ASSET PURCHASE AGREEMENT
AMONG
BRIMFIELD ACQUISITION CORP.
AS THE BUYER, A WHOLLY OWNED SUBSIDIARY
OF
MEDSOURCE TECHNOLOGIES, INC.
AND
BRIMFIELD PRECISION, INC.
AS THE SELLER,
AND
IMAGE GUIDED TECHNOLOGIES, INC.,
AS THE SHAREHOLDER OF THE SELLER
DATED AS OF DECEMBER 18, 1998
TABLE OF CONTENTS
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SALE AND PURCHASE OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SALE AND PURCHASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ASSUMPTION OF SPECIFIED LIABILITIES. . . . . . . . . . . . . . . . . . . . . . . . 4
ASSUMPTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
EXCLUDED LIABILITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
PURCHASE PRICE, PAYMENT AND ADJUSTMENTS. . . . . . . . . . . . . . . . . . . . . . 7
PURCHASE PRICE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
PAYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
PURCHASE PRICE ADJUSTMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . 7
TRANSFER TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ALLOCATION OF PURCHASE PRICE. . . . . . . . . . . . . . . . . . . . . . . . . 10
CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE SHAREHOLDER . . . . . . . . . 10
ORGANIZATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
CAPITALIZATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
AUTHORIZATION; VALIDITY OF AGREEMENT. . . . . . . . . . . . . . . . . . . . . 11
NO VIOLATIONS; CONSENTS AND APPROVALS . . . . . . . . . . . . . . . . . . . . 11
FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . . . . . 12
NO UNDISCLOSED LIABILITIES. . . . . . . . . . . . . . . . . . . . . . . . . . 12
LITIGATION; COMPLIANCE WITH LAW; LICENSES AND PERMITS . . . . . . . . . . . . 13
EMPLOYEE BENEFIT PLANS; ERISA . . . . . . . . . . . . . . . . . . . . . . . . 13
REAL PROPERTY.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
INTELLECTUAL PROPERTY; COMPUTER SOFTWARE. . . . . . . . . . . . . . . . . . . 16
TITLE TO ACQUIRED ASSETS; CAPITAL BUDGET. . . . . . . . . . . . . . . . . . . 17
MATERIAL CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
TAXES.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
AFFILIATED PARTY TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . 20
ENVIRONMENTAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
NO BROKERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
RECEIVABLES.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
PRODUCT CLAIMS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
WARRANTIES AND RETURNS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ASSETS UTILIZED IN THE BUSINESS . . . . . . . . . . . . . . . . . . . . . . . 23
INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
DELIVERY OF DOCUMENTS; CORPORATE RECORDS. . . . . . . . . . . . . . . . . . . 23
CUSTOMERS, SUPPLIERS AND DISTRIBUTORS . . . . . . . . . . . . . . . . . . . . 24
LABOR MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
DIRECTORS, OFFICERS AND CERTAIN EMPLOYEES . . . . . . . . . . . . . . . . . . 24
YEAR 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
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NO MISSTATEMENTS OR OMISSIONS . . . . . . . . . . . . . . . . . . . . . . . . 25
REPRESENTATIONS AND WARRANTIES OF THE BUYER. . . . . . . . . . . . . . . . . . . . 25
ORGANIZATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
AUTHORIZATION; VALIDITY OF AGREEMENT. . . . . . . . . . . . . . . . . . . . . 25
NO VIOLATIONS; CONSENTS AND APPROVALS . . . . . . . . . . . . . . . . . . . . 26
LITIGATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
OTHER AGREEMENTS OF THE PARTIES. . . . . . . . . . . . . . . . . . . . . . . . . . 26
CONDUCT OF BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ACCESS AND INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
TAX RETURNS; TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
NOTICE OF DEVELOPMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
NON-DISCLOSURE OF CONFIDENTIAL INFORMATION. . . . . . . . . . . . . . . . . . 30
NO SOLICITATION OF EMPLOYEES, SUPPLIERS OR CUSTOMERS. . . . . . . . . . . . . 30
NON-COMPETITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
PUBLIC STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
OTHER ACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
CHANGE OF NAME. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
COOPERATION ON TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
CONSENTS; RELEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
EXCLUSIVITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
RESERVED. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
INTERESTS IN REAL PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . 34
INFORMATION AND PAYROLL SYSTEMS . . . . . . . . . . . . . . . . . . . . . . . 35
ACCOUNTS RECEIVABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
CONDITIONS PRECEDENT TO THE CLOSING. . . . . . . . . . . . . . . . . . . . . . . . 35
CONDITIONS PRECEDENT TO THE BUYER'S OBLIGATIONS TO CLOSE. . . . . . . . . . . 35
CONDITIONS PRECEDENT TO THE SELLER'S OBLIGATIONS TO CLOSE . . . . . . . . . . 37
DOCUMENTS TO BE DELIVERED AT THE CLOSING.. . . . . . . . . . . . . . . . . . . . . 39
DELIVERIES OF THE SELLER AND THE SHAREHOLDER. . . . . . . . . . . . . . . . . 39
DELIVERIES OF THE BUYER . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
TERMINATION OF THE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
LIABILITY OF THE PARTIES. . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SURVIVAL OF REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE
SHAREHOLDER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SURVIVAL OF REPRESENTATIONS AND WARRANTIES OF THE BUYER . . . . . . . . . . . 42
INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
INDEMNIFICATION BY THE SELLER AND THE SHAREHOLDER . . . . . . . . . . . . . . 42
INDEMNIFICATION BY THE BUYER. . . . . . . . . . . . . . . . . . . . . . . . . 43
INDEMNIFICATION PROCEDURES. . . . . . . . . . . . . . . . . . . . . . . . . . 43
LIMITATIONS ON INDEMNIFICATION BY THE SELLER AND THE SHAREHOLDER. . . . . . . 49
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
TRANSACTION FEES AND EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . 49
NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
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WAIVER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
JURISDICTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
REMEDIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
BINDING EFFECT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
NO THIRD PARTY BENEFICIARIES. . . . . . . . . . . . . . . . . . . . . . . . . 49
ENTIRE AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
HEADINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
BULK SALES LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
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TABLE OF CONTENTS (CONT'D.)
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TABLE OF CONTENTS (CONT'D.)
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SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
v
DISCLOSURE LETTER
Section 5.2 Capitalization; Liens
Section 5.4(a) Violations
Section 5.4(b) Consents and Approvals
Section 5.5 Financial Statements
Section 5.7(a) Undisclosed Liabilities
Section 5.8(a) Litigation
Section 5.8(b) Violations of Law
Section 5.9(a) Employee Benefit Plans
Section 5.10(a) Owned Real Property
Section 5.10(c) Real Estate Related Contracts
Section 5.11(a) Intellectual Property; Rights of Ownership
Section 5.11(b) Licenses, etc. Rights of Ownership
Section 5.12(a) Liens
Section 5.12(b) Fixed Assets Ledger
Section 5.12(c) Capital Budget
Section 5.13 Material Contracts; Defaults or Events of Default
Section 5.14(a) Taxes
Section 5.15 Affiliated Party Transactions
Section 5.16 Environmental Matters
Section 5.19 Inventories
Section 5.20 Service and Product Liability Claims
Section 5.21 Warranties and Returns Policies; Product Failures or Defects
Section 5.22 Assets Utilized in the Business
Section 5.23 Insurance Policies
Section 5.25 Sales; Sales to Customers; Suppliers and Distributors
Section 5.27 Directors, Officers, Certain Employees
Section 5.28 Year 2000
Section 7.6 No Solicitation
Section 7.12(a) Employees
Section 7.13 Releases
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EXHIBITS
Exhibit 1.4 Form of Deposit Escrow Agreement
Exhibit 3.1(b) Form of Settlement Escrow Agreement
Exhibit 7.16(a) Form of Deed
Exhibit 8.1(j) Form of Opinion of Counsel for the Seller and the
Shareholder
Exhibit 8.2(f) Form of Opinion of Counsel for the Buyer
Exhibit 8.2(h) Form of ▇▇▇▇ of Sale, Assignment and Assumption Agreement
vii
ASSET PURCHASE AGREEMENT
DATED AS OF DECEMBER 18, 1998
The parties to this Asset Purchase Agreement (this "Agreement")
are Brimfield Acquisition Corp., a Delaware corporation (the "Buyer") and
wholly-owned subsidiary of MedSource Technologies, Inc., a Delaware
corporation ("MedSource"), Brimfield Precision, Inc., a Massachusetts
corporation (the "Seller"), and Image Guided Technologies, Inc., a Colorado
corporation that owns all of the outstanding capital stock of the Seller (the
"Shareholder").
W I T N E S S E T H:
The Seller is engaged in the business of manufacturing at its
Brimfield, Massachusetts facility and selling general surgical instruments
and orthopedic implants and orthopedic instrumentation (collectively, the
"Business").
The Buyer desires to purchase from the Seller, and the Seller
desires to sell to the Buyer, all of the Seller's assets and properties
relating to the Business in consideration for the payment of cash and the
assumption of the liabilities specified below, on the terms and subject to
the conditions set forth herein.
It is therefore agreed as follows:
1. SALE AND PURCHASE OF ASSETS.
1.1 SALE AND PURCHASE. Upon the terms and subject to the conditions
contained in this Agreement, at the Closing (as defined in section 4), the
Seller shall sell, assign, transfer and deliver to the Buyer, and the Buyer
shall purchase and accept from the Seller, all of the assets and rights of
every nature, kind and description, tangible and intangible, wherever
located, that are owned, used or held for use by the Seller in or for the
Business, as the same shall exist on the Closing Date (as defined in section
4) (collectively, the "Acquired Assets"), free and clear of any and all
liens, charges, claims, pledges, security interests or other encumbrances
("Liens"), other than Liens in section 1.1 of the Disclosure Letter,
including, without limitation, the following as to the Business:
(1) accounts receivable, notes receivable, drafts or other similar
instruments;
(2) inventory, including but not limited to finished goods, work
in process, raw materials and supplies;
(3) prepaid expenses and deposits;
(4) machinery, equipment, tools and dies, hand tools, vehicles,
computers and other data processing hardware (and all software related
thereto or used therewith) and other tangible personal property of similar
nature, including but not limited to all items set forth on the Seller's
fixed asset ledger described in section 5.12(b) of the Disclosure Letter (as
defined in section 5.30) (collectively, the "Machinery and Equipment");
(5) office furniture, office equipment, fixtures and other
tangible personal property of similar nature (collectively, the "Furniture
and Fixtures");
(6) interests to the extent owned by the Seller in any patent,
copyright, trademark, trade name, brand name, service ▇▇▇▇, logo, symbol,
trade dress, design or representation or expression of any thereof, or
registration or application for registration thereof, or any other invention,
trade secret, technical information, know-how, proprietary right or
intellectual property, technologies, methods, designs, drawings, software
(including documentation and source code listings), processes and other
proprietary properties or information (collectively, the "Intellectual
Property");
(7) the real property interests described in section 5.10(b) of
the Disclosure Letter, together with all buildings, facilities and other
improvements thereon and all licenses, leases, rights, privileges and
appurtenances thereto including, without limitation, all leases, agreements
and other rights to use, occupy or possess, or otherwise with respect to,
real property or machinery, equipment, vehicles, and other tangible personal
property of similar nature to which the Seller is a party, and all rights
arising under or pursuant to such leases, agreements and rights;
(8) to the extent not included above, and subject to sections 1.2
and 1.3, all contracts, agreements, options, commitments, understandings,
licenses, leases and instruments relating to the Business including, without
limitation, customer and supplier contracts, sales representative and
distributor contracts and commission contracts with respect thereto, and each
of the Material Contracts as listed in section 5.13 of the Disclosure Letter
(collectively, the "Assigned Contracts");
(9) customer and supplier lists, mailing lists, catalogs,
brochures and handbooks relating to the Business;
(10) other books, records, files, contracts, plans, notebooks,
production and sales data and other data of the Seller relating to the
Business, whether or not in tangible form or in the form of intangible
computer storage media such as optical disks, magnetic disks, tapes and all
similar storage media;
(11) the name Brimfield Precision and all variations thereof and
all similar names and the goodwill associated therewith, together with all
trademarks, service marks and trade names of the Seller related to the
Business, if any;
(12) rights related to any portion of the Business or the Acquired
Assets, including third party warranties and guarantees and other similar
contractual rights, as to third parties held by
2
or in favor of the Seller, and arising out of, resulting from or relating to
the Business or the Acquired Assets; and
(13) rights to insurance and condemnation proceeds relating to any
damage, destruction, taking or other similar impairment of any of the
Acquired Assets.
1.2 EXCLUDED ASSETS. The only assets of the Seller that the Buyer is
not acquiring hereby (the "Excluded Assets") are:
(1) assets owned by the Seller and used solely at, or solely in
connection with the business conducted at, its Springfield, Massachusetts,
facility (collectively, the "Excluded Business");
(2) patents owned by the Seller and used in the Excluded Business;
(3) claims for tax refunds;
(4) contracts of insurance and claims against insurers;
(5) the Seller's employee benefit plans;
(6) cash and cash equivalents of the Seller;
(7) the consideration to be delivered to the Seller pursuant to
this Agreement for the Acquired Assets to be sold to the Buyer hereunder and
the rights of the Seller hereunder;
(8) the certificate of incorporation, corporate seals, minute
books, stock books, Tax Returns (as defined in section 5.14(d)) and
supporting data prepared expressly in connection therewith, and other records
prepared directly in connection with the corporate organization and
capitalization of the Seller and/or its operation as a corporation under
applicable Laws (as defined in section 5.8(b));
(9) subject to section 7.12, all rights of the Seller under
employment agreements; and
(10) the shares of the capital stock of the Seller.
1.3 CONSENTS. To the extent that the assignment of any Assigned
Contract shall require the Consent (as defined in section 5.4(b)) of the
other parties thereto or of any third parties, this Agreement shall not
constitute an agreement to assign the same if an attempted assignment would
constitute a breach thereof or of other obligations or commitments of the
Seller. The Seller shall take any and all reasonable action necessary to
obtain all such Consents prior to the Closing Date. If any such Consent is
not obtained, and the Buyer waives the obtaining of such Consent as a
condition precedent hereunder, then the Seller shall continue such efforts
after the Closing Date and until such Consent is obtained and shall cooperate
with the Buyer in any arrangement (such as
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subcontracting, sublicensing or subleasing) requested by the Buyer intended
to provide for the Buyer all of the benefits of the Seller under such
Contract.
1.4 ESCROW DEPOSIT. Promptly after the execution and delivery of this
Agreement, the Buyer shall deliver to ▇▇▇▇▇▇ ▇▇▇▇▇▇ Flattau & Klimpl, LLP, as
escrow agent (the "Escrow Agent"), by check or wire transfer, the amount of
$100,000 as an escrow deposit (the "Deposit") to be held in accordance with
the escrow agreement (the "Deposit Escrow Agreement") annexed hereto as
Exhibit 1.4. If the Buyer has not terminated this Agreement pursuant to
section 10.1(a)(ii), the Buyer will deliver an additional $150,000 to the
Escrow Agent within thirty days after the date hereof as additional Deposit
pursuant to the terms of the Deposit Escrow Agreement. If the Buyer does not
deliver such additional $150,000 within such thirty days, then, subject to
the proviso at the end of this section 1.4, the Seller shall be entitled to
the $100,000 delivered by the Buyer as liquidated damages and such $100,000
shall be delivered to the Seller in accordance with the Deposit Escrow
Agreement. At the Closing, the Deposit shall be returned to the Buyer. In
the event, however, that the Closing does not occur in accordance with the
terms of this Agreement, neither the Seller nor the Shareholder is then in
material breach of this Agreement and all of the conditions set forth in
section 8.1 have been satisfied, then the Seller shall be entitled to the
Deposit (including the additional $150,000 if delivered to the Escrow Agent)
made by the Buyer as liquidated damages and the Deposit shall be delivered to
the Seller in accordance with the Deposit Escrow Agreement; PROVIDED,
HOWEVER, that any amounts delivered to the Escrow Agent pursuant to the
Deposit Escrow Agreement shall be returned to the Buyer if the Buyer
terminates this Agreement pursuant to sections 10(a)(ii) or 10(a)(iii).
