: New Drug Services, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President
Facsimile (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: Klehr, Harrison, ▇▇▇▇▇▇, Branzburg & ▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, III, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as either of them, by notice to the other may designate
from time to time. The transmission confirmation receipt from the sender's
facsimile machine shall be evidence of successful facsimile delivery. Time shall
be counted to, or from, as the case may be, the delivery in person or by
mailing.
Section 13.04. Headings. Section headings herein have been
inserted for reference only and shall not be deemed to limit or otherwise
affect, in any matter, or be deemed to interpret in whole or in part any of the
terms or provisions of this Agreement.
Section 13.05. Construction.
(a) The parties have participated jointly in the negotiation
and drafting of this Agreement, and, in the event of an ambiguity or a question
of intent or a need for interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement.
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(b) Except as otherwise specifically provided in this
Agreement (such as by "sole," "absolute discretion," "complete discretion", or
words of similar import), if any provision of this Agreement requires or
provides for the consent, waiver, or approval of a party, such consent, waiver,
and/or approval shall not be unreasonably withheld.
(c) The parties intend that each representation, warranty, and
covenant herein shall have independent significance. If any party has breached
any representation, warranty, or covenant contained herein in any material
respect, the fact that there exists another representation, warranty, or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) which the party has not breached shall not detract from or
mitigate the fact that the party is in breach of the first representation,
warranty, or covenant, as the case may be.
(d) Words of any gender used in this Agreement shall be held
and construed to include any other gender; words in the singular shall be held
to include the plural; and words in the plural shall be held to include the
singular; unless and only to the extent the context indicates otherwise.
(e) Any reference to any federal, state, local, or foreign
statute or law shall be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise.
(f) The word "including" means "including, without
limitation."
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Section l3.06. Severability. If any provision of this
Agreement otherwise is deemed to be invalid or unenforceable or is prohibited by
the laws of the state or jurisdiction where it is to be performed, or other
governing law this Agreement shall be considered divisible as to such provision
and such provision shall be inoperative in such state or jurisdiction and shall
not be part of the consideration moving from either of the parties to the other.
The remaining provisions of this Agreement shall be valid and binding and of
like effect as though such provision were not included.
Section 13.07. Entire Agreement. This Agreement contains the
entire understanding among the parties hereto with respect to the transactions
contemplated hereby and supercedes and replaces all prior and contemporaneous
agreements and understandings, oral or written, with regard to those
transactions. All exhibits and schedules hereto are expressly made a part of
this Agreement as fully as though completely set forth herein.
Section 13.08. Amendments and Waivers. This Agreement may be
amended or modified, and any of the terms, covenants, representations,
warranties, or conditions hereof may be waived, only by a written instrument
executed by the parties hereto, or in the case of a waiver, by the party waiving
compliance. Any waiver by any party of any condition, or of the breach of any
provision, term, covenant, representation, or warranty contained in this
Agreement, in any one or more instances, shall not be deemed to be or construed
as a further or continuing waiver of any condition or of the breach of any other
provision, term, covenant, representation, or warranty of this Agreement.
Section 13.09. Parties in Interest. Nothing in this Agreement
is intended to confer any rights or remedies under or by reason of this
Agreement on any Person other than Seller, the Stockholders, Purchaser and
Parent and their respective successors and permitted assigns.
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Section 13.10. Successors and Assigns. No party hereto shall
assignor delegate this Agreement or any rights or obligations hereunder without
the prior written consent of the other parties hereto, and any attempted
assignment or delegation without prior written consent shall be void and of no
force or effect. In the event Seller liquidates and dissolves after the date
hereof, ▇▇. ▇▇▇▇▇ shall have the right to exercise any and all rights of Seller
arising under this Agreement.
Section 13.11. Governing Law and Jurisdiction. This Agreement
shall be construed and enforced in accordance with, and governed by, the laws of
the State of Delaware (without giving effect to the principles of conflicts of
laws thereof). In conncection with any claim seeking temporary, preliminary or
permanent injunctive relief, the parties hereto irrevocably agree and consent to
the exclusive jurisdiction of the courts of the State of Florida and the federal
courts of the United States, sitting in Miami-Dade County, Florida for the
ajudication of the claim for relief.
Section 13.12 Arbitration. Except for a claim for equitable relief, any
controversy, dispute or claim arising out of or relating to this Agreement, or
its interpretation, application, implementation, breach or enforcement which the
parties are unable to resolve by mutual agreement, shall be settled by
submission by either party of the controversy, claim or dispute to binding
arbitration in Miami-Dade County, Florida (unless the parties agree in writing
to a different location), before three arbitrators in accordance with the rules
of the American Arbitration Association then in effect. In any such arbitration
proceeding the parties agree to provide all discovery deemed necessary by the
arbitrators. The decision and award made by the arbitrators shall be final,
binding and conclusive on all parties hereto for all purposes, and judgment may
be entered thereon in any court having jurisdiction thereof.
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Section 13.12. Counterparts. This Agreement is executed in one
or more counterparts, each of which shall be deemed an original, but all of
which shall together constitute the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed, or caused to be
executed by their duly authorized representatives, this Agreement as of the date
first above written.
SFBC INTERNATIONAL, INC.
By: /s/ ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------------------
▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Executive Vice President of Clinical Operations
SFBC NEW DRUG SERVICES, INC.
By: /s/ ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------------------
▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Authorized Signatory
NEW DRUG SERVICES, INC.
By: /s/ ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------------------------
▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Chief Executive Officer
/s/ ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------
Dr. ▇▇▇▇▇▇▇ ▇▇▇▇▇
/s/ ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇
---------------------------------
▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇
/s/ Mr. ▇▇▇▇▇ ▇▇▇▇▇
----------------------------------
Mr. ▇▇▇▇▇ ▇▇▇▇▇
/s/ ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------
▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
85