2. ASSUMPTION OF SPECIFIED LIABILITIES.
2.1 ASSUMPTION. Upon the terms and subject to all of the conditions
contained herein, at the Closing, the Buyer shall assume, and agree to pay,
perform and discharge (i) the obligations and liabilities of the Seller that
are reflected as "accounts payable" or "accrued liabilities" on the June 30,
1998 balance sheet (the "June 30 Balance Sheet") of the Business included in
the financial statements described in section 5.5 not discharged by the
Seller before the Closing, (ii) the obligations and liabilities of the
Business incurred since June 30, 1998 that are not in contravention of
section 7.1 and are reflected on the Closing Date Balance Sheet (as defined
in section 3.3(d)) as "accounts payable" or "accrued liabilities" as set
forth in the preceding clause (i) and (iii) obligations and liabilities of
the Buyer arising pursuant to its obligation to perform the Assigned
Contracts after the Closing, but only to the extent such obligations are not
Excluded Liabilities (all of the foregoing, collectively, the "Assumed
Liabilities" and, individually, an "Assumed Liability").
2.2 EXCLUDED LIABILITIES. The Buyer is only assuming the liabilities
and obligations of the Seller expressly set forth in section 2.1. Without
limiting the generality of the foregoing, the Buyer is not assuming, and the
Seller shall remain responsible for and shall promptly pay, perform and
discharge, all of the liabilities and obligations of the Seller other than
the Assumed Liabilities (the "Excluded Liabilities") such that the Buyer will
incur no liability in connection therewith, and the Seller shall indemnify
the Buyer with respect to and shall hold the Buyer harmless from and against
all such Excluded Liabilities, including but not limited to the following:
4
(1) any obligation or liability of the Seller to the Shareholder;
(2) any obligation or liability of the Seller arising from a
breach of a representation or warranty herein on its part or its failure to
fully, faithfully and promptly perform any agreement or covenant on its part
contained herein;
(3) any obligation or liability of the Seller to the extent the
same arose prior to the Closing out of or resulting from noncompliance with
any federal, state or local Laws, whether relating to the environment, the
health and safety standards applicable to employees, employee benefit plans,
wage and hour Laws or other labor related matters or otherwise;
(4) any obligation or liability of the Seller to the extent that
the Seller shall be indemnified by an insurer;
(5) any expenses of the Seller incurred in connection with the
transactions contemplated hereunder;
(6) any obligations relating to an Excluded Asset;
(7) any liability for Taxes (as defined in section 5.14(c));
(8) any indebtedness for borrowed money or any guaranty thereof,
except as expressly set forth in section 2.1;
(9) any amount due to the Shareholder or Affiliate (as defined in
section 5.15);
(10) any pension, profit-sharing or workmen's compensation or other
employee benefit or post retirement plan and any liability or obligation
arising thereunder, including, without limitation, any plan or other matter
set forth in section 5.9 of the Disclosure Letter, except as expressly
provided in section 7.12;
(11) any liability or obligation for, with respect to, related to
or arising out of any goods sold, shipped or delivered by the Seller prior to
Closing, including but not limited to any liability as a result of any injury
to persons or property;
(12) all claims of current and former employees arising out of
events, conditions and circumstances existing or occurring prior to Closing,
including, but not limited to, medical and health claims and disability
claims; and
(13) obligations of the Seller under the "Capital Leases and
Financings" set forth in section 5.13 of the Disclosure Letter; PROVIDED,
HOWEVER, that the Seller shall sell, assign, transfer and deliver to the
Buyer any and all of the Acquired Assets that are subject to such "Capital
Leases and Financings," as provided in section 1.1.
3. PURCHASE PRICE, PAYMENT AND ADJUSTMENTS.
5
3.1 PURCHASE PRICE. As consideration for the sale, assignment,
transfer and delivery of the Acquired Assets by the Seller to the Buyer, and
upon the terms and subject to the conditions contained herein, the Buyer
shall assume the Assumed Liabilities and pay, in the manner set forth in
section 3.2, an aggregate amount (the "Purchase Price"): (a) $5,750,000 (the
"Fixed Amount") and the Additional Amount (as defined below), if any, by wire
transfer of immediately available funds to an account designated in writing
by the Seller at least three days prior to the Closing, subject to
preliminary adjustment as provided in section 3.3(b) on the basis of the June
30 Balance Sheet (as defined in section 5.5), and (b) $250,000 (the
"Settlement Escrow Amount") to be held in escrow by the Escrow Agent pursuant
to the terms and conditions of an escrow agreement in the form attached
hereto as Exhibit 3.1(b) (the "Settlement Escrow Agreement"), all subject to
final adjustment after the Closing as provided in section 3.3(c) on the basis
of the Closing Date Balance Sheet referred to in section 3.3(c) (the Purchase
Price as so adjusted, the "Final Purchase Price"). If the Closing Date has
not occurred on or before January 31, 1999, then on the next day and on each
day thereafter before the Closing Date, the Purchase Price shall be increased
by an amount equal to $1,667. As used in this Agreement, the sum of the
increases to the Purchase Price pursuant to the immediately preceding
sentence shall be defined as the "Additional Amount."
3.2 PAYMENT.
(1) On the Closing Date, the Buyer shall deliver to the Seller an
amount (the "Estimated Purchase Price") equal to the Fixed Amount plus (i)
the Additional Amount, if any, plus (ii) the Estimated Price Increase (as
defined in section 3.3(b)), if any, or, alternatively, less (iii) the
Estimated Price Decrease (as defined in section 3.3(b)), if any.
(2) On the Closing Date, the Buyer shall deliver to the Escrow
Agent an amount equal to the Settlement Escrow Amount.
(3) Upon the determination of the Final Purchase Price, as finally
determined in accordance with section 3.3(d) on the basis of the Closing Date
Balance Sheet, either (i) the Buyer shall pay to the Seller the amount of the
Final Purchase Price Increase (as defined in section 3.3(d)) and the Buyer
shall cause the Escrow Agent to pay to the Seller the Settlement Escrow
Amount in accordance with the Settlement Escrow Agreement or, alternatively,
(ii) the Seller shall pay to the Buyer the amount of the Final Purchase Price
Decrease (as defined in section 3.3(d)) (each such payment, a "Purchase Price
Adjustment"), which such Final Purchase Price Decrease shall be made from the
Settlement Escrow Amount in accordance with the terms of the Settlement
Escrow Agreement (and the Buyer shall cause the Escrow Agent to pay to the
Seller the portion of the Settlement Escrow Amount that exceeds the amount of
such Final Purchase Price Decrease, if any, in accordance with the Settlement
Escrow Agreement) and, if such Final Purchase Price Decrease exceeds the
Settlement Escrow Amount, then such excess shall be paid by the Seller
pursuant to section 3.3(f) hereof.
(4) In the event that, after receipt of the notice contemplated by
section 7.3(f), the Massachusetts Department of Revenue informs the Buyer
that the Seller owes certain Taxes, then the portion of the Fixed Amount
delivered to the Seller shall be reduced by the amount of Taxes that such
state informs the Buyer are owed by the Seller and such Taxes shall be paid
to such
6
state by the Buyer; PROVIDED, HOWEVER, that the amount of any such reduction
shall be deemed to have been paid by the Buyer to the Seller; PROVIDED,
FURTHER, HOWEVER, that the Seller may contest the amount of such Taxes that
such state informs the Buyer are owed by the Seller, and the amount of any
reduction in such amount pursuant to such contest shall be paid to the Seller.
3.3 PURCHASE PRICE ADJUSTMENTS.
(1) At least three business days prior to the Closing Date, the
Seller shall deliver to the Buyer (i) a balance sheet of the Business (the
"Estimated Closing Date Balance Sheet") based upon the books and records of
the Seller and prepared in accordance with generally accepted accounting
principles as of the date of this Agreement ("GAAP") and reflecting the
Seller's best estimate of each of the items, and the amounts thereof, to be
included on the Closing Date Balance Sheet and (ii) a certificate of the
Seller, duly executed by an executive officer of the Seller, stating that the
Estimated Closing Date Balance Sheet has been prepared in good faith, has
been prepared in accordance with GAAP and reflects the Seller's best estimate
of, and fairly presents, each of the items, and the amounts thereof, to be
included on the Closing Date Balance Sheet.
(2) If the Net Asset Amount (as defined below) of the Business as
shown on the Estimated Closing Date Balance Sheet is greater than the Net
Asset Amount of the Business shown on the June 30 Balance Sheet, the payment
of the Fixed Amount to the Seller on the Closing Date shall be increased, as
a preliminary adjustment to the Fixed Amount as provided in section
3.2(a)(ii), by the amount of such excess (the "Estimated Price Increase").
If the Net Asset Amount of the Business as shown on the Estimated Closing
Date Balance Sheet is less than the Net Asset Amount of the Business as shown
on the June 30 Balance Sheet, the payment of the sum of the Fixed Amount and
the Additional Amount, if any, to the Seller on the Closing Date shall be
decreased, as a preliminary adjustment to the Fixed Amount as provided in
section 3.2(a)(iii), by the amount of such deficiency (the "Estimated Price
Decrease"). For purposes of this Agreement, "Net Asset Amount" of the
Business as of any date shall mean the total assets of the Business less the
sum of all cash and cash equivalents of the Seller, all "accounts payable"
and all "accrued liabilities" of the Business, all as set forth on a balance
sheet of the Business as of such date; PROVIDED, HOWEVER, that "Net Asset
Amount" as of any date shall exclude the "▇▇▇▇▇▇▇ ▇▇▇▇▇ receivable" and any
of the reserves established with respect thereto; PROVIDED, FURTHER, HOWEVER,
that the collection of any amount that exceeds $10,000 in any month with
respect to the "▇▇▇▇▇▇▇ ▇▇▇▇▇ receivable" between the date hereof and the
date of the Closing Date Balance Sheet shall reduce the Net Asset Amount by
the sum of the amounts of such excess in each such month.
(3) As of the close of business on the last day of the fiscal
month of the Seller in which the Closing occurs, or at such other time on
such other date as near as practicable thereto as may be mutually agreed to
by the parties to avoid business disruptions, the Buyer shall cause physical
counts to be made of the inventory of the Business located at such of the
Seller's facilities as the Buyer shall request (the "Inventory Count"), which
shall be observed by the accounting firm of Ernst & Young LLP, the costs of
the physical inventory to be shared equally by the Buyer and the Seller. The
Seller's representatives shall be entitled to attend and observe the taking
of the Inventory Count. Upon completion of the Inventory Count (and any
adjustment pursuant to the immediately following sentence), the Seller shall
be provided with copies of the relevant data relating to those counts for its
review. The results of the Inventory Count shall be adjusted to reflect
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the Seller's inventory at the date of the Closing Date Balance Sheet using
actual receipts and shipments, and the valuation of inventory for purposes of
the Closing Date Balance Sheet shall be based on the results of the Inventory
Count as so adjusted.
(4) Within forty-five (45) days following the date of the Closing
Date Balance Sheet, the Seller shall deliver to the Buyer a special purpose
balance sheet of the Business as of the close of business on the last day of
the month in which the Closing occurs, or, at the option of either the Buyer
or the Seller, as of the close of business on the Closing Date, prepared by
the Seller with the assistance of the Buyer (the "Closing Date Balance
Sheet"). The Buyer may, at its option, audit the Closing Date Balance Sheet,
at its own cost and expense, and the Seller and the Shareholder hereby agree
to cooperate in the preparation of such audit. The Closing Date Balance
Sheet shall be prepared in accordance with GAAP and shall set forth the
calculation of the Net Asset Amount of the Business in a manner consistent
with the calculation thereof on the June 30 Balance Sheet and the Estimated
Closing Date Balance Sheet as of the Closing Date. In connection with the
preparation of the Closing Date Balance Sheet, the Seller shall provide the
Buyer and the Buyer's accountants and representatives full access to the
Seller's books, records, facilities and employees. If the Net Asset Amount
of the Business as reflected in the Closing Date Balance Sheet is greater
than the Net Asset Amount of the Business reflected in the Estimated Closing
Date Balance Sheet, the Estimated Purchase Price shall be increased, by a
final adjustment to the Estimated Purchase Price as provided in section
3.2(c)(i), by the amount of such excess (the "Final Purchase Price
Increase"). If the Net Asset Amount of the Business as reflected in the
Closing Date Balance Sheet is less than the Net Asset Amount of the Business
as reflected in the Estimated Closing Date Balance Sheet, the Estimated
Purchase Price shall be decreased, by a final adjustment to the Estimated
Purchase Price as provided in section 3.2(c)(ii), by the amount of such
deficiency (the "Final Purchase Price Decrease").
(5) The Buyer shall have thirty (30) days after receipt by it of
the Closing Date Balance Sheet (the "Dispute Period") to dispute any item,
calculation or amount, or the method of calculation of any item or amount,
reflected therein (a "Dispute"). If the Buyer does not give written notice
of a Dispute (a "Dispute Notice") to the Seller within the Dispute Period,
the Closing Date Balance Sheet shall be deemed to have been accepted by the
Buyer in the form in which it was delivered by the Seller. In the event that
the Buyer does not agree with any item, calculation or amount, or the method
of calculation of any item or amount, reflected on the Closing Date Balance
Sheet, the Buyer shall give the Seller a Dispute Notice within the Dispute
Period, setting forth the basis of its disagreement, and the Seller and the
Buyer shall, within fifteen (15) days after the receipt by the Seller of such
Dispute Notice, attempt to resolve such Dispute and agree in writing upon the
final Closing Date Balance Sheet. In the event that the Seller and the Buyer
are unable to resolve any such Dispute within the fifteen (15) day resolution
period, then the national office of the certified public accounting firm of
Deloitte & Touche LLP or such other national office of a certified public
accounting firm or office as may be mutually agreed upon by the Seller and
the Buyer (the "Arbitrator") shall be employed as arbitrator hereunder to
settle such Dispute as soon as reasonably practicable. The parties agree
that the Arbitrator shall decide only the matter involved in the Dispute, and
not any other matters. Any Arbitration pursuant to this section 3.3(e) shall
be conducted in the national office of the Arbitrator, in accordance with the
Commercial Arbitration Rules of the American Arbitration Association then
existing and the Arbitrator's determination with respect to any Dispute shall
be final and binding on all parties and not subject to appeal on any
8
ground, and judgment on the arbitration award may be enforced in any court
having jurisdction over the subject matter of the controversy. The Seller
and the Buyer shall each pay one-half of the fees and expenses of the
Arbitrator for the services of the Arbitrator in the arbitration.
(6) In the event of a Final Purchase Price Decrease that is less
than or equal to the Settlement Escrow Amount, an amount equal to such
Purchase Price Adjustment shall be paid by the Escrow Agent to the Buyer and
an amount equal to the remainder of the Settlement Escrow Amount shall be
paid by the Escrow Agent to the Seller, in each case pursuant to the terms of
the Settlement Escrow Agreement. In the event of a Final Purchase Price
Decrease that exceeds the Settlement Escrow Amount, the amount of such
excess, together with interest on such amount at a rate equal to the rate of
interest announced from time to time by Chase Manhattan Bank to be its prime
or reference rate (the "Prime Rate"), from the Closing Date to the payment
date, shall promptly be paid by the Seller to the Buyer in immediately
available funds by wire transfer to such bank account as may be designated by
the Buyer to the Seller. In the event of a Final Purchase Price Increase,
the amount of such Purchase Price Adjustment, together with interest on such
amount at the Prime Rate, shall promptly be paid by the Buyer to the Seller
in immediately available funds by wire transfer to such bank account as may
be designated by the Seller to the Buyer. Each payment of a Purchase Price
Adjustment pursuant to this section 3.3(f) shall be made within ten (10) days
after the final determination of the Closing Date Balance Sheet.
3.4 TRANSFER TAXES. All sales, use, transfer, excise and similar
taxes imposed by any state, county, local or other governmental entity or
Taxing Authority (as defined in section 5.14(a)) as a result of the transfer
of the Acquired Assets hereunder and the other transactions contemplated
hereby shall be duly and timely paid by the Seller. The Seller shall duly
and timely file all Tax Returns in connection with such Taxes. The Seller
shall give a copy of each such Tax Return to the Buyer for its review with
sufficient time for incorporation of the Buyer's comments prior to filing,
and shall give the Buyer a copy of the Tax Return as filed, together with
proof of payment of the Tax shown thereof, promptly after filing.
3.5 ALLOCATION OF PURCHASE PRICE.
(1) The Buyer shall, as promptly as practicable after the Closing,
prepare and deliver to the Seller an allocation of the Purchase Price in
accordance with the relative fair market values of the Acquired Assets as
determined in the Buyer's reasonable determination. The Buyer, the Seller
and the Shareholder shall be bound by such allocation for all purposes,
including determining any Tax, shall prepare and file all Tax Returns,
including Forms 8594, in a manner consistent with such allocations, and shall
not take any position inconsistent with such allocations in any Tax Return,
any proceeding before any Taxing Authority or otherwise. In the event that
any allocation is questioned, audited or disputed by any Taxing Authority,
the party receiving notice thereof shall promptly notify and consult with the
other party concerning the strategy for the resolution thereof, and shall
keep the other party apprised of the status of such question, audit or
dispute and the resolution thereof.
(2) The Buyer and the Seller shall duly and timely file their
respective Forms 8594 with respect to the Fixed Amount, the Additional
Amount, if any, the Settlement Escrow Amount and Assumed Liabilities (as
adjusted), and with respect to each payment pursuant to
9
section 12 hereof, in accordance with this section 3.5. Each party shall
furnish a copy of each Form 8594 filed by it to the other party promptly
after filing. For purposes of the preparation of Form 8594, the name and
address of the Buyer and the Seller, respectively, is as set forth in section
13.2.
4. CLOSING.
The closing (the "Closing") of the transactions contemplated by this
Agreement shall take place at the offices of the Buyer's counsel in New York
City, at 10:00 a.m. local time (i) on or before ▇▇▇▇▇ ▇▇, ▇▇▇▇, (▇▇) at such
other date and time on which all the conditions set forth in section 8 of
this Agreement are satisfied or (iii) on such date after January 15, 1999 and
on or before March 31, 1999 on which the Buyer informs the Seller in writing
that such Closing shall take place (the "Closing Date"). The execution
and/or delivery of each document to be executed and/or delivered at the
Closing and each other action to be taken at the Closing shall be subject to
the condition that every other document to be executed and/or delivered at
the Closing is so executed and/or delivered and every other action to be
taken at the Closing is so taken, and all such documents and actions shall be
deemed to be executed and/or delivered or taken, as the case may be,
simultaneously.
5. REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE SHAREHOLDER.
The Seller and the Shareholder jointly and severally represent and
warrant to MedSource and the Buyer as follows:
5.1 ORGANIZATION. The Seller and the Shareholder are corporations
duly organized, validly existing and in good standing under the laws of their
respective jurisdictions of incorporation and have all requisite corporate
power and authority to own, lease and operate their respective properties and
to carry on their respective businesses as they are now being conducted. The
Seller and the Shareholder are duly qualified or licensed to do business as a
foreign corporation and are in good standing in each jurisdiction in which
the nature of the businesses conducted by them makes such qualification or
licensing necessary. The Seller and the Shareholder have each delivered to
the Buyer true, correct and complete copies of the Seller's and Shareholder's
respective certificates of incorporation and bylaws, as currently in effect.
5.2 CAPITALIZATION. The Shareholder is the only shareholder of the
Seller and owns all of the issued and outstanding capital stock of the Seller
of record and beneficially free and clear of all Liens, except as set forth
in section 5.2 of the Disclosure Letter. The Seller does not own any shares
of capital stock (or other equity interests of entities other than
corporations) of any partnership, joint venture, trust, corporation, limited
liability company or other entity.
5.3 AUTHORIZATION; VALIDITY OF AGREEMENT. Each of the Seller and the
Shareholder has the requisite corporate power and authority to execute, deliver
and perform this Agreement and each of the other agreements, instruments,
documents and certificates to be executed and delivered pursuant to this
Agreement, including but not limited to, any item referred to in section 9
(collectively, with this Agreement, the "Transaction Documents") to which it is
a party and to assume and perform its obligations hereunder and thereunder, and
to consummate the transactions
10
contemplated hereby and thereby. Each of this Agreement and the other
Transaction Documents has been duly executed, authorized and delivered by
each of the Seller and the Shareholder party thereto and is a valid and
binding obligation of each of the Seller and the Shareholder, enforceable
against each of the Seller and the Shareholder in accordance with their
respective terms, except as such enforceability may be subject to or limited
by applicable bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors' rights generally.
5.4 NO VIOLATIONS; CONSENTS AND APPROVALS.
(1) The execution, delivery and performance of each of this
Agreement and the other Transaction Documents by each of the Seller and the
Shareholder do not, and the consummation by each of the Seller and the
Shareholder of the transactions contemplated hereby and thereby will not, (i)
violate any provision of the certificate of incorporation or bylaws of the
Seller or the Shareholder, (ii) except as set forth in section 5.4(a) of the
Disclosure Letter, result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, amendment, cancellation or acceleration) under any of
the terms, conditions or provisions of any note, bond, mortgage, indenture,
guarantee, other evidence of indebtedness, license, lease, option, contract,
undertaking, understanding, covenant, agreement or other instrument or
document (collectively, a "Contract") to which the Seller or the Shareholder
is a party or by which any of the properties or assets of the Seller or the
Shareholder may be bound or otherwise subject or (iii) violate any order,
writ, judgment, injunction, decree, law, statute, rule or regulation
applicable to the Seller or the Shareholder or any of their respective
properties or assets.
(2) No filing or registration with, notification to, or
authorization, consent or approval of, any foreign, provincial, United States
federal, state, county, municipal or other local jurisdiction, political
entity, body, organization, subdivision or branch, legislative or executive
agency or department or other regulatory service, authority or agency (a
"Governmental Entity") or any other individual or other entity (a "Person")
is required in connection with the execution, delivery and performance of
this Agreement or any of the other Transaction Documents to which the Seller
or the Shareholder is a party or the consummation by the Seller or the
Shareholder of the transactions contemplated hereby and thereby, except for
such consents, approvals, orders, authorizations, notifications, notices,
estoppel certificates, registrations, ratifications, declarations, filings or
any waiver, exemption or variance with respect to any license, permit or
order as are set forth in section 5.4(b) of the Disclosure Letter
("Consents").
5.5 FINANCIAL STATEMENTS. Attached to section 5.5 of the Disclosure
Letter are the balance sheet of the Business as of June 30, 1998 (the "June
30 Balance Sheet") and the balance sheets of the Seller as of October 31,
1996, 1997 and 1998, together with the related statements of operations and
cash flows (including the related notes) for the fiscal years ended October
31, 1996 and 1997 and the related statement of operations for the ten-month
period ended October 31, 1998 (all of the foregoing, the "Financial
Statements"). The financial statements of the Seller for the years ended
October 31, 1996 and 1997 have been audited by ▇▇▇▇▇▇, Dixon, Riley, ▇▇▇▇▇▇▇
& ▇▇▇▇▇▇▇ LLC. The foregoing financial statements, as applicable, have been
derived from, and agree with, the books and records of the Seller and fairly
present the financial position of the Business or the Seller, as applicable,
as of the respective dates thereof and the results of operations of the
Business or the Seller, as applicable, for the respective periods set forth
therein. Each of the
11
foregoing financial statements has been prepared in accordance with GAAP as
of the dates and for the periods involved, subject, in the case of the June
30 Balance Sheet and the balance sheet of the Seller as of October 31, 1998
and the related statements of operations for such interim period, to normal
fiscal year-end adjustments in the ordinary course (none of which,
individually or in the aggregate, will be material).
5.6 NO MATERIAL ADVERSE CHANGE. Since the date of the June 30 Balance
Sheet, (a) no event, condition or circumstance has occurred that could, or
could be reasonably likely to, have a material adverse effect on the
Business, Acquired Assets or Assumed Liabilities, or on the condition
(financial or otherwise), results of operations or prospects of the Seller or
the Business; and (b) the Business has been conducted in the ordinary course
and consistent with past practice. As amplification and not in limitation of
the foregoing, since the date of the June 30 Balance Sheet, the Seller has
not, (i) made any change in any method of accounting or accounting practice,
principle or policy used by the Seller, (ii) incurred any indebtedness,
obligation or liability or paid, satisfied or discharged any indebtedness,
obligation or liability prior to the due date or maturity thereof, except
current indebtedness, obligations and liabilities in the ordinary course of
business, or (iii) made any change or modification in any manner of the
Seller's (A) billing and collection policies, procedures and practices with
respect to accounts receivable or unbilled charges, (B) policies, procedures
and practices with respect to the provision of discounts, rebates or
allowances, or (C) payment policies, procedures and practices with respect to
accounts payable.
5.7 NO UNDISCLOSED LIABILITIES.
(1) Except as set forth in section 5.7(a) of the Disclosure
Letter, neither the Seller nor the Business have, and as of the Closing will
not have, any liabilities (whether accrued, contingent, known, or otherwise)
other than those that (i) are set forth or reserved against in the balance
sheets referred to in section 5.5; or (ii) were incurred since June 30, 1998
in the ordinary course of business, none of which, individually or in the
aggregate, is material to the business, operations, condition or prospects of
the Business.
(2) The accounts payable of the Seller set forth in the balance
sheets referred to in section 5.5. or arising subsequent thereto are the
result of BONA FIDE transactions in the ordinary course of business and have
been paid or have not been due and payable for more than 60 days, in
accordance with the respective invoices relating thereto.
5.8 LITIGATION; COMPLIANCE WITH LAW; LICENSES AND PERMITS.
(1) Except as set forth in section 5.8(a) of the Disclosure
Letter, there is no claim, suit, action or proceeding ("Proceeding") pending,
nor, to the best knowledge of the Seller and the Shareholder, is there any
investigation or Proceeding threatened, that involves or affects the Seller
or the Business, by or before any Governmental Entity, court, arbitration
panel or any other Person.
(2) The Seller and the Business have, and on the Closing Date will
have, complied with all applicable foreign, provincial, United States
federal, state, county, municipal or other local criminal, civil or common
laws, statutes, ordinances, orders, codes, rules, regulations,
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permits, policies, guidance documents, judgments, decrees, injunctions, or
agreements of any Governmental Entity (collectively, "Laws"), including but
not limited to Laws relating to zoning, building codes, antitrust,
occupational safety and health, industrial hygiene, environmental protection,
water, ground or air pollution, the generation, treatment, storage or
disposal of Hazardous Substance (as defined in section 5.16), consumer
product safety, product liability, hiring, wages, hours, employee benefit
plans and programs, collective bargaining and the payment of withholding and
social security taxes. Since January 1, 1996, the Seller has not received
any notice of any violation of any Law except as set forth in section 5.8(b)
of the Disclosure Letter.
(3) Each of the Seller and the Business has every license, permit,
certification, qualification or franchise issued by any Governmental Entity
(each, a "License") and every approval, authorization, waiver, variance,
exemption, consent or ratification by or on behalf of any Person that is not
a party to this Agreement (each, a "Permit") required for it to conduct its
business as presently conducted. All such Licenses and Permits are in full
force and effect and neither the Seller nor any Shareholder has received
notice of any pending cancellation or suspension of any thereof nor, to the
best knowledge of the Seller and the Shareholder, is any cancellation or
suspension thereof threatened. The applicability and validity of each such
License and Consent will not be adversely affected by the consummation of the
transactions contemplated by this Agreement.
5.9 EMPLOYEE BENEFIT PLANS; ERISA.
(1) Section 5.9(a) of the Disclosure Letter lists each "employee
benefit plan" (as defined in Section 3(3) of ERISA), and all other material
employee benefit (including, without limitation, any non-qualified plans),
bonus, deferred compensation, incentive, stock option (or other
equity-based), severance, change-in-control, medical insurance and fringe
benefit plans maintained for the benefit of, or contributed to by the Seller
or any trade or business of the Seller, whether or not incorporated (an
"ERISA Affiliate"), that would be deemed a "single employer" within the
meaning of Section 4001 of the Employee Retirement Income Security Act of
1974 ("ERISA"), for the benefit of any employee or former employee of the
Seller (the "Plans"). The Seller has heretofore delivered to the Buyer true,
correct and complete copies of each of the Plans, including all amendments to
date.
(2) Each of the Plans that is subject to ERISA complies with ERISA
and the applicable provisions of the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder (the "Code")
and has been administered in accordance with ERISA and, where applicable, the
Code. There are no pending or, to the best knowledge of each of the Seller
and the Shareholder, threatened claims (other than routine claims for
benefits), actions, suits or proceedings by, on behalf of or against any of
the Plans or any trusts related thereto.
(3) No Plan provides benefits including, without limitation, death
or medical benefits (whether or not insured), with respect to any employees
or former employees of the Seller beyond their retirement or other
termination of service (other than (i) coverage mandated by applicable law,
(ii) death benefits or retirement benefits under any "employee pension plan,"
as that term is defined in Section 3(2) of ERISA, or (iii) benefits the full
cost of which is borne by the current or former employee (or his or her
beneficiary)).
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(4) The Seller has complied with the notice and continuation of
coverage requirements of Section 4980B of the Code and the regulations
thereunder with respect to each plan that is, or was during any taxable year
of the Seller for which the statute of limitations on the assessment of
federal income taxes remains open, by consent or otherwise, a group health
plan within the meaning of Section 4980B(g) of ERISA.
5.10 REAL PROPERTY.
(1) Section 5.10(a) of the Disclosure Letter sets forth a list and
description (including the legal description) of all real property owned by
the Seller and all real property to be owned by the Seller on the Closing
Date (the "Owned Real Property" or the "Real Property"). The Seller has good
and marketable title to and owns the Owned Real Property applicable to it in
fee simple subject to no Liens except as set forth in section 5.10(a) of the
Disclosure Letter. Neither the Seller nor the Shareholder has received
notice of any default or breach by the Seller or other owner under any of the
covenants, conditions, restrictions, easements, or rights-of-way affecting
the Owned Real Property or any portion thereof, and to the best knowledge of
the Seller and the Shareholder, no such default or breach now exists, and no
event has occurred or is continuing which with notice or the passage of time
or both, would constitute a default thereunder.
(2) The Seller does not lease any real property related to the
Business.
(3) The Seller has heretofore delivered to the Buyer a true,
correct and complete copy of a recent title insurance policy with respect to
each parcel of Owned Real Property. Neither the Seller nor any other owner
of the Owned Real Property has entered into any leases, subleases, licenses
or occupancy agreements relating to the Owned Real Property and no Person has
any rights to acquire, lease, sublease or otherwise occupy the Owned Real
Property or any part thereof or to otherwise obtain any interest therein, and
there are no outstanding options, rights of first refusal or rights of
reverter relating to the Owned Real Property or any interests therein.
Except as set forth in section 5.10(c) of the Disclosure Letter, there are no
service or maintenance contracts, management agreements or similar agreements
relating to the Owned Real Property. There has been no service, material or
other work provided or supplied to the Owned Real Property that has not been
paid in full, except as set forth in section 5.10(c) of the Disclosure Letter.
(4) With respect to the Real Property, (i) there is a right of
ingress and egress to public thoroughfares to and from the Real Property,
(ii) the Real Property has adequate water supply and sewer or septic service
for the present use thereof and all sewer or septic service and water supply
facilities required for the present use of the Real Property are properly and
fully installed and operating, and (iii) all curb cut and street opening
permits or licenses required for vehicular access to and from any part of the
Real Property to any adjoining public street have been obtained and, if
required, paid for by the Seller and are in full force and effect. The
Seller has heretofore delivered to the Buyer true, correct and complete
copies of any certificate or certificates of operation for any incinerator,
boiler or other burning equipment on the Real Property, to the extent
available. There is no real property of any kind whatsoever used by the
Business, except for the Real Property, and the Real Property constitutes all
of the real property necessary to conduct the Business.
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(5) All licenses, permits and certificates of occupancy (the
"Approvals"), in connection with the construction, use, occupancy and
maintenance of any Real Property are in full force and effect in accordance
with the respective terms thereof, and none of the Approvals has been
amended, assigned, pledged or otherwise transferred. There is no alteration,
improvement or change in use of any building or other improvement located on
the Owned Real Property that would require any new Approvals or amendment of
an existing Approval. The condition and use of the Owned Real Property
conforms to each Approval. The Seller has obtained all of the approvals
necessary for the operation of the Business on the Real Property.
(6) To the best knowledge of each of the Seller and the
Shareholder, except as disclosed in the capital expense budget set forth in
section 5.12(c) of the Disclosure Letter or in section 5.10(f) of the
Disclosure Letter, (i) the Real Property including, without limitation, all
building systems and equipment, all structural components, the roof, the
basement, all plumbing, electrical, mechanical, heating, ventilating, air
conditioning and sprinkler systems, and all sewer, waste water, paving and
parking equipment, systems and facilities, are fully installed and, as
applicable, operating, in good condition and repair and adequate for the
conduct of the business of the Seller as presently and proposed to be
conducted, (ii) there are no defects in the same that would hinder or impair
the business and operations of the Seller and, (iii) no extraordinary repair
or improvement expense with respect thereto is anticipated during the two
years following the Closing Date. The electricity service and all other
public or private utilities ("Utilities") serving the Real Property are fully
installed and operating, adequate for the conduct of the business of the
Seller as presently and proposed to be conducted, and enter the Real Property
through adjoining public streets or through valid easements across adjoining
private lands, and all installation, connection and capital recovery charges
in connection with the Utilities have been paid in full.
(7) To the best knowledge of each of the Seller and the
Shareholder, there is no pending, proposed, contemplated or anticipated (i)
annexation, condemnation, eminent domain or similar proceeding affecting, or
that may affect, all or any portion of the Real Property, (ii) proceeding to
change or redefine the zoning classification of all or any portion of the
Real Property, (iii) imposition of any special or other assessments for
public betterments or otherwise, (iv) special assessments affecting the Real
Property or any portion thereof that are or would be payable by the Seller or
the Shareholder and could result in a Lien against any of the Real Property,
(v) change in any applicable Laws relating to the use, occupation or
operation of the Real Property, (vi) tax certiorari proceeding with respect
to any Real Property or (vii) pending changes in road patterns or grades that
may adversely affect access to any roads providing a means of ingress or
egress from the Real Property.
(8) In the last 18 months, neither the Seller nor the Shareholder
has received notice from any insurance company or Board of Fire Underwriters
(or organization exercising functions similar thereto) or from any mortgagee
requesting the performance of any work or alteration in respect of any of the
Real Property, and, to the best knowledge of each of the Seller and the
Shareholder, there are no outstanding requirements or recommendations from
any of the foregoing.
(9) There has been no material damage to any portion of the Real
Property within the last 24 months caused by fire or other casualty that has
not been repaired.
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(10) Except as set forth in section 5.10(j) of the Disclosure
Letter, the Real Property (including all improvements thereon) and the uses
to which the Real Property (and all improvements thereon) are put, and all
operations conducted thereon, are in compliance with, and are not in default
under or in violation of, any building, zoning, land use, public health,
public safety, sewage, water or sanitation Law, or any Environmental Law or
any covenant, easement, restriction or other agreement, materially affecting
the Real Property and no notice of any such default or violation has been
received by the Seller or the Shareholder.
(11) The Seller is not a "foreign person" for purposes of Section
1445 of the Code.
5.11 INTELLECTUAL PROPERTY; COMPUTER SOFTWARE.
(1) Section 5.11(a) of the Disclosure Letter lists all material
Intellectual Property including, without limitation, trademarks, trade names,
service marks, service names, ▇▇▇▇ registrations, logos, assumed names,
copyrights, copyright registrations, patents and all applications therefor
that are owned by the Seller and used by the Seller in the operations of the
Business, and there are no pending or threatened claims by any Person
relating to the Seller's use of any Intellectual Property. Upon consummation
of the transactions contemplated hereby, the Buyer will acquire a valid and
enforceable right to use all material Intellectual Property that is owned by
any Person other than the Seller and is used by the Seller in the operations
of the Business. Except as set forth in section 5.11(a) of the Disclosure
Letter, the Seller has such rights of ownership (free and clear of all Liens)
of, or such rights by license, lease or other agreement to use (free and
clear of all Liens) the Intellectual Property as are necessary to permit the
Seller to conduct its business and the Seller is not obligated to pay any
royalty or similar fee to any Person in connection with the Seller's use or
license of any of the Intellectual Property.
(2) Except as set forth in section 5.11(b) of the Disclosure
Letter, the Seller has such rights of ownership (free and clear of all Liens)
of, or such rights by license, lease or other agreement to use (free and
clear of all Liens), the computer software programs including, without
limitation, application software that are used by the Seller and that are
material to the conduct of the Business as currently conducted, as are
necessary to permit the conduct of the Business as currently conducted. With
respect to the Business, none of the Seller's ownership rights or rights to
use any of the computer programs referred to above will be adversely affected
by any of the transactions contemplated hereby.
5.12 TITLE TO ACQUIRED ASSETS; CAPITAL BUDGET.
(1) The Seller has good and marketable title to the Acquired
Assets, including, without limitation, all assets shown on the June 30
Balance Sheet, free and clear of all Liens, other than (i) Liens, if any, for
personal property taxes and assessments not yet due and payable, (ii)
inventories sold since the date of the June 30 Balance Sheet in the ordinary
course of business and consistent with past practice and (iii) Liens
disclosed in section 5.12(a) of the Disclosure Letter. At the Closing, the
Seller will have caused each Lien referred to in section 5.12(a) of the
Disclosure Letter (other than Liens relating to leased operating equipment)
to have been terminated, and the Buyer will obtain good and marketable title
to all of the Acquired Assets free and clear of all Liens.
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(2) All material items of machinery, equipment, tooling and other
tangible personal property owned or leased by the Seller and used in the
conduct of the Business (other than items of inventory) are listed in the
detailed fixed assets ledger of the Seller attached to section 5.12(b) of the
Disclosure Letter (collectively, the "Personal Property"). The Personal
Property conforms in all material respects to all requirements of applicable
Laws. All of the items of machinery, equipment and tooling included within
the Personal Property are in good operating condition and in a good state of
maintenance and repair, are adequate for use in the conduct of the Seller's
business as previously conducted and are capable of manufacturing the
products of the Business.
(3) Section 5.12(c) of the Disclosure Letter includes a true,
correct and complete capital budget for the fiscal year ending December 31,
1999. Except as set forth in section 5.12(c), of the Disclosure Letter no
capital expenditures are contemplated by the Seller for the Business.
5.13 MATERIAL CONTRACTS.
(1) Section 5.13 of the Disclosure Letter sets forth a true,
complete and correct list of every Contract with respect to the Business that
(i) provides for aggregate future payments by the Seller or to the Seller of
more than $25,000 and has an unexpired term exceeding six months and may not
be canceled upon 60 days notice without any liability, penalty or premium
(excluding purchase orders and invoices arising in the ordinary course of
business); (ii) was entered into by the Seller with the Shareholder, or an
officer, director or significant employee of the Seller; (iii) is a
collective bargaining or similar agreement; (iv) guarantees or indemnifies or
otherwise causes the Seller to be liable or otherwise responsible for the
obligations or liabilities of another or provides for a charitable
contribution by the Seller; (v) involves an agreement with any bank, finance
company or similar organization; (vi) restricts the Seller or the Business
from engaging in any business or activity anywhere in the world; (vii) is an
employment agreement, consulting agreement or similar arrangement with any
employee of the Seller; or (viii) any other Contract that is material to the
rights, properties, assets, business or operations of the Seller or the
Business (the foregoing, collectively, "Material Contracts"). The Seller has
heretofore provided true, complete and correct copies of all Material
Contracts to the Buyer.
(2) Except as set forth in section 5.13 of the Disclosure Letter,
(i) there is not, and to the best knowledge of each of the Seller and the
Shareholder there has not been claimed or alleged by any Person with respect
to any Material Contract, any existing default, or event that with notice or
lapse of time or both would constitute a default or event of default, on the
part of the Seller or, to the best knowledge of each of the Seller and the
Shareholder, on the part of any other party thereto and (ii) no consent,
approval, authorization or waiver from, or notice to, any Governmental Entity
or other Person is required in order to maintain in full force and effect any
of the Material Contracts, other than such consents and waivers that have
been obtained and are unconditional and in full force and effect and such
notices that have been duly given and copies of such consents, waivers and
notices have been delivered to the Buyer.
(3) Except as set forth in section 5.13 of the Disclosure Letter,
the Contracts to which the Seller is a party do not involve the payment by
the Seller thereunder of more than
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$50,000 per year in the aggregate (excluding purchase orders issued by the
Seller or received from customers in the ordinary course for the sale or
purchase of products at standard prices) and are not otherwise material,
individually or in the aggregate, to such Seller or the Business.
5.14 TAXES.
(1) Except as set forth in section 5.14(a) of the Disclosure
Letter:
(1) the Seller has (A) duly and timely filed or caused to be
filed with the Internal Revenue Service or other applicable Governmental
Entity (collectively, "Taxing Authorities") all Tax Returns that are required
to be filed by or on behalf of the Seller or that include or relate to the
Acquired Assets or the Business, which Tax Returns are true, correct and
complete, and (B) duly and timely paid in full or caused to be paid in full,
all Taxes that are due and payable on or before the date hereof that could
result in a Lien on any of the Acquired Assets or the Business and has
recorded a provision for such payment on the books and records of the Seller
in accordance with GAAP for the payment of all Taxes that are not due and
payable on or before the date hereof;
(2) the Seller has duly and timely complied with all
applicable Laws relating to the collection or withholding of Taxes, and the
reporting and remittance thereof to the applicable Taxing Authorities;
(3) no audit, examination, investigation, reassessment or
other administrative or court proceeding (collectively, a "Tax Proceeding")
is pending or proposed, or to the best knowledge of each of the Seller and
the Shareholder threatened, with regard to any Tax or Tax Return referred to
in clause (i) above;
(4) there is no Lien for any Tax upon any of the Acquired
Assets or the Business;
(5) there is no outstanding or pending request for a ruling
from any Taxing Authority, subpoena or request for information by any Taxing
Authority; closing agreement within the meaning of Section 7121 of the Code
or any analogous provision of applicable Law) relating to any Tax for which
the Seller is or may be liable or with respect to the Seller's income, assets
or business, power of attorney or adjustment related to, or in connection
with, any Tax that could result in a Lien on any of the Acquired Assets or
the Business; and
(6) no claim has ever been made by a Taxing Authority in a
jurisdiction in which the Seller has not paid any Tax or filed any Tax Return
relating to the Business or any Acquired Asset asserting that the Seller is
or may be subject to Tax in such jurisdiction.
(2) The Seller has provided to the Buyer true, correct and
complete copies of (i) all Tax Returns relating to, and (ii) all audit
reports relating to each proposed adjustment, if any, made by any Taxing
Authority with respect to, any taxable period ending after July 31, 1993, to
any Taxes for which a Lien may be imposed on any Acquired Assets or the
Business.
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(3) As used herein, (i) "Tax Return" means any return,
declaration, report, information return or statement, and any amendment
thereto, including without limitation any consolidated, combined or unitary
return or other document (including any related or supporting information),
filed or required to be filed with any Taxing Authority in connection with
the determination, assessment, collection, payment, refund or credit of any
federal, state, local or foreign Tax or the administration of any Laws
relating to any Tax, and (ii) "Tax" or "Taxes" means any and all taxes,
charges, fees, levies, deficiencies or other assessments of whatever kind or
nature including, without limitation, all net income, gross income, profits,
gross receipts, excise, real or personal property, sales, AD VALOREM,
withholding, social security, retirement, excise, employment, unemployment,
minimum, estimated, severance, stamp, property, occupation, environmental,
windfall profits, use, service, net worth, payroll, franchise, license,
gains, customs, transfer, recording and other taxes, customs duty, fees
assessments or charges of any kind whatsoever, imposed by any Taxing
Authority, including any liability therefor as a transferee (including
without limitation under Section 6901 of the Code or any similar provision of
applicable Law), as a result of Treasury Regulation Section 1.1502-6 or any
similar provision of applicable Law, or as a result of any Tax sharing or
similar agreement, together with any interest, penalties or additions to tax
relating thereto.
5.15 AFFILIATED PARTY TRANSACTIONS. Except for obligations arising
under this Agreement, or as set forth in section 5.15 of the Disclosure
Letter, as of the Closing Date neither the Seller nor the Shareholder will
have, directly or indirectly, any obligation to or claim against the Business
and neither the Shareholder nor any Persons presently or formerly controlled
by or are under common control with the Seller or the Shareholder
(collectively, "Affiliates") will have, directly or indirectly, any
obligation to, or cause of action or claim against, the Business.
5.16 ENVIRONMENTAL MATTERS. Except as set forth in section 5.16 of the
Disclosure Letter:
(1) the Seller is in compliance with, and the Business has been
conducted in material compliance with, all Environmental Laws (as defined
below) and Environmental Permits (as defined below);
(2) no Site (as defined below) is a treatment, storage or disposal
facility, as defined in and regulated under the Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901 ET SEQ., is on or ever was listed or is
proposed for listing on the National Priorities List pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. Section 9601 ET SEQ., or on any similar state list of sites requiring
investigation or cleanup;
(3) Neither the Seller nor any Shareholder has received any notice
that remains pending or outstanding with respect to its business or any Site
from any Governmental Entity or Person alleging that the Seller is not in
material compliance with any Environmental Law;
(4) there has been no Release (as defined below) of a Hazardous
Substance (as defined below) at, from, in, to, on or under any Site and no
Hazardous Substances are present in, on, about or migrating to or from any
Site that could give rise to an Environmental Claim (as defined below)
against the Seller;
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(5) there are no pending or outstanding corrective actions
requested, required or being conducted by any Governmental Entity for the
investigation, remediation or cleanup of any Site, and there have been no
such corrective actions, whether still pending or otherwise;
(6) the Business has obtained and holds all necessary
Environmental Permits, and those Environmental Permits will remain in full
force and effect after the consummation of the transactions contemplated
hereby;
(7) there are no past or pending, or to the best knowledge of each
of the Seller and the Shareholder threatened, Environmental Claims against
the Seller or, with respect to the Business, the Seller or the Acquired
Assets, the Shareholder, and neither the Seller nor the Shareholder is aware
of any facts or circumstances which could be expected to form the basis for
any Environmental Claim against the Business;
(8) to the best knowledge of each of the Seller and the
Shareholder, neither the Seller, any predecessor of the Seller, nor any
entity previously owned by the Seller, has transported or arranged for the
treatment, storage, handling, disposal, or transportation of any Hazardous
Substance to any off-Site location that could result in an Environmental
Claim against the Seller;
(9) there are no (i) underground storage tanks, active or
abandoned, (ii) polychlorinated biphenyl containing equipment, or (iii)
asbestos containing material at any Site; and
(10) to the best knowledge of each of the Seller and the
Shareholder, there have been no environmental investigations, studies,
audits, tests, reviews or other analyses (which have been reduced to writing)
conducted by, on behalf of, or that are in the possession of the Seller with
respect to any Site or any transportation, handling or disposal of any
Hazardous Substance that has not been delivered to the Buyer prior to
execution of this Agreement.
(11) As used herein, (i) "Environment" means all air, surface
water, groundwater, or land, including land surface or subsurface, including
all fish, wildlife, biota and all other natural resources; (ii)
"Environmental Claim" means any and all administrative or judicial actions,
suits, orders, claims, liens, notices, notices of violations, investigations,
complaints, requests for information, proceedings or other communications
(written or oral), whether criminal or civil, (collectively, "Claims")
pursuant to or relating to any applicable Environmental Law by any person
(including, but not limited to, any Governmental Entity, Person and citizens'
group) based upon, alleging, asserting, or claiming any actual or potential
(x) violation of or liability under any Environmental Law, (y) violation of
any Environmental Permit, or (z) liability for investigatory costs, cleanup
costs, removal costs, remedial costs, response costs, natural resource
damages, property damage, personal injury, fines, or penalties arising out
of, based on, resulting from, or related to the presence, Release, or
threatened Release into the Environment, of any Hazardous Substances at any
location, including, but not limited to, any off-Site location to which
Hazardous Substances or materials containing Hazardous Substances were sent
for handling, storage, treatment, or disposal; (iii) "Environmental Law"
means any and all Laws relating to the protection of health and the
Environment, worker health and safety, and/or governing the handling, use,
generation, treatment, storage, transportation, disposal, manufacture,
distribution, formulation, packaging, labeling, or Release of Hazardous
Substances and the state analogies thereto, all as
20
amended or superseded from time to time up to the Closing Date; and any
common law doctrine, including, but not limited to, negligence, nuisance,
trespass, personal injury, or property damage related to or arising out of
the presence, Release, or exposure to a Hazardous Substance; (iv)
"Environmental Permit" means any permits, licenses, approvals, consents or
authorizations required by any Governmental Entity under or in connection
with any Environmental Law; (v) "Hazardous Substance" means petroleum,
petroleum hydrocarbons or petroleum products, petroleum by-products,
radioactive materials, asbestos or asbestos-containing materials, gasoline,
diesel fuel, pesticides, radon, urea formaldehyde, lead or lead-containing
materials, polychlorinated biphenyls; and any other chemicals, materials,
substances or wastes in any amount or concentration which are now included in
the definition of "hazardous substances," "hazardous materials," "hazardous
wastes," "extremely hazardous wastes," "restricted hazardous wastes," "toxic
substances," "toxic pollutants," "pollutants," "regulated substances," "solid
wastes," or "contaminants" or words of similar import, under any
Environmental Law; (vi) "Release" means any spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
dumping, or disposing of a Hazardous Substance into the Environment; and
(vii) "Site" means any of the real properties currently or previously owned,
leased, used or operated by the Seller, any predecessors of the Seller or any
entities previously owned by the Seller, including all soil, subsoil, surface
waters and groundwater thereat.
5.17 NO BROKERS. Neither the Seller nor the Shareholder has employed
or otherwise engaged any broker or finder or incurred any liability for any
brokerage or investment banking fees, commissions, finders' fees or other
similar fees in connection with the transactions contemplated by this
Agreement, other than the fee to be paid by the Shareholder in connection
with the preparation of a fairness opinion. The obligation for such fee is
an obligation of the Shareholder and not the Seller or the Buyer.
5.18 RECEIVABLES. Except for the "▇▇▇▇▇▇▇ ▇▇▇▇▇ receivable" as to
which no representations are made, (i) all accounts receivable, except for
the "▇▇▇▇▇▇▇ ▇▇▇▇▇ receivable," net of reserves (excluding from such reserves
any and all reserves associated with the "▇▇▇▇▇▇▇ ▇▇▇▇▇ receivable"), of the
Seller with respect to the Business have arisen, and as of the Closing Date
will have arisen, from bona fide transactions in the ordinary course of the
Seller's business consistent with past practice and established in the
ordinary course of such Seller's business consistent with past practice and
(ii) each of the accounts receivable, except for the "▇▇▇▇▇▇▇ ▇▇▇▇▇
receivable," net of reserves (excluding from such reserves any and all
reserves associated with the "▇▇▇▇▇▇▇ ▇▇▇▇▇ receivable"), of the Seller with
respect to the Business either has been or will be collected in full, without
any set-off other than against the reserves established on the Closing Date
Balance Sheet (excluding from such reserves any and all reserves associated
with the "▇▇▇▇▇▇▇ ▇▇▇▇▇ receivable"), within 90 days after the day on which
it first becomes due and payable.
5.19 INVENTORIES. As reflected on the Financial Statements, the
inventories of the Seller have been valued at the lower of cost (on the
first-in, first-out method) or market in accordance with GAAP, consistently
applied, and the value of obsolete materials and materials of below standard
quality has been written down in accordance with GAAP, consistently applied.
Except as reflected in the June 30 Balance Sheet referred to in section 5.5,
the inventories of the Business do not contain items not saleable or usable
within 12 months from the date thereof at normal profit margins consistent
with historical sales practices. Except as set forth in section 5.19 of the
Disclosure
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Letter, the Seller with respect to the Business is not under any liability or
obligation with respect to the return of inventory or merchandise in the
possession of wholesalers, distributors, retailers or other customers.
5.20 PRODUCT CLAIMS. No product liability claim is pending, or to the
best knowledge of each of the Seller and the Shareholder threatened, against
the Seller or, to the best knowledge of each of the Seller and the
Shareholder, against any other party with respect to the products of the
Business. Section 5.20 of the Disclosure Letter lists all service and
product liability claims seeking damages in excess of $1,000 asserted against
the Seller (or in respect of which the Seller or any Shareholder has received
notice) with respect to the products of the Business or the Seller during the
last five years. Claims not listed in section 5.20 of the Disclosure Letter
do not aggregate more than $20,000.
5.21 WARRANTIES AND RETURNS. Section 5.21 of the Disclosure Letter
sets forth a summary of the practices and policies followed by the Seller
with respect to warranties and returns of any products manufactured or sold
by, in or for the Business, whether such practices are oral or in writing or
are deemed to be legally enforceable. Except as set forth in section 5.21 of
the Disclosure Letter, there is not presently, nor, to the best knowledge of
each of the Seller and the Shareholder, was there from December 31, 1995
until December 12, 1997, any failure or defect in any product sold by, in or
for the Business that has required, or that may require, a general recall or
replacement campaign or similar action with respect to such product or a
reformulation or change of such product, nor has there been any acceptance of
returned or defective goods of the Buyer in excess of $10,000 in the
aggregate for all such transactions with respect to products sold by it since
December 12, 1997 or, to the best knowledge of each of the Seller and the
Shareholder, from December 31, 1995 until December 12, 1997.
5.22 ASSETS UTILIZED IN THE BUSINESS. Except as set forth in section
5.22 of the Disclosure Letter, the assets, properties and rights owned,
leased or licensed by the Seller or used in connection with the Business and
that will be owned, leased or licensed by the Seller as of the Closing Date,
and all the agreements to which the Seller is a party, constitute all of the
properties, assets and agreements necessary to the Seller in connection with
the operation and conduct by the Seller of the Business as presently and as
proposed to be conducted. Included in section 5.22 of the Disclosure Letter
are all services provided by the Shareholder to the Seller and all other
arrangements involving the Shareholder and the Seller that are not included
in the Acquired Assets or the Business.
5.23 INSURANCE. Section 5.23 of the Disclosure Letter contains a
complete and correct list of all policies of insurance of any kind or nature
covering the Seller, including policies of life, fire, theft, casualty,
product liability, workmen's compensation, business interruption, employee
fidelity and other casualty and liability insurance, indicating the type of
coverage, name of insured, the insurer, the expiration date of each policy,
the amount of coverage and whether on an "occurrence" or "claims made" basis.
All such policies (i) are sufficient for compliance with all material
requirements of law and of all applicable material agreements and (ii) are
valid, outstanding and enforceable policies. All such insurance policies or
comparable coverage shall be continued in full force and effect through the
Closing Date. Since December 12, 1997, the Seller has not been, and,
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to the best knowledge of each of the Seller and the Shareholder, from
December 31, 1995 until December 12, 1997, was not denied any insurance
coverage which it requested.
5.24 DELIVERY OF DOCUMENTS; CORPORATE RECORDS. The Seller has
heretofore delivered to the Buyer true, correct and complete copies of all
documents, instruments, agreements and records referred to in this section 5
or in the Schedules to this Agreement and copies of the minute and stock
record books of the Seller. The minute and stock record books of the Seller
contain true, correct and complete copies of the records of all meetings and
consents in lieu of a meeting of the Board of Directors (and any committee
thereof) and the shareholders of the Seller since December 31, 1994.
5.25 CUSTOMERS, SUPPLIERS AND DISTRIBUTORS. Section 5.25 of the
Disclosure Letter sets forth (i) the sales of the Business for the ten months
ended October 31, 1998, (ii) the ten customers with the highest dollar volume
of purchases from the Business during such period indicating the approximate
total sales to each of those customers; and (iii) the ten largest suppliers
of the Business during such period. There has not been any adverse change in
the business relationship of the Seller with any such customer or supplier,
and neither Seller nor the Shareholder is aware of any threatened loss of any
such customer or supplier. The Seller has no distributors with respect to
the Business.
5.26 LABOR MATTERS. There are no labor strikes, slow-downs or
stoppages or other labor troubles pending or, to the best knowledge of the
Seller and the Shareholder, threatened with respect to the employees of the
Seller; to the best knowledge of the Seller and the Shareholder, no
representation questions exist; there is no collective bargaining agreement
binding on the Seller and there is no agreement which restricts the Seller
from relocating or closing any or all of its businesses or operations; there
are no grievances asserted that might have an adverse effect upon the
Seller's business, or the financial condition or prospects of the Seller, nor
is there pending any arbitration proceeding arising out of or under any labor
union agreement; the Seller has not experienced any work stoppage since
December 12, 1997 and, to the best knowledge of each of the Seller and the
Shareholder, from December 31, 1995 until December 12, 1997.
5.27 DIRECTORS, OFFICERS AND CERTAIN EMPLOYEES. Section 5.27 of the
Disclosure Letter sets forth a complete and correct list of the names,
current annual salary, bonus and title, for each director and officer and
each other employee of the Seller who is a party to an employment agreement
with the Seller or who received annual compensation during the Seller's
current fiscal year, or who is entitled to receive compensation, on an
annualized basis, whether or not paid to date, in excess of $50,000. Neither
the Seller nor the Shareholder is aware of any employee in the Seller's
senior management who intends to terminate his or her relationship with the
Business, either as a result of the transactions contemplated hereby or
otherwise. The persons identified in section 5.27 of the Disclosure Letter
are the Seller's key employees.
5.28 YEAR 2000. Except as set forth in section 5.28 of the Disclosure
Letter, all of the Seller's systems, software, data and databases (other than
data provided to it by its customers) (collectively, the "Systems") are Year
2000 Compliant (as hereinafter defined). For purposes of this Agreement,
"Year 2000 Compliant" shall mean: (i) the occurrence in or use by the
Systems of dates before, on or after January 1, 2000 will not adversely
affect the performance of the Systems with respect to date-dependent data,
computations, output or other functions, including, without
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limitation, calculating, comparing and sequencing; (ii) the Systems will not
abnormally end or provide invalid or incorrect results as a result of
date-dependent data; and (iii) the Systems can accurately recognize, manage,
accommodate and manipulate date-dependant data, including, without
limitation, single century formulas and leap years.
5.29 NO MISSTATEMENTS OR OMISSIONS. No representation or warranty by
the Seller or the Shareholder contained in this Agreement and no statement
contained in any certificate, list, Schedule, Exhibit, the Disclosure Letter
dated the date hereof and addressed to the Buyer from the Seller (the
"Disclosure Letter") or other instrument specified or referred to in this
Agreement, whether heretofore furnished to the Buyer or hereafter furnished
to the Buyer pursuant to this Agreement, contains or will, at any time at or
prior to the Closing, contain any untrue statement of a material fact or
omits or will omit any material fact necessary to make the statements
contained therein, in light of the circumstances under which it was made, not
misleading.
6. REPRESENTATIONS AND WARRANTIES OF THE BUYER.
The Buyer represents and warrants to the Seller as follows:
6.1 ORGANIZATION. The Buyer is a corporation duly organized, validly
existing and in good standing under the laws of Delaware and has all
requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as it is now being conducted. The
Buyer is duly qualified or licensed to do business as a foreign corporation
and is in good standing in each jurisdiction in which the nature of the
business conducted by it makes such qualification or licensing necessary.
The Buyer has heretofore delivered to the Seller true, correct and complete
copies of its certificate of incorporation and bylaws as currently in effect.
6.2 AUTHORIZATION; VALIDITY OF AGREEMENT. The Buyer has the requisite
corporate power and authority to execute, deliver and perform this Agreement
and each other agreement executed or to be executed by the Buyer pursuant to
the terms of this Agreement (collectively, the "MedSource Agreements") and to
consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance by the Buyer of this Agreement and the MedSource
Agreements and the consummation of the transactions contemplated hereby and
thereby have been duly and validly authorized by the Board of Directors of
the Buyer, and no other corporate proceedings on the part of the Buyer are
necessary to authorize the execution, delivery and performance of this
Agreement and the MedSource Agreements by the Buyer and the consummation of
the transactions contemplated hereby. This Agreement and each MedSource
Agreement has been duly executed and delivered by the Buyer and, assuming due
authorization, execution and delivery of this Agreement by the Seller and
each Shareholder, is a valid and binding obligation of the Buyer enforceable
against the Buyer in accordance with its terms, except as such enforceability
may be subject to or limited by applicable bankruptcy, insolvency,
reorganization, or other similar laws, now or hereafter in effect, affecting
the enforcement of creditors' rights generally.
6.3 NO VIOLATIONS; CONSENTS AND APPROVALS.
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(1) The execution, delivery and performance of this Agreement and
the MedSource Agreements by the Buyer do not, and the consummation by the
Buyer of the transactions contemplated hereby and thereby will not, (i)
violate any provision of the certificate of incorporation or Bylaws of the
Buyer, (ii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration) under, any of the terms,
conditions or provisions of any material note, bond, mortgage, indenture,
guarantee, other evidence of indebtedness, license, contract, agreement or
other instrument to which the Buyer is a party or by which the Buyer or any
of its properties or assets may be bound or otherwise subject or (iii)
violate any order, writ, judgment, injunction, decree, law, statute, rule or
regulation applicable to the Buyer or any of its properties or assets.
(2) No filing or registration with, notification to, or
authorization, consent or approval of, any Governmental Entity is required in
connection with the execution, delivery and performance of this Agreement or
the MedSource Agreements by the Buyer or the consummation by the Buyer of the
transactions contemplated hereby and thereby.
6.4 LITIGATION. There is no Proceeding pending nor, to the best
knowledge of the Buyer, is there any investigation or Proceeding threatened,
which involves or affects the Buyer, by or before any court, Governmental
Entity or arbitration panel or any other Person.
7. OTHER AGREEMENTS OF THE PARTIES.
7.1 CONDUCT OF BUSINESS. During the period from the date hereof (or
earlier, as set forth below) through the Closing Date, the Seller shall
conduct the Business in the ordinary course, consistent with past practice,
and in such a manner that would not result in a Material Adverse Effect.
Without limiting the generality of, and in addition to, the foregoing, prior
to the Closing Date, the Seller shall not, except as the Buyer may otherwise
consent to in writing:
(1) amend its certificate of incorporation or bylaws, except as
would not have an adverse effect on, or change in, the ability of each of the
Seller and the Shareholder to consummate the transactions contemplated hereby;
(2) authorize for issuance, issue, sell, deliver or agree or
commit to issue, sell or deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or
otherwise) any stock of any class or any other securities;
(3) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) to any shareholder or
otherwise in respect of its capital stock or redeem or otherwise acquire any
of its securities, or make any payments or distributions to the Shareholder,
any of the Shareholder's Affiliates, any Person (other than institutional
bank lenders) to which the Seller has any liability (other than trade
accounts payable incurred in the ordinary course of business, subject to the
other provisions of this section 7) or any officer or director of the Seller,
except as would not have an adverse effect on, or change in, the ability of
each of the Seller and the Shareholder to consummate the transactions
contemplated hereby;
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(4) (i) incur or assume any indebtedness, other than trade
payables incurred in the ordinary course of business; (ii) assume, guarantee,
endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for any obligations of any other Person; or (iii)
make any loans, advances or capital contributions to, or investments in, any
other Person (other than loans or advances to employees in the ordinary
course of business in accordance with past practices), except as would not
have an adverse effect on, or change in, the ability of each of the Seller
and the Shareholder to consummate the transactions contemplated hereby;
(5) other than in the ordinary course and consistent with past
practice, enter into, adopt or amend any bonus, profit sharing, compensation,
severance, termination, stock option, stock appreciation right, restricted
stock, performance unit, pension, retirement, deferred compensation,
employment, severance or other employee benefit agreements, trusts, plans,
funds or other arrangements of or for the benefit or welfare of any employee,
or increase in any manner the compensation or fringe benefits of any employee
or pay any benefit not required by any existing plan and arrangement
(including, without limitation, the granting of stock options, stock
appreciation rights, shares of restricted stock or performance units) with
respect to the Business or any of the Acquired Assets;
(6) acquire, sell, lease, transfer or dispose of any of its
properties or assets except in the ordinary course of business and consistent
with past practice or enter into any material commitment or transaction with
respect to the Business or any of the Acquired Assets;
(7) except as may be required by law, take any action to terminate
or materially amend any of its employee benefit plans with respect to or for
the benefit of employees with respect to the Business or any of the Acquired
Assets;
(8) other than in the ordinary course and consistent with past
practice, modify any policy or procedure with respect to credit to customers
or collection of receivables with respect to the Business or any of the
Acquired Assets, including, without limitation, collect more than $10,000 per
month in connection with the "▇▇▇▇▇▇▇ ▇▇▇▇▇ receivable" without making an
adjustment to the Net Asset Amount, as provided in section 3.3(b);
(9) pay, discharge or satisfy before it is due any claim or
liability of the Seller, or fail to pay any such item in a timely manner
given the Seller's prior practices with respect to the Business or any of the
Acquired Assets;
(10) waive any claims or rights of substantial value with respect
to the Business or any of the Acquired Assets;
(11) except to the extent required by applicable law, change any
accounting principle or method or make any election with respect to, or that
could have any effect on, any of the Acquired Assets or the Business for
purposes of foreign, federal, state or local income Taxes;
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(12) other than in the ordinary course and consistent with past
practice, take or suffer any action that would result in the creation, or
consent to the imposition, of any Lien on any of the properties or assets of
the Seller with respect to the Business or any of the Acquired Assets;
(13) make or incur any capital expenditure, lease or commitment for
additions to property, plant, equipment or other capital assets in excess of
$25,000, with respect to the Business or any of the Acquired Assets;
(14) except in the ordinary course of business and consistent with
past practice, amend, waive, surrender or terminate or agree to the
amendment, waiver, surrender or termination of any Material Contract or
Approval;
(15) except in the ordinary course of business consistent with past
practice, extend or renew any Material Contract; or
(16) enter into any Contract to do, or take, or agree in writing or
otherwise to take or consent to, any of the foregoing actions.
7.2 ACCESS AND INFORMATION. From the date hereof until the Closing
Date, the Seller shall, and shall cause each of the Seller's officers,
directors, employees, agents, accountants and counsel to, upon reasonable
notice, (i) afford the officers, employees and authorized agents,
accountants, counsel and representatives of the Buyer reasonable access,
during normal business hours, to (A) the offices, properties, plants, other
facilities, books, Contracts and records of the Seller and any records
concerning the Seller maintained and accumulated by its representatives, and
(B) those officers, directors, employees, agents, accountants and counsel of
the Seller who have any knowledge relating to the Seller or the Acquired
Assets, and (ii) furnish to the officers, employees and authorized agents,
accountants, counsel and representatives of the Buyer such additional
financial and operating data and other information regarding the Acquired
Assets (including, without limitation, any Contracts, licenses and patents in
effect as of the date hereof and any Contracts or licenses being negotiated
or entered into between the date hereof and the Closing Date), properties and
goodwill of the Seller as the Buyer may from time to time reasonably request.
7.3 TAX RETURNS; TAXES.
(1) The Seller and the Shareholder shall duly and timely file or
cause to be filed with the applicable Taxing Authorities all Tax Returns that
are required to be filed by or on behalf of the Seller or that include or
relate to the Acquired Assets or the Business, which Tax Returns shall be
true, complete and correct, and shall duly and timely pay in full or cause to
be paid in full all Taxes that are due and payable on or before the Closing
Date and could result in a Lien on any Acquired Asset or the Business, and
has recorded a provision on the books and records of the Seller in accordance
with GAAP for the payment of all such Taxes that are not due and payable on
or before the Closing Date. The Seller shall provide to the Buyer true,
complete and correct copies of such Tax Returns and all correspondence,
reports and documents relating to any Tax Proceeding with respect thereto.
The Seller shall duly and timely comply with all applicable laws relating to
the allocation or withholding of Taxes and the reporting and remittance
thereof to the applicable Taxing Authorities.
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(2) The Seller and the Shareholder shall indemnify the Buyer and
Affiliates, (collectively, the "Taxpayer"), and hold the Taxpayer harmless,
on an after-Tax basis, from and against any (i) Taxes with respect to the
Business or any of the Acquired Assets for any period on or before the
Closing Date for which the Taxpayer is or may be liable, (ii) the effect, if
any, on the Taxpayer in any period that ends after the Closing Date of an
adjustment with respect to a period on or before the Closing Date and (iii)
fees and expenses (including, without limitation, reasonable attorneys' fees)
incurred by the Buyer or its Affiliates in connection therewith or in
enforcing its rights or collecting any amounts due hereunder. This indemnity
shall apply notwithstanding any investigation made by the Buyer in connection
with the transactions contemplated by this Agreement or, its receipt,
examination, filing of or commenting on any Tax Return, and shall be separate
and independent of any other indemnity between the parties hereto.
(3) The Buyer shall promptly forward to the Shareholder a copy of
all written communications from any Governmental Authority received by the
Taxpayer relating to any period on or before the Closing Date. The
Shareholder shall promptly forward to the Buyer a copy of all written
communications from any Governmental Authority received by the Seller or the
Shareholder relating to any period on or before the Closing Date for which
the Taxpayer is or may be liable.
(4) The Buyer shall not settle or make any payment of any amount
claimed to be due with respect to a proposed adjustment described above for
at least 15 days after giving notice thereof to the Shareholder under section
7.3(c) hereof. If, within such 15-day period, the Buyer receives from the
Shareholder in writing a request that the proposed adjustments be contested,
which includes a reasonable basis in fact or in law for such contest, and
acknowledges its liability under this indemnity, the Taxpayer shall contest
such proposed adjustments in good faith and agrees to consult with the
Shareholder regarding the contest and to keep the Shareholder informed as to
its progress, all at the Shareholder's expense. The Shareholder shall
cooperate with the Taxpayer in connection with any Proceeding. The
Shareholder may participate in the Proceeding at its own expense; PROVIDED,
HOWEVER, that the Taxpayer shall retain full control over the Proceeding.
The decision of a court of competent jurisdiction as to the outcome of such
contest which has become final shall be conclusive and binding on the
parties. The Taxpayer shall not be required to appeal.
(5) Any Taxes for a period which includes but does not end on the
Closing Date shall be allocated between the period before the Closing Date
and the balance of the period in accordance with this section 7.3(e). To the
extent permitted under applicable Law, the parties shall elect to treat the
Tax period as ending at the close of business on the Closing Date. Where
applicable Law does not permit such an election to be made, the taxable
income or other Tax base for the entire period shall be allocated between the
period on or before the Closing Date and the balance of the period on the
basis of an interim closing of the books at the close of the Closing Date,
except that exemptions, allocations and deductions calculated on an annual
basis shall be apportioned on the basis of the relative number of days in the
period on or before the Closing Date and in the balance of the period.
Notwithstanding the foregoing, any real estate or personal property Taxes
shall be allocated on the basis of the relative number of days in the period
on or before the Closing Date and in the balance of the applicable period.
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(6) The Seller hereby agrees to comply with the notice and other
requirements of the General Laws of the Commonwealth of Massachusetts of
1932, Chapter 62C, section 51.
7.4 NOTICE OF DEVELOPMENTS. Prior to the Closing Date, the Seller
shall promptly notify the Buyer in writing of (i) all events, circumstances,
facts and occurrences arising subsequent to the date of this Agreement that
could result in any material breach of a representation or warranty or
covenant of the Seller in this Agreement or which could have the effect of
making any representation or warranty of the Seller in this Agreement untrue
or incorrect in any material respect, and (ii) all other material
developments affecting the Acquired Assets, liabilities, Business, financial
condition, operations, results of operations, customer or supplier relations,
employee relations, projections or prospects of the Seller.
7.5 NON-DISCLOSURE OF CONFIDENTIAL INFORMATION. From and after the
date hereof, the Seller and the Shareholder agree not to divulge,
communicate, use to the detriment of the Buyer or for the benefit of any
other Person not a party to this Agreement, or misuse in any way, any
confidential information or trade secrets included in or relating to the
Acquired Assets including, without limitation, personnel information, secret
processes, know-how, customer lists or other technical data. From and after
the date hereof, the Buyer agrees that any of the Seller's confidential
information or trade secrets received by the Buyer will not be divulged or
communicated to any other Person or used for any purpose other than to
evaluate the transaction contemplated by this Agreement. The Buyer's
obligation pursuant to the preceding sentence shall terminate upon
consummation of the transactions contemplated by this Agreement. If this
Agreement shall terminate pursuant to section 10.1, the Buyer shall, after
receipt of a written request from the Seller, return to the Seller any
documents or other materials received from the Seller.
7.6 NO SOLICITATION OF EMPLOYEES, SUPPLIERS OR CUSTOMERS. Neither the
Seller nor the Shareholder shall, and neither shall permit any Affiliate of
the Seller or the Shareholder to, from and after the Closing Date, and for a
period of three years thereafter, directly or indirectly, for itself or on
behalf of, or in association with, any other Person, (a) employ, engage or
retain any Person who, at any time during the preceding 12-month period,
shall have been an employee of the Buyer, or (b) contact any supplier of the
Buyer, any customer of the Buyer or any such employee of the Buyer for the
purpose of (i) soliciting (A) any customer of the Buyer with respect to the
Competing Business (as defined in section 7.7(a), (B) any such employee of
the Buyer or (C) or any supplier of the Buyer with respect to the Competing
Business, or (ii) diverting (A) any supplier from the Buyer, (B) any customer
from the Buyer with respect to the Competing Business or (C) any such
employee from the Buyer. For the purposes of this section 7.6 and section
7.7(a), the definition of "Affiliate" shall (w) exclude any Person who
purchases the business of the Shareholder by way of a merger, stock purchase
or sale of all or substantially all of the assets of the Shareholder and (x)
exclude any Person, other than ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ to the extent provided in the
following subsection (z), who, on the date hereof, is a director of the
Seller or the Shareholder and is not an employee of, or consultant to, either
of them and (y) exclude any Person, other than ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ to the extent
provided in the following subsection (z), not an affiliate of the Seller or
the Shareholder on the date hereof and (z) include ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ until
December 11, 2000.
7.7 NON-COMPETITION.
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(1) Until the third anniversary of the Closing Date, none of the
Seller, the Shareholder or any Affiliate of either the Seller or the
Shareholder shall, anywhere in North America or Europe, directly or
indirectly, alone or in association with any other Person, firm, corporation
or other business organization (i) acquire or own in any manner, any interest
in any Person that is engaged in the manufacture, sale or marketing of
products competing with (x) specific products being manufactured, sold or
marketed out of the Brimfield, Massachusetts facility of the Seller on the
Closing Date or (y) specific products that are proposed to be manufactured,
sold or marketed by the Business and with regard to which the Business has
contacted current or potential customers, or develops plans to do so on or
before the Closing Date (the manufacture, sale or marketing of the products
described in the foregoing clauses (x) and (y) are collectively referred to
as the "Competing Business"), (ii) compete with the Competing Business in any
way or (iii) be employed in any capacity by, serve as an employee of, or
consultant or advisor to, or otherwise participate in the management or
operation of, any Person that competes with the Competing Business in any way.
(2) The parties hereto intend that the covenant contained in
section 7.7(a) shall be construed as a series of separate covenants, one for
each state or country specified. Except for geographic coverage, each such
separate covenant shall be deemed identical in terms to the covenant
contained in section 7.7(a) above. If, in any judicial proceeding, a court
shall refuse to enforce any of the separate covenants deemed included in
section 7.7(a), then such unenforceable covenant shall be deemed reduced in
scope or, if necessary, eliminated from these provisions for the purpose of
those proceedings to the extent necessary to permit the remaining separate
covenants to be enforced.
(3) The Seller and the Shareholder acknowledge that the provisions
of this section 7.7, and the period of time, geographic area and scope and
type of restrictions on its activities set forth herein, are reasonable and
necessary for the protection of the other partes hereto and are an essential
inducement to the other's entering into the Transaction Documents to which it
is a party and consummating the transactions contemplated thereby.
7.8 PUBLIC STATEMENTS. From and after the date hereof and until the
Closing Date, none of the Buyer, the Shareholder nor the Seller shall, or
permit any Affiliate thereof to, either make, issue or release any press
release or any oral or written public announcement or statement concerning or
with respect to, or acknowledgment of the existence of, or reveal the terms,
conditions and status of, the Transaction Documents or the transactions
contemplated thereby, without the prior written consent of each of the other
parties hereto (which consent shall not be unreasonably withheld or delayed),
unless such announcement is required by Law or a Governmental Authority or
the Shareholder reasonably determines that such disclosure is appropriate to
satisfy its obligations as a public company, in which cases the other parties
shall be given notice of such requirement prior to such announcement and the
parties shall consult with each other as to the scope and substance of such
disclosure. The parties acknowledge that the Shareholder has already issued
a press release with respect to the letter of intent executed by the parties.
7.9 OTHER ACTIONS. Each of the parties hereto shall use all
reasonable efforts to (i) take, or cause to be taken, all actions, (ii) do,
or cause to be done, all things, and (iii) execute and deliver
30
all such documents, instruments and other papers, as in each case may be
necessary, proper or advisable under applicable Laws, or reasonably required
in order to carry out the terms and provisions of this Agreement and to
consummate and make effective the transactions contemplated hereby.
7.10 CHANGE OF NAME. Simultaneously with the Closing, the Seller shall
take such action necessary to change its name to a name that does not include
the words "Brimfield" or "precision."
7.11 COOPERATION ON TAXES. Each of the Seller, the Shareholder and the
Buyer shall cooperate with each other by executing or causing to be executed
any required documents and by making available to the other, all books and
records relating to the Acquired Assets or the Business (including work
papers, records and notes of any kind) at all reasonable times, for the
purpose of allowing the appropriate party to complete its Tax Returns,
respond to, defend or prosecute any Tax Proceeding, make any determination
required under this Agreement (including, but not limited to, determinations
as to which period any asserted Tax liability is attributable) and verify
issues.
7.12 EMPLOYEES.
(1) The Buyer and the Seller shall prepare a mutually agreeable
list of employees of the Seller to be attached to this Agreement as section
7.12(a) of the Disclosure Letter. The Buyer shall offer employment effective
as of the Closing to all employees of the Seller listed in section 7.12(a) of
the Disclosure Letter (all such employees who accept such offer of employment
being referred to as the "Transferred Employees"). The Seller shall obtain,
and provide the Buyer with the written agreement of each Transferred Employee
consenting to the Buyer's review of the personnel file of such Transferred
Employee. In addition to the obligation of the Seller set forth below, all
responsibility for employees of the Seller, other than Transferred Employees,
including, without limitation, claims arising out of the decision not to
include such employees in section 7.12(a) of the Disclosure Letter, shall be
Excluded Liabilities.
(2) The Buyer shall not be responsible for any payments, expenses
and costs paid or required to be paid in connection with the employment or
termination of employment of any employees of the Seller who are not listed
in section 7.12(a) of the Disclosure Letter or who are listed in section
7.12(a) of the Disclosure Letter and do not accept the Buyer's offer of
employment with the Buyer.
(3) Except to the extent expressly provided in the other
subsections of this section 7.12, the Seller shall remain responsible for (A)
payment of any and all wages, bereavement pay, jury duty pay, disability
income, supplemental unemployment benefits, fringe benefits or other
perquisites of employment or similar benefits (whether arising under any
plan, program, policy or arrangement of the Seller or under applicable local
law), payroll taxes and other payroll related expenses and (B) payments to or
under employee benefit plans (within the meaning of Section 3(3) of ERISA)
maintained or contributed to by the Seller, in either case arising out of or
relating to the employment of any of the Transferred Employees by the Seller
on or prior to the Closing.
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(4) The Buyer shall only assume responsibility for the Seller's
liability for accrued vacation pay only to the extent such liability is
expressly included in the Assumed Liabilities.
(5) The Seller shall retain responsibility and liability for all
workers' compensation claims of the Transferred Employees to the extent
relating to events, conditions or circumstances that occur or exist on or
prior to the Closing. Notwithstanding the foregoing, the Buyer may, at its
election, assume responsibility for the supervision, defense or settlement of
any such workers' compensation claims at the Seller's cost and expense,
provided that such costs and expenses are reasonable. The Buyer shall keep
the Seller reasonably apprised of the status of such workers' compensation
claims. The Seller may, at its own expense, participate in the supervision,
defense or settlement of any such workers' compensation claims, and shall
cooperate in the supervision, defense or settlement of any such workers'
compensation claims if requested to do so by the Buyer. The Buyer shall have
sole responsibility and liability for any workers' compensation claims of
Transferred Employees to the extent relating to any event, condition or
circumstance that occurs after the Closing.
(6) In respect of grievances or EEOC Claims of Transferred
Employees to the extent relating to their employment by the Seller,
including, without limitation, any such EEOC Claims filed before state or
local authorities for which payment has not been made prior to the Closing,
the Seller shall retain responsibility and liability for all amounts due with
respect thereto, including, without limitation, the payment of any amounts in
the nature of back pay or employee compensation, and any state or federal
taxes in connection with such back pay or employee compensation. Handling of
such grievances and EEOC Claims shall be at the Seller's cost and expense.
The Buyer shall have sole responsibility and liability for any EEOC Claims of
Transferred Employees that relate to their employment with Buyer.
(7) Nothing in this section 7.12 shall limit the at will nature of
the employment of the Transferred Employees or the right of the Buyer to
alter or terminate any employee benefit plan.
(8) The Buyer shall establish a tax qualified 401(k) plan as soon
as practicable following the Closing, and such plan will permit Transferred
Employees to roll over their accounts from the Seller's "Brimfield Precision,
Inc. 401(k) Savings and Retirement Plan."
7.13 CONSENTS; RELEASES. The Seller and the Shareholder shall use all
commercially reasonable efforts to cause the Seller to receive all Consents
on or prior to the Closing Date, each of which Consents are set forth in
section 5.4(b) of the Disclosure Letter. At or prior to the Closing, the
Shareholder and the Seller shall cause the Business and the Acquired Assets
to be released from all liabilities, liens or other obligations not
constituting an Assumed Liability, a schedule of which is set forth in
section 7.13 of the Disclosure Letter.
7.14 EXCLUSIVITY. From and after the date hereof and unless and until
this Agreement is terminated as provided in section 10, neither the Seller
nor the Shareholder shall, and neither shall knowingly permit the Seller or
any of their respective Affiliates, officers, directors, employees, agents or
representatives, directly or indirectly, to encourage, solicit, initiate or
participate in
32
discussions or negotiations with, provide any information to, or enter into
any agreement with, any third party, in each case other than the Buyer, that
involves the sale, joint venture or the other disposition of all or any
portion of the Acquired Assets or the Business or any merger, consolidation,
recapitalization or other business combination of any kind involving the
Seller. If the Seller or any Shareholder receives or becomes aware of any
such offer or proposed offer, the Seller or such Shareholder, as the case may
be, shall promptly notify the Buyer.
7.15 RESERVED.
7.16 INTERESTS IN REAL PROPERTY. At the Closing, the Shareholder shall
cause the Seller to obtain, and the Seller shall obtain, the following
documents with respect to the transfer of interests in real property:
(1) a deed (the "Deed") in the form attached hereto as Exhibit
7.16(a);
(2) The Deed shall be in recordable form. The Deed shall have
affixed thereto any requisite surtax and documentary tax stamps, in proper
amount, affixed and at the Seller's sole cost and expense. At the Closing,
the Seller shall pay the appropriate tax collecting agency all taxes and
charges in connection with the sale and transfer of the Owned Real Property
by the Seller to the Buyer and the recording of the Deed;
(3) (i) true and complete material maintenance records for the
Real Property; (ii) a validly issued permanent certificate of occupancy for
each of the buildings comprising a part of the Real Property; (iii) all
original material licenses and permits, authorizations and approvals
pertaining to the Real Property; and (iv) all material guarantees and
warranties which the Company has received in connection with any work or
services performed or equipment installed in the aforementioned buildings and
all improvements erected on the Real Property;
(4) such affidavits, indemnities and information as the Buyer's
title insurance company shall reasonably require in order to issue policies
of title insurance in the form required by this Agreement;
(5) to the extent available, a set of plans and specifications of
the buildings and all improvements comprising a part of the Real Property;
(6) The following are to be apportioned between the parties as of
and on the Closing Date:
(1) ad valorem, real estate and personal property taxes,
water charges, and sewer rents; and
(2) utilities, including telephone, steam, electricity and
gas; and
(7) the Seller and the Shareholder hereby jointly and severally
covenant and agree that, after the Closing Date and at their sole cost and
expense, they shall promptly commence and diligently pursue to completion a
"quiet title" action to ensure that the mortgage by ▇▇▇▇▇▇▇ ▇.
33
▇▇▇▇▇ to Quaboag Development Company, Inc. in the original principal amount
of $8,500 dated January 22, 1976 and recorded in the Hampden County Registry
of Deeds in Book 4225, page 22 is removed of record.
7.17 INFORMATION AND PAYROLL SYSTEMS. The Buyer hereby agrees to allow
the Seller to use the information and payroll systems included in the
Acquired Assets until March 31, 1999, and the Seller hereby agrees to pay the
Buyer commercially reasonable rates for the use of such systems.
7.18 ACCOUNTS RECEIVABLE.
(1) After the Closing, the Seller shall permit the Buyer to
collect, in the name of the Seller, all accounts receivable constituting part
of the Acquired Assets and to endorse with the name of the Seller for deposit
in the Buyer's account any checks or drafts received in payment thereof. The
Seller shall take any and all steps reasonably requested by the Buyer to
effectuate the intent of the preceding sentence.
(2) The Seller shall promptly turn over to the Buyer any cash,
checks or other property that it may receive after the Closing in respect of
any receivable constituting part of the Acquired Assets.
8. CONDITIONS PRECEDENT TO THE CLOSING.
8.1 CONDITIONS PRECEDENT TO THE BUYER'S OBLIGATIONS TO CLOSE. The
obligation of the Buyer to enter into this Agreement and to consummate the
transactions contemplated hereby is subject to the satisfaction prior to or
on the Closing Date of each of the following conditions; PROVIDED, HOWEVER,
that the Buyer shall have the right to waive all or any part of each such
condition and to close the transactions contemplated hereby without, however,
releasing the Seller or any Shareholder from any covenant, obligation or
agreement contained herein or from any liability for any loss or damage
sustained by the Buyer by reason of the breach by the Seller or any
Shareholder of any covenant, obligation or agreement contained herein or by
reason of any misrepresentation made by the Seller or any Shareholder; and
PROVIDED, FURTHER, HOWEVER, that the Buyer's participation in the Closing
shall not in any way be deemed to be a waiver of any claim it may have
hereunder for any breach of any representation, warranty, covenant or
agreement:
(1) The representations and warranties of the Seller and the
Shareholder contained in this Agreement shall have been true and correct in
all material respects when made and shall be true and correct in all material
respects as of the Closing Date, with the same force and effect as if made on
the Closing Date, except for such representations and warranties as are made
as of a specific date, which shall be true and correct in all material
respects as of such date; PROVIDED, HOWEVER, that if any representation or
warranty is already qualified by materiality, for purposes of determining
whether this condition has been satisfied, such representation or warranty as
so qualified shall be true and correct in all respects.
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(2) The covenants and agreements of the Seller and the Shareholder
contained in this Agreement and required to be complied with or performed on
or prior to the Closing Date shall have been complied with or performed in
all material respects.
(3) The Buyer shall have received (i) a certificate dated the
Closing Date and executed by an executive officer of the Seller, and (ii) a
certificate dated the Closing Date and executed by the Shareholder, in each
case certifying the satisfaction of the conditions referred to in sections
8.1(a) and (b).
(4) The Buyer and the Seller shall have received, each in form and
substance reasonably satisfactory to the Buyer, all Consents of, and estoppel
certificates and releases from, and shall have delivered all notices to, any
Governmental Entity or other Person that is required for the consummation of
the transactions contemplated hereby and for the Buyer to conduct and operate
the Business, which Consents, notices and estoppel certificates are listed in
section 5.4(b) of the Disclosure Letter and which releases are listed in
section 7.13 of the Disclosure Letter.
(5) No event or events shall have occurred between the date hereof
and the Closing Date which, individually or in the aggregate, have, or are
reasonably likely to have, a material adverse effect on the Acquired Assets
or the Business.
(6) The Buyer shall have received a certificate of the Seller (the
"Seller's Secretary's Certificate") certifying the resolutions duly and
validly adopted by the Board of Directors and the Shareholder of the Seller,
its authorization of the execution and delivery of this Agreement and the
other Transaction Documents to which the Seller is a party and the
consummation of the transactions contemplated hereby and thereby, and the
names and signatures of the officers of the Seller authorized to sign this
Agreement and the other Transaction Documents.
(7) The Buyer shall have received a certificate of the Shareholder
(the "Shareholder's Secretary's Certificate") certifying the resolutions duly
and validly adopted by the Board of Directors of the Shareholder, its
authorization of the execution and delivery of this Agreement and the other
Transaction Documents to which the Shareholder is a party and the
consummation of the transactions contemplated hereby and thereby, and the
names and signatures of the officers of the Shareholder authorized to sign
this Agreement and the other Transaction Documents.
(8) The Buyer shall have received all such documents and
instruments including, without limitation, such deeds of transfer and title
reports with respect to the transfer of all legal rights in the real property
to be transferred pursuant to this Agreement.
(9) The form and substance of all certificates, transfer
documents, title reports, deeds, opinions, consents, instruments and other
documents delivered to the Buyer under this Agreement shall be satisfactory
in all reasonable respects to the Buyer and its counsel.
(10) The Buyer shall have received from counsel for the Seller and
the Shareholder an opinion dated the Closing Date in the form of Exhibit
8.1(j) attached hereto.
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(11) The Buyer shall have received from the Seller at the Closing a
certificate of non-foreign status, in the form required by Section 1445 of
the Code and the regulations thereunder.
(12) There shall be no order, decree or injunction of a court of
competent jurisdiction or other Governmental Entity that prevents the
consummation of the transactions contemplated by this Agreement or Proceeding
that threatens to prevent such transactions.
(13) The Buyer shall have received at the Buyer's expense an
owner's extended coverage policy of title insurance with respect to the Owned
Real Property (or a marked-up and signed title commitment if the policy of
insurance is not customarily issued on the Closing Date in one or more of the
relevant locales), issued on the date of Closing by a title insurance company
acceptable to counsel for Buyer. Such title insurance policy shall be in an
amount designated by Buyer and shall insure the Buyer's ownership of fee
title to the Owned Real Property and to all buildings, structures and
improvements located thereon, free and clear of all Liens. At Buyer's sole
option and expense, each such policy shall include an ALTA-9 comprehensive
endorsement. Such title insurance policy shall otherwise be in form
reasonably satisfactory to counsel to Buyer.
8.2 CONDITIONS PRECEDENT TO THE SELLER'S OBLIGATIONS TO CLOSE. The
obligation of the Seller and the Shareholder to consummate the transactions
contemplated hereby is subject to the satisfaction prior to or on the Closing
Date of each of the following conditions; PROVIDED, HOWEVER, that the Seller
shall have the right to waive all or any part of each such condition, and to
close the transactions contemplated hereby without, however, releasing the
Buyer from any covenant, obligation or agreement contained herein or from any
liability for any loss or damage sustained by the Seller by reason of the
breach by the Buyer of any covenant, obligation or agreement contained
herein, by reason of any misrepresentation made by the Buyer; and PROVIDED
FURTHER, HOWEVER, that the Seller's participation in the Closing shall not in
any way be deemed to be a waiver of any claim it may have hereunder for any
breach of any representation, warranty, covenant or agreement:
(1) The representations and warranties of the Buyer contained in
this Agreement shall have been true and correct in all material respects when
made and shall be true and correct in all material respects as of the Closing
Date, with the same force and effect as if made as of the Closing Date, other
than such representations and warranties as are made as of a specific date,
which shall be true and correct in all material respects as of such date;
PROVIDED, HOWEVER, that if any representation or warranty is already
qualified by materiality, for purposes of determining whether this condition
has been satisfied, such representation or warranty as so qualified shall be
true and correct in all respects. .
(2) The covenants and agreements contained in this Agreement to be
complied with by the Buyer on or before the Closing Date shall have been
complied with in all material respects.
(3) The Seller shall have received a certificate dated the Closing
Date and executed by an officer of the Buyer, certifying to the satisfaction
of the conditions referred to in sections 8.2(a) and (b).
36
(4) The Seller shall have received a certificate of the Secretary
of the Buyer (the "Buyer Secretary's Certificate") certifying the resolutions
duly and validly adopted by the Buyer evidencing its authorization of the
execution and delivery of this Agreement and the other Transaction Documents
to which the Buyer is a party and the consummation of the transactions
contemplated hereby and thereby, and the names and signatures of the officers
of the Buyer authorized to sign this Agreement and the other Transaction
Documents to be delivered hereunder.
(5) The form and substance of all certificates, opinions,
consents, instruments and other documents delivered to the Seller under this
Agreement shall be satisfactory in all reasonable respects to the Seller and
its counsel.
(6) The Seller shall have received from ▇▇▇▇▇▇ ▇▇▇▇▇▇ Flattau &
Klimpl, LLP, counsel for the Buyer, an opinion dated the Closing Date in the
form of Exhibit 8.2(f) attached hereto.
(7) No Law shall be in effect which prohibits any party hereto
from consummating the transactions contemplated hereby.
(8) The Seller shall have received a ▇▇▇▇ of Sale, Assignment and
Assumption Agreement duly executed by the Buyer, in which, among other
things, the Buyer agrees to assume the Assumed Liabilities, in the form of
Exhibit 8.2(h) attached hereto (the "▇▇▇▇ of Sale, Assignment and Assumption
Agreement").
(9) There shall be no order, decree or injunction of a court of
competent jurisdiction or other Governmental Entity that prevents the
consummation of the transactions contemplated by this Agreement or Proceeding
that threatens to prevent such transactions.
9. DOCUMENTS TO BE DELIVERED AT THE CLOSING.
9.1 DELIVERIES OF THE SELLER AND THE SHAREHOLDER. At the Closing, the
Seller and the Shareholder shall deliver or cause to be delivered the
following items to the Buyer:
(1) the Settlement Escrow Agreement, each duly executed by the
Seller;
(2) the ▇▇▇▇ of Sale, Assignment and Assumption Agreement duly
executed by the Seller that, among other things, conveys, transfers and sells
to the Buyer all right, title and interest of the Seller in and to the
Acquired Assets;
(3) the releases referred to in section 7.13;
(4) the certificates referred to in section 8.1(c) duly executed
by an executive officer of the Seller and by the Shareholder;
(5) the Consents referred to in section 8.1(d);
37
(6) the Seller's Secretary's Certificate referred to in section
8.1(f), duly executed by the Secretary of the Seller, and the Shareholder's
Secretary's Certificate referred to in section 8.1(g), duly executed by the
Secretary of the Shareholder;
(7) the opinion of counsel to the Seller referred to in section
8.1(j);
(8) the certificate referred to in section 8.1(k); and
(9) a Tax, lien and judgment search of the Seller and the Acquired
Assets showing no items not disclosed in any section of the Disclosure Letter
and UCC-3 termination statements with respect to any of the Acquired Assets
appearing in such lien search.
9.2 DELIVERIES OF THE BUYER. At the Closing, the Buyer shall deliver
or cause to be delivered the following items to the Seller:
(1) the Settlement Escrow Agreement, duly executed by the Buyer,
(2) the certificate referred to in section 8.2(c) duly executed by
an officer of the Buyer;
(3) the Buyer Secretary's Certificate referred to in section
8.2(d) duly executed by the Secretary of the Buyer;
(4) the opinion of counsel to the Buyer referred to in section
8.2(f);
(5) the Fixed Amount and the Additional Amount, if any, subject to
preliminary adjustment in the aggregate as provided in section 3.3(b); and
(6) the ▇▇▇▇ of Sale, Assignment and Assumption Agreement duly
executed by the Buyer.
10. TERMINATION OF THE AGREEMENT.
10.1 TERMINATION.
(1) This Agreement may be terminated:
(1) Reserved.
(2) by the Buyer, on or before January 5, 1999, in the event
the Buyer shall not have received a copy of a Phase I Environmental Report
relating to the Seller's Real Property that shall be satisfactory in the sole
judgment of the Buyer; or
(3) by the Buyer on or before January 29, 1999, in the event:
38
(1) the Buyer shall not have received, at its own cost and
expense, a current survey of the Owned Real Property, in form and revealing
a state of facts reasonably satisfactory to counsel for Buyer, that (i) is
prepared in insurable form in accordance with standards applicable to
registered and licensed land surveyors making surveys in the Commonwealth
of Massachusetts and (ii) shows (x) the absence of any title defects, (y)
the location of all easements burdening such parcel and the absence of any
encroachment by any Improvement onto the area of any such easement and (z)
unrestricted access from such parcel to a public street at and over the
driveways and accessways currently being used in connection with the
operation of such parcel; OR
(2) the Buyer shall not have received a copy of an
inspection report prepared by a structural engineering firm relating to the
Real Property that shall be satisfactory in the reasonable judgment of the
Buyer.
(2) This Agreement may be terminated at any time prior to the
Closing:
(1) by the mutual agreement of the Buyer and the Seller;
(2) by the Buyer or the Seller (if such party is not in material
breach of or default under this Agreement) giving written notice to such effect
to the other party if the Closing shall not have occurred on or before March 31,
1999, or such later date as the parties shall have agreed upon prior to the
giving of such notice; or
(3) by either the Buyer or the Seller in the event of a material
breach by or default of the other party hereto.
(3) Notwithstanding anything herein to the contrary, if this
Agreement has not previously terminated pursuant to the terms hereof, this
Agreement shall terminate thirty-one days after the date hereof if the Buyer has
not then delivered $150,000 to the Escrow Agent, as contemplated by section 1.4.
10.2 LIABILITY OF THE PARTIES.
(1) Upon termination of this Agreement pursuant to section 10.1(a)
or (c), all obligations of the parties hereunder shall terminate, except for
obligations that arise pursuant to section 1.4.
(2) Upon termination of this Agreement pursuant to section
10.1(b), all obligations of the parties hereunder shall terminate except
those under section 1.4 and section 12; PROVIDED, HOWEVER, that no such
termination shall relieve the Seller or the Shareholder of any liability to
the Buyer, or the Buyer of any liability to the Seller, by reason of any
breach of or default under this Agreement.
11. SURVIVAL.
39
11.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE
SHAREHOLDER. Notwithstanding any right of the Buyer fully to investigate the
affairs of the Seller and the Shareholder and notwithstanding any knowledge
of facts determined or determinable by the Buyer pursuant to such
investigation or right of investigation, the Buyer has the right to rely
fully upon the representations and warranties of the Seller contained in this
Agreement or in any other Transaction Document. All such representations and
warranties shall survive the execution and delivery of this Agreement and the
Closing hereunder and shall thereafter continue in full force and effect
until eighteen months after the Closing Date, and the Seller's and the
Shareholder's liability in respect of any breach of any such representation
or warranty shall terminate eighteen months after the Closing Date, except
for liability with respect to which notice shall have been given on or prior
to such date to the party against which such claim is asserted pursuant to
section 12.3. The foregoing notwithstanding, the representations and
warranties contained in (i) section 5.16 shall survive the Closing and the
Seller's and the Shareholder's liability in respect of any breach thereof
shall continue until the fifth anniversary of the Closing Date, and (ii)
sections 5.3, 5.12(a) and 5.14 shall survive the Closing and the Seller's and
the Shareholder's liability in respect of any breach thereof shall continue
until 60 days after the expiration of all applicable statutes of limitation,
including extensions and waivers, except for liability in the preceding
clauses (i) and (ii) with respect to which notice shall have been given on or
prior to such date to the party against which such claim is asserted pursuant
to section 12.3, which such liability shall remain an obligation of the party
against whom such claim is asserted.
11.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES OF THE BUYER. The
Seller and the Shareholder have the right to rely fully upon the
representations and warranties of the Buyer contained in this Agreement or in
any other Transaction Document. All such representations and warranties
shall survive the execution and delivery of this Agreement and the Closing
hereunder and shall thereafter continue in full force and effect until
eighteen months after the Closing Date, and Buyer's liability in respect of
any breach of any such representation or warranty shall terminate eighteen
months after the Closing Date, except for liability with respect to which
notice shall have been given on or prior to such date to the party against
which such claim is asserted pursuant to section 12.3, which such liability
shall remain an obligation of the party against whom such claim is asserted.
11.3 SURVIVAL OF OBLIGATIONS UNDER SECTION 12.1(D). The Seller's and
the Shareholder's obligation pursuant to section 12.1(d) shall survive the
execution and delivery of this Agreement and the Closing hereunder and shall
thereafter continue in full force and effect until the fifth anniversary of
the Closing Date, except for liability with respect to which notice shall
have been given to the party against which such claim is asserted pursuant to
section 12.3, which such liability shall remain an obligation of the party
against whom such claim is asserted.
12. INDEMNIFICATION.
12.1 INDEMNIFICATION BY THE SELLER AND THE SHAREHOLDER. Subject to the
limitations contained in section 11 and section 12.4, the Seller and the
Shareholder shall jointly and severally indemnify and defend the Buyer and
each of its officers, directors, employees, shareholders, agents, advisors
and representatives (each, a "Buyer Indemnitee") against, and hold each Buyer
Indemnitee harmless from, any loss, liability, obligation, deficiency, damage
or expense including, without
40
limitation, interest, penalties, reasonable attorneys' and consultants' fees
and disbursements (collectively, "Damages"), that any Buyer Indemnitee may
suffer or incur based upon, arising out of, relating to or in connection with
any of the following (whether or not in connection with any third party
claim):
(1) any breach of any representation or warranty made by the
Seller or the Shareholder contained in this Agreement or in any other
Transaction Document or in respect of any third party claim made based upon
facts alleged which, if true, would constitute any such breach;
(2) either the Seller's or the Shareholder's failure to perform or
to comply with any covenant or other agreement required to be performed or
complied with by the Seller or the Shareholder contained in this Agreement or
in any other Transaction Document;
(3) the ownership or operation of the Business or Acquired Assets
prior to the Closing Date except for the Assumed Liabilities; or
(4) each and every Environmental Claim or any other violation of
Environmental Law, or alleged Environmental Claim, or any other alleged
violation of Environmental Law, against the Buyer arising out of or relating
to any fact, condition, act or omission in each case with respect to the
Business or any of the Acquired Assets, or alleged fact, condition, act or
omission that existed on or prior to the Closing Date.
12.2 INDEMNIFICATION BY THE BUYER. Subject to the limitations
contained in section 11 and section 12.4, the Buyer shall indemnify and
defend the Seller and the Shareholder and each of the Seller's officers,
directors, employees, shareholders, agents, advisors and representatives
(each, a "Seller Indemnitee") against, and hold each Seller Indemnitee
harmless from, any Damages that such Seller Indemnitee may suffer or incur
arising from, related to or in connection with any of the following:
(1) any breach of any representation or warranty made by the Buyer
contained in this Agreement or in any other Transaction Document or in
respect of any third party claim made based upon facts alleged which, if
true, would constitute any such breach;
(2) the Buyer's failure to perform or to comply with any covenant
or other agreement required to be performed or complied with by the Buyer
contained in this Agreement or in any other Transaction Document; or
(3) the acts or inactions relating to the Business or Acquired
Assets arising from events first occurring after the Closing.
12.3 INDEMNIFICATION PROCEDURES.
(1) Promptly after notice to an indemnified party of any claim or
the commencement of any Proceeding, including any Proceeding by a third
party, involving any Damage referred to in sections 12.1 or 12.2, such
indemnified party shall, if a claim for indemnification in respect thereof is
to be made against an indemnifying party pursuant to this
41
section 12, give written notice to the latter of the commencement of such
claim or Proceeding, setting forth in reasonable detail the nature thereof
and the basis upon which such party seeks indemnification hereunder;
PROVIDED, HOWEVER, that the failure of any indemnified party to give such
notice shall not relieve the indemnifying party of its obligations under such
section, except to the extent that the indemnifying party is actually
prejudiced by the failure to give such notice.
(2) (i) In the case of any such Proceeding by a third party
against an indemnified party, the indemnifying party shall, upon notice as
provided above, assume the defense thereof, with counsel reasonably
satisfactory to the indemnified party, and, after notice from the
indemnifying party to the indemnified party of its assumption of the defense
thereof, the indemnifying party shall not be liable to such indemnified party
for any legal or other expenses subsequently incurred by the indemnified
party in connection with the defense thereof (but the indemnified party shall
have the right, but not the obligation, to participate at its own cost and
expense in such defense by counsel of its own choice) or for any amounts paid
or foregone by the indemnified party as a result of the settlement or
compromise thereof (without the written consent of the indemnifying party).
(ii) Anything in section 12.3(b)(i) notwithstanding, if both
the indemnifying party and the indemnified party are named as parties or
subject to such Proceeding and either such party determines with advice of
counsel that there may be one or more legal defenses available to it that are
different from or additional to those available to the other party or that a
material conflict of interest between such parties may exist in respect of
such Proceeding, then the indemnifying party may decline to assume the
defense on behalf of the indemnified party or the indemnified party may
retain the defense on its own behalf, and, in either such case, after notice
to such effect is duly given hereunder to the other party, the indemnifying
party shall be relieved of its obligation to assume the defense on behalf of
the indemnified party, but shall be required to pay any legal or other
expenses including, without limitation, reasonable attorneys' fees and
disbursements, incurred by the indemnified party in such defense.
(3) If the indemnifying party assumes the defense of any such
Proceeding, the indemnified party shall cooperate fully with the indemnifying
party and shall appear and give testimony, produce documents and other
tangible evidence, allow the indemnifying party access to the books and
records of the indemnified party and otherwise assist the indemnifying party
in conducting such defense. No indemnifying party shall, without the consent
of the indemnified party, consent to entry of any judgment or enter into any
settlement or compromise which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such indemnified party of
a release from all liability in respect of such claim or Proceeding. Provided
that proper notice is duly given, if the indemnifying party shall fail
promptly and diligently to assume the defense thereof, then the indemnified
party may respond to, contest and defend against such Proceeding (but the
indemnifying party shall have the right to participate at its own cost and
expense in such defense by counsel of its own choice) and may make in good
faith any compromise or settlement with respect thereto after giving notice
of such action to the indemnifying party, and recover from the indemnifying
party the entire cost and expense thereof including, without limitation,
reasonable attorneys' fees and disbursements and all amounts paid or foregone
as a result of such Proceeding, or the settlement or compromise thereof. The
indemnification required hereunder shall be made by periodic payments of the
amount thereof during the course of the
42
investigation or defense, as and when bills or invoices are received or loss,
liability, obligation, damage or expense is actually suffered or incurred.
(4) Any payment pursuant to this section 12 shall be treated as an
adjustment to the purchase price for the Acquired Assets.
12.4 LIMITATIONS ON INDEMNIFICATION BY THE SELLER AND THE SHAREHOLDER.
(a) The Seller and the Shareholder shall have indemnification
obligations pursuant to section 12.1(a) respecting Damages that result from
actual or claimed breaches of representations or warranties set forth in this
Agreement (other than the representations and warranties contained in section
5.3, only if and only to the extent that the aggregate of all Damages
resulting from such actual breaches, or claimed breaches by third parties,
shall exceed $100,000. Anything to the 44contrary notwithstanding, neither
the Seller nor the Shareholder shall have any liability pursuant to (i)
section 12.1(a) with respect to Damages that result from actual or claimed
breaches of representations or warranties set forth in this Agreement (other
than the representations and warranties contained in section 5.3) or (ii)
section 12.1(d), in each case, for and to the extent that the aggregate
amount of the Damages set forth in the preceding clauses (i) and (ii) exceeds
$3,000,000. For the purposes of determining whether any Buyer Indemnitee is
able to seek indemnification from the Seller or the Shareholder under section
12.1(a) for any breach or alleged breach of any representation or warranty in
this Agreement, the use of the terms "knowledge," "best of (a party's)
knowledge" or "material," other than the use of such terms, if any, in
section 5.10(f), shall be disregarded and any and all claims for such
indemnification shall be determined as if no such terms were present in such
representation or warranty. The parties hereto expressly acknowledge that
the sole purpose for using the terms "knowledge," "best of (a party's)
knowledge" and "material" is to determine whether the conditions set forth in
section 8.1 have been satisfied.
(b) The limitations set forth in paragraph (a) of this section
12.4 shall not limit or reduce the Seller's and the Shareholder's obligations
to indemnify the Buyer in respect of Damages that result from actual or
claimed breaches of the representations and warranties contained in section
5.3.
(c) In the event that any Damages of the Buyer are covered by
insurance proceeds or other reimbursement obligations, whether maintained by
the Buyer or the Seller, the Buyer shall not be deemed to have any Damages if
and to the extent that the Buyer actually realizes the proceeds of such
insurance or other reimbursement obligations, which payments shall in no
event be included in the basket set forth in section 12.4(a).
13. MISCELLANEOUS.
13.1 TRANSACTION FEES AND EXPENSES. Each party hereto shall bear such
costs, fees and expenses as may be incurred by it in connection with this
Agreement and the transactions contemplated hereby.
43
13.2 NOTICES. Any notice, demand, request or other communication which
is required, called for or contemplated to be given or made hereunder to or
upon any party hereto shall be deemed to have been duly given or made for all
purposes if (a) in writing and sent by (i) messenger or a recognized national
overnight courier service for next day delivery with receipt therefor, or
(ii) certified or registered mail, postage paid, return receipt requested, or
(b) sent by facsimile transmission with a written copy thereof sent on the
same day by postage paid first-class mail or (c) by personal delivery to such
party at the following address:
To the Buyer:
c/o Kidd & Company, LLC
Three Pickwick Plaza
Greenwich, Connecticut 06830
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇ Flattau & Klimpl, LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
To the Seller or the Shareholder at:
Image Guided Technologies, Inc.
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▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇, President
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
with respect to each of the Seller and the Shareholder, with a copy to:
Ireland, ▇▇▇▇▇▇▇▇▇, et al.
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
or such other address as either party hereto may at any time, or from time to
time, direct by notice given to the other party in accordance with this
section. The date of giving or making of any such notice or demand shall be,
in the case of clause (a)(i), the date of the receipt, in the case of clause
(a)(ii), five business days after such notice or demand is sent, and, in the
case of clause (b), the business day next following the date such notice or
demand is sent. A copy of any notice to the
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Shareholder shall be sent concurrently to the Seller and a copy of any notice
to the Seller shall be sent concurrently to the Shareholder.
13.3 AMENDMENT. Except as otherwise provided herein, no amendment of
this Agreement shall be valid or effective unless in writing and signed by or
on behalf of the party against whom the same is sought to be enforced.
13.4 WAIVER. No course of dealing of any party hereto, no omission,
failure or delay on the part of any party hereto in asserting or exercising
any right hereunder, and no partial or single exercise of any right hereunder
by any party hereto shall constitute or operate as a waiver of any such right
or any other right hereunder. No waiver of any provision hereof shall be
effective unless in writing and signed by or on behalf of the party to be
charged therewith. No waiver of any provision hereof shall be deemed or
construed as a continuing waiver, as a waiver in respect of any other or
subsequent breach or default of such provision, or as a waiver of any other
provision hereof unless expressly so stated in writing and signed by or on
behalf of the party to be charged therewith. The Buyer's receipt of Tax
Returns, waiver of bulk sales and other waivers and receipt of information
contained herein shall not be deemed to waive the Buyer's rights under the
indemnification provisions of section 12.
13.5 GOVERNING LAW. This Agreement shall be governed by, and
interpreted and enforced in accordance with, the laws of the State of
Delaware.
13.6 JURISDICTION. Each of the parties hereto hereby irrevocably
consents and submits to the exclusive jurisdiction of the United States
District Court for the District of Delaware in connection with any Proceeding
arising out of or relating to this Agreement or the transactions contemplated
hereby, waives any objection to venue in such District (unless such court
lacks jurisdiction with respect to such Proceeding, in which case, each of
the parties hereto irrevocably consents to the jurisdiction of the courts of
the State of Delaware in connection with such Proceeding and waives any
objection to venue in the State of Delaware, and agrees that service of any
summons, complaint, notice or other process relating to such Proceeding may
be effected in the manner provided by clause (a) of section 13.2.
13.7 REMEDIES. In the event of any actual or prospective breach or
default by any party hereto, the other parties shall be entitled to equitable
relief, including remedies in the nature of rescission, injunction and
specific performance. All remedies hereunder are cumulative and not
exclusive. Nothing contained herein and no election of any particular remedy
shall be deemed to prohibit or limit any party from pursuing, or be deemed a
waiver of the right to pursue, any other remedy or relief available now or
hereafter existing at law or in equity (whether by statute or otherwise) for
such actual or prospective breach or default, including the recovery of
damages. Notwithstanding anything herein to the contrary, the parties agree
that the rights to indemnification set forth in section 12 of this Agreement
shall be exclusive of any right to indemnification that such party (or its
successors and assigns) would otherwise have by statute, common law or
otherwise.
13.8 SEVERABILITY. The provisions hereof are severable and if any
provision of this Agreement shall be determined to be legally invalid,
inoperative or unenforceable in any respect by a court of competent
jurisdiction, then the remaining provisions hereof shall not be affected, but
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shall, subject to the discretion of such court, remain in full force and
effect, and any such invalid, inoperative or unenforceable provision shall be
deemed, without any further action on the part of the parties hereto, amended
and limited to the extent necessary to render such provision valid, operative
and enforceable.
13.9 FURTHER ASSURANCES. Each party hereto covenants and agrees
promptly to execute, deliver, file or record such agreements, instruments,
certificates and other documents and to perform such other and further acts
as the other party hereto may reasonably request or as may otherwise be
necessary or proper to consummate and perfect the transactions contemplated
hereby.
13.10 ASSIGNMENT. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto, their heirs
and their respective successors and permitted assignees. Permitted assignees
of the Buyer's rights hereunder shall include any Affiliate of the Buyer and
any or all financial institutions or other entities investing and/or lending
monies to finance the transactions herein contemplated. Permitted assignees
of the Seller's rights hereunder shall include any Affiliate of the Seller.
Neither Buyer nor Seller may assign any of its obligations hereunder without
the consent of the other party, except to a permitted assignee. Except for
the permitted assignees, neither party shall have the right to assign any
rights or delegate any duties hereunder without the consent of the other
party.
13.11 BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective legal representatives,
successors and permitted assigns.
13.12 NO THIRD PARTY BENEFICIARIES. Nothing contained in this
Agreement, whether express or implied, is intended, or shall be deemed, to
create or confer any right, interest or remedy for the benefit of any Person
other than as otherwise provided in this Agreement.
13.13 ENTIRE AGREEMENT. This Agreement (including all the schedules and
exhibits hereto), together with the Disclosure Letter, Exhibits, Schedules,
certificates and other documentation referred to herein or required to be
delivered pursuant to the terms hereof, contains the terms of the entire
agreement among the parties with respect to the subject matter hereof and
supersedes any and all prior agreements, commitments, understandings,
discussions, negotiations or arrangements of any nature relating thereto.
13.14 HEADINGS. The headings contained in this Agreement are included
for convenience and reference purposes only and shall be given no effect in
the construction or interpretation of this Agreement.
13.15 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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BULK SALES LAW. The parties waive compliance with the provisions of any bulk
sales law that may be applicable to the transactions contemplated hereby.
SELLER: BRIMFIELD PRECISION, INC.
By: /S/ ▇▇▇▇ ▇. ▇▇▇
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Name: ▇▇▇▇ ▇. ▇▇▇
Title: Chief Executive Officer
BUYER: BRIMFIELD ACQUISITION CORP.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chairman
SHAREHOLDER: IMAGE GUIDED TECHNOLOGIES, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇
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Name: ▇▇▇▇ ▇ . ▇▇▇
Title: President
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